Market Reacts to Surprise Change in Interest Rate Cut Hopes

Market action has been mixed on Thursday as investors await Jerome Powell's speech at Jackson Hole on Friday. Existing home sales and weekly unemployment claims were mostly in line with expectations, but trading is very thin and choppy.

The main issue that investors are grappling with is that the odds of a Fed cut at the September meeting have fallen from over 90% to around 75% and many economists and pundits think there is a good likelihood that the Fed may not cut rates at all.

Hopes of a rate cut have been a major driving force for the market, and creeping doubts about a dovish Fed, along with some valuation concerns, are causing pressure. Mix in a little negative seasonality, and we have very limited upside right now.

The great likelihood is that we are not going to get much clarity from Powell on Friday. There are several important economic reports coming before the next meeting, and they will have a significant impact. Market participants will be listening to Powell's tone and will try to gauge how much pressure from President Trump is influencing it.

There is little to do while we wait for the Jackson Hole event. Volume is light, breadth is running negative, but the pullbacks are small, and there isn't any panic to create opportunities. My list of stocks moving up more than 10% is very short, and speculators are dumping Bitcoin IBIT on Thursday. There isn't much of interest, and rather than try to force something, I'm doing very little.

Perpetua Resources PPTA, which I discussed on Wednesday, is inching up nicely, and it's about to test key overhead resistance. It could use some increased volume, but the chart looks good.

At the time of publication, DePorre was long PPTA.