(Bloomberg) — A rally that put stocks on track for their best week in 2024 lost steam on Friday, with traders assessing the latest economic data for clues about the outlook for Federal Reserve policy.
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Just a week before Jerome Powell’s speech in Jackson Hole, Wyoming, Wall Street paused to evaluate a series of data points that on balance indicated that the Fed does not need to rush to implement aggressive easing because the economy is not moving from a cliff falls. . This view has led traders to scale back their bets on major rate cuts this week, as the market continues to brace for a first Fed cut in September.
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After a six-day rally, the S&P 500 was slightly lower. Government bonds saw small movements. The dollar slipped. Gold rose to $2,500 for the first time.
US consumer confidence rose for the first time in five months in early August on more optimistic expectations about their finances as inflation stabilized. The rise in sentiment was driven in part by President Joe Biden’s decision not to seek re-election. New home construction in the US fell in July to the lowest level since the aftermath of the pandemic.
“Investors should expect more volatility in the near term as economic data is likely to provide conflicting signals,” said Jeff Roach of LPL Financial.
Fed Chairman Jerome Powell will speak at the Kansas City Fed’s Jackson Hole Economic Policy Symposium next Friday.
With the central bank set to cut interest rates from their highest level in more than two decades, Powell’s comments will be closely analyzed for any clues about how the Fed chief views the economy in the wake of a weaker than expected jobs report. and a further decline in inflation.
The Fed is widely expected to cut borrowing costs at its next meeting on September 17-18, but there is some disagreement over how big that cut will be.
“The key message in Fed Chair Jerome Powell’s speech will likely be that monetary policy has overall worked as intended, and that current interest rate levels are restrictive,” said Anna Wong of Bloomberg Economics. “He might say that the balance of risk between the Fed’s mandates – employment and inflation – is about equal. We expect him to signal that an interest rate cut is coming, but not to indicate whether it will be 25 basis points or 50 basis points. That will depend on the August jobs report.”
Five big questions for the Fed in Jackson Hole: Bill Dudley
At Bank of America Corp. says Ralf Preusser that the coming weeks will likely determine whether the Fed will cut rates by 50-75 basis points this year or more aggressively.
“We maintain a bullish bias in U.S. interest rates and view a Jackson Hole-induced selloff as an opportunity to buy,” he noted.
Fed Bank of Chicago President Austan Goolsbee said the labor market and some leading indicators for the economy are showing warning signs, adding there are concerns that unemployment will continue to rise.
Business highlights:
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Texas Instruments Inc. is expected to receive $1.6 billion in Chips Act grants and $3 billion in loans, the Biden administration announced Friday, marking the latest major award from a program designed to boost U.S. semiconductor manufacturing.
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Rivian Automotive Inc. has started production of the electric commercial vehicle for Amazon.com Inc. makes, halted due to a parts shortage in the latest supply chain snafu for the EV maker.
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Shares of Bayer AG rose after a significant victory for the German company in the long-running cancer lawsuit over its Roundup weedkiller.
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BHP Group and labor leaders in Chile reached a preliminary wage deal on Friday, paving the way for a resumption of normal production at the world’s largest copper mine.
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A combination Covid-flu vaccination developed by Pfizer Inc. and BioNTech SE missed one of its targets in a final-stage trial: a setback for the companies as they search for lucrative new applications of a technology that has been successful in the pandemic.
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Autodesk Inc. continued a controversial sales strategy after promising investors it would stop and ignored internal warnings about its risks, according to previously unreported internal documents.
Some of the major moves in the markets:
Stocks
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The S&P 500 was down 0.2% as of 10:50 a.m. New York time
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The Nasdaq 100 fell 0.3%
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The Dow Jones Industrial Average fell 0.2%
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The Stoxx Europe 600 rose 0.2%
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The MSCI World Index rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.1% to $1.0987
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The British pound rose 0.2% to $1.2885
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The Japanese yen rose 0.8% to 148.04 per dollar
Cryptocurrencies
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Bitcoin rose 2.4% to $58,041.05
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Ether rose 1.3% to $2,582.95
Bonds
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The yield on 10-year government bonds was little changed at 3.91%
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The German ten-year yield fell by two basis points to 2.25%
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The British ten-year yield remained little changed at 3.92%
Raw materials
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West Texas Intermediate crude fell 2.2% to $76.41 a barrel
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Spot gold rose 1.2% to $2,485.67 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from John Viljoen and Richard Henderson.
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