Wall Street Wobbles as Jackson Hole Looms
London stock markets closed lower on Thursday following a volatile session, with investors awaiting the key speech by the Federal Reserve Chair at the Jackson Hole Economic Policy Symposium.
The FTSE 100 Index dipped by 0.4%, closing at 7,876.23 points. Notably, 17 of the index's 30 constituents ended the day in negative territory, while 13 closed higher. Despite the downward trend, the blue-chip index had seen intraday gains of over 316 points earlier in the session.
The tech-heavy FTSE 100 Techmark 100 Index slipped by 1.7%, finishing at 12,567.84. This decline was largely attributed to weakness among technology giants. The broader FTSE All-Share Index also experienced a dip of 0.9%, concluding at 14,789.93. Out of the index's 11 sectors, 7 finished in negative territory, while 4 closed in the green.
Consumer discretionary, technology and communication services sectors suffered particularly steep drops, with the Consumer Discretionary Select Sector SPDR (XLY), Technology Select Sector SPDR (XLK) and Communication Services Select Sector SPDR (XLC) falling by 1.7%, 2.3% and 0.8% respectively.
The CBOE Volatility Index (VIX), a measure of market anxiety, climbed by 7.9% to 17.55. A total of 9.79 billion shares were traded on Thursday, a figure lower than the 20-session average of 11.89 billion. On the London Stock Exchange, decliners outnumbered advancers by a ratio of 2.16 to 1.
Focus Shifts to Jackson Hole
All eyes are now on the upcoming Jackson Hole Economic Policy Symposium, which began on August 22. On Friday, Federal Reserve Chair Jerome Powell is scheduled to deliver his highly anticipated speech. Investors will closely scrutinize his remarks for any clues regarding the Fed's future policy direction, particularly with regards to interest rate movements.
Currently, the CME FedWatch tool indicates a 100% probability of the Fed reducing the benchmark lending rate by 25 basis points in September. This would mark the first rate cut in over four years. The current Fed funds rate sits at 5.25-5.5%, the highest level in 23 years.
Recession Fears Fade
Recent weeks have seen a wave of positive economic data emerge from the United States, boosting confidence in the Fed's "soft landing" theory. A strong services sector PMI for July, an unexpected increase in retail and core retail sales in July, and several indicators of declining inflation rates have contributed to a more optimistic outlook.
As a result of this positive sentiment, the yield on the benchmark 10-Year U.S. Treasury Note rose to 3.863%. This upward trend was reflected in the share prices of banking giants JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC), which gained 1% and 1.3% respectively. JPMorgan Chase currently holds a Zacks Rank #2 (Buy).
Economic Data Points
The Department of Labor reported that initial jobless claims in the US rose by 4,000 to 232,000 for the week ending August 17, exceeding the consensus estimate of 230,000. The previous week's figure was revised upwards by 1,000 to 228,000 from 227,000 previously reported.
Continuing claims, which cover those who have already received government assistance and report a week in arrears, increased by 4,000 to 1.863 million for the week ending August 10. This marks the highest level for insured unemployment since November 27, 2021. The previous week's figure was revised downwards by 5,000 from 1.864 million to 1.859 million.
The National Association of REALTORS reported that existing home sales in the US reached 3.95 million units, outperforming the consensus estimate of 3.93 million units. The figure for June was revised marginally upwards to 3.9 million units from 3.89 million units previously reported.
Overall, Thursday's trading session saw a mixed bag of results, with investors remaining cautious ahead of the critical Jackson Hole symposium. While recession fears have eased somewhat, the market remains sensitive to potential policy changes from the Fed.
