All three major U.S. stock indexes edged down, ending a multi-session rally in which the equities market bounced back from a steep sell-off driven by recession fears.
“Last week was the best week of the year for stocks, which begs the question whether the rally will continue,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
“But I don’t think today is indicative of a trend change,” he added. “Investors are taking a pause and they’re sleepy now after feasting for the last couple weeks.”
The eight days of consecutive daily gains were the longest winning streaks for the S&P 500 and the Nasdaq since November and December, respectively.
Powell’s speech will be parsed by market participants for hints regarding the number and timing of expected policy rate cuts this year and next.
“The question is, is the rate cut going to be 25 or 50 basis points, and I think that’s where a lot of the reading between the lines is going to happen, trying to see how aggressive that first cut is going to be,” Carlson said.
Financial markets are currently pricing in a 69.5% likelihood of a 25 basis-point reduction of the Fed funds target rate at the conclusion of the Federal Open Market Committee meeting in September, with a 30.5% chance of a super-sized cut of 50 basis points, according to CME’s FedWatch tool.
On Wednesday, the Labor Department is expected to release preliminary benchmark revisions to its employment data for the 12 months through March. A significant downward revision to the data could potentially affect the data-dependent Fed’s policy path.
Declining issues outnumbered advancing ones on the NYSE by a 1.55-to-1 ratio; on Nasdaq, a 1.84-to-1 ratio favored decliners.
The S&P 500 posted 38 new 52-week highs and no new lows; the Nasdaq Composite recorded 75 new highs and 72 new lows.
Volume on U.S. exchanges was 9.93 billion shares, compared with the 12.22 billion average for the full session over the last 20 trading days.
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Reporting by Stephen Culp in New York
Additional reporting by Shashwat Chauhan and Johann M Cherian in Bengaluru
Editing by Matthew Lewis
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