[New York Stock Market] Decline Ahead of Jackson Hole Powell Speech... Nasdaq Down 1.87%

The three major indices of the U.S. New York stock market all closed lower on the 24th (local time) as they awaited Federal Reserve (Fed) Chair Jerome Powell's Jackson Hole speech. Nvidia's strong earnings, which had excited the market the previous day, did not lead to a rally in tech stocks on this day. Since the earnings surprise was anticipated early on, it is evaluated that the market had already priced it in. U.S. Treasury yields also rose again, weighing on investor sentiment.

At the New York Stock Exchange (NYSE) on this day, the Dow Jones Industrial Average fell 373.56 points (1.08%) from the previous close to finish at 34,099.42. The large-cap focused S&P 500 index dropped 59.70 points (1.35%) to 4,376.31, and the tech-heavy Nasdaq index declined 257.06 points (1.87%) to close at 13,463.97.

All 11 sectors in the S&P 500 index fell. The declines in technology, communication, and consumer discretionary stocks exceeded 2%. Nvidia, which reported an earnings surprise after the previous day's close, ended slightly higher. Apple, Tesla, Amazon, and Microsoft, which had risen together due to the Nvidia effect the day before, all fell by more than 2%. Semiconductor stock AMD slid nearly 7%. Dollar Tree plunged about 13% after releasing weak earnings and guidance before the market opened. AMC dropped more than 26% after completing its stock split. T-Mobile fell over 2% following an announcement to cut 5,000 jobs. Nike declined more than 1%, extending its losing streak to 11 consecutive trading days.

[Image source=Reuters Yonhap News]

Investors closely watched the Jackson Hole meeting held in Wyoming, along with corporate earnings, economic indicators, and movements in Treasury yields. Nvidia's Q2 earnings, released after the previous day's close, beat market expectations, but the tech rally did not continue on this day. Conversely, Dollar Tree's weak earnings released before the market opened fueled investor concerns about consumer spending. Max Wasserman, founder of Miramar Capital, said, "Nvidia's earnings were good, but the market had already priced them in," adding, "Investors may want to take some profits before the Fed pours cold water on the rally after experiencing a sharp rise in the market." Philip Kolmar, global strategist at MPB Partners, pointed out that only a few stocks are leading the entire market.

The manufacturing data released on this day was also weak. New durable goods orders in July fell 5.2% month-over-month, marking the largest decline since April 2020. This result was worse than Wall Street's forecast of a 4.1% drop. The preliminary Purchasing Managers' Index (PMI) released by S&P Global the previous day also showed the lowest level in six months. The manufacturing PMI fell below the baseline of 50, indicating a sharper-than-expected contraction in the sector, and the service sector PMI, which had been supporting the economy, also dropped to a six-month low.

On the other hand, weekly initial jobless claims, which provide insight into the U.S. labor market, decreased for the second consecutive week. According to the U.S. Department of Labor, claims for the week of the 13th to 19th fell by 10,000 to 230,000, below the Dow Jones estimate of 240,000. These figures suggest that the U.S. labor market remains robust, which could be a basis for the Fed's tightening to last longer than expected.

Investors' attention is focused on Jackson Hole. Chair Powell, European Central Bank (ECB) President Christine Lagarde, central bank governors from various countries, senior officials, and economic scholars are attending the economic symposium, the Jackson Hole meeting, held in Jackson Hole, Wyoming, starting this day. Chair Powell is scheduled to deliver his economic outlook speech at 10:05 a.m. Eastern Time on the second day, the 25th. As this is a key opportunity to gauge the direction of U.S. monetary policy entering the final phase of the tightening cycle, all eyes are on the tone of his remarks.

At this event, Chair Powell is expected to reaffirm a data-dependent stance while leaving the door open for additional rate hikes if necessary. According to a survey conducted by 22V Research, 78% of investors expect Powell to emphasize data dependency. Dennis Debussch, founder of a New York-based research firm, told Bloomberg News, "If Powell focuses on data dependency, it will help stabilize the 10-year Treasury yield."

Ahead of Powell's speech, Patrick Harker, President of the Federal Reserve Bank of Philadelphia, expressed the view that no further rate hikes are needed. In a CNBC interview conducted at Jackson Hole, he said, "We have probably taken sufficient action," adding, "(Rates) are at a restrictive level and should remain there for some time." Known as a prominent dove (favoring monetary easing) within the Fed, he left open the possibility of rate cuts in 2024 depending on data. He said, "If inflation indicators fall faster than expected, we could cut rates sooner," but added, "However, I think we need to maintain this level for a while."

Conversely, Susan Collins, President of the Boston Fed, said in an interview with Yahoo that "further rate hikes may be necessary." Collins, who does not have a vote in this year's FOMC, explained, "Additional evidence may be needed. We may be very close to a position where rates need to be maintained for a considerable period," but also said, "I will not signal exactly where the peak is at this time."

James Bullard, former President of the St. Louis Fed and known as a prominent hawk (favoring monetary tightening), also reaffirmed in an interview with Bloomberg TV that additional rate hikes could occur due to a strong economy. Recently appointed dean of the Purdue University Krannert School of Management, he said, "This economic acceleration puts upward pressure on inflation, suppresses the disinflation we are seeing, and could delay the Fed's plan to end monetary tightening." He had conveyed a similar message in an interview released by the Wall Street Journal the previous day. There are three remaining FOMC meetings this year: September, November, and December.

In the New York bond market on this day, Treasury yields rose. The benchmark 10-year U.S. Treasury yield hovered around 4.21%, while the 2-year Treasury yield, sensitive to monetary policy, was around 4.99%. The Dollar Index, which shows the value of the dollar against six major currencies, rose more than 0.3% to about 103.7.

Oil prices rose for the first time in four trading days on expectations that oil-producing countries may implement additional production cuts. On the New York Mercantile Exchange, October delivery West Texas Intermediate (WTI) crude oil closed at $79.05 per barrel, up 16 cents (0.20%) from the previous close.