FILE - In this Aug. 16, 2019, file photo traders Dudley Devine, left, and Christopher Fuchs work on the floor of the New York Stock Exchange. The U.S. stock market opens at 9:30 a.m. EDT on Thursday, Aug. 22. (AP Photo/Richard Drew, File)

US stocks mixed ahead of Fed chairman's speech

August 22, 2019 - 3:48 pm

Major stock indexes on Wall Street wavered between small gains and losses Thursday afternoon as investors turned cautious ahead of a widely anticipated speech by the Federal Reserve chairman.

Gains by banks, consumer goods makers, industrial companies and other stocks were offset by losses in technology, health care and materials stocks. Bond prices fell, nudging yields higher.

Stocks gave up an early gain and then wobbled through much of the day after a mixed batch of economic data coupled with remarks from two Federal Reserve bank presidents left investors less certain about the likelihood that the central bank will lower interest rates again next month.

Minutes from the Fed's July meeting released Wednesday provided little clarity on what the future course for rates will be. Traders hope for a better read on Fed policy Friday, when Chairman Jerome Powell is scheduled to speak at the central bank's annual conference in Jackson Hole, Wyoming.

"The market is expecting a rate cut in September, and if Powell doesn't think that consensus is going to be to cut rates, he needs to start preparing the market for that," said Willie Delwiche, investment strategist at Baird.

Investors now predict a 91.2% likelihood that the Fed will cut its benchmark rate by a quarter-point next month, according to the CME Group, which tracks investor bets on central bank policy. That's down from 98.5% the day before.

The shift comes after two central bank presidents questioned the need for the Fed to lower rates next month. New economic data also did little to make clear the Fed's next move. Positive consumer-related data on home sales, retail spending and jobless claims could argue against the need for lower rates. But a closely watched index showing manufacturing activity contracted this month for the first time in a decade, which could help make the case for another cut.

"The market is trying to figure out what Powell is going to say tomorrow," said Delwiche. "Any news today is being viewed through that context."

The central bank cut its benchmark rate in July for the first time in a decade to help shore up the economy amid signs of slowing global growth and uncertainty over the U.S.'s escalating trade war with China.

The Trump administration has imposed a 25% tariff on $250 billion in Chinese imports. A pending 10% tariff on another $300 billion in goods would hit everything from toys to clothing and shoes that China ships to the United States, however some 60% of the new tariffs wouldn't go into effect until mid-December, and others were taken off the table altogether.

Surprisingly strong quarterly results from several big retailers this week have given investors reasons to hope that consumers are still eager to spend despite the cloudy economic outlook.

Nordstrom, BJ's Wholesale Club and Dicks' Sporting Goods rose Thursday after reporting quarterly results that topped analysts' forecasts. L Brands was a notable exception. Its shares slumped after it gave an outlook that fell short of Wall Street's expectations.

KEEPING SCORE: The S&P 500 was up 0.1% as of 3:30 p.m. Eastern Time. The Dow Jones Industrial Average gained 73 points, or 0.3%, to 26,279. The Nasdaq dropped 0.2%.

Major indexes in Europe closed lower.

EYES ON THE FED: The Fed cut its key policy rate on July 31 for the first time in more than a decade. It cited a number of "uncertainties" that were threatening the country's decade-long expansion, from Trump's trade battles to slowing global growth.

Investors have been convinced that the central bank will follow up the July rate cut with further cuts at coming meetings, beginning with one next month.

But remarks from Esther George, president of the Fed's Kansas City regional bank, and Philadelphia Fed President Patrick Harker, have injected some doubt about what the Fed will do next.

In televised interviews, both said they don't see a need for another rate cut.

George and Eric Rosengren, president of the Boston Fed, dissented from the 8-2 rate cut vote, arguing that they favored no rate cut at all.

TECH TUMBLE: Tech companies took some of the heaviest losses. Microsoft slid 1.2%, while Adobe fell 1.6%.

NOT SO STYLISH: L Brands slid 3.3% after the owner of Victoria's Secret and Bath & Body Works gave a third quarter earnings outlook that fell below what analysts expected.

LOOKING GOOD: Nordstrom jumped 15.4% after the department store chain reported results that topped Wall Street's forecasts.

STRONG RESULTS: Dick's Sporting Goods gained 2.9% after the athletic apparel chain's second quarter earnings and revenue came in ahead of analysts' estimates. The company noted growth in all its key segments and raised its guidance for the year.

GOOD QUARTER: BJ's Wholesale Club vaulted 15.4% after the company reported better-than-expected quarterly results.

HOUSING BOOSTER: Homebuilders surged for the second straight day after average long-term mortgage rates slipped to their lowest level since November 2016. Low mortgage rates give homebuyers more purchasing power. Hovnanian Enterprises led the pack, climbing 3.5%.

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