The mood on Wall Street took a cautious tone Thursday with the Dow Jones, S&P 500, and the Nasdaq all finishing with losses as markets remain on edge heading into a key speech by Federal Reserve Chair Jerome Powell at the Jackson Hole Economic Symposium. The wait is over, and this much-anticipated speech is expected to define where interest rates and monetary policy are headed in the remaining part of 2025.
Key Takeaways
- U.S. stock indexes had a down day in anticipation of Powell’s Jackson Hole speech, and all indexes ended the day in the red.
- Investors are still unsure as to when an interest rate cut could be implemented, and expectations on a September cut have dropped substantially.
- Recent economic reports have been jumbled, as companies have been recording high activity, and jobless claims have been on the rise, creating fear about the labour market.
- The dismal earnings of Walmart just added to the pressure on the retail and consumer segment and reflect the bleak trend of tariff impacts and new consumer spending trends.
- The next comments of the Fed chair should set a trend in the coming months, influencing the stock market route and the monetary policy expectations.
News Highlights
The Dow Jones Industrial Average was lower by more than 150 points, and the S&P 500 was lower for five consecutive days in one of the longest downward streaks of the year. The technology-sensitive Nasdaq also declined, led by a sharp decline in Technology and Retail Stocks. Shares of retail giant Walmart are dropping following the company’s reporting a missed quarterly profit, the first in three years, adding to fears of tepid consumer spending and the effect of continuous tariffs.
The biggest shadow that is cast over the markets is the speech which Powell will make today in Jackson Hole. Investors are hoping to find signs of what the Fed will do next; will the Fed finally take steps to lower interest rates in September, or will it hold firm on the data-driven approach? Recent economic data in the U.S. have given an ambivalent picture- there has been vigorous business activity and elevated jobless claims, which have pointed to both expansions and strains, and this has made it unclear which way the central bank could go.
Traders’ hopes have been dented lately, as the frustratingly slow pace of interest rate reduction has caused the odds on a September move to drop to slightly above 73 per cent in recent days, in contrast to an 82 per cent chance about a week ago. The shift is attributable to the uncertainty of whether the Fed will be comfortable enough about inflation and stabilisation of the economy to act aggressively.
Due to this coin flip, traders should expect high levels of volatility as they await the comments of Powell. That speech may calm or fray investor nerves, depending on whether the Fed chair expresses his personal support of rate relief in the immediate future or whether he takes a wait-and-see attitude. Wall Street became all eyes on Jackson Hole and awaited any indications that could be formed and shape financial markets towards the rest of the year.
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