Fed’s Powell opens door to potential rate cuts at Jackson Hole
Investing.com - U.S. stock futures stagnated Thursday as investors awaited the start of the Federal Reserve’s Jackson Hole symposium later in the session, as well as the release of more labor market data. Retail giant Walmart also offers up its latest quarterly results, a widely-watched gauge of the health of the U.S. consumer.
1. Jackson Hole symposium starts
The U.S. Federal Reserve’s highly anticipated Jackson Hole symposium kicks off later Thursday, with central bankers from around the world gathering in Wyoming to discuss monetary policy.
The highlight is likely to be Jerome Powell’s speech on Friday - his last one at the annual gathering as Fed chairman - with investors searching for hints for a September cut after expectations soared in the wake of a surprisingly soft payrolls at the start of the month.
“Powell’s reaction function to recent stagflationary data will be key,” said analysts at Bank of America, in a note. “Will he be spooked by jobs revisions or lean into the labor supply slowdown?”
Market-implied odds of a quarter-point cut on September 17 currently stand at 80%, down from 84% a day ago.
Powell could also use his speech to guide how his tenure is recorded in the history books, particularly given the severe criticism leveled at him by President Donald Trump for refraining from rate cuts this year.
Trump’s growing influence over the direction of monetary policy, a potential threat to the independence of the central bank, has been an issue for the markets of late.
The president’s most recent target has been Fed Governor Lisa Cook, with Trump demanding her resignation over allegations made by one of his political allies about mortgages she holds in Michigan and Georgia.
2. U.S. futures steady ahead of jobless claims
U.S. stock futures traded in tight ranges Thursday ahead of the release of key labor market data as well the start of the Federal Reserve’s Jackson Hole symposium.
At 03:00 ET (07:00 GMT), the S&P 500 futures traded just 1 point, or 0.1%, lower, Nasdaq 100 futures gained 12 points, or 0.1%, and Dow futures rose 50 points, or 0.1%.
The major indices closed in a mixed fashion Wednesday, with the Dow Jones Industrial Average eking out a small gain while the S&P 500 and the Nasdaq Composite closed lower. This meant a four-day losing streak for the broad-based S&P 500 as tech names weighed heavily.
The minutes from the last Fed policy meeting indicated that the majority of policymakers still remained concerned about the labor market and inflation, as the two who dissented against the U.S. central bank decision’s to leave interest rates unchanged last month appear not to have been joined by other policymakers.
"Almost all participants viewed it as appropriate to maintain the target range for the federal funds rate at 4.25% to 4.50% at this meeting," the minutes of the July 29-30 meeting said.
Weekly jobless claims are due later in the session, and are expected to show a small increase in the number of Americans claiming unemployment benefits for the first time.
Existing home sales for July and the Philadelphia Fed’s business index are also due for release, while the Fed’s Jackson Hole symposium starts later in the day [see above].
3. Walmart reports Q2 results
Walmart (NYSE:WMT), the world’s largest retailer by sales, headlines the earnings slate Thursday, reporting its second-quarter results before markets open and providing a barometer on the health of the U.S. consumer.
Investors and analysts expect the retailer to report earnings of 74 cents a share, up nearly 11% from a year ago, and revenue of $176.16 billion, up 4%.
Sales fell slightly short of expectations in Walmart’s last quarter, but July’s retail sales report bolstered confidence in current spending trends.
Walmart’s low-price model and dominance in grocery can help it weather economic storms better than others. The world’s largest retailer by sales has surpassed earnings estimates for 11 consecutive quarters, according to LSEG data, sending its valuation soaring even as other consumer staples companies have struggled this year.
That said, Walmart’s management could strike a cautious tone on customer demand as the U.S. labor market cools and inflation ticks up, especially given the uncertainty surrounding the possible impact of the Trump administration’s tariffs policies.
The week has seen a number of big-box retailers reporting. Home Depot (NYSE:HD) started the ball rolling on Tuesday, while Target (NYSE:TGT) tumbled on Wednesday after the company named insider Michael Fiddelke as CEO and retained annual forecasts that were lowered in May.
4. Meta pauses spending on AI recruitment
Has the artificial intelligence craze run its course, or just pausing from breath?
Meta Platforms (NASDAQ:META) confirmed late Thursday a Wall Street Journal report that it has paused hiring for its new artificial intelligence division, ending a spending spree that saw it spend fortunes on a wave of AI researchers and engineers.
The Facebook owner is a member of the group of Wall Street’s so-called AI Hyperscalers, a bracket of tech megacaps spending hundreds of billions of dollars on developing new AI models and building more data center capacity.
Meta by itself has earmarked as much as $72 billion on AI spending this year.
A Meta spokesperson said that the pause was simply “some basic organizational planning: creating a solid structure for our new superintelligence efforts after bringing people on board and undertaking yearly budgeting and planning exercises.”
However, this trend of outsized capital spending has grown into a major investor concern in recent weeks, with shareholders questioning whether increased expenses and the stock-based compensations offered by Meta stood to hurt overall returns on investing in the company.
A report from the Massachusetts Institute of Technology, released earlier this week, claimed that 95% of AI ventures remained unprofitable, adding to the doubts over the extent of the AI spending.
5. U.S. demand boosts crude prices
Oil prices rose Thursday, adding to recent gains and buoyed by signs of resilient demand in the U.S., the world’s largest consumer of energy.
At 03:00 ET, Brent futures gained 0.3% to $67.30 a barrel, and U.S. West Texas Intermediate crude futures rose 0.8% to $63.22 a barrel.
Both contracts climbed over 1% in the prior session.
U.S. crude inventories fell by 6 million barrels last week, the U.S. Energy Information Administration said on Wednesday, while gasoline stocks dropped by 2.7 million barrels, both more than expected.
This indicated steady driving demand during the peak summer travel season, helping offset some concerns about global economic uncertainty.
Traders are also keeping an eye on developments in the search for a peace deal in Ukraine, expecting oil prices to fall once a peace deal is reached.
That said, the drawn-out efforts to secure peace in Ukraine mean Western sanctions on Russian oil supply remain in place, and that the possibility of tougher sanctions and more tariffs on Russian oil buyers still hangs over the market.
(Reuters contributed reporting.)