MARKET WRAPS
Watch For:
Personal Income & Outlays for July; University of Michigan Final Consumer Survey for August
Opening Call:
Stock futures rose Friday as investors awaited Jerome Powell's speech at Jackson Hole, seeking clues about when the central bank might start to scale back its easy-money policies.
Major indexes are close to all-time highs, powered by expectations that strong economic growth will extend a surge in corporate profits. A key question for investors is when the Fed will scale back its $120 billion in monthly asset purchases and consider raising interest rates. Minutes from the Fed's late July policy gathering showed that many of the officials thought asset buying could start to slow down by the end of this year.
Powell is due to address the central-bank symposium in Wyoming at 10 a.m. ET and his remarks will be streamed online. Investors are looking to gauge whether the Delta variant, which threatens to delay a rebound in travel and leisure spending, will alter the Fed's plans.
"Everyone is waiting for Jackson Hole, for Powell's speech," said Joost Van Leenders, senior investment strategist at Kempen Capital Management. "It is clear the hawks in the [FOMC] are getting more vocal on this and there is not a full consensus. I would like to have more clarity on this."
Powell is unlikely to give a clear date at which the Fed will end its bond-buying program Friday and will probably stress that raising interest rates isn't linked to tapering, Van Leenders said.
A spurt of inflation has prompted some central-bank officials to push for stimulus to be dialed down soon. Three Fed officials said Thursday that the time to cut back on bond-buying is looming. "We want to get going on taper, get the taper finished by the end of the first quarter next year," Federal Reserve Bank of St. Louis President James Bullard said.
On the economic front, the Commerce Department is due to release measures of consumer spending and the Fed's preferred inflation gauge at 8:30 a.m. ET. The data on household outlays could show the continuing shift toward spending on in-person services.
In overseas markets, the Stoxx Europe 600 was relatively flat. Gains for shares of basic-resource companies offset losses for retail and banking stocks. Asian markets were mixed by the close of trading.
Stocks to Watch:
Dell projects above-seasonal revenue growth this quarter, despite industry-wide supply-chain challenges. Company officials said they see year-over-year growth up mid to high teens and, sequentially, up mid-single digits compared with the normal roughly 2% decline. The client solutions group, which saw record revenue of $14.3 billion in the second quarter, is expected to see a high-single-digit growth sequentially, they said.
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Four Corners Property Trust, building up its restaurant and retail holdings a few million dollars at a time, "has now invested over $1 billion in high-quality net-leased real estate" overall, including a $12.9 million deal for eight Tires Plus properties announced Wednesday. FCPT was spun off from Darden Restaurants in 2015, and tenants include Darden brands Olive Garden and LongHorn Steakhouse.
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KKR has agreed to buy New Zealand bus company Ritchies Transport, its fourth acquisition in the country in recent months. Financial terms of the deal weren't disclosed. A person with knowledge of the transaction said the bus company was valued at about $347 million. KKR's purchase of a majority stake in the 86-year-old family-owned company is conditional on approval from New Zealand's foreign investment regulator, which is expected to take four to five months.
Forex:
The dollar, which has strengthened in recent months on expectations the Fed will tighten monetary policy ahead of its big-economy peers, edged down against other major currencies, with the USD Index dipping back below 93.00.
However, said MUFG said the currency should remain supported overall, even if Powell avoids giving specific details about plans to taper asset purchases in his speech later.
"Rates and the dollar should remain supported by confirmation that a plan is emerging," said Derek Halpenny, MUFG's head of research for global markets in EMEA. MUFG expects Powell to confirm that progress is being made towards a plan for tapering, although the Fed is likely to want to see next week's jobs report and signs that the delta variant of coronavirus isn't worsening before giving more specific details.
"The advancing inevitability of QE tapering is unlikely to be altered by today - merely extended to September," Halpenny said.
Bonds:
In the bond market, the yield on 10-year Treasury notes ticked up to 1.345% from 1.342% Thursday.
Pantheon Macroeconomics doesn't expect Powell to signal a tapering start date at Jackson Hole because the Fed needs to see employment data in the fall first.
No one knows what will happen when schools and childcare fully reopen and the unemployment benefits end, so the Fed's leadership is reluctant to take any action until the consequences of these events are clear, said chief economist Ian Shepherdson.
"The labor market could look very different in the fall, so a Fed committed to driving unemployment back to pre-Covid levels as quickly as possible will want to wait to see exactly what plays out. We'd be amazed if Powell today hints at a specific date for tapering."
Commodities:
Oil prices extended gains in Europe, recovering Thursday losses, as a tropical storm swirls toward the Gulf of Mexico, threatening to disrupt supply.
Tropical Storm Ida in the Caribbean Sea is forecast to move through key oil-producing regions in the Gulf Friday, lifting prices in anticipation of supply disruptions. Investors are also feeling more confident that fresh virus cases shouldn't impact demand in the long term.
"The Delta variant has caused concern for global oil demand, but should be transient," said Helge Andre Martinsen, senior oil analyst at DNB Markets. "We have observed that in mature economies with a high vaccine uptake the mobility holds up despite increasing case numbers."
Gold prices have remained stable despite investors exiting ETFs in the build-up to Jackson Hole. Gold ETFs tracked by FactSet registered outflows of over $700 million over the last week.
Copper gained ahead of Powell's speech but Fitch said headwinds are likely to hold back the metal, with the slowdown in global economic growth momentum and the continued spread of the Delta variant creating a more challenging environment.
Meanwhile, risks of supply disruptions in the form of mine strikes in South America appear to be easing and Chinese demand cooling. This is likely to "prevent copper from reaching the highs seen in May this year, " Fitch said.
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08-27-21 0555ET
