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The S&P500 (+0.36%) and Nasdaq (+0.76%) advanced to new records on Tuesday, as investors continued betting on accommodative Federal Reserve (Fed) policy to redress the US economy that has been ravaged by the pandemic, but Fed Chair Powell’s Thursday’s speech in Jackson Hole meeting may remain short of the very dovish market expectations and trigger a downside correction at the current levels.
Airline shares which led Monday gains were sharply sold, as companies prepare to announce by how much they will shrink operations once the federal aid expires on October 1st and the numbers will be ugly.
Equities in Asia failed to follow up on US session gains. Major Asian indices edged lower on lingering uncertainties regarding the global economic outlook.
The latest data showed that new home sales in the US rose sharply in July (+13.9% m-o-m) to reach the highest since 2006, but the average American household remains squeezed by slow business activity and the delay in government help. The US consumer confidence dived to a six-year low in August.
Due today, the US durable goods orders are expected to have risen 4.3% in July. A softer-than-expected figure should revive the Fed doves, while a better-than-expected read would improve the investor mood, but should not have a material impact on dovish Fed expectations as it is clear to everyone that the economy needs sustained support for posting good results.