Stock markets fluctuated during Wednesday’s trading, as investors awaited Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole, scheduled for Friday. Powell is expected to lay the foundation for the impending monetary policy easing, supported by data revealing a softening job market and the deceleration of inflation toward the central bank’s target.
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In August, accelerating rate-cut expectations and signs of continued consumer resilience helped the markets rebound from their previous four-week slump. Stocks rallied for eight consecutive trading days through Monday, the longest such streak this year. Although stock markets clocked in a small decline on Tuesday, pressured by a fall in energy shares, Wednesday ended on a positive note after investors saw additional dovish signs in both payroll revisions and the Fed minutes.
Regarding employee numbers, the Bureau of Labor Statistics said that it estimates that the job growth was almost 30% lower over the past year than previously reported. It revised nonfarm payroll numbers down by 818,000 for the 12 months through March of this year, the steepest such revision since 2009.
Meanwhile, recently released minutes of the FOMC’s July meeting revealed that Fed officials were overwhelmingly in favor of cutting rates immediately, though they eventually ended up voting to keep them unchanged at that time. Most policymakers opined that if the inflation continues to ease as expected, it would be appropriate to ease the monetary policy in September.
Now, with the latest data confirming a softening labor market and weakening price pressures, the stage has been set for the central bank to reduce rates at its next meeting. Investors expect Powell to shed some light on the pace of the impending easing process, and markets are now pricing in a full percentage point worth of rate cuts by the end of this year.
As the minutes and the payroll revision increased investor confidence, all main indexes ended Wednesday with gains. The S&P 500 (SPX) gained 0.42%, rising to less than 1% from its all-time high. The Nasdaq-100 (NDX) rose by 0.53%, the Nasdaq Composite (NDAQ) increased by 0.57%, and the Dow Jones Industrial Average (DJIA) gained 0.14%.
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