By
Steve Muchoki
April 16th, 2024
Volatility has ensued on Wall Street as the Fed is going to announce its decision on dialing back the bond purchases going forward, Dow Futures climb.
Last week at Wall street was full of volatility for investors. However, it’s a fresh start this week as Dow Futures (INDEXDJX: .DJI) futures surged 150 points on early Monday morning. Similarly, the S&P 500 (INDEXSP: .INX) and Nasdaq Composite (INDEXNASDAQ: .IXIC) futures were also in the positive territory.
There has been a growing concern among investors that Fed’s decision to pull back the monetary stimulus can slow down the economic recovery. Furthermore, the continuous surge in the COVID-19 delta cases is putting the added pressure.
Traders are eagerly awaiting the Jackson Hole symposium. This will give them the clue on Fed’s timeline for rolling back its $120 billion a month bond-buying program. This event will happen virtually on the coming Thursday and Friday.
Previously, the Fed had decided to conduct this event in a mixed virtual and live presentation. However, with the rising number of delta cases across the US the Fed has decided to go all virtual. Ahead this week, Fed Chairman Jerome Powell will be giving a speech dubbed “The Economic Outlook”.
Near Term Focus
Experts in the industry believe that the upcoming speech of Powell will have a near-term focus. Nomura economist Aichi Amemiya said:
“Given the recent deterioration in incoming data and the pandemic situation, we see some risk Powell focuses on increased uncertainty due to the latest COVID-19 surge. At a minimum, we view recent comments from Fed officials as supporting our view of a December tapering announcement despite a preference on the FOMC for November as of the July meeting.”
Last week, the market remained under pressure for most of the time. The blue-chip Dow futures dropped 1.1% while the S&P 500. The tech-heavy Nasdaq also dropped 0.7% over the last week. Craig Johnson, the technical market strategist at Piper Sandler, said:
“We suspect investor conviction is being challenged by the potential for upcoming monetary policy changes, shifting growth vs. value rotations, and a rising trajectory of new coronavirus cases”.
However, for the month of August, major benchmarks are likely to post modest gains. Despite the recent correction, the S&P 500 is up 1.1% this month so far. Similarly, the Dow Jones is up 0.5% and the Nasdaq is up 0.3% this month. Rod von Lipsey, managing director at UBS Private Wealth Management said:
“August is a historically volatile month for markets and this year is no different, with investors currently climbing multiple walls of worries. Upticks in Covid-19 cases and a downward spiral in Afghanistan are creating a crisis of confidence, at a time when many investors are on holiday.”