The market is off to the races after Jerome Powell speech: Wein

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CNBC Television 30 August, 2021 - 06:23am 4 views

What is a taper Fed?

Tapering is the gradual slowing of the pace of the Fed's large scale asset purchases. Once the tapering is complete then the Fed may go for reduction in the size of the balance sheet. The aim is to slowly remove the monetary stimulus. Economic TimesWhy does the Fed need to taper & why is it such a worry for markets

When is the Jackson Hole Economic Symposium 2021?

US stock market investors are waiting with bated breath to see the outcome of the Jackson Hole Fed's annual Economic Policy Symposium, which is scheduled to be held by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming between August 26 and 28, 2021. Financial ExpressJackson Hole Economic Policy Symposium 2021: Global investors to have a close watch on the outcome

What time does Jerome Powell speak tomorrow?

Powell's speech is at 10 a.m. EDT tomorrow, but the Fed sometimes releases a copy of Powell's remarks just before he delivers them, so think about being on the lookout anytime after 9 a.m. ForbesTo Taper Or Not To Taper: Fed In Focus As Jackson Hole Kicks Off Tomorrow

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Will the Powell Rally Rollover into September?

FX Empire 31 August, 2021 - 10:25am

August has certainly been another positive month for global equity markets with the dovish comments from Federal Reserve Jerome Powell last Friday adding icing to the cake. Equity bulls are loving Powell’s messaging, especially after he stressed that Fed tapering and rate hikes are mutually exclusive events. With the S&P 500 on track for its seventh straight monthly advance and hitting its 12th all-time high this month, the path of least resistance certainly points north.

As we head into the new trading month of September, the key question is how much further can stock markets rally before bears enter the scene? Risks in the form of the Delta menace, concerns around China’s slowing economic growth and regulatory crackdown among other themes could impact upside gains. In the meantime, the overall market mood remains mixed with all eyes on the US jobs report on Friday.

The dollar is struggling to nurse the wounds inflicted by Jerome Powell’s dovish speech last Friday. It has weakened against every single G10 currency this morning with the Dollar Index dipping below 92.50.

Investors who were expecting the Fed Chair to make an official taper announcement or even provide fresh insight into the central bank’s plan on tapering were left empty-handed. Powell offered no concrete taper signals and made it clear that the Fed was in no rush to raise interest rates, despite the recent spike in inflation. According to Powell, the “substantial further progress” test has been met for inflation while there has also been “clear progress towards maximum employment”.

Given how he highlighted how there was “much ground to cover to reach maximum employment”, this makes Friday’s jobs report all the more important. Before this major risk event, investors will be offered appetisers in the form of the US August consumer confidence report and weekly jobless claims.

The New Zealand dollar entered Tuesday’s session with a spring in its step, appreciating against every single G10 currency. Buying sentiment towards the currency remains supported by optimism over the lockdowns successfully reducing new Covid-19 infections. This optimism seems to have overshadowed the fact the New Zealand business sentiment fell in August, even before the lockdowns were enforced across the country. Looking at the technical picture, the NZDUSD has the potential to push higher if prices can conquer the 0.7080 – 0.7110 zone, where the 100 and 200-day Simple Moving Averages reside.

After experiencing a sharp appreciation last Friday, gold continues to hover around key resistance levels. The precious metal may remain on standby ahead of the heavily anticipated US jobs report on Friday. In the meantime, gold is likely to be influenced by the dollar, treasury yields and risk sentiment. Should bulls fail to secure a daily close above $1818, prices may drift lower back towards $1800 in the near term.

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Progressives led by AOC call for Biden to replace Fed Chair Powell - KTVZ

KTVZ 31 August, 2021 - 09:23am

Progressive Democrats, including New York Rep. Alexandria Ocasio-Cortez, are calling on President Joe Biden to give the Federal Reserve a sweeping makeover by replacing Jerome Powell as chairman.

“We urge President Biden to reimagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice,” the lawmakers said in a statement Tuesday morning.

In addition to Ocasio-Cortez, the statement was issued Reps. Rashida Tlaib of Michigan, Ayanna Pressley of Massachusetts, Mondaire Jones of New York and Chuy Garcia of Illinois, all members of the Congressional Progressive Caucus.

Powell, a Republican and former investment banker, was nominated to lead the powerful Federal Reserve by former President Donald Trump in 2017, who later sharply criticized his handpicked chairman. Powell’s term as chair expires in February, and the White House has not said whether he will be reappointed.

Under Powell, the Fed wasted little time responding forcefully to the economic fallout from the pandemic in March 2020. Economists have credited the Fed’s historic actions with helping to prevent a full-blown depression and financial crisis in the United States.

The Fed is tasked by Congress to maximize the number of American jobs while keeping inflation low. Although the Democrats in the statement credited the Powell-led Fed with making changes to how it approaches its goal of full employment, they voiced concern over his track record on the climate crisis and regulation.

“Under his leadership the Federal Reserve has taken very little action to mitigate the risk climate change poses to our financial system,” the lawmakers said in the statement.

However, the Fed did join an international network of global financial regulators focused on climate change in late 2020. In June, Powell warned the climate crisis poses “profound challenges for the global economy and certainly the financial system.”

The AOC-led statement also criticized the Fed for “weakening” financial regulations enacted after the Great Recession, including capital and liquidity requirements, stress tests and the Volcker Rule. Powell has previously disputed the argument that the Fed has weakened regulations.

The Fed chair is appointed by the president. The term lasts four years. Looking for continuity, former Democratic Presidents Bill Clinton and Barack Obama reappointed Fed chairs that were appointed by previous presidents, both of whom were Republicans. But Trump did not reappoint Fed Chair Janet Yellen, who was appointed by Obama.

A White House official told CNN on Tuesday that when it comes to appointing Fed officials, Biden “will appoint the candidates who he thinks will be the most effective in implementing monetary policy.”

The Federal Reserve declined to comment.

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Progressives led by AOC call for Biden to replace Fed Chair Powell - KTVZ

BloombergQuint 31 August, 2021 - 09:23am

Progressive Democrats, including New York Rep. Alexandria Ocasio-Cortez, are calling on President Joe Biden to give the Federal Reserve a sweeping makeover by replacing Jerome Powell as chairman.

“We urge President Biden to reimagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice,” the lawmakers said in a statement Tuesday morning.

In addition to Ocasio-Cortez, the statement was issued Reps. Rashida Tlaib of Michigan, Ayanna Pressley of Massachusetts, Mondaire Jones of New York and Chuy Garcia of Illinois, all members of the Congressional Progressive Caucus.

Powell, a Republican and former investment banker, was nominated to lead the powerful Federal Reserve by former President Donald Trump in 2017, who later sharply criticized his handpicked chairman. Powell’s term as chair expires in February, and the White House has not said whether he will be reappointed.

Under Powell, the Fed wasted little time responding forcefully to the economic fallout from the pandemic in March 2020. Economists have credited the Fed’s historic actions with helping to prevent a full-blown depression and financial crisis in the United States.

The Fed is tasked by Congress to maximize the number of American jobs while keeping inflation low. Although the Democrats in the statement credited the Powell-led Fed with making changes to how it approaches its goal of full employment, they voiced concern over his track record on the climate crisis and regulation.

“Under his leadership the Federal Reserve has taken very little action to mitigate the risk climate change poses to our financial system,” the lawmakers said in the statement.

However, the Fed did join an international network of global financial regulators focused on climate change in late 2020. In June, Powell warned the climate crisis poses “profound challenges for the global economy and certainly the financial system.”

The AOC-led statement also criticized the Fed for “weakening” financial regulations enacted after the Great Recession, including capital and liquidity requirements, stress tests and the Volcker Rule. Powell has previously disputed the argument that the Fed has weakened regulations.

The Fed chair is appointed by the president. The term lasts four years. Looking for continuity, former Democratic Presidents Bill Clinton and Barack Obama reappointed Fed chairs that were appointed by previous presidents, both of whom were Republicans. But Trump did not reappoint Fed Chair Janet Yellen, who was appointed by Obama.

A White House official told CNN on Tuesday that when it comes to appointing Fed officials, Biden “will appoint the candidates who he thinks will be the most effective in implementing monetary policy.”

The Federal Reserve declined to comment.

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Ida Slams Gulf Coast, But Data Surge To Come Friday With Payrolls Report | Investing.com

Investing.com 30 August, 2021 - 03:24pm

What is it about Fridays lately? Last week, Friday brought a critical speech from Fed Chairman Jerome Powell. This week, the August payrolls report comes Friday and could help shape market action and Fed policy as the month of September starts.

Generally, analysts think another solid jobs report might be the last straw on the camel’s back to get the Fed to start tapering its $120-billion-a-month bond-buying program. That program was designed to ease borrowing costs and underpin the economy during the pandemic. The last three months saw average job gains of more than 800,000, so judging from those numbers, it looks like the Fed has been moving toward its goal to bring down unemployment. Still, Powell made clear we haven’t come far enough.

We’ll talk more later this week about analysts’ expectations for the August jobs report and how it might be affected by both the Delta variant and wage demands. At an early glance, analysts expect another solid gain of around 750,000 new jobs, according to research firm Briefing.com.

One thing to keep in mind: the employment numbers come on the Friday ahead of the Labor Day holiday. Because many traders tend to square up positions and tiptoe out early to enjoy a long weekend, the numbers might need to be either a big hit or a big miss in order to have a major market impact. But it might also mean we see some extra gyrations between now and Friday.

But first, we have a few days of market activity ahead. Topping this morning’s newsmakers: Hurricane Ida made landfall in Louisiana last night, exactly 16 years after Katrina rocked the area. While most crude oil production in the Gulf of Mexico—and much of the power grid in and around New Orleans—is currently offline, Ida has been downgraded to a tropical storm, and initial reports seem to indicate the worst has been spared, particularly those oil rigs.

After last week’s surge in crude oil futures, Monday started to stabilize, possibly interrupting a rally that had barely clawed above a three-week high, as Hurricane Ida’s tropical downgrade may have eased the energy markets a bit.

Also easing crude concerns, OPEC+ meets Wednesday to discuss a scheduled 400,000-barrels-per-day-output increase; OPEC delegates are likely to give the production ramp-up the green light.

For the moment, that “buy the dip” mentality, which so many of us have gotten familiar with over the last few weeks appears to remain front and center. Friday was another example after Thursday’s moderate losses. All but two S&P 500 sectors rose on Friday, with health care and utilities missing out, and “reopening” sectors like energy and financials again among the leaders. Those two topped the sector scoreboard last week.

For those keeping score at home, Friday marked the 52nd new high for the S&P 500 Index this year, and the 31st new high for the NASDAQ Composite.

Small-caps also rebounded Friday, a positive sign for anyone worried that a lagging Russell 2000 Index might be a harbinger of some kind of broader selloff, as it sometimes has been historically. Recent dollar strength— which tends to help small-caps gain ground over large-caps—may be one reason for RUT’s revival.

Having said that, some of the best performing stocks on Friday aren’t known for being too small. They included Occidental Petroleum (NYSE:OXY), Freeport-McMoran Copper & Gold Inc (NYSE:FCX), Caesars Entertainment (NASDAQ:CZR) and Advanced Micro Devices (NASDAQ:AMD). Looking at these names, you see a nice sweep across many sectors, including oil and gas exploration, mining, hotels and casinos, and semiconductors. It’s just one day, but if the market is healthy, that kind of diversification among the strongest performing stocks is what you often see.

Beyond that, Friday was a good day for the tech “mega-caps,” too, like Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL). Some analysts had worried that the five or six heavily-weighted mega-caps were too dominant in the recent rally and may have made things look better than they actually are. That wasn’t the case on Friday, at least.

We’re getting into a bit of an earnings desert here in these steamy days of late August, but maybe—as your grandma might have told you—investors can cool off with a bowl of hot soup as Campbell Soup (NYSE:CPB) reports this week. Zoom Video (NASDAQ:ZM), Chewy (NYSE:CHWY) and Broadcom (NASDAQ:AVGO) are other earnings to consider watching over the next few days before things wind down for the Labor Day holiday next Monday.

Even before Fed Chairman Jerome Powell’s speech on Friday, the market had been making new highs. His words didn’t appear to change the course as major indices plowed higher again into the weekend, and index futures start Monday morning with a slight extension of the rally.

More importantly, maybe, is what we saw with volatility after Powell’s remarks. The Cboe Volatility Index (VIX) had been flirting with 20 earlier last week, but by the end of the day Friday it was back below 17 and near recent post-COVID lows. It’s hard to find a better sign that the market approved of Powell’s comments.

Yes, Powell did make it clear the Fed has plans to eventually, maybe soon, begin to cut back on its bond purchase program. However, he didn’t say exactly when, and he also made it very clear that the Fed sees the tapering of bond purchases as a different process from any eventual rate hikes. That may have soothed investors who might have worried the Fed could go back quickly to the kind of regime we saw back in 2018 with regular interest rate increases.

The market also appeared soothed by Powell sticking to his favorite word, “transitory,” to describe inflation. He also defined it a bit more clearly. A lot of the price increases have been in durable goods, as demand for those items soared during the pandemic, while demand for services lagged. Some of the price pressure on durables, like used cars, he said, is already starting to go away and may actually fall. This could ease inflation in the months ahead, perhaps putting less pressure on the Fed to change policy too much.

He also made it clear that he hasn’t seen the price pressure start affecting wages. While we’d all like people to get paid more, the concern the Fed has is possible higher prices leading employees to demand higher wages, forcing companies to raise prices to pay their workers, a kind of “wage-price” spiral, so to speak. Powell said he’s seen no sign of that, but the Fed continues to closely watch inflation expectations and would clamp down quickly if those started getting out of hand.

The Fed meets Sept. 21-22, and anticipation could rise ahead of that meeting as investors debate whether the taper calendar might be revealed then. A lot could depend on jobs and other data before that. If the Fed sees more progress on employment in early September, some analysts think we might see a September taper timing announcement as more likely. The Delta variant, however, could have a say in that, too. Case counts—as well as fresh lockdowns and mask mandates—have been rising across the globe.

If the Fed announced tapering plans in September, maybe we’d see its bond purchases slow down late this year or early next. Some Fed presidents around the country are calling pretty loudly for a tapering relatively soon to ease pricing pressure. It sounds like Powell is just about on their page, so to speak.

Looking further ahead, the market sees chances of a rate hike as slim to none before next June, when the CME Fed funds futures contract indicates about a 12% chance of a first rise in rates. Even a year from now, there’s more than an 80% chance that rates will be right where they are now, the futures market tells us. The first month when the market sees a more than 50% chance of higher rates is December 2022.

That’s a bit earlier than the Fed’s last projections released in June, where most Fed officials didn’t expect the first hike until 2023. We’ll get a new set of Fed projections next month and it could be interesting to see how that squares with market expectations.

It might be tempting to use a possible taper announcement—along with the fact that September tends to be a relatively weak month historically—as a reason to lighten the load. But remember: August also tends to be weak historically, but barring any sort of late-month pullback, we could see a 2% gain on the month in the SPX.

CHART OF THE DAY: RUT REBUT. Earlier this month there were worries that small-cap stocks (RUT—candlestick) might drag down the broader market, as we’ve seen sometimes in recent years. However, the RUT rebounded over the last week or so and is back to levels last seen more than a month ago, as this three-month chart shows. It still lags the S&P 500 Index (SPX—purple line) during that time period. Data Sources: FTSE Russell, S&P Dow Jones Indices. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

COVID Trends That Last: Earnings late last week from Salesforce (NYSE:CRM) could serve as a good reminder of something we’ve talked about a lot during the pandemic. Namely, the “stickiness” of a product. Even before the earnings data, CRM was having a nice year in the market after its acquisition of Slack. Shares of CRM initially took off when COVID hit as people got stuck at home and cloud demand got traction.

As we’ve often seen, once people start using a product, they don’t necessarily stop just because circumstances change. Even though many workplaces are now open again, CRM raised guidance and continues to see acceleration in its business. Also, its executives said Thursday they don’t see a negative impact from the Delta variant.

Two Camps At Fed? The speech Friday by Powell sounded pretty “dovish,” because he basically kicked the can down the road on when the Fed might announce tapering its asset purchases. Analysts are now divided about whether the Fed could make that announcement at its September or November meeting. It also illustrated what could be a developing divide at the Fed, because several Fed presidents who spoke before Powell last week urged a quick transition to tightening policy based on signs of rising inflation. Powell sees the inflation, too, but continues to say it’s “transitory” and more focused on the durable goods part of the economy. He worries if the Fed moves too soon to dampen inflation, it could damage the recovery.

However, the Fed presidents could arguably be closer to their respective business communities, and are hearing straight from those contacts about supply shortages and price hikes. Many small firms continue to deal with those issues, and for them it may be hard to agree with Powell that inflation is “transitory.” They ultimately could face the tough choice of whether to raise prices for their customers or take a hit to their margins, and perhaps they think the Fed should move more quickly to tame the inflation beast. Powell, on the other hand, said in the past when the Fed moved too quickly on inflation, it hurt jobs growth.

Sectors To Watch If Taper Starts: Despite Powell’s dovish tone, his speech did make it pretty clear we’re getting close to a tapering of the Fed’s $120 billion a month bond-buying program. The question that he didn’t answer is when will this start? Last week, analysts at Goldman Sachs (NYSE:GS) raised the odds of the Fed announcing a taper at its November meeting to 45% from its prior 25%. If it starts looking like we’re approaching this move by the Fed, remember to keep an eye on several sectors for possible reaction. Often, it’s growth sectors like tech and communication services that feel the blow of possible higher rates more than other sectors. That’s what we saw when the Fed kept tightening rates back in late 2018 and the tech sector led a dramatic Q4 market dive. Tech also got slammed earlier this year when 10-year Treasury yields made a meteoric rise.

Financials are one likely sector that could benefit if the Fed starts tightening, but so far bond yields just haven’t been moving the way you might expect considering there’s so much talk of a more hawkish Fed policy. Higher yields typically help profit margins at the big banks. However, the 10-year yield actually fell about two basis points in the hour after Powell spoke on Friday. That could indicate that the bond market continues to agree with Powell about inflation being transitory. It could also have to do with Powell clearly separating bond-buying policy from rate policy in his speech.

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