Fed Chairman Jerome Powell’s speech at Jackson Hole Friday will be a highlight of the week.
Mandel Ngan/AFP via Getty Images
The stock market was rising Thursday as the Federal Reserve’s Jackson Hole conference was set to begin. Economic stimulus from China is providing a boost.
The Dow Jones Industrial Average has gained 69 points, or 0.2%. The S&P 500 has risen 0.7%, and the Nasdaq Composite has gained 1%.
The major indexes broke three-day losing streaks Wednesday, and are now looking to start a winning streak, though they still are lower for the week.
That sets the stage for the annual Jackson Hole Symposium, where the Fed will provide color on the pace of rate hikes going forward. Wall Street expects the Fed to slow down the pace of interest rate hikes on the back of a July inflation result that was below June’s reading, and that has helped boost the stock market off its June lows.
For the moment, the stock market isn’t afraid that higher rates will do much damage to the economy or corporate earnings. Companies, already, showed in the second quarter that they can still surpass analysts’ earnings estimates.
“The market seems more comfortable that higher interest rates will not derail earnings,” wrote Louis Navellier, founder of Navellier & Associates.
Now the question is whether the market has read the Fed correctly. For the September meeting, markets expect the Fed to lift the fed-funds rate by at least half a point, with a 61% chance of a three-quarter point increase. Any indication of that the increase will be half a point—or that there will be smaller hikes going forward—could boost stocks.
The risk to the stock market is that “the Fed is ready to be locked in tightening mode until inflation eases,” wrote Edward Moya, senior market analyst at Oanda.
But it’s not just about the U.S., as China took steps to boost its flagging economy. The 19-point $146 billion package of fiscal stimulus out of China buoyed Asian stocks and risk sentiment more broadly, and appears to be spilling optimism into the U.S. premarket session. While analysts have noted that it’s unlikely to be a panacea for lagging growth in the world’s second-largest economy, the measures should still provide some support to Chinese gross domestic product and debt investment.
“One supportive factor has been a further package of measures from China’s State Council that includes 1 trillion yuan focused largely on infrastructure spending,” said Henry Allen, an analyst at Deutsche Bank.
Alibaba (ticker: BABA) jumped 8.2% following the Chinese fiscal stimulus news, with shares in tech peers JD.com (JD) up 10% and NetEase (NTES) climbing 5%.
But starting tomorrow, Powell takes center stage.
Here are some stocks on the move Thursday:
Snowflake (SNOW) stock gained 22% after the company reported a loss of 70 cents a share, though sales were $497 million, above expectations for $467 million.
Tesla (TSLA) has dropped 0.5% after splitting its stock.
Nvidia (NVDA) has gained 3.5% after offering below-consensus revenue guidance.
Dollar General (DG) reported a profit of $2.98 a share, beating estimates of $2.94 a share, on sales of $9.43 billion, above expectations of $9.4 billion. The stock is down 1.2%.
Williams Sonoma (WSM) also posted a solid second quarter. The company reported a profit of $3.87 a share, beating estimates of $3.52 a share, on sales of $2.138 billion, above expectations of $2.029 billion. The stock was up 1.9%.
Lennar (LEN) stock gained 0.9% even after getting downgraded to Underperform from Neutral at Bank of America.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com and Jack Denton at jack.denton@dowjones.com
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