U.S. stock futures stabilize after Dow’s 374-point plunge preceding Powell’s key speech

U.S. stock futures final­ly exhib­it sta­bil­i­ty on Fri­day, poised for Fed­er­al Reserve Chair Jerome Pow­ell’s eager­ly antic­i­pat­ed address tak­ing place in near­ly five hours.

The Dow Jones Indus­tri­al Aver­age futures (YM00, 0.23%) rose 62 points, or 0.2%, reach­ing 34202. Mean­while, the S&P 500 futures (ES00, +0.22%) notched a gain of 6 points, or 0.1%, arriv­ing at 4392. Con­verse­ly, Nas­daq 100 futures (NQ00, 0.12%) retreat­ed by 5 points, or 0%, arriv­ing at 14857.

Thurs­day saw sig­nif­i­cant set­backs: the Dow Jones Indus­tri­al Aver­age (DJIA) plung­ing 374 points, or 1.08%, clos­ing at 34099. Sim­i­lar­ly, the S&P 500 (SPX) endured a decline of 60 points, or 1.35%, rest­ing at 4376, and the Nas­daq Com­pos­ite (COMP) plum­met­ed 257 points, or 1.87%, to 13464.

Under­ly­ing Mar­ket Forces

The recent mar­ket tumult con­trasts with the week’s over­all upward tra­jec­to­ry of the S&P 500. Even Nvidia, the chip­mak­er, wres­tled to main­tain gains fol­low­ing robust finan­cial results sur­pass­ing Wall Street expectations.

Bespoke Invest­ment Group high­lights the Nas­daq Com­pos­ite’s strug­gle to rebound above its 50-day mov­ing aver­age since breach­ing that lev­el a fort­night ago.

Tech­ni­cal com­pli­ca­tions aside, stock woes accom­pa­ny bond sell-offs. The 10-year yield (BX:TMUBMUSD10Y) reached its sixth peak this year, reflect­ing the econ­o­my’s strong per­for­mance. This is cou­pled with dimin­ished pur­chas­es from the Fed­er­al Reserve, Japan, and Chi­na for diverse reasons.

The Await­ed Speech

All eyes now turn to Fed­er­al Reserve Chair Jerome Pow­ell’s speech sched­uled at 10:05 a.m. East­ern in Jack­son Hole, Wyo. Pow­ell’s tone has shift­ed from last year’s hawk­ish stance, expect­ed to reflect a more bal­anced perspective.

Chief U.S. econ­o­mist at SGH Macro Advi­sors, Tim­o­thy Duy, observes a change in sen­ti­ment due to evolv­ing eco­nom­ic data. Boston Fed Pres­i­dent Susan Collins echoes this sen­ti­ment, indi­cat­ing the need for evi­dence of eco­nom­ic slow­ing before com­mit­ting to infla­tion control.

“I don’t think the Fed was com­mit­ted to an Oct/Nov rate hike at the July FOMC meet­ing, but that’s because it had a very pes­simistic out­look for growth at that time. And I think par­tic­i­pants were very con­fi­dent in that out­look, but incom­ing data has shak­en that con­fi­dence,” Duy said.

Simul­ta­ne­ous­ly, Euro­pean Cen­tral Bank Pres­i­dent Chris­tine Lagarde’s speech adds anoth­er lay­er of antic­i­pa­tion. Lagarde’s chal­lenge lies in address­ing slug­gish Euro­zone growth amid infla­tion concerns.