Key Takeaways
- Fed Reiterates Hawkish Stance
- Bitcoin Down 10% For August
- Economic Data Heavy Week
Hawkish comments from Federal Reserve Chairman Jerome Powell caused stocks to give up early morning gains on Friday, but markets managed to close slightly higher. For the week, the S&P 500 was up a little less than 1% while the Nasdaq Composite gained 2%. However, even with those gains, stocks are on track for their first down month since February. A slew of economic data this week could decide if stocks storm into September or limp.
At the conclusion of their annual Jackson Hole meeting, both Chairman Powell and European Central Bank President Lagarde reiterated their hawkish stance with regards to interests rates. Following their comments, expectations for another rate increase this year moved higher according data provided by the Chicago Mercantile Exchange. While there is a near 79% probability the Fed will leave rates alone in September, the odds on an increase in November are now just over 50%.
What the Federal Reserve does at their next meeting could hinge on a slew of economic data set for release this week. Markets will be bombarded with a fresh set of numbers to digest from the housing market, a new reading on Personal Consumption Expenditures (PCE) and then on Friday, the latest employment report. PCE is the Fed’s preferred gauge for measuring inflation. The numbers to watch here will be the core month-over-month and year-over-year, both scheduled for Thursday. On a month-over-month basis, markets are looking for an increase of 0.2% and on a year-over-year basis, an increase of 4.2%. As for Friday’s employment report, non-farm payrolls are expected to increase by 170 thousand and the unemployment rate is forecast to have held steady from July at 3.5%.
Another developing story worth monitoring is a potential strike looming in the auto industry. United Auto Workers (UAW) members have put forth a set of demands that could threaten production plants at GM, Ford and Stellantis. The union is demanding a 46% pay increase along with changes to their pension system and a 32 hour work week. We’ve recently seen a decrease in prices for used automobiles and a strike now could have the potential to send those prices back higher if production comes to a halt.
A few other items of note include upcoming earnings, China and bitcoin. Although earnings season is winding down, there are some household names scheduled to report this week, including Best Buy tomorrow before the open and Lululemon later in the week. At tastytrade, we’ve seen our customers taking bearish positions in Lululemon of late, so we’ll see how the street actually reacts when Lulu reports Thursday after the close. Over in China, Beijing cut taxes on trading in an effort to prop up their stock market. Chinese stocks are down around 4% for the year. Finally, bitcoin is something I’m closely watching. Prices there are down 10% this month and in premarket trading, bitcoin is down 1%.
Lastly, market volatility as measured by the VIX continues to remain subdued. On Friday, VIX closed at 15.68 but is up 2% premarket. With summer winding down and kids back to school, it wouldn’t surprise me to see an uptick in volume as we head into September. Whether or not that translates into an uptick in volatility remains to be seen. As always, I would stick with your investing plans and long term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
Read the full article here
