US futures steady as the countdown to Jackson Hole begins

U.S. stocks were broadly steady on Monday, after posting their best week in a year, as investors began counting down to a speech by Jerome Powell in Jackson Hole that could reset expectations for rate cuts.

Futures on the S&P 500 (ES=F) were flat but near record highs, while futures on the Dow Jones Industrial Average (YM=F) also hovered around the flat line. Contracts on the tech-heavy Nasdaq 100 (NQ=F) fell 0.1%.

Stock markets are likely to consolidate last week’s strong gains as a measure of the calm return to a market previously beset by worries about a possible recession. Last week’s rally offset losses incurred during the early August sell-off, when Wall Street worried about cracks in the economy – concerns that have since been allayed by stimulative inflation and consumer spending data.

Attention is already turning to Fed Chairman Powell’s speech at the central bank’s Jackson Hole symposium on Friday, in a quiet week for economic data. As confidence grows in a ‘soft landing’ for the economy – Goldman Sachs now sees a smaller chance of a recession – the question for investors is not whether the Fed will cut rates in September, but by how much.

From Monday morning traders price in According to CME’s FedWatch tool, there is a 72% chance that the Fed will cut rates by 0.25% at that meeting, and a 28% chance of a 0.50% cut. But Wednesday’s release of the minutes of the July Fed meeting could impact these expectations.

Meanwhile, investors will also be keeping a close eye on the Democratic National Convention that kicks off Monday, which could provide more insight into what to expect from presidential candidate Kamala Harris.