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Sell-Off From Last Trading Day Continues Into Monday's Pre-Market
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For sure it wasn’t the way we had hoped to close out the week of trading Friday, but the market indices bled out goodwill garnered earlier this month, when investors had seemed to talk themselves into the Fed making short work of interest rate hikes in the interest of seeing the economy grow again. But at the Jackson Hole symposium Friday morning, Fed Chair Jay Powell slammed the door on this notion.
The normally demure and cautious Powell used dramatic phrasing to describe the Fed’s job ahead in curbing inflation, including that the monetary policy body will “bring some pain to households and businesses.” This is not the language of someone looking to put an end to interest rate hikes. Further, Powell reiterated that +2% inflation was still the optimum level to which the economy needs to return, and we were still seeing PCE numbers, for instance, at +6.8%. This may require considerably more “pain.”
Normally, the market handles expectations of reports like this with a little more savvy: selling into the news on the hopes that better-than-expected results will pop valuations higher, and if the news is worse than expected, at least valuations were coming down anyway. Last week, after the initial sell-off period, investors started creeping back into equities on the thinking that the normally mild-spoken Powell couldn’t possibly stay hawkish and harsh in the face of inflation data starting to roll over.
As Zacks Exec VP Kevin Matras says in this morning’s Profit from the Pros, market levels are still solidly up from June lows. There may be some compromise from the Fed over time that +2% inflation isn’t obtainable in our current economic climate, and adjusts to, say, +3% instead. We also have plenty of data points between now and the Fed’s next meeting in four weeks, meaning there are plenty more opportunities for the Fed to see the economy is right on time with its inflation pullback — without needing to cause too much “pain” in the future.
The week ahead has a surprising amount of data, actually, including quarterly earnings reports for Best Buy (BBY - Free Report) , Hewlett-Packard (HPQ - Free Report) (HPE - Free Report) , Crowdstrike (CRWD - Free Report) and lululemon (LULU - Free Report) , among others. We also get a new Case-Shiller home price reports and JOLTS numbers tomorrow; private-sector jobs totals from ADP (ADP) Wednesday; Jobless Claims, Q2 Productivity and Labor Costs and ISM Manufacturing on Thursday; and the big non-farm payroll report from the U.S. Bureau of Labor Statistics (BLS) Friday.
Today we’re quiet on the new data front, so the sell-off from Friday continues into today’s pre-market. Participants are busy pricing back in 75 basis points for next month’s hike, and pushing out their slide rules for rate hikes north of 3% — perhaps even 4%? — by the end of the year. Yet pre-market futures continue to slide, bringing us back to levels prior to our bubble of hopefulness.
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Sell-Off From Last Trading Day Continues Into Monday's Pre-Market
For sure it wasn’t the way we had hoped to close out the week of trading Friday, but the market indices bled out goodwill garnered earlier this month, when investors had seemed to talk themselves into the Fed making short work of interest rate hikes in the interest of seeing the economy grow again. But at the Jackson Hole symposium Friday morning, Fed Chair Jay Powell slammed the door on this notion.
The normally demure and cautious Powell used dramatic phrasing to describe the Fed’s job ahead in curbing inflation, including that the monetary policy body will “bring some pain to households and businesses.” This is not the language of someone looking to put an end to interest rate hikes. Further, Powell reiterated that +2% inflation was still the optimum level to which the economy needs to return, and we were still seeing PCE numbers, for instance, at +6.8%. This may require considerably more “pain.”
Normally, the market handles expectations of reports like this with a little more savvy: selling into the news on the hopes that better-than-expected results will pop valuations higher, and if the news is worse than expected, at least valuations were coming down anyway. Last week, after the initial sell-off period, investors started creeping back into equities on the thinking that the normally mild-spoken Powell couldn’t possibly stay hawkish and harsh in the face of inflation data starting to roll over.
As Zacks Exec VP Kevin Matras says in this morning’s Profit from the Pros, market levels are still solidly up from June lows. There may be some compromise from the Fed over time that +2% inflation isn’t obtainable in our current economic climate, and adjusts to, say, +3% instead. We also have plenty of data points between now and the Fed’s next meeting in four weeks, meaning there are plenty more opportunities for the Fed to see the economy is right on time with its inflation pullback — without needing to cause too much “pain” in the future.
The week ahead has a surprising amount of data, actually, including quarterly earnings reports for Best Buy (BBY - Free Report) , Hewlett-Packard (HPQ - Free Report) (HPE - Free Report) , Crowdstrike (CRWD - Free Report) and lululemon (LULU - Free Report) , among others. We also get a new Case-Shiller home price reports and JOLTS numbers tomorrow; private-sector jobs totals from ADP (ADP) Wednesday; Jobless Claims, Q2 Productivity and Labor Costs and ISM Manufacturing on Thursday; and the big non-farm payroll report from the U.S. Bureau of Labor Statistics (BLS) Friday.
Today we’re quiet on the new data front, so the sell-off from Friday continues into today’s pre-market. Participants are busy pricing back in 75 basis points for next month’s hike, and pushing out their slide rules for rate hikes north of 3% — perhaps even 4%? — by the end of the year. Yet pre-market futures continue to slide, bringing us back to levels prior to our bubble of hopefulness.