Market Pulse

In focus

Earnings, inflation, and Federal Reserve (Fed) policy are still on the forefront of investors’ minds. The continued crosscurrents are likely to result in choppy markets as investors digest incoming data and try to ascertain how it impacts any of the three previously mentioned items.

With earnings season slowly wrapping up, it can be said that earnings were better than feared, with companies continuing to show their resilience in such a dynamic and uncertain environment. Earnings and sales continued to surprise to the upside for the quarter, despite fears that profits would start faltering as the Fed ramps up its policy tightening and inflation eats into consumers’ spending power. However, there is still earnings risk as the global economy continues to slow.

On the topic of the Fed and inflation, this week’s Jackson Hole symposium will give markets a bird's eye view of how some central bankers are thinking about the inflation conundrum. Fed Chair Jerome Powell will give a speech that will likely include little forward guidance, but market participants will keep a close eye on his every word, nonetheless. After last month’s meeting where he stated the Fed would be less transparent and more data dependent, any communication is a chance for the Fed to give insight into how they are interpreting incoming data. This will be especially pertinent for investors given the continued gap between market expectations for Fed policy and the forecasts from Fed officials.

A look back

• Global stocks fell last week as equities in the U.S., emerging markets, and international developed markets fell. U.S. stocks outperformed their international peers.
• The 2/10-year U.S. Treasury yield curve steepened, though remained inverted, as 10-year yields rose to 2.98% while 2-year yields remained flat for the week.
• The Fed released minutes of last month’s meeting showing they agreed in “acting with resolve” to fight inflation. Markets read their unison and recent comments as hawkish.

A look ahead

• After the poor housing starts and existing home sales numbers last week, this week will show new and pending home sales to get an idea of the extent of the slowdown in the U.S. housing market.
• The Kansas City Fed hosts its annual symposium in Jackson Hole, Wyoming where many central bankers will give speeches and markets will watch for any clues about forward guidance.
• Economic releases: S&P Global U.S. Manufacturing & Services, New & Pending Home Sales, Durable Goods Orders, PCE Price Index.

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