Powell to Deliver Jackson Hole Speech on August 22...
Will He Signal a Rate Cut?
July FOMC Minutes to Be Released on August 20
Home Depot, Walmart, Target, and Others to Report Earnings This Week
Focus Also on Peace Agreement Talks for the War
The three major U.S. stock indexes on the New York Stock Exchange were flat in early trading on August 18 (local time). After last week's rally, investors are taking a breather and focusing on Federal Reserve (Fed) Chair Jerome Powell's upcoming speech at Jackson Hole this week, as well as any progress in peace agreement discussions regarding the war in Ukraine.
As of 9:37 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average (Dow) was up 14.2 points (0.03%) at 44,960.32. The large-cap S&P 500 Index was down 0.51 points (0.01%) at 6,449.29, while the tech-heavy Nasdaq was up 7.435 points (0.03%) at 21,630.412.
Amid a continued rally driven by expectations of interest rate cuts, the market's attention is turning to the Jackson Hole meeting scheduled for August 21-23. Chair Powell is expected to offer clues about the future economic outlook and monetary policy direction in his speech set for 10:00 a.m. on August 22. With the labor market continuing to slow, investors are watching to see if Powell will signal a resumption of monetary easing, and if so, how significant and fast the rate cuts might be. In last year's Jackson Hole speech, Powell mentioned that it was time to adjust policy, and a month later, the Fed implemented a 0.5 percentage point rate cut. Some analysts predict that Powell will take a cautious stance, given that inflation and employment data for August will be released before the September Federal Open Market Committee (FOMC) meeting.
Currently, the market is treating a 0.25% rate cut in September as a foregone conclusion. According to the CME FedWatch tool, as of today, there is an 85.1% probability that the Fed will lower the current benchmark rate of 4.25-4.5% by 0.25 percentage points.
Before Powell's Jackson Hole speech, the minutes from the July FOMC meeting will be released on August 20. Through this, investors will be able to gauge the flow of rate discussions and the internal atmosphere among committee members. At last month's meeting, Fed Vice Chair Michelle Bowman and Fed Governor Christopher Waller both advocated for a 0.25 percentage point rate cut and cast dissenting votes against the majority decision to hold rates steady. This was the first time in 32 years that there were multiple dissenting votes in an FOMC rate decision, which is typically unanimous.
This week, key Fed officials-including Chair Powell, Vice Chair Bowman, Governor Waller, and Raphael Bostic, President of the Atlanta Fed-are also scheduled to make public remarks. With dovish and cautious views dividing the Fed, the market will look to these messages for guidance on the future direction of interest rate policy.
Corporate earnings reports are also on the agenda. Major building materials retailers such as Home Depot and Lowe's, as well as leading consumer goods companies like Walmart and Target, will announce their results. According to market research firm FactSet, 92% of S&P 500 companies have reported earnings so far, and 82% of them have exceeded Wall Street expectations.
Geopolitical factors are also expected to affect the stock market. On this day, U.S. President Donald Trump is scheduled to meet with Ukrainian President Volodymyr Zelensky and European leaders at the White House to discuss a peace agreement to end the war in Ukraine, based on the agenda from the recent U.S.-Russia summit. President Trump is expected to pressure President Zelensky to accept a territorial exchange demanded by Russia in return for providing Ukraine with NATO-style collective security guarantees.
U.S. Treasury yields are moving sideways. The yield on the benchmark 10-year U.S. Treasury note fell by 1 basis point (1bp = 0.01 percentage point) from the previous session to 4.31%, while the yield on the 2-year Treasury note is unchanged at 3.75%.
By stock, Tesla is up 0.68%. The company initially fell in pre-market trading following reports of a 40% discount on lease vehicles in the UK due to sluggish sales, but has since rebounded. Novo Nordisk is up 4.83% after its obesity drug Wegovy was approved by the U.S. Food and Drug Administration (FDA) as a treatment for liver disease. Dayforce, a human resources software company, is soaring 25.97% on speculation that it may be taken private by a private equity fund.
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