S&P 500 and Nasdaq 100: Futures Gain as Powell’s Rate Cut Forecast Looms

Stock Futures Rise as Traders Await Powell’s Speech at Jackson Hole

Stock futures climbed on Friday morning as traders looked ahead to Federal Reserve Chair Jerome Powell’s highly anticipated speech at the annual Jackson Hole symposium. Investors are eager for insights on future interest rate cuts, which could signal the Fed’s direction in the coming months.

Futures Show Gains Ahead of Powell’s Speech

Futures on the Dow Jones Industrial Average increased by 133 points, or 0.3%, while the S&P 500 and Nasdaq-100 futures gained 0.5% and 0.7%, respectively. Powell is scheduled to speak at 14:00 GMT, and market participants expect him to indicate that the Federal Reserve may begin lowering interest rates soon. However, the details on the magnitude and frequency of potential cuts remain uncertain.

Adam Turnquist, chief technical strategist at LPL Financial, noted that Powell is likely to set the stage for the Fed’s first rate cut in over four years, citing reduced pricing pressures and cooling economic growth as key factors. The CME Group’s FedWatch Tool shows that traders are betting on a 25-basis-point cut at the Fed’s September meeting, with a smaller chance of a more aggressive 50-basis-point reduction.

Market Rebound in Focus Despite Recent Volatility

Thursday’s trading session saw stocks under pressure due to rising Treasury yields, with the S&P 500 dropping 0.9% and the Nasdaq Composite falling 1.7%, marking its worst day since early August. The Dow Jones Industrial Average also slipped by 177 points. Despite these declines, the Dow and S&P 500 remain modestly up for the week, although the Nasdaq is down 0.1% and on track for its fifth negative week in six.

Market strategist Adam Crisafulli emphasized that the core drivers of the recent market rebound—reassuring growth, solid earnings, and expectations of Federal Reserve easing—remain intact. However, he cautioned that high valuations and potential tempered expectations from Powell’s speech could pose challenges for bulls in the near term.

Economic Concerns Loom Over Rate Cut Expectations

The bond market reflected caution on Friday, with the U.S. 10-year Treasury yield edging lower as investors awaited Powell’s remarks. While the Fed’s July meeting minutes indicated that a “vast majority” of officials supported a rate cut in September, concerns about the broader economy persist.

BCA Research’s chief strategist, Garry Evans, warned that the U.S. economy might be nearing a recession, with upcoming rate cuts unlikely to prevent it. He pointed to a weakening labor market and declining manufacturing activity as signs of economic deterioration. Despite market expectations of multiple rate cuts by year-end, Evans remains skeptical about their effectiveness in averting a recession.

Market Outlook

As traders focus on Powell’s speech, the market outlook hinges on whether the Fed will adopt a dovish stance or maintain caution in its approach to rate cuts. A clear signal of easing could provide short-term support for equities, but ongoing economic uncertainties may limit the market’s upside potential. Investors should brace for potential volatility as the Fed’s policy path becomes clearer.

Technical Analysis

E-mini S&P 500 Index futures are trading higher, but inside yesterday’s wide range. This tends to indicate investor indecision and impending volatility.

A trade through this week’s high at 5665.25 will signal a resumption of the current uptrend. This could trigger an acceleration to the upside with 5721.25 the next target.

A move through 5582.75 could trigger an acceleration to the downside with the 50-day moving average at 5532.17 the inital target. Watch for a technical bounce on the first test of this indicator. If it fails as support then look for a possible steep drop into the pivot at 5420.50.