Stocks slide as investors brace for Powell’s Jackson Hole speech

• It's all about JJ today.
• Markets continue to churn lower.
• Eco data is mixed to better.
• Oil up, gold down, Bonds down, Yields up.
• Try the Swordfish Siciliana.

Stocks continued to ‘pare back all of those gains as investors, traders and algo’s prepared for the BIG speech today at 10 am.

By the closing bell – the Dow -158 pts (-0.3%), S&P -25 pts (-0.45%), Nasdaq -72 pts (-0.35%), Russell +4 pts (+0.2%), Transports -12 pts (-0.1%), Equal-Weight S&P -26 pts (-0.3%) while the Mag 7 -152 pts (-0.5%).

Since the highs, the pullback has been relatively modest: the Dow is off 1.6%, the S&P down 2.2%, the Nasdaq lower by 4%, the Russell off 3%, and the Transports down 5.6%. Equal Weight S&P has slipped just 1.2%, while Mag 7 has lost 4.7%. Hardly a disaster, but enough to make some investors a bit uneasy — and naturally raise the question: What now? Do I sell? Do I buy? Or do I simply sit tight? The answer to those questions depends on who you are, where you are in the life cycle and whether or not you need this money at the moment.

Economic data painted a mixed but generally positive picture. Initial Jobless Claims came in at 235k, about 10k higher than expected, while Continuing Claims ticked up slightly to 1.97 million versus the 1.96 million forecast. The Philly Fed Business Outlook disappointed, slipping to -0.3 against expectations of +6.

On the brighter side, the PMI data surprised to the upside. Manufacturing PMI jumped 4 points to 53.3 (firmly back in expansion territory), Services PMI advanced further to 55.4, and the Composite PMI also printed at 55.4 — putting all three squarely in the expansion zone, a net positive for the outlook.

Meanwhile, Existing Home Sales came in stronger than expected, rising 2% versus the forecasted decline of -0.3%. That tells us that 6.75% 30-year mortgage rates aren’t stopping buyers — and the reason may be that housing prices are finally trending lower. Realtor.com notes that more than 20% of listings in July saw price reductions, HousingWire puts that number closer to 35%, and the NAHB reports that homebuilders are cutting prices by about 5%. But even that’s a little misleading, since 62% of builders are also dangling “free incentives” to sweeten the deal — capisce?

So where are we seeing the cuts? Think of it like the “sexy growth” names — NVDA, PLTR, MSFT, TSLA, GOOG, AAPL — all under pressure after running too far, too fast. The housing parallels show up in places like Austin, Miami, San Antonio, San Francisco, Denver, Orlando, and Raleigh, NC.

It’s interesting to see how quickly expectations shift. Just two weeks ago, futures were pricing in a 97% chance of a 25-bps rate cut — with some even speculating that JJ might surprise with 50 bps. Last week, that dropped to an 85% chance of 25 bps and zero odds of anything larger. Today, the market is now at only a 70% chance of 25 bps, with 30% saying the Fed will hold steady.

Cleveland Fed President Beth Hammick made it clear yesterday: if the FOMC were meeting tomorrow, she would not support easing. She’s not alone. Atlanta’s Raffi Bostic said he sees just one cut this year (without saying when), while Kansas City’s Jeffrey Schmid leaned hawkish, arguing that “inflation risks outweigh labor market risks” — suggesting no cut.

And let’s not forget Wednesday’s FOMC minutes, which showed that most members share that cautious view. The outliers? Chrissy Waller and Mishy Bowman — both pushing for cuts, and both, coincidentally, in the running for JJ’s job.

Bonds pulled back – the TLT and TLH lost 0.5% and 0.4% and that sent yields higher…. The 10 yr is now yielding 4.33% while the 30 yr is yielding 4.92%. Recall that trendline resistance for the 10 yr is 4.34%...so this is KEY…. This is now the 4^th time we have tested this trendline…..The question now is – do we pierce it or not? If we pierce it – then we could see us test 4.38% quickly and if that doesn’t hold we are onto 4.5%....and if that happens – stocks will go lower…

Oil continues to hold within the trendlines at $62.55/$64.80 — this morning down 11 cents at $63.40. The next move will depend squarely on developments between Russia, Ukraine, and the U.S./EU.

Yesterday, Russia unleashed a wave of missiles and drones — described by the media as one of the largest assaults of the year. That has serious implications for the so-called “peace talks.” The EU is now convinced that Vlad has no intention of engaging in meaningful dialogue, while Moscow counters that Ukraine is unwilling to consider a “sustainable, fair, and long-term settlement.”

Bottom line? The conflict remains unresolved — and if that’s the case, oil will almost certainly begin to price in a war-risk premium.

Gold failed to react to the latest geo-political drama, instead focusing on what it expects out of the FED…..As a result – it fell $5 yesterday and is down $9 this morning…..as traders appear to be cutting their rate cut bets ahead of todays speech. This morning it is trading at $3,370 – hugging the trendline.

US futures are bouncing off the lows…..Dow +160 pts, the S&P’s +15, the Nasdaq is up 47 while the Russell is up 11 pts.

The spotlight today is squarely on JJ and his final speech at the Jackson Hole Boondoggle. As I’ve said before, I don’t expect him to hijack the stage with an impromptu FOMC press conference — though some are betting he’ll take an indirect swipe at Trump and all the distractions swirling around. I don’t see it.

The theme of this conference is “Economic Outlook and Framework Review,” which tells you all you need to know. Expect him to address the current and future state of the economy, while reinforcing the message that the Fed remains independent of any administration and firmly focused on the data and its dual mandate.

Don’t look for promises. At best, he may hint that the data is leaning toward a cut at some point this year — but don’t expect him to qualify or quantify it with anything definitive. As long as he leaves the door open and doesn’t rule out a rate cut, I expect markets to continue churning lower. That said, it may not happen today — we could get a bounce after the recent weakness — but my sense is that we still need to test 6,200 on the S&P before any move meaningfully higher.

The S&P closed at 6,370 — down 25 points. This morning, futures are pointing to a bounce… no surprise there, as investors, traders, and algos pin hopes on JJ to stop the bleed with his remarks.

But remember being cautious is not being a coward — it simply means you’re managing risk appropriately. Doing nothing is still a decision; if you’re invested, you’re already participating. Let your portfolio do the work… and brace yourself for a volatile September.

Swordfish siciliana

A great dish from this Island nation - well not really their own nation - but if you ask an Italian - Sicilians are Sicilians....Capisce?

For this you need: Raisins, green olives, capers, pignoli nuts (pine nuts), tomatoes, garlic, onion, s&p, olive oil and the swordfish.

This dish is easy to make - it will tease your senses - and tickle your pallet - only takes about 15 or 20 min's to prepare and 20 min's to cook....enough time to set the table, pour the wine, light the candles, put on the music and dim the lights.....

Preheat oven to 400 degrees (f)

Season the swordfish with s&p.

Next, soak the raisins in warm water for about 1/2 hr... drain and set aside.

Heat the olive oil in a sauté pan on med high heat.... sauté the diced onion and crushed garlic until soft. Do Not Burn. Maybe like 5 / 8 min's.... add raisins, diced tomatoes, chopped olives (no pits!), and capers - like 1 tblspn. (If you like capers feel free to add a bit more - but not too much as the taste will overpower the dish). Reduce heat to simmer and cover...stirring occasionally.... for about 15 min's or so...

Place the swordfish in a baking dish and cover the fish with the raisin/olive/caper/tomato mixture - bake for 15 min's or until the steaks are firm.....

Present the fish on a warmed plate with steamed green beans and a large mixed green salad with red onions, cucumbers, grape tomatoes, maybe some fresh mozzarella.... dress with s&p, oregano, a splash of fresh lemon juice, balsamic vinegar and olive oil.