US stock futures are flat and rates rise ahead of today's main event: Fed chief Kevin Warsh’s Jackson Hole speech at 10am ET (full preview here) as traders seek clarity on his economic outlook and his strategy for lowering inflation back to the Fed's 2% target. As of 8:00am ET, S&P futures are little changed and Nasdaq 100 futures are lower following the Nvidia-driven rally for the index in the prior session, when however only 30% of the S&P and 1 of 11 sectors closed green as the index continues to be carried by a handful of AI names while the median stock goes nowhere. Pre-market, Mag 7 stocks are mostly higher led by TSLA (+0.
6%) and AMZN (+0.3%); NVDA is the laggard (-0.5%).
PayPal slumped 16% in premarket trading after Advent and Stripe abandoned their pursuit of the firm. Overnight, headlines were largely quiet with WTI dropping further as the Iran conflict remains quiet. Bond yields are 1-2bps higher (10Y 4.
69% and 3Y rates up two basis points to 5.21%) while the dollar and gold barely budged. Brent crude fluctuated.
Copper headed for a ninth weekly gain, the longest run since 2020. USD is flat. Commodities are all modestly higher across base metals, precious metals (silver +1.
5%) and ags. Today's US economic data calendar includes August MNI Chicago PMI (9:45 a.m.
New York time, several minutes earlier for subscribers), August final University of Michigan sentiment (10 a.m.) and August Kansas City Fed services activity (11 a.
m.). In premarket trading, Mag 7 names are mostly higher: Tesla +0.
4%, Alphabet +0.3%, Amazon +0.4%, Meta +0.
2%, Apple +0.2%, Microsoft -0.3%, Nvidia -0.
3%Affirm Holdings (AFRM) climbs 13% after the financial technology company forecast revenue for the first quarter that beat the average analyst estimate. Also, the company and Shopify expanded their global partnership to launch Shop Pay Installments in Australia.Autodesk (ADSK) falls 4% as the application software company forecast adjusted earnings per share for the third quarter that missed the average analyst estimate.
Citi notes that the company’s sales growth looks to be moderating in the second half of the year.Elastic (ESTC) rises 18% after the company boosted its adjusted earnings per share guidance for the full year and posted guidance that beat the average analyst estimate.Gap (GAP) gains 14% after the apparel retailer named Michael Francis as head of Old Navy and profit outpaced estimates, offsetting a sales decline at the value chain and lower sales guidance.
Marvell Technology (MRVL) reported second-quarter results that modestly beat expectations and gave an outlook that is above the analyst consensus. However, shares of the chipmaker are down 7%; the stock had soared more than 180% this year, as of its Thursday close.PayPal (PYPL) falls 17% as people familiar with the matter say that a consortium of buyout firm Advent and payment processor Stripe has decided to abandon its pursuit of the fintech pioneer.
SentinelOne (S) falls 3% as the cybersecurity platform’s forecast for fiscal-year adjusted EPS trails the average estimate.Solstice Advanced Materials (SOLS) rises 15% after the company and Element Solutions mutually agreed to terminate their merger pact.Ulta Beauty (ULTA) falls about 1% as higher discounts and promotions weighed on the cosmetics retailer’s margins.
Analysts said gross margins were underwhelming but noted guidance could be conservative.In other corporate news Gap jumped in premarket trading after naming a retail industry veteran as head of Old Navy and reporting profit above estimates, offsetting a sales decline at the value chain and lower sales guidance. Tencent released a foundation model it says outperforms rivals Z.
AI and Moonshot AI in internal tests. The UAE has given SpaceX’s Starlink a 10-year general satellite services license. Fox responded to a Reuters report that Rupert Murdoch and Lachlan Murdoch are considering a recombination of Fox and News Corp.
, saying there have been no discussions on the topic since consideration of a possible merger in 2022. Element Solutions and Solstice Advanced Materials mutually agreed to terminate their merger pact.As described in our Jackson Hole preview (here) Warsh’s address, scheduled for 10 a.
m. New York time, is shaping up as a crucial moment for markets as doubts about his commitment to taming inflation have helped push up long-term yields. A divided policy committee and the Treasury’s bond market intervention are further complicating the backdrop.
“Investors are reluctant to increase their exposure just hours before Kevin Warsh’s speech,” said Nabil Milali at Edmond de Rothschild Asset Management. “His recent comments have been so vague that no one knows what to expect today, with some investors anticipating a very hawkish message and others expecting the exact opposite.” Warsh’s speech could flatten the US yield curve, bolster risk appetite and support the dollar, if he gets it right, according to Bank of America's Michael Hartnett.
“What investors want to see is the framework that the Fed is using to think about the economy to allow markets to better assess incoming data,” said Hugh Gimber, global markets strategist at JPMorgan Asset Management. “That’s the piece that’s been missing at the moment.”Goldman rates trader George Cole made the following notable remarks ahead of J-Hole:Obviously the speech is very interesting in the context of the buyback announcement, the Druckenmiller op-ed, and the July meeting, which was a head-scratcher.
He seemed to endorse the idea that higher long-end yields were a reflection of the market finally standing on its own feet and getting some vol back after years of central bank repression. I think that's a somewhat false narrative, but that was the story he gave us — only for Bessent to say the market doesn't understand the fundamentals, has the price wrong. Philosophically, you can't claim to want an unpolluted read of market pricing while bullying that same market.
So we'd be surprised if he re-runs the July script and celebrates the move higher in long-end yields.What we're looking for instead is something vol-reducing: marginally hawkish near term, but fundamentally calming. The market isn't worried about the Fed's stance — it's confused about what the Fed is actually doing.
Three things would help: 1) a clear statement that the policy rate, not long-end yields, is the main transmission mechanism; 2) an acknowledgement that recent data has been encouraging and reaffirms recent FOMC decisions — not forward guidance, but evidence the Fed is reading the data in a familiar, sensible way; and 3) a recommitment to price stability that sounds a bit more like June.The speech will be more significant for foreign-exchange, gold and bond markets than for equities, said Ulrich Urbahn at Berenberg. History suggests a similar response, with the S&P 500 gaining just 0.
4% on average in the week following the gathering, data compiled by Bloomberg show. “A firm message on inflation, fiscal credibility or the need to preserve restrictive policy would tend to lift real and nominal long-end yields, support the dollar and pressure duration-sensitive assets,” Urbahn said.Bloomberg’s Editorial Board writes that investors demanding clear answers to their many questions from his speech are almost certain to come away disappointed.
“Warsh can and should try to dispel some of the doubts that have arisen since his appointment began in May. But it’ll be a while before he can provide a definitive account of his preferred approach to monetary policy. Having commissioned five task forces of eminent experts to offer advice, he has little choice but to wait until they’ve reported back and he and his colleagues have discussed the findings.
” - Bloomberg EditorialWhat can’t wait, though, is a commitment to investors that the Fed will freely explain the rationale for its actions going forward. To put it more bluntly, Warsh needs to say: “Message received.”Elsewhere, Citadel Securities posted a