Wednesday may be the most important day for markets in recent memory as Chair Warsh will have an opportunity to update investors on the prospects of a rate hike given rising oil prices, and big tech earnings may help shed light on whether or not we are finally seeing a return on investment for the massive amounts of AI spending taking place.
We think any interest rate hike this year is unlikely, in part because bond yields have already risen to the upper end of their trading range, and have essentially acted as a rate hike without the Federal Reserve making any adjustments.
While oil prices are sensitive to Iran headlines, it’s clear that the stock market is no longer moving in lockstep with oil prices, which is an extremely welcome sign, and an indication that stocks are more focused on earnings, which once again have been strong so far this season.
The stock market is looking for more clarity on interest rates and AI’s return on investment, and has been stuck in a narrow trading range and can’t seem to meaningfully break past 7,500 on the S&P 500.
While stocks are on track for modest gains during the month of July, August is known for its volatility and we have seen a fair share of market corrections over the years take place during the month of August.
