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Stocks were gaining Thursday as sentiment was buoyed by fiscal stimulus in China, while investors eagerly awaited the Jackson Hole economic conference which kicks off in the day ahead.
Futures for the
Dow Jones Industrial Average
gained 100 points, or 0.3%, after the index advanced 59 points on Wednesday to close at 32,969.
S&P 500
futures rose 0.6% and the tech stock-heavy
Nasdaq
was poised to gain 0.8%.
Overseas, the pan-European
Stoxx 600
climbed 0.2% and Hong Kong’s
Hang Seng Index
surged 3.6%, leading Asian stocks higher after economic news out of China.
The biggest day for markets this week is likely to come on Friday with inflation data and a key speech from Federal Reserve Chair Jerome Powell, but stocks were still heading higher on Thursday after snapping a three-day losing streak Wednesday.
“One supportive factor has been a further package of measures from China’s State Council that includes 1 trillion yuan focused largely on infrastructure spending,” said Henry Allen, an analyst at Deutsche Bank.
This 19-point package of fiscal stimulus out of China buoyed Asian stocks and risk sentiment more broadly, and appears to be spilling optimism into the U.S. premarket session. While analysts have noted that it’s unlikely to be a panacea for lagging growth in the world’s second-largest economy, the measures should still provide some support to Chinese gross domestic product and debt investment.
Beyond China, the Jackson Hole economic conference kicks off Thursday, with Federal Reserve Chairman Jerome Powell’s hotly anticipated speech set for Friday. Investors will closely watch Powell’s speech for indications about the central bank’s monetary policy path—crucial amid shifting expectations around whether the Fed will continue tightening financial conditions or move towards easing in 2023.
“Markets have become increasingly nervous about [Powell’s speech] over the past few days, and which has seen bond yields move sharply higher in the expectation he will deliver a hawkish message,” said Michael Hewson, an analyst at broker
While Powell’s speech will likely be the headlining event of the week—with the Fed’s preferred measure of inflation, the core personal consumption expenditures (PCE) index, also due Friday—there is more current news out of the central bank.
Atlanta Fed President Raphael Bostic told The Wall Street Journal that it’s a coin toss between whether the central bank raises rates by 50 basis points or 75 basis points in September. The Fed hiked by 75 basis points, or three-quarters of a percentage point, in both June and July, the biggest increases since 1994.
A stock market rally in July—the S&P 500’s best month since 2020—came on the back of optimism that the Fed had reached peak hawkishness, but that narrative has largely unraveled in August amid a return of investor jitters over inflation and the economy. While hiking interest rates is an effective method of fighting inflation, raising borrowing costs and denting economic demand also raises the risk of a slowdown and recession.
This is why investors have been awaiting Powell’s speech all week, hoping that it will give the market much-desired clarity on policy. But some on Wall Street are unenthusiastic about how much new news Powell will deliver.
“We expect that any revelations from Jackson Hole commentary will be marginal to the ongoing index vacillation between hard and soft landing expectations,” said Scott Chronert, an analyst at Citi, referring to a “hard landing” in which the Fed cools inflation but is unable to avoid recession.
“Some incremental hawkishness may be priced in courtesy of the past week’s pullback. To us, the trend points to increasing likelihood of mild recession effects unfolding during the first half of next year,” Chronert said.
Here are stocks on the move Thursday:
Alibaba
(ticker: BABA) jumped 3.5% in the U.S. premarket following the Chinese fiscal stimulus news, with shares in tech peers
JD.com
(JD) up 4.5% and
NetEase
(NTES) climbing 2.5%.
Write to Jack Denton at jack.denton@dowjones.com
Read More: Stocks Rise on Chinese Stimulus and Jackson Hole Summit