The aftermath of Jackson Hole continues to filter through the markets, with supportive jobs data maintaining the latest estimates for a 75bp hike in September. Both treasuries and equities are feeling the re-repositioning as they come to terms that the Fed is in for the long term (for now), which will likely flow into the next month and the next FOMC meeting. Futures pre-market were enjoying a nice bounce, but a bigger than expected Job Opening number, combined with a Consumer Confidence reading of 103.2 (versus est. of 98), halted the green and led to losses across the board. Good news via job growth means the Fed has more leverage to raise rates and leave them, and that is not what the markets want to hear currently. Every sector fell, with Energy (XLE -3.39%) and Metals/ Mining (XME -4.2%) lagging, and the S&P 500 ultimately closed below 4000 (and below the 50 day). If there was any doubt of the Fed’s position, speakers today hammered the must tackle inflation message. Barkin, Bostic and Williams all read the same script when they spoke; rates and policy needs to be restrictive, and that one datapoint (July CPI) is not enough. Jobs data will remain the theme for the week especially with the nonfarm payroll out Friday. Current estimates are for a gain of 300k, but after last month’s surprise beat, traders will likely be playing it safe until after the long weekend (US is closed next Monday). That means lower volumes will keep the volatility high and exaggerate moves. Hopefully the S&P closing below 4000 falls under that this week, or next month could be a tough end to the quarter.
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