US Data and Fed in Focus Ahead of Jackson Hole

U.S. indices are expected to open around one and a half percent higher on Wednesday, as we head into what is likely to be another volatile trading session.

We’re still seeing some big market swings today after rate cuts from the People’s Bank of China proved not enough to stop the panic selling in Chinese stocks. Losses were much lower though which suggests they did at least ease the selling pressure a little. The rate cut from the central bank was clearly not enough to put investors’ concerns at ease.

Whether this morning’s announcement of a 140 billion Yuan liquidity injection from the PBOC in the form of short-term liquidity operations (SLOs) will do the job is yet to be seen but the response in Europe so far has been muted. Clearly there is still a lot of unease in the markets following such a volatile start to the week. The 500 point sell-off in the Dow in the final hour of trading yesterday emphasized just how anxious investors still are.

Focus today will be on U.S. data with core durable goods orders due out just before the open. This is regarded as a great barometer of confidence in the U.S. economy as these kind of investments are only made if the long-term outlook is positive. These numbers can be quite volatile from month to month so a single decline or significant increase can’t be read into too much, although given the fragile nature of the market at the moment, it would probably get a response. A poor number today would only add to the argument for no rate hike this year, despite three positive months prior to this.

Crude oil inventories will also be released today and we’re expecting to see another build of 2.167 million barrels. Another rise in inventories could weigh further on oil prices, with WTI and Brent already trading near six and a half year lows. It is likely that the supply glut will start to ease off soon and U.S. production slows but until we see evidence of this, downward pressure is likely to remain on prices.

Well also get comments from William Dudley, a voting member of the FOMC, which will bring Jackson Hole in focus. With everything that’s happened in China this week, investors will be looking for reassurances from policy makers that rates won’t be hiked in September which would only add to the negativity in the markets. The Fed has appeared determined to hike rates this year though and in the coming days we’ll learn whether recent events has changed that at all.

The S&P is expected to open 32 points higher, the Dow 262 points higher and the Nasdaq 60 points higher.

For a look at all of today’s economic events, check out our economic calendar.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.