Making sense of the forces driving global markets

By Jamie McGeever, Reuters Open Interest Markets Columnist 

Gnawing doubts about the frenzy around artificial intelligence weighed on tech shares again on Wednesday, pushing Wall Street into the red as investors cast a nervous eye towards a key speech from Fed Chair Jerome Powell on Friday.

More on that below. In my column today I look ahead to Fed Chair Jerome Powell's eighth and final Jackson Hole speech. If market moves following his previous seven are any guide, investors should be in for a bumpy ride. 

I’d love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

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* Trump interference. Investors are increasingly concerned about the involvement - or interference - from President Donald Trump and his administration in many aspects of the economy, private sector business, and independent policy-making. 

Trump on Wednesday called for Fed governor Lisa Cook to resign over mortgage allegations, which could pave the way for another Trump appointee at the Fed inclined to lower interest rates. Commerce Secretary Howard Lutnick, meanwhile, is said to be looking into the government taking equity stakes in Intel and other chipmakers in exchange for grants under the CHIPS Act.

This comes on the heels of Trump's recent sideswipe at Goldman Sachs's CEO and chief U.S. economist, criticism of JPMorgan Chase and Bank of America, firing of a senior statistics official, and months of verbal attacks on Fed Chair Jerome Powell for not cutting rates. 

* Tech fatigue. After leading Wall Street's charge this year to new peaks, U.S. tech shares are now losing steam and dragging broader indices lower. Whether that's simply rotation and diversification, unease over the megacap concentration or doubts about the huge AI spend, air is coming out of the tech balloon.

The S&P 500 tech sector is down nearly 5% in the last five trading days. But a bit of perspective is required - the sector rallied 60% between April 7 and August 13.

* Fed minutes. With just two days to go until Fed Chair Jerome Powell's last Jackson Hole speech, investors on Wednesday had the minutes of the Fed's July 29-30 policy meeting to pore over. 

The minutes appear to show that the two policymakers who dissented against the central bank decision's to leave rates unchanged appear not to have been joined by others in voicing support for lowering rates at that meeting. "Almost all participants viewed it as appropriate to maintain the target range for the federal funds rate at 4.25% to 4.50% at this meeting," the minutes read.

Maybe the bar to cutting rates is higher than thought? But bear in mind, the weak July payrolls data were released two days after that decision. 

Financial markets are taking in a collective breath ahead of Jerome Powell's eighth and final keynote Jackson Hole speech as Federal Reserve Chair. If the moves following his last seven are any guide, investors buckle up for a bumpy ride.

Fed-watchers will be focused squarely on whether Powell signals that he's willing to cut interest rates at the central bank's September 16-17 meeting. His public comments in recent months have been relatively hawkish, but those were all before the release of the weak July employment figures that fired up easing expectations. 

Rates futures traders are pricing in an 85% probability of a quarter-point cut next month, with another 25 basis points of easing expected by year end. Powell's words on Friday could provide significant clarity about whether these positions are 'in the money' or not.

Given that traders are betting so heavily on an imminent move, the 'pain trade' will be if Powell holds the line that policymakers need to see more incoming data before resuming the easing cycle put on hold in December. 

Investors have reason to be cautious. History shows Powell's Jackson Hole speeches tend to move markets a lot, especially the bond market. And even though Powell is often considered a policy dove at heart, his Jackson Hole set-piece speeches have usually pushed yields higher, not lower.