[ad_1]
(Bloomberg) — A rally that put stocks on track for their best week in 2024 lost steam Friday, as traders weighed the latest economic data for clues about the Federal Reserve’s policy outlook.
Most Read from Bloomberg
After six days of gains, the S&P 500 has been wobbly amid “consolidation” of gains. Just a week before Jerome Powell speaks in Jackson Hole, Wyoming, Wall Street paused to assess a slew of data that suggested the Fed will not need to deploy aggressive easing because the economy is not heading off a cliff. That view has prompted traders to scale back bets on massive interest rate cuts this week, as the market braces for the first cut in September.
Listen to the Here's Why podcast on Apple, Spotify, or wherever you listen.
Atlanta Fed GDP gauge falls to 1.99% from 2.44%
Friday, however, saw another set of mixed economic readings. U.S. consumer sentiment rose in early August for the first time in five months amid more optimistic expectations about their financial situation and stabilizing inflation. The caveat here is that the uptick in sentiment was driven in part by politics after President Joe Biden’s decision not to seek reelection. Housing starts fell to their lowest level since the aftermath of the pandemic.
“Investors should expect more volatility in the near term as economic data is likely to give mixed signals,” said Jeff Roach of LPL Financial.
Florian Eilbaugh of Lombard Odier Investment Management says economic data is still accompanied by “contradictions” – a warning against excessive optimism.
“A fresh wave of US data has convinced markets that a recession is not imminent,” Elbow said. “Although the market was quick to anticipate a recession, it may have been too quick to dismiss the risk: uncertainty remains, more than market valuations suggest.”
The S&P 500 was volatile. When it came to its major groups, the picture was very mixed. Industrials and technology sectors lagged, while financials outperformed. Applied Materials fell after a sales forecast disappointed investors who were looking for a bigger return on AI spending.
The yield on 10-year U.S. Treasury notes was little changed at 3.92 percent. The dollar fell, and gold briefly rose to a record high of $2,500.
Federal Reserve Chairman Jerome Powell will speak next Friday at the Kansas City Fed's economic policy symposium in Jackson Hole.
With the central bank on track to cut interest rates from their highest level in more than two decades, Powell's comments will be closely analyzed for any hints about how the Fed chairman views the economy in the wake of a weaker-than-expected jobs report and further easing in inflation.
The Fed is widely expected to cut borrowing costs at its next meeting on September 17-18, but there is some disagreement over how much.
“The main message from Fed Chair Jerome Powell’s speech is likely to be that monetary policy has generally worked as intended, and that the current level of rates is constrained,” said Anna Wong of Bloomberg Economics. “He may say that the balance of risks between the Fed’s mandates — employment and inflation — is roughly equal. We expect him to signal that a rate cut is coming, but not whether it will be 25 basis points or 50 basis points. That will depend on the August jobs report.”
Five Big Questions for the Jackson Hole Fed: Bill Dudley
Next week's Jackson Hole symposium will be the “perfect platform” for the Fed to set policy expectations for September, strategists at TD Securities said.
They noted that they are waiting for Powell to signal that given recent progress, the Fed is likely to ease policy next month, without fully committing to the size of the rate cut. “We expect a 25 basis point cut. The minutes from the July FOMC meeting will provide a glimpse into the easing discussions on Wednesday,” they added.
While recent data has suggested that a 25 basis point rate cut in September looks more likely than a larger cut, given the Fed’s increased focus on the labor market, the upcoming jobs report will be crucial in determining the final decision, according to Fawad Razakzada at City Index and Forex.com.
“Any strong hints of a September rate cut at the Jackson Hole conference could push the dollar lower and support gold expectations,” he added.
The next few weeks will likely determine whether the Fed ends up cutting rates by 50-75 basis points this year or more aggressively, says Ralph Pruisser, a director at Bank of America Corp.
He noted that we maintain a bullish bias on US interest rates, and will see the Jackson Hole sell-off as a buying opportunity.
The company's most prominent achievements:
-
Texas Instruments Inc. is set to receive $1.6 billion in CHIPS Act grants and $3 billion in loans, the Biden administration announced Friday, marking the latest major award from a program designed to boost U.S. semiconductor manufacturing.
-
Rivian Automotive Inc. has halted production of an electric commercial truck it makes for Amazon.com Inc. due to a parts shortage in the latest supply chain problem for the electric vehicle maker.
-
Bayer AG shares jumped after the German company won a major victory in a long-running cancer lawsuit over Roundup weed killer.
-
BHP Group and Chilean union leaders reached a preliminary agreement on wages on Friday, paving the way for normal production to resume at the world's largest copper mine.
-
A joint COVID-19 vaccine developed by Pfizer and BioNTech failed to meet one of its goals in the final stage of clinical trials, a setback for the companies as they search for profitable new uses for a technology that has been successful in combating the pandemic.
-
Autodesk continued to use a controversial sales strategy after promising investors it would stop, and ignored internal warnings about the risks of doing so, according to previously unreported internal documents.
Some key movements in the markets:
Stocks
-
The S&P 500 was little changed as of 11:37 a.m. New York time.
-
The Nasdaq 100 fell 0.2%.
-
The Dow Jones Industrial Average was little changed.
-
The Stoxx Europe 600 index rose 0.3%.
-
MSCI World Index rose 0.3%
-
The Bloomberg Magnificent 7 Total Return Index was little changed.
-
The Russell 2000 Index was little changed.
Currencies
-
The Bloomberg Dollar Index fell 0.3%.
-
The euro rose 0.2% to $1.0995.
-
The pound rose 0.4% to $1.2902.
-
The Japanese yen rose 0.7% to 148.24 yen per dollar.
Cryptocurrencies
-
Bitcoin rose 2% to $57,831
-
Ether rose 0.6% to $2,565.72
Bonds
-
The yield on the 10-year US Treasury note was little changed at 3.92%.
-
The yield on the 10-year German bond was little changed at 2.25%.
-
The yield on 10-year British bonds rose one basis point to 3.93%.
Goods
-
West Texas Intermediate crude fell 1.7% to $76.84 a barrel.
-
Spot gold rose 1.2 percent to $2,486.84 an ounce.
This story was produced with the help of Bloomberg Automation.
–With the assistance of John Viljoen and Richard Henderson.
Most Read from Bloomberg Businessweek
©2024 Bloomberg LP
[ad_2]
Source