Stocks Remain Steady as Fed Decision Looms and Volatility Rises
Stocks Remain Steady as Fed Decision Looms and Volatility Rises
By:JJ Kinahan
Anticipation builds as investors await Powell's speech. Meanwhile, revised payroll data keeps markets on edge
- Investors await Fed Chair Jerome Powell's speech amid volatility and rate cut speculation.
- Revised payroll data adds importance to the upcoming September jobs report.
- Market anxiety increases as election cycle and Fed decisions loom.
This week in Chicago has been lively, with the Democratic National Convention taking center stage and drawing intense media coverage. However, it's been one of the least eventful weeks of the year for investors. Despite the S&P 500 and Russell 2000 each dropping 0.9% yesterday, the Nasdaq Composite falling 1.7%, and the Dow Jones Industrial Average losing 0.4%, stocks have remained relatively stable throughout the week.
The week has been light on earnings reports, but there was some intriguing economic data in the form of revised payroll numbers. Markets have mostly been in a holding pattern, anticipating today's speech by Federal Reserve Chairman Jerome Powell from Jackson Hole at 9 a.m. CDT.
By the numbers
An interest rate cut in September is now considered a certainty, according to the CME Fed Watch Tool. What remains unclear is the size of that cut. In premarket trading, the odds of a quarter-point cut stand at just under 74%, while the chances of a half-point cut are slightly over 26%.
One of the key economic data points released this week was the revision of payroll numbers dating back to March. Estimates predicted a drop of between 800,000 to one million jobs, and the actual revision showed a decrease of 818,000 jobs. While this figure falls within the lower range of estimates, it underscores the importance of the next jobs report, which is scheduled for Sept. 6.
Individual stocks
This week has been quiet for individual stock news. But this morning, Cava Group (CAVA) reported earnings that exceeded forecasts and raised its guidance. The Mediterranean food company’s stock is up 9% in premarket trading, continuing its impressive run since going public just over a year ago.
Additionally, shares of Workday (WDAY) have surged by 13% in premarket trading after the company raised its margin outlook and announced a $1 billion buyback.
Powell’s speech
With volatility increasing slightly after its recent decline, markets appear to be on edge as we move deeper into the election cycle. Futures are pointing higher in premarket trading today, but I wouldn't be surprised if they pull back to around unchanged levels before Powell's speech.
Investors are keen to hear whether Powell will address the revised jobs number in relation to the upcoming rate cut. A quarter-point cut would likely suggest inflation is under control and that the economy is stable, while a larger cut could signal more significant economic concerns.
As always, it’s important to stick to your investment plans and long-term objectives.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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