New York Stock Market Rises Awaiting FOMC Minutes... Nasdaq Up 0.26%

Minutes of July FOMC Meeting Released This Afternoon
September Rate Cut Path Expected to Be Indicated
Focus on Powell's Jackson Hole Speech on the 23rd

The three major indices of the U.S. New York Stock Exchange showed an early upward trend on the 21st (local time). Investors are waiting for the minutes of the July Federal Open Market Committee (FOMC) to be released in the afternoon, aiming to gauge the Federal Reserve's (Fed) interest rate cut path next month.

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As of 10:33 a.m. in the New York stock market, the blue-chip-focused Dow Jones Industrial Average was up 0.02% from the previous trading day, standing at 40,843.02. The large-cap-focused S&P 500 index rose 0.2% to 5608.47, and the tech-heavy Nasdaq index was trading 0.26% higher at 17,863.35.

With concerns about an economic recession easing, the New York stock market had continued its rally for eight consecutive trading days but took a breather after falling yesterday for the first time in nine days.

The market is focusing on the Fed's July FOMC minutes, which will be released at 2 p.m. The Fed kept the federal funds rate unchanged at 5.25-5.5% for the eighth consecutive time on the 31st of last month, and Fed Chair Jerome Powell hinted at the possibility of a rate cut in September during the subsequent press conference. The policy statement at that time indicated progress on inflation and expressed a commitment to pay attention not only to prices but also to employment risks.

Most notably, Chair Powell confirmed that there were officials who advocated for an early rate cut in July at the last FOMC meeting, drawing more attention to the minutes to be released today. Investors expect to confirm the Fed officials' views on the current interest rate level and economic conditions through the minutes and find clues regarding the September rate decision.

A rate cut in September is becoming a foregone conclusion. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market is pricing in nearly a 100% probability that the Fed will cut rates by at least 0.25 percentage points in September. The key issue is the size of the cuts within the year. The market is watching whether the Fed will make one or more big cuts (0.5 percentage point rate cuts) in the three scheduled FOMC meetings in September, November, and December. The market currently reflects a 72.3% probability that the Fed will take two baby steps (0.25 percentage point cuts) and at least one big cut within this year.

What the market is paying even more attention to is Chair Powell's speech scheduled for the 23rd at Jackson Hole. The annual economic policy symposium, the Jackson Hole Meeting, attended by central bank officials from major countries, will be held over three days starting on the 22nd in Wyoming. Investors are trying to gauge the size of the rate cuts within the year through Chair Powell's speech on the second day of the Jackson Hole Meeting. The market expects dovish (monetary easing-favoring) messages, but there is also a possibility that expectations could turn into disappointment depending on Powell's remarks.

Jack Janasiewicz, Senior Portfolio Strategist at Natixis Investment Managers Solutions, analyzed, "The important thing is the tone of Chair Powell's speech, which we expect to be dovish. Inflation is moving toward 2%, and if signals of labor market easing are added, Powell will likely have little need to maintain a hawkish (monetary tightening-favoring) stance."

One of the employment indicators, initial jobless claims, will be announced on the 22nd. However, the trend of the labor market is expected to be confirmed in the August employment report to be released on the 6th of next month.

Government bond yields are declining. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 1 basis point (1 bp = 0.01 percentage point) from the previous trading day to 3.8%, and the U.S. 2-year Treasury yield, sensitive to monetary policy, dropped 3 basis points to 3.96%.

By stock, U.S. retailer Target surged 13.91% after reporting quarterly earnings that exceeded market expectations. U.S. department store brand Macy's fell 13.42% after lowering its annual sales forecast.

International oil prices are rising. West Texas Intermediate (WTI) crude oil rose $0.77 (1.05%) from the previous trading day to $73.94 per barrel, and Brent crude, the global oil price benchmark, increased $0.69 (0.89%) to $77.89 per barrel.