Stock Futures Concerned About Hurricane Laura; All Eyes On Fed
European and U.S. futures are trading lower as traders as investors are concerned about the economic damage that Hurricane Laura is going to cause. Hurricane Laura has hit the land in Louisiana as a category 4 hurricane. So far, the economic damage is estimated to be in several billion, and the sad fact is that Americans are facing another natural tragedy when the first one isn't over. All of this is likely to have an adverse influence on consumer confidence and consumer spending. The country's economic health is already weak, and this is just another blow at the wrong time.
Dow Jones and S&P 500 futures also want to take a breather after the stellar rally we have seen this year. The technology sector has been leading the gains, and once again, it was the U.S. tech giants like Facebook and Netflix that scored most of the gains yesterday.
There is also an element of caution among investors as the Fed chairman, Jerome Powell, will deliver a speech on a monetary policy framework later today. Dow Jones and the S&P 500 futures are likely to experience higher volatility on the back of this. The future of the coronavirus stock market rally is highly dependent on the Fed's monetary policy stance.
Generally speaking, the Fed is expected to acknowledge that the U.S.'s recovery is taking place, but the Fed's monetary policy needs to remain accommodative. Yes, there has been a decent improvement in U.S. durable goods, new homes sales, and the labor market. However, the country's economic health is still fragile as millions of Americans are out of work, and small businesses are on the brink of bankruptcy. If the Fed starts to withdraw their support, it could turn out to be a massive disaster for the U.S. economy.
The Fed's chairman is also likely to remain a bit more cautious tone today. This means the Fed doesn't want to sound too dovish and do not wish to send the wrong message. This is because one of the Fed's task is to tackle inflation. A lot of conversation is likely to occur around this topic because consumer prices have been undershooting the bank's target during the past 10 years. The Fed chairman is likely to highlight the plan that can drive the consumer prices higher. The conversation on the inflation topic may bring some serious moves for the dollar index, which is already under tremendous selling pressure. If the Fed allows its accommodative monetary policy to run for longer, it means more weakness for the mighty dollar.
In terms of economic data, all eyes will be on the Initial Jobless Claims and Continuing Jobless data. Last week, we saw another uptick in the Initial Jobless Claims number, but the forecast for today's number is for one million. There are some rumors that this number can fall below the one million mark as the U.S. jobs market is experiencing a slow recovery. Suppose the jobless claims number does fall below one million. In that case, the market participants are likely to take this as positive news, and the Fed may also refer to this improvement during their review of the monetary policy framework.