Stocks slide ahead of Powell’s speech

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Sharp decline
Wall Street fell ahead of Federal Reserve Chair Jerome Powell’s speech at Jackson Hole, Wyoming. The S&P 500 dropped 0.89% after coming within striking distance of its all-time high. The Dow Jones Industrial Average slid 0.43% and the Nasdaq Composite lost 1.67%. All three indexes had traded higher during the session. The yield on the 10-year Treasury climbed nearly 9 basis points to 3.862%, while U.S. oil prices rose 1.42% after erasing most of their 2024 gains.

September rate cut
Philadelphia Fed President Patrick Harker endorsed an interest rate cut for September during an interview with CNBC at the Fed’s Jackson Hole retreat. His comments follow minutes from the central bank’s last meeting indicating growing confidence in inflation trends and concerns about labor market weakness. “I think it means this September we need to start a process of moving rates down,” Harker said, adding the Fed should ease “methodically and signal well in advance.” Harker is undecided between a 25 or 50 basis point reduction. CNBC’s Jeff Cox has more on what to expect from Powell’s speech.  

Peloton soars
Peloton posted its first sales increase in nine quarters, driven by cost-cutting measures and a focus on profitability. Sales rose by 0.2% to $643.6 million during its fiscal fourth quarter. The troubled connected fitness company also narrowed its losses to $30.5 million, compared to a loss of $241.8 million a year ago. Peloton has struggled post-pandemic and is currently run by two board members since former CEO Barry McCarthy resigned earlier this year. The company’s shares shot up as much as 40% after the earnings release.  

Driverless rides
General Motors‘ Cruise has partnered with Uber to offer driverless rides to Uber users as early as next year. The move comes as Cruise attempts to revive its robotaxi venture after a serious accident last year and subsequent investigations, which led to the resignation of its CEO and co-founder. Uber abandoned its own self-driving project after a fatal 2018 incident and now collaborates with other developers like Google‘s Waymo.

Asia mixed, yen up
The Japanese yen gained 0.3% to 145.77 against the U.S. dollar as the Bank of Japan’s governor said he would press ahead with raising interest rates but warned markets remain unstable. Japan’s Nikkei 225 rose 0.4% as core inflation accelerated for the third straight month. Hong Kong’s Hang Seng index fell 0.44%, while mainland China’s CSI 300 climbed 0.28%. Alibaba Group edged up 0.55% after the Chinese tech giant said it would convert its secondary listing in Hong Kong to a primary listing a move that could attract new funds from the mainland. Elsewhere, South Korea’s Kospi and Australia’s S&P/ASX 200 were little changed.

[PRO] Gold rush
Gold prices surged to a new record high, reaching $2,531.60 per ounce on Tuesday. The precious metal is up 20% year-to-date, outperforming the S&P 500. Analysts predict further gains, driving gold mining stocks higher. 

Whether traders are working from home or in the office, at 10 a.m. ET everything will come to a halt as Fed Chair Jerome Powell delivers one of the most anticipated economic speeches of the year.

With the “vast majority” of Fed members advocating for a rate cut in September, markets are banking on a 100 basis point reduction for 2024. The expectation suggests at least one 50 basis point cut, given that there are only three rate-setting meetings left this year.

George Brown, senior U.S. economist at Schroders, believes Powell will emphasize the risks of being too aggressive with rate cuts.

“I don’t think he’s going to pre-commit to a specific easing path,” Brown told CNBC. “Instead, I think he’s going to frame it as they will be data dependent and they will let the data guide them in terms of their decisions.”

“A lot of his speech will focus on the risks of being too aggressive with rate cuts versus being too late to cut rates — and I think his comments will really focus in on trying to find that middle ground, which helps to maintain or safeguard the economic expansion while ensuring inflation remains contained.” 

Henry Allen, Deutsche Bank macro strategist, thinks the market’s rate cut forecasts for the next year are overly dovish given the current state of the economy. Markets are “pricing 200 bps of cuts in the next year alone and those are the sort of paces you only normally see during a recession, not in a non-recession.”

Despite this, the Fed has faced criticism for keeping rates high for too long, with some arguing that its heavy reliance on data could negatively impact the economy and stocks. 

“A soft landing, the probabilities are going up, and that’s why this should be a benign cutting cycle … good for markets. But I think the key is the Fed getting off data dependence, because data dependence is the reason they missed the inflation turn,” Tom Lee, Fundstrat’s head of research, told CNBC’s “Squawk Box” in an interview Thursday.

— CNBC’s Jeff Cox, Fred Imbert, Gabrielle Fonrouge, Lora Kolodny, Pia Singh, Alex Harring and Spencer Kimball contributed to this report.