Stocks Drift Ahead of Fed Minutes – Nasdaq Down 0.3%
Major U.S. stock indices drifted lower but remained near recent highs in trading yesterday as investors continued to price in potential rate cuts from the Federal Reserve in the coming months. The Nasdaq lost 0.33%, the S&P 500 declined by 0.20%, and the Dow edged down 0.15%. Traders are increasingly expecting deeper rate cuts, with treasury yields again taking a hit: the 2-year yield dropped by another 7 basis points to 3.998%, and the 10-year yield fell by 4.9 basis points to 3.818%. Meanwhile, the dollar reached an 8-month low on the index, closing at 101.44. Oil prices declined as Middle East tensions eased, with Brent down 0.6% to $77.20 and WTI off 0.4% to $74.40. Gold was once again the standout performer, hitting a new high of $2,531.60 before pulling back later in the session to close at $2,513.
First Fed Update Today – Dollar in Focus
In what has been a quiet week, the market’s focus is on two key updates from the Federal Reserve, with the FOMC minutes due tonight and Fed Chair Jerome Powell scheduled to speak on Friday from Jackson Hole. Recent market movements indicate a preference for a more dovish Fed, and tonight’s minutes could be the first indication that might challenge this optimism. The dollar hit an 8-month low overnight, and some FX traders are beginning to feel that this move may be overdone. Rate cut expectations for September have not shifted significantly in the last few days, and many believe that another weak jobs report will be necessary to justify the recent market moves. Any suggestion that the Fed may want more data before pushing for cuts could lead to sharp reversals, particularly with the release coming during thinner liquidity conditions at the end of the day.
Slow Calendar Day Ahead for Traders
Today is expected to be a slow trading day in what has been a thin calendar week. However, one of the highlights of the week will occur at the end of the New York trading session. The first two sessions of the day have little to offer, so range-bound conditions are expected ahead of the New York open. The main focus will undoubtedly be the FOMC meeting minutes, which will be released near the end of the session. Oil traders will also be keeping an eye on the latest U.S. inventory data, which will be announced earlier in the day.
