Mid-Week Market Minute 08.31.22

Stocks were lower this week following on the heels of Federal Reserve Chair Jerome Powell’s speech in Jackson Hole on Friday. In the brief and direct address, Powell made it clear the focus of the Fed will be to bring down inflation even it means “pain for households and businesses.” Powell stated at the symposium that how much the Fed raises rates at their September meeting largely will depend on the data. Currently, futures markets are pricing in about a 70% probability of a 0.75% (75 basis point) rate hike next month, with the Fed funds rate now expected to be in the 3.75%-4.0% range by year-end. On Tuesday, the more Fed-sensitive 2-year Treasury yield briefly touched 3.49%, a level we have not seen since 2007 as relative strength in economic data continues to bolster the case for more aggressive policy tightening.

This week, the Conference Board’s gauge of consumer confidence improved more than expected in August to a three-month high, while the Jobs Openings and Labor Turnover Survey (JOLTS) showed available positions unexpectedly increased to 11.2 million in July. The report underscored a tight labor market that could continue putting upward pressure on wage inflation.Separately, the ADP employment report came in weaker than expected, showing slower-than-expected payroll growth. This report precedes the all-important monthly jobs report due out Friday, where non-farm payrolls are expected to increase 300,000 for the past month, with the unemployment rate expected to remain at 3.5%.  The upcoming jobs report, along with the August CPI report due Sept. 13, will be key data metrics for the Fed. 

Source: GSAM, CNBC, JPMorgan

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