S&P 500 futures were flat this morning after the index closed down 0.3% yesterday. There’s not a great deal of movement globally this morning—Europe and Asia are mixed but the shifts are less than 1% either way, so nothing to get excited about.
The VIX “fear” index, on the other hand, jumped more than 5% yesterday. While it is not at an elevated level like it was in April, it does suggest investors might be positioning themselves for some excitement today.
They are likely to get it.
In the next few hours we will get new official numbers on U.S. Q2 GDP, a new interest rate decision from the U.S. Federal Reserve, a new number from ADP on private payrolls, and personal consumption stats (tomorrow). Any surprises across that dashboard could send ripples through the market.
In terms of the Fed, it is almost guaranteed that Chairman Jerome Powell will keep the rate at the 4.25%-plus level. What investors will be looking for are any changes in his statement or answers to questions after the announcement.
Specifically, analysts are split on whether Powell will deliver rate cuts starting in September or push them off until later in the year—spectators will be hankering for any hints on whether that reduction will come sooner rather than later.
Analysts are also looking for dissent within the Fed.
One stockholder in particular will be loudly urging in favour of dissent inside the Fed: President Trump. The problem is that any Fed governor who agrees with him risks looking like a patsy, according to UBS’s Paul Donovan.
“The question is whether one can credibly disagree, without appearing as a political puppet. A case can be made for rate cuts (if one views U.S. President Trump’s trade taxes as a heavier burden on U.S. consumers). However, even if a Fed member sincerely believes that scenario, their dissent would almost inevitably be viewed as Trump twitching the political puppet strings in the background,” he wrote this morning.
Here’s a snapshot of the action prior to the opening bell in New York:
