Powell Speech Likely To Be In Focus On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to move back to the upside after coming under pressure over the course of the previous session.

Traders may see the notable decrease on Thursday as a buying opportunity amid ongoing optimism about the outlook for interest rates.

Early trading activity is likely to be somewhat subdued, however, as traders look ahead to Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Economic Symposium.

Powell is scheduled to speak on the economic outlook at the symposium beginning at 10 am ET, with traders looking to the central bank chief’s remarks for additional clarity about the outlook for rates.

“Powell is expected to lay the groundwork for the Fed’s first rate cut in over four years,” said Adam Turnquist, Chief Technical Strategist for LPL Financial. “Signs of reduced pricing pressures and cooling economic growth will likely be enough for policymakers to start reducing the target rate.”

He added, “However, investors will be listening for more details on the path of longer-term monetary policy beyond the expected cut in September.”

After failing to sustain an early move to the upside, stocks came under considerable selling pressure over the course of the trading session on Thursday. The major averages pulled back well off their early highs and firmly into negative territory.

The Nasdaq and the S&P 500 finished the day just off their lows of the session. The Nasdaq tumbled 299.63 points or 1.7 percent to 17,619.35, the S&P 500 slumped 50.21 points or 0.9 percent to 5,570.64 and the Dow fell 177.71 points or 0.4 percent to 40,712.78.

The downturn on Wall Street partly reflected profit taking, with the pullback coming after the S&P 500 closed within striking distance of the record highs set in mid-July.

While traders remain optimistic about the outlook for interest rates following the release of the minutes of the Federal Reserve’s latest monetary policy announcement on Wednesday, they may feel the likelihood of a rate cut next month has already been priced into the markets.

Traders may also have been reluctant to continue buying stocks ahead of Powell’s speech at the Kansas City Fed’s Jackson Hole Economic Symposium.

Negative sentiment may also have been generated in reaction to a rebound by treasury yields, with the yield on the benchmark ten-year note bouncing off its lowest closing level in well over a year.

In U.S. economic news, the Labor Department released a report showing a modest rebound by initial jobless claims in the week ended August 17th.

The report said initial jobless claims rose to 232,000, an increase of 4,000 from the previous week’s revised level of 228,000.

Economists had expected jobless claims to inch up to 230,000 from the 227,000 originally reported for the previous week.

Meanwhile, the National Association of Realtors released a separate report showing existing home sales snapped a four-month skid in July, with sales rebounding by slightly more than expected.

NAR said existing home sales shot up by 1.3 percent to an annual rate of 3.95 million in July after plunging by 5.1 percent to a revised rate of 3.90 million in June.

Economists had expected existing home sales to jump by 1.0 percent to an annual rate of 3.93 million from the 3.89 million originally reported for the previous month.

Semiconductor stocks came under substantial selling pressure over the course of the session, dragging the Philadelphia Semiconductor Index down by 3.4 percent.

Considerable weakness was also visible among gold stocks, as reflected by the 2.3 percent slump by the NYSE Arca Gold Bugs Index. The index pulled back off its best closing level in well over two years amid a steep drop by the price of gold.

Software stocks also showed a significant move to the downside, with the Dow Jones U.S. Software Index falling by 1.8 percent.

Networking, computer hardware and airline also moved notably lower as the day progressed, while some strength remained visible among banking stocks.

Commodity, Currency Markets

Crude oil futures are surging $1.38 to $74.39 a barrel after jumping $1.08 to $73.01 a barrel on Thursday. Meanwhile, after plunging $30.80 to $2,516.70 an ounce in the previous session, gold futures are climbing $18.80 to $2,535.50 an ounce.

On the currency front, the U.S. dollar is trading at 146.11 yen versus the 146.29 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1114 compared to yesterday’s $1.1112.

Asia

Asian shares ended mixed in muted trading Friday, as investors awaited Fed Chair Jerome Powell’s Jackson Hole speech later in the day for confirmation U.S. rate cuts would start in September.

The dollar extended its recent sharp slide and Treasury yields eased, while gold edged up slightly but was poised for a weekly loss. Crude oil futures held gains but were on track to end the week lower amid U.S. and Chinese demand concerns.

Chinese shares finished modestly higher after a choppy session. The benchmark Shanghai Composite Index rose 0.2 percent to 2,854.37, while Hong Kong’s Hang Seng Index dipped 0.2 percent to 17,612.10.

Japanese markets eked out modest gains and the yen strengthened against the dollar after Bank of Japan Governor Kazuo Ueda reaffirmed his resolve to raise interest rates if economic and price developments move as forecast.

Data out early in the day showed Japan’ese core inflation accelerated for a third straight month in July due to higher electricity costs.

The Nikkei 225 Index climbed 0.4 percent to 38,364.27, while the broader Topix Index settled half a percent higher at 2,684.72. Pharma stocks led the way higher, with Sumitomo Pharma and Chugai Pharma rallying 3.5 percent and 1.5 percent, respectively.

Seoul stocks snapped a three-day winning streak as investors took a wait-and-see approach before Powell’s speech. The Kospi ended down 0.2 percent at 2,701.69.

Chipmaker SK Hynix lost 2.9 percent and market bellwether Samsung Electronics gave up 0.8 percent, while automaker Hyundai Motor climbed 1.8 percent and its affiliate Kia Corp. added 1.6 percent.

Australian markets finished marginally lower following ten straight sessions of gains. Commodity and technology stocks came under selling pressure, offsetting gains in the banking sector.

ANZ fell 2.2 percent after the country’s bank regulator raised the amount of spare cash that the lender must keep on hand due to suspected wide-ranging misconduct at its bond trading unit.

Across the Tasman, New Zealand’s S&P/NZX-50 Index finished 0.5 percent higher at 12,529.99, snapping a four-day losing streak.

Europe

European stocks have moved higher for a third straight session on Friday, as investors brace for Fed Chair Jerome Powell’s Jackson Hole speech later in the day for confirmation U.S. rate cuts would start in September.

With a potential recession looming in the world’s largest economy and inflationary pressures abating, markets currently expect the U.S. Federal Reserve to deliver quarter-point rate cuts at each of the remaining three meetings of 2024.

Bank of England governor Andrew Bailey is also scheduled to speak at the symposium.

On a light day on the economic calendar, monthly data from the statistical office INSEE revealed the confidence among French manufacturers strengthened more than expected in August. The manufacturing sentiment index climbed to 99 in August from June’s 43-month low of 95.

The pan European STOXX 600 is up by 0.3 percent to 517.06 after hitting its highest level this month in the previous session.

While the German DAX Index is up by 0.5 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both up by 0.4 percent.

In corporate news, Nestle shares have tumbled after the Swiss food group announced it is replacing chief executive Mark Schneider with veteran executive Laurent Freixe.

Unilever is marginally higher after recalling 137000 cases of its single-serve Popsicle Jolly Rancher Frozen Confection Pop products over concerns that they may contain milk.

Energy giant BP Plc and Shell have also risen as oil extends overnight gains but remains on track for a weekly loss on U.S. and Chinese demand concerns.

U.S. Economic Reports

Federal Reserve Chair Jerome Powell is due to speak on the economic outlook before the 2024 Jackson Hole Economic Policy Symposium at 10 am ET.

Also at 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of July.

New home sales are expected to surge by 2.1 percent to an annual rate of 630,000 in July after falling by 0.6 percent to a rate of 617,000 in June.

Stocks In Focus

Shares of Workday (WDAY) are surging in pre-market trading after the human capital management company reported fiscal fourth quarter results that beat analyst estimates on both the top and bottom lines.

Off-price retailer Ross Stores (ROST) is also likely to see initial strength after reporting better than expected fiscal second quarter earnings.

Meanwhile, shares of Las Vegas Sands (LVS) may see initial weakness after UBS downgraded its rating on the casino and resort company to Neutral from Buy.