New York Stock Market Rises Ahead of Powell's Jackson Hole Speech Amid Confidence in 'September Pivot'

FOMC Minutes Hint at September Rate Cut
US Unemployment Claims Rise... Gradual Cooling in Employment
Focus on Powell's Speech on 23rd... Low Possibility of Big Cut Indicated

The three major indices of the U.S. New York Stock Exchange showed an upward trend on the 22nd (local time). The minutes of the July Federal Open Market Committee (FOMC) released the previous day gave investors confidence in a rate cut in September, stimulating market sentiment. Market attention is focused on whether Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), will deliver a dovish (monetary easing preference) message in his speech at the Jackson Hole meeting on the 23rd.

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As of 9:55 a.m. in the New York stock market on the day, the Dow Jones Industrial Average, centered on blue-chip stocks, was trading at 40,907.52, up 0.04% from the previous trading day. The S&P 500 index, focused on large-cap stocks, rose 0.25% to 5,635.12, and the Nasdaq index, centered on technology stocks, increased 0.38% to 17,987.65.

The July FOMC minutes released the previous day supported the outlook that a rate cut in September is almost certain barring any surprises. According to the minutes, the majority of Fed officials viewed a rate cut in September as appropriate, and many had already advocated for a cut in July. Concerns about a cooling labor market formed a consensus among Fed officials that a shift in monetary policy was necessary. The minutes stated, "The majority of participants noted that the risk to the employment goal had increased," and "some participants pointed out that if labor market conditions gradually eased further, the situation could worsen."

The U.S. labor market appears to be gradually slowing down. According to the U.S. Department of Labor on the morning of the day, initial jobless claims for the week of August 11-17 were 232,000, and continuing claims for unemployment benefits for at least two weeks were 1,863,000 for the week of August 4-10. Both figures slightly exceeded the revised figures for the previous week (228,000 and 1,859,000, respectively). The Department of Labor also revised down the annual nonfarm payroll employment figure (from April last year to March this year) by 27.6% to 818,000 compared to the previously announced number.

Chris Larkin, Head of Trading at Morgan Stanley, said, "Investors can now overlook the moderate jobless claims today and focus on next week's inflation data and Nvidia's earnings."

Investors are confident about a rate cut at the September FOMC. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market fully reflects a 100% probability that the Fed will cut rates by at least 0.25 percentage points in September. The key question is whether there will be a 'big cut' of 0.5 percentage points at once within the year. The market currently reflects a 70.3% probability that the Fed will cut rates by at least 0.25 percentage points at all three remaining FOMC meetings this year in September, November, and December, and that there will be at least one big cut, lowering rates by more than 1 percentage point by the end of the year.

Now, investors' attention is focused on the annual economic policy symposium, the Jackson Hole meeting, which opens in Wyoming on the day. Chairman Powell is expected to provide signals about a rate cut in September and clues about the pace of cuts in his scheduled speech on the 23rd. However, the possibility of indicating a big cut is considered low. Considering the Fed's style of making policy decisions based on data, it is unlikely that they will move ahead before confirming the August inflation figures and employment report, which will be released before the FOMC meeting on September 17-18.

Chris Senick, Chief Investment Strategist at Wolfe Research, said, "Powell will maintain a dovish tone and signal the start of a rate cut cycle at the September meeting. However, unlike the pricing in the rate futures market, I do not expect Powell to signal a rate cut exceeding 25 basis points."

U.S. Treasury yields are rising. The 2-year U.S. Treasury yield, sensitive to monetary policy, rose 5 basis points to 3.97%, and the 10-year U.S. Treasury yield, a global bond yield benchmark, traded at around 3.83%, up 6 basis points from the previous day.

By individual stocks, software company Snowflake fell 11.66% despite better-than-expected quarterly earnings and an upward revision of its annual earnings forecast. U.S. apparel retailer Urban Outfitters dropped 12.05% as its quarterly same-store sales fell short of market expectations.

International oil prices are moving sideways. West Texas Intermediate (WTI) crude oil rose $0.43 (0.6%) from the previous trading day to $72.36 per barrel, and Brent crude, the global oil price benchmark, increased $0.29 (0.4%) to $76.34 per barrel.