A Calm Start for Wall Street as the Fed Meeting Approaches:
Wall Street indices began the week quietly amid geopolitical developments critical for the Federal Reserve.
U.S. President Donald Trump hoped for a trilateral meeting with Russia and Ukraine,
while the White House hosted Ukrainian President Volodymyr Zelensky to discuss a potential peace agreement.
Contents
Anticipation of Powell’s Speech
Index Fluctuations
After a series of record gains for the S&P 500, the index witnessed notable volatility.
Reports emerged that the Trump administration is considering purchasing about 10% of Intel’s shares.
Meanwhile, investors are awaiting earnings from major retailers such as Walmart and Target this week,
seeking a clearer picture of U.S. consumer spending under the new tariffs imposed by the administration.
The 10-year U.S. Treasury yield rose two basis points to 4.34%,
and the Bloomberg Dollar Spot Index climbed 0.2%.
In the UK, 30-year inflation-linked bond yields reached their highest level since 1998.
On the commodities side, oil prices rose slightly while gold fluctuated.
Anticipation of Powell’s Speech in Jackson Hole
Markets are now focused on the Federal Reserve’s annual economic policy symposium, which begins Thursday in Jackson Hole, Wyoming.
The event in the Grand Teton mountains is widely regarded as a traditional platform for major monetary policy signals.
Fed Chair Jerome Powell is expected to announce the central bank’s new strategic framework
for inflation and employment on Friday, with potential hints about the Fed’s direction ahead of its September meeting.
Chris Larkin from E-Trade, part of Morgan Stanley, said markets are betting that signs
of labor market weakness will outweigh inflation risks in the Fed’s rate-cut debate.
Jason Pride and Michael Reynolds of Glenmede added that Powell’s speech would be the week’s focal point,
noting that the question is no longer about whether the Fed will cut rates but how much and how fast.
Market Bets on Rate Cuts
Short-term U.S. bond yields have dropped sharply this month as markets priced in a quarter-point rate cut in September.
This outlook was reinforced by weak July employment data, alongside downward revisions to prior months,
while recent inflation surprises had little effect.
Scott Wren of Wells Fargo Investment Institute noted, “If the Fed intends to cut rates next month,
We expect signals during Jackson Hole.”
Interest-rate swap contracts suggest an 80% chance of a 25-basis-point cut in September,
With full pricing for two cuts by year-end.
However, Matt Maley of Miller Tabak warned:
“Overly aggressive rate cuts would inflate the current bubble and create bigger problems when it bursts.”
Meanwhile, Anna Wong of Bloomberg Economics predicted that the FOMC
will likely cut rates in September to manage labor market risks.
Still, Powell cannot state this explicitly before the August jobs report.
Krishna Guha of Evercore suggested Powell will remain cautious,
avoiding full disclosure before the September meeting,
but his message will likely align with a measured 25-basis-point cut.
Strong Earnings Season and Stock Market Outlook
Joe Kalish of Ned Davis Research cautioned that those expecting clear guidance for September may be disappointed,
as Powell seeks to preserve flexibility.
During his speech, Oscar Muñoz of TD Securities predicted Powell would signal a dovish tilt,
especially after weaker-than-expected inflation data.
Richard Saperstein of Treasury Partners said the Fed may use Jackson Hole
to prepare markets for a more accommodative stance through year-end,
projecting a 25-basis-point cut in September.
Oppenheimer analysts, led by John Stoltzfus, highlighted that small-cap U.S. equities
still have room to climb as markets anticipate a September rate cut.
Goldman Sachs’ David Kostin noted that S&P 500 companies outperformed expectations this season,
finding ways to offset tariffs and benefit from dollar weakness.
Jeffrey Buchbinder of LPL Financial emphasized that more substantial earnings, big surprises,
and rising forecasts over the past four weeks have given investors little to complain about,
marking a stark shift from Q1 earnings.
Mark Hackett of Nationwide added that robust fundamentals and technical momentum have pushed markets higher,
even as retail investors challenge traditional market rules.
A Calm Start for Wall Street as the Fed Meeting Approaches