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We're down again
(Google Finance)
Stocks are in the red.
The Dow is down 115 points (0.7%), the S&P 500 is down 15 points (0.8%), and the Nasdaq is down 45 points (0.9%).
But this is much better than where we started. Futures were red since they started trading at 6:00 p.m. ET on Sunday, and the Dow had been down by as much as 199 points in Monday morning trading.
All of this follows what is being interpreted as hawkish comments from Stanley Fischer, vice chairman of the Federal Reserve.
"Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further," Fischer said on Saturday during a panel at the Kansas City Fed's Economic Symposium in Jackson Hole, Wyoming.
Lately, the markets have been trying to time a rate hike from the Fed. In its efforts to stimulate growth and stoke inflation, the Fed has kept rates near zero since the financial crisis. An initial rate hike, which economists expect could happen some time between September and March, would be the first hike since June 2006.
(Federal Reserve Board)
Stanley Fischer is happy with how inflation expectations look.
While economic growth has been healthy, inflation has been lackluster, and it has been cooling with the recent drop in energy prices. But Fischer's comments suggest the Fed may not be too concerned with inflation, increasing the odds that a rate hike comes sooner rather than later. Regarding the recent plunge in energy prices, Fischer dismissed it as a "one-off" type event.
"With inflation low, we can probably remove accommodation at a gradual pace," Fischer said. "Yet, because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2% to begin tightening."
"Comments by Fed Vice Chair Fischer kept the door open to a September rate hike," Societe Generale's Michala Marcussen said on Sunday. "At present the market is pricing in a probability of just under 40% for a September rate hike, up from a low last week of 24% but still below our own baseline which sits above 50% and more dovish than our interpretation of the tone struck at Jackson Hole and recent data releases."
Elsewhere in the markets ...
The extremely volatile Chinese stock market had another rough day, with the Shanghai Composite closing down 0.8% on Monday. This came after a Financial Times report that the Chinese government was abandoning plans to boost stocks through widespread purchases. For the month of August, it fell 12.5% after a 14.3% drop in July.
Elsewhere in the Asia-Pacific region, Japan's Nikkei closed down 1.3%, Australia's S&P/ASX 200 fell 1.0%, and Hong Kong's Hang Seng climbed 0.3%.
In Europe, Germany's DAX is down 0.4%, France's CAC 40 is down 0.5%, and Spain's IBEX is down 0.6%. British markets are closed for a bank holiday.
Remember last week?
Last week was crazy. At one point, the Dow was down a mind-boggling 1,089 points, 0r 6.6%, in a single day. And yet after being down as much as 5.2% earlier, the S&P 500 managed to close the week up 0.9%.
"Risk markets reached new lows for the year mid-week, with global equities falling back to their 2013 levels, but then rebounded strongly," JPMorgan's Jan Loeys noted on Friday. "Global stocks today remain 10% below the cycle peaks reached only three months ago. Our view remains that the fall is a correction, but in a bull market that is aging and that has less upside medium-term."
This week is jobs week in America. And it's a big one because it's the last one before the Federal Reserve's next two-day FOMC meeting, which runs September 16-17. Unless it's a total disaster, Friday's monthly US jobs report should confirm that the US economy continues to add jobs at a healthy clip while maintaining an unemployment rate that is way down from where it was during the darkest days of the financial crisis.
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