Stocks rise ahead of Jackson Hole, oil headed for weekly loss

Some hawkish talk ahead of Warsh address

The Fed’s annual economic symposium is underway at Jackson Hole, Wyoming, and several Fed policymakers have been giving their views on inflation ahead of Chair Kevin Warsh’s keynote address later today at 14:00 GMT. With low hopes that Warsh will offer any major policy insights, there’s little clarity from other Fed officials, even as they talk up inflation risks.

Kansas City Fed President Jeff Schmid, who’s hosting the event, and Cleveland Fed chief Beth Hammack maintained their hawkish stance. The Chicago Fed's Austan Goolsbee also sounded worried about inflation but didn’t explicitly voice support for a rate hike, while the Boston Fed’s Susan Collins was the least hawkish, describing the recent inflation data as “mixed”.

The comments suggest the Fed remains divided on the interest rate path and those who are undecided will likely need some more convincing before voting for a hike, especially after July’s weak NFP report. This probably allows Warsh to play for time before steering the rate-setting committee towards any particular decision, not least because he wants to wait for the review of his five task forces that were set up to look into the Fed’s operation.

Moreover, with this year’s Jackson Hole theme being about financial innovation, Warsh may avoid mentioning monetary policy altogether. However, following the recent volatility in Treasuries after Bessent’s intervention and uncertainty about the rate outlook, there’s a risk of a market fallout if Warsh doesn’t at least try to provide investors with some clues about what the Fed’s new framework will look like.

Stocks edge up but Marvell sinks

Ahead of that crucial speech, there’s a notable improvement in risk sentiment. Nvidia’s stellar earnings results on Wednesday eased concerns about AI demand not holding up. Its shares surged 8.7% on Thursday, though performance within the broader tech sector was very mixed.

Nevertheless, all three of Wall Street’s main indices finished yesterday’s session higher and are on track for solid weekly gains.

Shares in Asia and Europe are also in positive territory today, but US futures are mixed, as Marvell Technology could be a drag on chip stocks when Wall Street opens, with its stock tumbling 7.5% in pre-market trading. 

Marvell is yet another AI chip company that announced robust earnings but investors fretted about one tiny detail. With Marvell, investors were disappointed that the company’s chip deal with Google won’t materially boost revenue until after 2028.

Dollar on stronger footing, yen stays in the spotlight

Things are calm on the FX front as well, as investors await Warsh’s Jackson Hole address for direction. The US dollar has rebounded somewhat this week against a basket of currencies, aided by a steadier Treasuries market. Any comments by Warsh on the Treasury Department’s efforts to bring down long-dated yields will be closely watched.

But the rout has eased this week, and global bond yields are headed lower, with the exception of Japanese government yields. Investors continue to push up long-term Japanese borrowing costs on fears that inflation in Japan will spiral out of control.

CPI data released today for the Tokyo region appeared to back such worries, as the core reading increased to 1.8% in August from a downwardly revised 1.7%.

Yet, the yen barely budged and is slightly down on the week. The dollar has been slowly crawling higher all week, approaching 159.60 yen. But a breakout from the current sideways range may not happen today if Jackson Hole proves to be a non-event, not only if Warsh says little about rates but also because Bank of Japan Governor Ueda is not attending.

Instead, the next key focus for the Japanese currency will be the G20 meeting of finance ministers on Monday and Tuesday, where both Japan’s finance minister, Satsuki Katayama, and Ueda are expected to attend and potentially hold talks with US Treasury Secretary Scott Bessent.

Gold rally cools, oil prices take a dive

In commodities, gold continues to test the $4,600 level after finding support in the $4,570 region. Wednesday’s slightly stronger-than-expected PCE inflation data took the steam out of gold’s latest upswing, pulling it away from $4,700. However, the absence of any rate hike signals from Warsh today could revive the uptrend.

It’s been an even worse week for oil prices despite the ongoing stalemate in the Middle East. WTI and Brent futures are down more than 4% and 5% respectively in the week to date.

Signs that more oil is able to flow through the Strait of Hormuz even though there continues to be reports of attacks on ships is seen as relieving the oil shortages. There also appears to have been progress in the talks between Iran and Oman on how the two countries would manage traffic along the Hormuz Strait and share revenue.

However, Trump is refusing to talk to Iran and has signalled he does not want to revive the June ceasefire agreement, likely hoping that the latest economic sanctions will force Tehran to make more concessions.