Traders May Stick To The Sidelines Ahead Of Fed Minutes, Jackson Hole Symposium

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to experience choppy trading after moving mostly higher over the course of the previous session.

A lack of major U.S. economic data may keep traders on the sidelines ahead of key events later this week that could impact the outlook for interest rates.

Traders are likely to analyze the minutes of the Federal Reserve’s latest monetary policy meeting, which are due to be released on Wednesday, for additional clues about the likelihood of a rate cut next month.

Later in the week, remarks by Fed Chair Jerome Powell and other Fed officials at the Jackson Hole Economic Symposium are also likely to attract attention.

According to CME Group’s FedWatch Tool, there is a 73.5 percent of a quarter point rate cut next month and a 26.5 percent chance of a half point rate cut.

“September is being tipped as the month for that first Fed cut after inflation finally dropped below 3%,” said Danni Hewson, AJ Bell head of financial analysis. “How far Jay Powell and the FOMC will go, how deep that first cut will be, and whether or not it could be the only one delivered this year are now the questions on investors’ lips.”

She added, “Nerves that the Fed had been too slow have been somewhat allayed, but every word spoken at this week’s Jackson Hole Symposium will still be scrutinized.”

However, it is worth noting stocks got off to a lackluster start on Monday before upward momentum propelled the markets to another strong day.

Among individual stocks, shares of Lowe’s (LOW) are likely to be in focus after the home improvement retailer reported better than expected fiscal second quarter earnings but cut its full-year outlook due to “lower-than-expected DIY sales and a pressured macroeconomic environment.”

Stocks moved mostly higher over the course of the trading session on Monday, adding to the strong gains posted last week. The major averages showed a lack of direction early in the session but climbed firmly into positive territory as the day progressed.

The major averages surged going into the final hour of trading, with the Nasdaq and the S&P 500 closing just shy of their highs of the session. The Nasdaq shot up 245.05 points or 1.3 percent to 17,876.77, the S&P 500 jumped 54.00 points or 1.0 percent to 5,608.26 and the Dow climbed 236.77 points or 0.6 percent to 40,896.53.

The strength that emerged on Wall Street came as stocks continued to benefit from recent upward momentum, with the major averages extending the upward trend seen over the past several sessions.

The Nasdaq and the S&P 500 closed higher for the eight consecutive session and have more than offset the steep drop seen early this month.

The buying interest also came as recent data has eased concerns about the economic outlook while also increasing confidence the Federal Reserve will cut interest rates next month.

In U.S. economic news, the Conference Board released a report showing its reading on leading U.S. economic indicators fell by much more than expected in the month of July.

The Conference Board said its leading economic index slid by 0.6 percent in July after dipping by 0.2 percent in June. Economists had expected the index to decrease by 0.3 percent.

Meanwhile, the report said the index fell by 2.1 percent over the six-month period ending in July 2024, a smaller rate of decline than the 3.1 percent slump over the six-month period between July 2023 and January 2024.

“The LEI continues to fall on a month-over-month basis, but the six-month annual growth rate no longer signals recession ahead,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board.

Biotechnology stocks moved sharply higher over the course of the session, with the NYSE Arca Biotechnology Index surging by 2.2 percent to its best closing level in almost three years.

Significant strength was also visible among gold stocks, as reflected by the 2.1 percent jump by the NYSE Arca Gold Index. The index reached a two-year closing high amid a modest increase by the price of the precious metal.

Semiconductor stocks also turned in a strong performance on the day, driving the Philadelphia Semiconductor Index up by 1.9 percent.

Housing, natural gas and airline stocks also saw notable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are inching up $0.02 to $74.39 a barrel after plunging $2.28 to $74.37 a barrel on Monday. Meanwhile, after creeping up $3.50 to $2,541.30 an ounce in the previous session, gold futures are jumping $22.80 to $2,564.10 an ounce.

On the currency front, the U.S. dollar is trading at 146.43 yen compared to the 146.59 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1084 compared to yesterday’s $1.1085.

Asia

Asian stocks turned in a mixed performance on Tuesday despite dovish Fed expectations and signs of easing Middle East tensions.

The dollar index was on the defensive as investors awaited the minutes of the Federal Reserve’s July policy meeting and a speech from Chair Jerome Powell in Jackson Hole for additional clues on the possibility of a rate cut at the September policy meeting.

Gold and oil prices dipped in Asian trading as Israel’s demand for control over Gaza’s Philadelphi and Netzarim corridors threatened cease-fire talks with Hamas.

China’s Shanghai Composite Index fell 0.9 percent to 2,866.66 after the People’s Bank of China left its benchmark lending rates unchanged as expected. Hong Kong’s Hang Seng Index dipped 0.3 percent to 17,511.08.

Japanese stocks rallied as a weaker yen helped spur bargain hunting after steep losses in the previous session.

The Nikkei 225 Index jumped 1.8 percent to 38,062.92 after having snapped a five-day winning streak the previous day. The broader Topix Index settled 1.1 percent higher at 2,670.54.

Land transportation shares were in focus, with East Japan Railway and West Japan Railway rising around 2 percent each after data showed the number of passengers on express and limited express trains during this summer’s Bon holiday period in Japan rose 7 percent from a year earlier.

Seoul stocks rose notably after snapping a five-day winning streak the previous day. The Kospi climbed 0.8 percent to 2,696.63, with tech stocks leading the surge. Market bellwether Samsung Electronics rose 0.8 percent and SK Hynix jumped 3 percent.

Australian stocks eked out modest gains after the minutes of Reserve Bank of Australia’s recent meeting showed the central bank had considered raising interest rates earlier in August.

The benchmark S&P/ASX 200 Index edged up 0.2 percent to 7,997.70, while the broader All Ordinaries Index closed 0.2 percent higher at 8,207.60.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index slid 0.8 percent to 12,558.08, extending losses for a second straight session. Power companies led losses, with Mercury NZ falling 2.9 percent on a bleak FY25 outlook.

Europe

European stocks have moved modestly lower on Tuesday after the annual inflation rate in the Eurozone was confirmed at 2.6 percent in July, according to Eurostat’s second estimate.

Investors await the minutes of the Federal Reserve’s July policy meeting and a speech from Chair Jerome Powell in Jackson Hole this week for additional clues on the possibility of a rate cut at the September policy meeting.

Meanwhile, Sweden’s central bank, the Riksbank, lowered its policy rate for the second time this year and indicated that more cuts could be forthcoming if the inflation outlook remains the same.

The pan European STOXX 600 is down 0.2 percent at 513.62 after touching a three-week high in the previous session.

While the U.K.’s FTSE 100 Index has slid by 0.8 percent, the German DAX Index and the French CAC 40 Index are both down by 0.1 percent.

Energy giants BP Plc and Shell lost have slumped as crude oil prices hit two-week lows on growing hopes for Israel-Hamas ceasefire.

Miner Antofagasta was marginally lower after pretax profit declined in line with market expectations in the first six months of the year.

Meanwhile, Nordex has risen after it received five turbine orders from Akfen Renewable Energy for a total of 102MW for several wind farm extensions in Turkey.

U.S. Economic News

Atlanta Federal Reserve President Raphael Bostic is scheduled to participate in a fireside chat before a hybrid “Innovating for Inclusion” forum at the Federal Reserve Bank of Atlanta at 1:35 pm ET.

At 2:45 pm ET, Federal Reserve Vice Chair for Supervision Michael Barr is due to participate in a “Cybersecurity” discussion before the Joint Financial and Banking Information Infrastructure Committee-Financial Services Sector Coordinating Council Meeting.

Stocks In Focus

Shares of Hawaiian Holdings (HA) are moving sharply higher in pre-market trading after Alaska Airlines (ALK) said the time period for the Justice Department to complete its regulatory investigation of the proposed merger of the two companies has expired.

Fabrinet (FN) is also seeing significant pre-market strength after the company reported fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Palo Alto Networks (PANW) may also move to the upside after the cybersecurity company reported better than expected fiscal fourth quarter earnings and provided upbeat guidance.