A rate cut is coming — or at least the market is convinced that is the case based on yesterday’s release of the minutes for the July 30-31 FOMC meeting. That good news, however, hasn’t launched the market, because the market had already launched in front of it
Nonetheless, the market has found ongoing support in the idea of a rate cut and the reality that the indices have shown some enduring resilience to selling interest.
That resilience has continued to stir buying interest while keeping selling interest in check at the same time.
Currently, the S&P 500 futures are up 11 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 68 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 31 points and are trading 0.1% above fair value.
Market participants remain fixated on the speech Fed Chair Powell will deliver at 10:00 a.m. ET on Friday at the Jackson Hole Economic Symposium. There is an expectation that he will bless the idea of a rate cut in September using Fedspeak that doesn’t indicate as much explicitly, but which says it implicitly.
A relatively hawkish-sounding Fed chair would take the capital markets by negative surprise since they have been so busy in recent weeks pricing in a rate cut in September, as well as in November and December, according to the CME FedWatch Tool.
Looking at this morning’s data, initial jobless claims for the week ending August 17 increased by 4,000 to 232,000 (Briefing.com consensus 225,000) and continuing jobless claims for the week ending August 10 increased by 4,000 to 1.863 million.
The key takeaway from the report is that it won’t alter the market’s rate cut view or the inclination to think the economy can avoid a hard landing.
The economic calendar will be rounded out today with the preliminary August S&P Global US Manufacturing PMI (prior 49.6) and Services PMI (prior 55.0) reports at 9:45 a.m. ET and the July Existing Home Sales Report at 10:00 a.m. ET (Briefing.com consensus 3.90 million).
The news from those reports will be enmeshed with earnings news that includes relatively disappointing results and/or guidance from Williams-Sonoma (WSM), Advance Auto Parts (AAP), Urban Outfitters (URBN), Snowflake (SNOW), and BJ’s Wholesale Club Holdings (BJ).
Those stocks are all suffering material declines in pre-market trading. Conversely, Agilent Technologies (A), Zoom Video (ZM), Peloton (PTON), and Synopsys (SNPS) are all trading higher after their reports.
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Originally Posted August 22, 2024 – Riding on rate cut support
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