Federal Reserve Chairman Kevin Warsh expressed concern about high inflation Friday at the Jackson Hole Economic Symposium.
U.S. stock-index futures were little changed on Sunday, as investors ponder the likelihood of a fresh interest-rate hike and look ahead to fresh labor data and tech earnings this week.
Dow Jones Industrial Average futures (YM00) were down about 60 points, or 0.1%, late Sunday. S&P 500 futures (ES00) and Nasdaq-100 futures (NQ00) were fractionally lower. Bitcoin (BTCUSD) was trading around $78,500, after rallying nearly 25% over the past month.
West Texas Intermediate crude (CL.1) rose 1.8% on Sunday following the Trump administration's announcement late Friday that it has secured a deal to assert control over a vast amount of Venezuela's oil reserves. That plan, however, leaves many practical questions unanswered, and may take years to come to fruition. WTI settled at $83.40 a barrel on Friday, down about 3.7% for the week. Meanwhile, Brent crude (BRN00), the global benchmark, ended the week down more than 5.6%, settling Friday at $88.10 a barrel. Meanwhile in the Middle East, a weeks-long quiet spell in the Iran war was broken when U.S. officials said American forces had struck Iranian rocket launchers along the Strait of Hormuz, the Associated Press reported.
On Friday, Fed Chair Kevin Warsh spoke at the annual Jackson Hole, Wyo., economic symposium, and opened the door to an interest-rate hike at the Fed's next meeting in September, saying inflation is a concern. That led to a big jump in short-term Treasury yields, as the 2-year yield rose 0.118 percentage points to 4.348% on Friday. Expectations for rate hike jumped to 60% as of Sunday, according to CME's FedWatch tool, up from 40% before Warsh's speech.
"Before Jackson Hole, the market largely asked what the economy would need to do to force the Fed back into tightening," Stephen Innes, managing partner at SPI Asset Management, said in a weekend note. "Now the question is increasingly what the economy has to do to keep the Fed from tightening, and that subtle shift in the burden of proof is what the bond market understood first."
Stocks closed lower Friday as investors digested Warsh's comments, but all three major indexes still managed to end positive for the week. The S&P 500 SPX gained 0.5%, for its fourth weekly gain in the past five weeks, while the Dow DJIA rose 0.5% and the Nasdaq COMP advanced 0.9% for the week.
Investors will be looking forward this week to fresh labor data, including Friday's unemployment-rate report, as well as inflation readings on U.S. manufacturing and services.
"But the market is already looking over Friday's jobs report toward the inflation numbers waiting behind it, because that is where Warsh has told us the argument ultimately lives," Ives wrote in his note. "A stronger jobs number, especially one accompanied by sticky wages and an unemployment rate refusing to budge, would add another log to the September fire."
On the earnings side, AI chip maker Broadcom (AVGO) reports quarterly earnings Wednesday, a week after rival Nvidia (NVDA) delivered an eye-popping revenue forecast that sent shares surging Thursday before retreating Friday. Hardware makers Dell Technologies (DELL) and Hewlett Packard Enterprise (HPE) will also report this week.
-Mike Murphy