Stocks lower, week ahead, oil, bitcoin, Artemis I-5 things to know
Here are five things you need to know for Monday, August 29:
1. — Stock futures extend slide after Powell’s inflation reality check
U.S. stock futures extended declines on Monday, while Treasury yields rose and the dollar tested multi-decade highs against its global rivals, as Federal Reserve Chairman Jerome Powell’s inflationary rhetoric rippled through global markets.
Powell’s Friday speech at the central bank symposium in Jackson Hole warned of the “pain” needed to tame the fastest inflation in more than forty years, and signaled further — and possibly larger — rate hikes to come between now and the end of December.
“Restoring price stability will take some time and requires vigorous use of our tools to bring demand and supply into better balance,” Powell said. “Reducing inflation is likely to require a sustained period of below-trend growth.”
Powell’s reality check on inflation pushed U.S. stocks into one of their worst one-day declines of the year on Friday, reversing a solid six-week rally that had been predicted to be in play for an easier rate path from the Fed.
However, those bets have been largely erased in the wake of Powell’s speech, as interest-sensitive 2-year Treasury yields rose to 3.47% in overnight trade, the highest since 2007, while the US dollar index rose 0.52% against a basket. of its global peers to trade a 109,372 and come within a whisker of the highest levels since 2002.
CME Group’s FedWatch, meanwhile, is pricing in a 68% chance of a 75-basis-point rate hike from the Fed at its next policy meeting in September, up from just 55% a week ago and just 28% at the start of the month .
Central banks around the world, apart from the People’s Bank of China, also echo Powell’s hawkish stance, with the European Central Bank’s Francois Villeroy de Galhau calling for a “significant” rate hike in September, even as the region’s economy flirts with both a looming one. energy crisis and the potential for recession.
Recession in Britain is also a growing risk, according to economists at Goldman Sachs, who called for a contraction to begin in the final three months of the year and extend into most of 2023, amid a rise in home energy costs that will affect discretionary spending and potentially lead to a consumer debt crisis.
The gloomy backdrop for stocks heading into the final week of August trading has markets on the back foot, with Europe’s Stoxx 600 marking 0.94% lower in early Frankfurt trade, following a 1.85% drop for the MSCI ex-Japan index in Asia and a decline of 2.66% for the Nikkei 225 in Tokyo.
On Wall Street, futures tied to the S&P 500 indicate an opening bell decline of 39 points, while those like the Dow Jones Industrial Average are priced for a 270-point move to the downside. Futures linked to the technology-focused Nasdaq indicate a drop of 163 points.
2. — Week ahead: Jobs data in focus as the headwinds in September approach
Friday’s August jobs report highlights a quiet week for earnings and data releases heading into the Labor Day long weekend and the start of the market’s historically toughest month.
The labor market has been the economic sector that has outperformed this summer, with 528,000 new jobs added in July, taking the overall unemployment rate to a near five-decade low of 3.5%.
However, this growth rate is likely to slow sharply in August, with forecasters looking for a headline total of 285,000 new jobs added to the world’s largest economy. However, wages are likely to rise as more than 11 million open positions remain unfilled, and that could test the market’s complacency about slowing consumer price pressures. Economists are looking for average hourly earnings to rise 5.3% from last year, and 0.4% from July.
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Beyond work, investors will get updates on the mortgage market with MBA’s weekly assessment on Wednesday, with a key reading of eurozone inflation set for the same day.
On the earnings front, Best Buy (BBY) HP (HPQ) Hewlett Packard Enterprises (HPE) and Broadcom (AVGO) are all scheduled to report this week, while Bed Bath & Beyond (BBBY) is expected to unveil its much-anticipated turnaround plans ahead of Friday’s jobs data.
3. — Oil prices extend gains on supply concerns
Global oil prices jumped higher on Monday, rising in the face of both a skyrocketing US dollar and dwindling growth prospects in the world’s largest economies, amid ongoing concerns about production cuts by OPEC.
Saudi Arabia, the cartel’s most influential member, has hinted at production cuts amid what the energy minister has described as “chaotic” global markets and the impending supply of Iranian crude, which could hit markets in the coming months if talks between the US, the EU and Tehran on the future until its nuclear program continues to move forward.
Deadly unrest over the weekend in Libya, a key OPEC supply nation, added to concerns about near-term disruptions that could keep prices high.
WTI crude futures for October delivery were marked 56 cents higher at $93.62 a barrel, while Brent contracts for the same month, the global price benchmark, added 28 cents to trade at $101.27 a barrel.
4. — Bitcoin falls back below $20,000
Bitcoin prices fell back below the $20,000 mark on Monday after a Friday rally for the dollar, and a jump higher in Treasury yields, on the back of Fed Chairman Jerome Powell’s hawkish address in Jackson Hole.
Powell’s speech, which raised the odds of another 75 basis point hike in the benchmark Fed Funds rate next month, drove the dollar to within touching distance of its two-decade high in currency markets over the weekend, putting downward pressure on assets such as such as gold and digital coins, which do not pay investors interest.
Additional pressure was attached to reports that creditors owed debts from the collapse of Mt. Gox crypto exchange in 2014 will begin accepting payments from administrators in Japan, a move that could see 137,000 new bitcoins added to the market — and possibly sold — in the coming weeks.
Bitcoin prices were last seen trading 1.59% higher in the Monday session at 19,881.70 each.
5. — Artemis I is “Go For Launch”
NASA will begin its first moon-focused rocket launch in more than fifty years on Monday with the launch of Artemis I, a mission consisting of the administration’s next-generation Space Launch System and an unmanned Orion capsule.
The Artemis I mission will take off from the Kennedy Space Center in Cape Canaveral, Florida, at 8:33 a.m. ET, and set off on a test flight that will take the combined spacecraft around the moon and back to Earth over the next six weeks.
The $37 billion program, more than a decade in the making, aims to return American astronauts to the lunar surface for the first time since Gene Cernan, the twelfth and last man to walk on the moon, in December 1972.
“This is a huge turn in history, because we are going back to the moon after 50 years, to stay, to learn to work, to create, to develop new technologies and new systems and new spacecraft to go to Mars,” said NASA Administrator Bill Nelson.
