Aug 23 2024: Wall Street is expected to trade within narrow ranges on Thursday, with investors keeping a close watch on labor data, a speech by Vice President Kamala Harris, and the highly anticipated start of the Jackson Hole symposium on Friday.
1. Powell’s Speech to Set Market Tone The focus is on Wyoming’s Grand Teton National Park, where Fed Chair Jerome Powell is set to deliver a pivotal speech at the Jackson Hole symposium on Friday. This address is likely to influence market expectations regarding upcoming monetary policy and the broader economy.
Recent U.S. economic data has softened, paving the way for the Federal Reserve to consider cutting interest rates. The minutes from the Fed’s July meeting revealed that a “vast majority” of policymakers supported the idea of beginning policy easing as soon as September. Consequently, Powell’s speech may center more on evaluating the economy’s current state rather than adjusting rate cut expectations.
Concerns over a cooling labor market have stoked fears of a significant economic slowdown in the U.S., dampening risk appetite throughout the week.
Goldman Sachs expects Powell to emphasize a data-dependent and cautious approach to rate cuts, reiterating the Fed’s readiness to act swiftly if economic conditions deteriorate. However, Powell is likely to avoid committing to aggressive easing without further data.
“While the academic discussions at the symposium may shape long-term policy, the side interviews could offer more insight into immediate policy questions,” analysts at the influential investment bank noted.
2. U.S. Futures Edge Higher Before Jackson Hole U.S. stock futures edged higher on Friday, as markets await Fed Chair Jerome Powell’s critical speech at the Jackson Hole symposium, which could signal the start of a rate-cutting cycle by the central bank.
As of 04:05 ET (08:05 GMT), Dow futures were up by 105 points, or 0.3%, S&P 500 futures gained 23 points, or 0.4%, and Nasdaq 100 futures rose by 120 points, or 0.6%.
On Thursday, Wall Street’s main indices closed sharply lower due to a surge in Treasury yields. The S&P 500 fell by 0.9%, the tech-heavy Nasdaq Composite dropped 1.7%, and the Dow Jones Industrial Average declined by nearly 180 points, or 0.4%.
Despite these declines, the DJIA and the S&P 500 remain modestly up for the week, while the Nasdaq is down just 0.1% for the week, amid optimism that the Fed is nearing a shift to easier monetary policy.
The U.S. economic calendar includes the latest data on building permits and new home sales for July, but the spotlight will be on Powell’s comments regarding future interest rates.
In corporate news, Uber (NYSE
) announced a multiyear partnership with Cruise, a subsidiary of General Motors (NYSE
), to deploy self-driving vehicles on Uber’s platform.
Ross Stores (NASDAQ
) saw its stock rise sharply in premarket trading after the retailer raised its fiscal 2024 profit forecast and reported better-than-expected second-quarter results, driven by strong demand for its discounted apparel and lower freight costs.
3. BOJ’s Ueda Reaffirms Rate Hike Intentions While Fed Chair Jerome Powell will dominate headlines on Friday, other key central bankers are also grappling with challenging policy decisions.
Bank of Japan Governor Kazuo Ueda reaffirmed earlier in the session his intention to raise interest rates but cautioned that financial markets remain unstable.
“Japan’s short-term rates are very low. If the economy is performing well, they will rise to neutral levels,” Ueda stated, while also highlighting the “high uncertainty” regarding where rates will eventually settle.
The BOJ ended its negative interest rate policy in March and raised its short-term policy rate to 0.25% in July, signaling a shift away from a decade of ultra-loose monetary policies.
In Europe, European Central Bank policymakers left interest rates unchanged last month after starting a rate-cutting cycle in June. Attention now shifts to the ECB’s September meeting.
ECB policymaker Martins Kazaks indicated that the central bank might implement two more rate cuts this year, as inflation is generally trending downward as expected. “Our June projections assumed two more rate cuts this year, and at this point, I see no reason to deviate from that path,” said Kazaks, who is also Latvia’s central bank governor. He added that his final decision for September would depend on August inflation data and the ECB’s updated projections.
4. Harris Officially Accepts Democratic Nomination Kamala Harris formally accepted the Democratic nomination for the 2024 presidential race during a speech on the final night of the Democratic National Convention in Chicago on Thursday. Harris emphasized that passing a tax cut for the middle class would be a primary goal of her presidency, alongside improving housing and social care.
Harris also underscored her commitment to gun control and reproductive rights, both key issues in her campaign.
The first Harris-Trump debate is scheduled for September 10, with the vice-presidential debate set for October 1. A second presidential debate may be added in October.
Recent polls indicate Harris is closing the gap with Trump, following President Joe Biden’s withdrawal from the 2024 race earlier this year. With just over two months until the election, the odds of a Republican victory have decreased by 10 percentage points since August 1, while the likelihood of a Republican sweep of both Congress and the Presidency has fallen by 4 percentage points.
Goldman Sachs economists suggested that the most probable outcome of the upcoming election is a Harris victory with a divided government.
5. Crude Prices on Track for Significant Weekly Losses Crude oil prices inched higher on Friday but are on track for substantial weekly losses amid ongoing concerns over weakening demand.
By 04:05 ET, U.S. crude futures (WTI) rose 0.5% to $73.39 per barrel, while Brent futures climbed 0.5% to $77.62 per barrel.
Both benchmarks hit their lowest levels since early January this week, with Brent down about 3% for the week and WTI dropping nearly 5%.
Recent data from China, the world’s largest oil importer, pointed to an economy struggling and weakening demand from refiners. Additionally, the sharp revision to U.S. employment data earlier in the week has heightened fears of a hard landing for the U.S. economy, the largest energy consumer.
Efforts to broker a ceasefire in Gaza between Israel and Hamas, with U.S. and Israeli delegations meeting in Cairo to resolve differences over a truce proposal, have also eased supply concerns, putting downward pressure on oil prices.
Concerns over a potential oil supply glut were also raised after U.S. oil production reached a record high of over 13 million barrels earlier in August, while OPEC+ plans to increase output later this year.
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