US equity futures showed mixed signals ahead of Monday's trading session, with Dow Jones futures trading 0.13% higher at 53,690 points and S&P 500 futures up 0.06% at 7,747 points as of Thursday evening. According to Investing.com data, this indicates a more than 120-point elevated open for the Dow and a +17-point higher open for the S&P 500 compared to Thursday's close. However, Nasdaq 100 futures declined 0.21% to 29,634 points, suggesting a marginally lower opening for the tech-heavy index. Nasdaq-100 futures ended Friday trading at about 29,491.75, indicating a small futures premium and making Monday's opening particularly volatile.
Federal Reserve Chair Kevin Warsh's hawkish Jackson Hole speech sent markets into a frenzy, with US rate-hike expectations jumping sharply to 57% for a September hike according to latest reports. Warsh made it clear that inflation control is a top priority and suggested that interest rate hikes may soon be necessary to combat escalating price pressures. As per The Economic Times, this announcement has heightened expectations for a rate increase come September, with investors remaining cautious and eagerly anticipating key economic data on jobs and inflation for guidance on potential Fed actions. Reuters noted that there was a 55.7% chance of the Fed raising interest rates in September, which was a significant shift from 35.4% the previous day based on the CME Group's FedWatch. The statement did not directly call for a rate increase in September but rather insisted that there be solid evidence of reaching 2% inflation.
Thursday's trading session saw significant gains across major US indices, with the S&P 500 ending 0.72% higher at 7,730.99 points versus 7,675.70 points at Thursday's close, while the Nasdaq 100 rallied 1.43% to 29,641.56 points from 29,224.52 points at the previous market close. However, Friday's 0.70% drop in Nasdaq-100 makes momentum weak and indicates how swiftly technology stock prices can be affected by monetary policy surprises. S&P 500 rose 0.5% on Friday, supported by strong NVIDIA earnings that eased AI-related concerns and helped offset earlier monetary policy concerns. Nvidia fell 4.58%, AMD was down by 2.3%, and Marvell Technology tanked by 10.3%, while Alphabet increased by 1.74%, Microsoft by 1.68% and Amazon by 3.97%. The Nasdaq is still relatively healthier compared to the Dow on a year-to-date basis, but the decline of 0.70% on Friday indicates how swiftly the prices of technology stocks can be affected by the surprises in the monetary policy.
Investor sentiment received additional support from US weekly jobless claims declining by 18,000 to 1.78 million, according to official data. The positive market reaction to Nvidia's earnings helped offset earlier concerns about artificial intelligence spending cuts. However, investors are now focusing on media reports suggesting that Advent and Stripe are no longer pursuing a buyout of PayPal, which could reduce chances for one of the largest leveraged buyouts on Wall Street. Additionally, US consumer confidence declined to a seven-month low amid rising gasoline prices and economic concerns, while the US economy expanded at a sluggish 1.5% pace in the second quarter with consumer spending staying strong. Warsh noted that inflation is still high with PCE 12-month inflation standing at 3.7% and six-month inflation at 4.1%, with 54% of the PCE basket having recorded an increase of more than 3% in prices on a yearly basis, which is important for technology stocks because they are sensitive to interest rates.
Asian equity markets ended mixed on Friday, with India's BSE SENSEX closing 0.43% higher and Japan's Nikkei 225 gaining 0.41%. However, South Korea's KOSPI ended 1.79% lower and China's Shanghai closed 0.11% down. According to Investing.com, Hong Kong's Hang Seng Index rose 0.07% and Singapore's FTSE closed 0.28% higher. Indian equities rebounded on Friday with strong gains in heavyweight IT stocks lifting the Sensex and Nifty after two consecutive sessions of losses. However, Nifty faces potential pressure on Monday following Warsh's hawkish inflation comments, with analysts expecting range-bound trading amid mixed global cues and geopolitical tensions. The critical level for the near future is between 29,000 and 30,000 as holding above 29,000 would preserve the broader bullish structure, while a sustained break below that level could trigger a deeper correction.
