By
Steve Muchoki
April 16th, 2024
Wall Street investors are eagerly waiting for the Fed’s commentary on the Jackson Hole symposium event scheduled later today. The Fed is most likely to taper the stimulus measures for the rest of the year.
On Thursday, August 26, the US stock indices remained under pressure dropping for the first time after a five-day winning streak. Each of the top-three indices corrected by 0.5-0.6% yesterday.
This happened as Wall Street investors remained under doubt while waiting for the Federal Reserve’s plans of dialing back on the monetary stimulus.
US Stock Indices Movements
The Dow Jones (INDEXDJX: .DJ) lost 0.58% or 192 points giving a closing at 35,213 levels. Similarly, the S&P 500 (INDEXSP: .INX) dropped 0.5% closing at 4470 levels. The tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) was also down 0.6% ending under 15,000 levels.
Mixed economic data is putting Wall Street on tenterhooks. As per the Labor Department, the weekly jobless claims for the last week stood at 353,000. This was a bit higher against the expected number of 349,000.
According to the Commerce Department, economic growth stood at 6.6% for the second quarter of 2021. This also stood more or less on the expected lines.
However, the energy stocks witnessed strong selling pressure on Thursday. Companies in this sector corrected anywhere between 2-3% on Thursday. The share price of Diamondback Energy and Occidental Petroleum dropped by 2.5%. Similarly, APA Corp. lost 2.4% and Halliburton fell 1.9%.
All Eyes on Fed’s Jackson Hole Symposium
The much-awaited Jackson Hole symposium from the Federal Reserve will happen virtually on Friday, August 27. During the event, the central bank executives will brief on Fed’s decision on stimulus tapering.
Reports are that the Fed is considering dialing back its $120 billion monthly stimulus purchases. Esther George, president of the Kansas City Fed told CNBC that it is “appropriate” for the Fed to opt for curtailing the stimulus. She further noted:
“When you look at the job gains we saw last month, the month before, you look at the level of inflation right now, I think it would suggest that the level of accommodation we’re providing right now is probably not needed in this scenario. So I would be ready to talk about taper sooner rather than later.”
James Bullard, St. Louis Fed president also believes that the Fed should begin with its stimulus tapering measures soon. This will prevent the US economy from overheating, added James.
“I think we want to get going on taper. Get the taper finished by the end of the first quarter next year. And then we can evaluate what the situation is and we’ll be able to see at that point whether inflation has moderated and if that’s the case we’ll be in great shape. If it hasn’t moderated, we’re going to have to be more aggressive to contain inflation,” added he.
Surge in the 10-Year Treasury Yield
On Thursday, the yield for the 10-year Treasury note surged to 1.375%. This was the highest level since the beginning of August 2021. Commenting on it, Jim Paulsen, chief investment strategist at the Leuthold Group said:
“The 10-year Treasury bond yield has continued rising in recent days and exploded higher in [Wednesday’s] trading, sending a strong message that the delta variant of Covid may be peaking in the U.S. which should improve confidence, restart economic reopenings, and drive investment flows toward small caps and cyclical”.
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