Wall Street muted as investors look to Fed after stocks recovery

By Lawrence Delevingne and Huw Jones

-Global shares idled on Wednesday after a lengthy rebound propelled them towards recent record highs, and as investors awaited clues on interest-rate cuts from the Federal Reserve to decide their next move.

Fed Chair Jerome Powell is expected to further cement the view that the central bank is about to start loosening credit conditions after taming the worst outbreak of inflation in 40 years when he speaks on Friday at the Fed’s Jackson Hole conference in Wyoming.

Oil prices were pushed lower in early afternoon U.S. trading, while dollar weakness on the prospect of rate cuts kept gold near Tuesday’s record high.

On Wall Street, the Dow Jones Industrial Average was little changed at 40,858, the S&P 500 gained 0.28% to 5,612 and the Nasdaq Composite gained 0.3% to 17,871.

The MSCI All Country index for global stocks gained 0.27%, standing near its mid-July record high and up 13.5% for the year.

In Europe, the STOXX index of 600 companies was up about 0.3%, also nearing its all-time high, reached on June 7.

Stocks have been on a roller-coaster ride this month after investors took fright following U.S. jobs data that raised the prospect of recession in the world’s biggest economy.

Those worries have given way to bets on a soft landing cushioned by cuts in U.S. borrowing costs expected to start in September.

U.S. employers added far fewer jobs than originally reported in the year through March, the Labor Department said on Wednesday, underscoring the growing concerns the Fed has about the health of the labor market.

Fed meeting minutes are also expected later on Wednesday to reinforce a dovish stance.

“We expect the Fed chairman to continue to signal that a first rate cut is on the cards for September. Yet there is a chance that investors could be disappointed by the comments, if there are any references to the stickiness of inflation,” said Guy Stear, head of developed markets strategy at Amundi Investment Institute.

Interest-rate futures have fully priced in a 25 basis point U.S. rate cut next month, with a one-in-three chance of a 50 bp cut. Almost 100 bps of cuts are priced in for this year, and another 100 bps next year.

U.S. Treasury yields drifted lower. The yield on benchmark 10-year notes fell 3.4 basis points to 3.784%, from 3.818% late on Tuesday. The 2-year note yield, which typically moves in step with interest rate expectations, fell 7.2 basis points to 3.9284%.

A potentially unique situation beckons with material rate cuts without a recession, unlike the backdrop for cutting borrowing costs in five of the past seven cutting cycles, said Ross Yarrow, U.S. equities managing director at investment bank Baird.

“If we get a scenario where the Fed is cutting, inflation is falling and employment continues to rise, it really does start to look like a Goldilocks scenario,” Yarrow added.

“So I think the rebound in equities and their prospects from here are actually pretty good.”

Markets may still be constrained, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

“We see markets are range-bound until after the November elections,” Samana wrote in an email.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.34%.

Hong Kong’s Hang Seng was down 0.7% with JD.com dropping 8.7% as top shareholder Walmart moved to sell its large stake.

Japan’s Nikkei fell 0.3% as a recovery from its collapse in early August runs into resistance around the 38,000 level.

The falling dollar has spurred gold to record highs and returned the yen to 145.140 per dollar from last month’s 38-year trough.

The euro is also up around 3% in August and, at $1.115, is at its highest since early December. [FRX/]

Oil prices fell again on Wednesday. U.S. crude lost 1.69% to $71.93 a barrel and Brent fell to $76.09 per barrel, down 1.44% on the day.

Gold prices hovered around $2,500 an ounce, just below record levels touched on Tuesday.

This article was generated from an automated news agency feed without modifications to text.