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Powell’s Comments in Jackson Hole Drive Markets


Jackson Hole, Powell Comments

Speaking at the Fed’s annual symposium in Jackson Hole, Fed Chairman Jerome Powell reassured investors by expressing confidence in the state of the U.S. economy and by indicating the Fed is likely to continue with a gradual approach to rate hikes.  Powell’s speech had been anxiously awaited following critical comments throughout the week from President Trump about recent Fed policy action.  Powell has the unenvious job of having to avoid stunting the economic expansion by raising rates too quickly, while at the same time normalizing rates quickly enough to avoid more inflation.  Powell characterized the domestic economy as strong, but did acknowledge some of the recent turmoil in emerging markets (ie Turkey) could require a reevaluation of policy.



Risk Assets Rally on Powell’s Comments

After the somewhat dovish comments from the Fed out of Jackson Hole, the equity markets advanced while the dollar fell.  All three major US stock indices finished the week on a high note, with the NASDAQ advancing 0.96% while the S&P 500 was up 0.62% and DJIA gained a respectable 0.52%.  US Treasurys bull flattened on the day, with the yield on the 10-year note set to close near 2.81% and the spread between yields on 2 year and 10 year treasuries sitting at a paltry 19 bps.  In commodities, WTI crude futures edged 1.1% higher to $68.60/barrel.  Foreign exchange markets saw the US Dollar (USD) weaken vs other major currencies dropping 0.7% against the Euro (EUR) and falling 0.3% against the British Pound (GBP).



Goods Orders Disappoint             

The Commerce Department announced that durable goods orders decreased by 1.7% month-over-month for June, coming in worse than the expectations of a 1.0%  slide. This is the third decline in orders for the past four months. The headline number was pushed lower due to a decrease in the orders for transportation equipment, as the volatile demand for civilian aircraft fell.  Core capital goods orders (nondefense, excluding aircrafts) rose 1.4% (+0.5% expected), and the prior month’s reading was revised higher from a gain of 0.2% to a gain of 0.6%.  In other positive signs for the economy, core capital shipments were also higher, increasing by 0.9% and exceeding the estimates of +0.3%.



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