After a roller coaster week for markets, this week is gearing up to be another busy one as events with plenty of market-moving potential grab the attention of investors.
As interest rates remain in focus, market watchers will be paying extremely close attention to the Federal Reserve and its chairman Jerome Powell this week. On Wednesday, The Federal Open Market Committee (FOMC) will be releasing its July meeting minutes, and on Friday, Powell will be speaking to kick off the Fed’s annual Jackson Hole Economic Policy Symposium.
Following the Fed’s first rate cut in more than a decade, the meeting minutes are expected to provide some additional light around its decision. Economists were widely expecting the 25 basis point cut in July; however, it was revealed that two members of the committee that voted against the cut. “The dissents from George and Rosengren, the only two hawkish voters this year, on lowering the policy rate may have not fully reflected the amount of debate that occurred during the July meeting on appropriate policy action,” Nomura wrote in a note Friday. “In that regard, it will be important to evaluate divisions in the FOMC to determine how high of a hurdle it will be for some participants to support another rate cut later this year.”
UBS expects that the minutes will illustrate a more detailed picture of which members wanted larger cuts, while some saw no need for a rate cut. “We infer that the decision was contentious. We expect that "some" FOMC members (in our view including the Chair, Williams, and Clarida) pushed for a larger rate cut, while several (meaning at least 6) saw no reason to cut,” the firm wrote in a note to clients Thursday.
Meanwhile, the focus Friday morning will be on Fed Chairman Powell when he delivers his speech in Jackson Hole. Powell is expected to clarify the Fed’s future monetary policy path and explain whether or not the Fed plans on continuing to cut rates.
TD Securities does not expect much clarity from the Fed at its Jackson Hole conference. “We don't think that the Fed will provide much new information on either front. Jackson Hole is an academic conference and not the appropriate forum to announce a change in policy. The Committee is also divided on the outlook for rates and the impact of weak global growth and trade uncertainty on the US remains uncertain.”
UBS economists agree with TD Securities and doesn’t think any notable comments will come out of Jackson Hole. “Given the July decision, when the cut was only 25bps and Powell seemed unable to lead the FOMC to a bigger cut, the risk of any speech disappointing market expectations for dovishness is high.”
On the corporate earnings side, retailers will take centerstage this week. Department store earnings continue to disappoint, but big-box retail is telling a different story about the retail industry. Last week, Walmart surprised investors with a strong quarter with growth in numerous categories. Even as additional tariffs loom, Walmart was able to deliver strong results. As many other big names gear up to report this week, investors will be looking for additional clues on how the retailers plan on tackling tariffs, as the trade war rages on.
Some of the heavyweights reporting this week include Home Depot, Kohl’s, Lowe’s, Target, Nordstrom and Dick’s Sporting Goods.
The yearlong U.S.-China trade war has been taking no prisoners. Corporations both in the U.S. and abroad have been feeling the heat, but Huawei has really been one of the main companies caught in the crosshairs. Earlier this year, the Trump administration blacklisted the Chinese tech giant and banned U.S. companies from selling their supplies to Huawei. The Commerce Department granted Huawei a reprieve in May that is set to expire on Monday. The U.S. is expected to announce and a 90-day extension to that reprieve, according to Reuters.
Friday: Foot Locker (FL) before market open
Wednesday: MBA Mortgage Applications, week ended Aug 16 (21.7% prior); Existing Home Sales, July (5.40 million expected; 5.27 million in June); FOMC Meeting Minutes
Thursday: Initial Jobless Claims, week ended Aug 17 (216,000 expected, 220,000 prior); Continuing Claims, week ended Aug 10 (1.726 million prior); Bloomberg Consumer Comfort, week ended Aug 18 (61.2 prior); Markit US Manufacturing PMI, August (50.5 expected, 50.4 in July); Markit US Services PMI, August (52.8 expected, 53.0 in July); Markit US Composite PMI, August (52.6 in July); Leading Index, July (0.2% expected, -0.3% in June)
Friday: New Home Sales, July (644,000 expected, 646,000 in June)
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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