Major indices have moved off session highs and into the red, with gold and bitcoin giving back some gains from their recent rally. This comes as investors react to news out of Jackson Hole (more below).

Five sectors are moving higher, with Consumer Discretionary (XLY) in the lead with Amazon (AMZN) contributing to the bulk of the gains. Within the sector Amazon is joined by other internet retail, restaurants, and travel names. Communication Services (XLC) is the runner up and being driven by its Magnificent Seven components, Alphabet (GOOG/L) and Meta Platforms (META), but also seeing broad strength across the sector. On the other hand, Utilities (XLU), Industrials (XLI), and Technology (XLK) are lagging. While Nvidia (NVDA) and semiconductor names are mostly moving lower following an adverse reaction to Marvell Technology (MRVL) earnings, there are some green patches within the software niche, including a favorable earnings reaction to Workday (WDAY).

Warsh Speaks

Warsh’s Jackson Hole remarks were not forward guidance, and he declined to give a reaction function or a timeline. He called the economy stronger, citing fast-rising capex, tight credit spreads and unemployment at 4.1%, and said he would be hard pressed to call financial conditions restrictive. Inflation is the focus, with PCE at 3.7% over twelve months and 4.1% over six, and summer prints that beat expectations without meaningfully improving the underlying trend. No hike was called for, but he said the Fed has work to do unless inflation moves to target clearly and fast enough, which the street read as a hawkish tilt.

Prediction markets saw a surge in rate hike expectations following Warsh’s comments.

Additionally, bond yields are moving higher across the board.

Keeping an Eye on Japan

Despite the recent US and Japanese intervention, the Yen is once again cracking the key level of 160.

In other news, reports are circulating that the Commerce Department is developing policy with the goal of stopping Chinese AI firms from accessing US chips housed in overseas data centers, including in Southeast Asia.

Economic Data

Chicago PMI for August fell to 47.1 from 57.6 and missed expectations of 58.3. This came as new orders fell by 15.4 points and production slipped by 8.8 points, partially offset by a 4.3 point increase in employment. Furthermore, prices paid rose by 3.8 points reaching its highest level since February 2022.

Notably, one of the special questions, on geopolitics and trade, showed over half of respondents seeing increased consumer pricing as a result, while 36% were able to absorb higher material costs and 14% reported no impact.

The University of Michigan Consumer Sentiment Index was revised slightly higher to 51.7 from 51.0 for August.

Have a great weekend!

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