Stocks Ended Lower Yesterday, Bank Fears Weighed, While Investors Cheered Better Than Expected PPI

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Stocks Close Modestly Lower As Traders Assess The Economy And Future Rate Hikes

	Profit from the Pros By Kevin Matras Executive Vice President
	Stocks Close Modestly Lower As Traders Assess The Economy And Future Rate Hikes Image: Bigstock Stocks closed mostly lower yesterday with only the small-cap Russell 2000 finishing in the green. But all of the indexes are still up sharply since bottoming in mid-June. Profit taking and position squaring ahead of Friday's Jackson Hole speech by Fed Chair Jerome Powell, continued to weigh on stocks. The markets will be listening to every word Mr. Powell has to say to glean any insight on how much the Fed will raise rates on September 21. In addition, they'll be looking for any hints on what comes after that, as we have 2 more meetings on November 1-2 and December 13-14. They raised rates by 75 basis points their last two times out. And even though the Fed has been consistent in their messaging that they will continue to raise rates until inflation goes meaningfully lower (i.e., on its way back down to 2%), traders have become skeptical of their resolve. Although, with the 10-year Treasury yield back above 3% (3.054 yesterday), it would appear that some are starting to be believers again. The Fed had previously floated that they expect to see the Fed Funds rate between 3-3.5% (the midpoint is at 2.38% now) by year's end. That would mean at least another 112 basis points over the next 3 FOMC meetings to hit the high end of that range. In other news, yesterday's PMI Composite report showed the index slipping to 45.0 vs. last month's 47.7 and views for 49.2. The Manufacturing index came in at 51.3 vs. the consensus for 51.8, while the Services index came in at 44.1 vs. the consensus for 49.0. New Home Sales declined to 511,000 units (annualized) vs. last month's downwardly revised 585K and estimates for 575K. And the Richmond Fed Manufacturing Index fell to -8 vs. last month's 0 and the consensus for -3. Today we'll get MBA Mortgage Applications, the Pending Home Sales Index, Durable Goods Orders, and the Survey of Business Uncertainty. But Friday's Jackson Hole speech is what the market is really waiting for. In the meantime, we'll see if the markets can consolidate their recent price action heading into it. See you tomorrow, Kevin Matras Executive Vice President, Zacks Investment Research
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