US Markets Retreat Ahead of Jackson Hole – Nasdaq Down 1.1%
US stock markets experienced a pullback overnight as investors reduced their positions ahead of key updates from central bankers later today. Tech stocks once again led the decline, with the Nasdaq losing 1.13%, the S&P 500 dropping 0.63%, and the Dow Jones falling 0.45%. US Treasury yields climbed higher, with the rate-sensitive 2-year yield jumping 7.7 basis points to 3.999% and the benchmark 10-year yield rebounding 8 basis points to 3.856%. The US dollar regained some lost ground after a weaker performance earlier in the week, with the DXY rising 0.4% to close around 101.41. Meanwhile, oil prices halted a five-day losing streak, with Brent crude up 1.83% and WTI up 1.86%, finishing the day at $77.44 and $73.27, respectively. Gold, however, retreated from recent historic levels, losing 1.2% to close at around $2,482.
A Pivotal Day for the Fed?
Today could prove pivotal for the Federal Reserve as Jerome Powell speaks at the annual Jackson Hole economic symposium. This forum has historically been used by previous Fed Chairs to signal significant policy shifts from the FOMC, and investors will be closely monitoring Powell’s remarks for any confirmation that the Fed is set to begin its long-awaited easing cycle. The Fed tends to maintain its course once it starts, which is why today’s speech is so critical. However, it’s worth noting that the Fed has already hinted that rate cuts will commence at the next meeting. The key question now is how aggressive these cuts will be both at the upcoming meeting and as we move towards the end of the year. While markets are still anticipating a 25-basis point cut next month, they are also pricing in an additional 75 basis points of cuts before 2025. This expectation is not reflected in the Fed’s dot plot, so there could be further market adjustments if Powell adheres to the Fed’s recent guidance.
Central Bankers in Focus for Markets Today
Central bank updates are the primary focus for traders today, with the potential for sharp market movements as key figures from around the world speak. In the Asian session, Bank of Japan Governor Kazuo Ueda is scheduled to testify before both houses of the Japanese Government in Tokyo regarding the recent rate hike. Traders are bracing for volatility in the yen, especially if there are any changes to the forward guidance during the testimony. The European session offers little on the event calendar, but things are expected to heat up as the US session begins. Attention will first turn to Canadian Retail Sales figures before swiftly shifting to Jackson Hole in Wyoming, where Fed Chair Jerome Powell and Bank of England Governor Andrew Bailey, among others, are set to speak.