After markets swung lower on Wednesday, investors will turn their attention both to the struggling retail sector and to the great state of Wyoming.
On Thursday, earnings highlights include expected results from Sears (SHLD), Abercrombie & Fitch (ANF), Tiffany’s (TIF), and Dollar Tree (DLTR). Covering a wide swath of U.S. consumers, these results will give markets more fodder for discussions about the health of consumers and the future of brick and mortar retailers.
On the economic calendar, existing home sales in July and the latest report on initial jobless claims will be highlights in the morning, but the biggest economic event of the week will also kick off in the evening with the start of the Jackson Hole symposium, the year’s biggest meeting of central bankers held in the Wyoming resort town by the Kansas City Fed.
Federal Reserve Chair Janet Yellen is expected to speak in what could be her final symposium as Fed Chair — her term expires in February — with European Central Bank chief Mario Draghi also expected to speak during the event.
Earlier this week, Yahoo Finance’s Sam Ro noted that Yellen’s speech could “inadvertently” send a hawkish signal to markets — meaning it would point towards more aggressive action from the central bank than intended — given the topic Yellen is set to tackle, which is financial stability. Sometimes called the Fed’s “third mandate” (its two official mandates are full employment and 2% inflation), financial stability is basically what it sounds like — financial conditions that allow business to flourish but do not create undo risks, i.e. bubbles, in the economy.
In a note to clients on Wednesday, Michael Feroli, an economist at J.P. Morgan, said the most likely outcome for Yellen’s speech is a fairly neutral discussion of the Fed’s regulatory and supervisory responsibilities. Feroli adds that this would be in keeping with Yellen’s previous speeches at Jackson Hole which were more academic in nature and not a real signal for future policy.
Feroli writes that Yellen’s history at the event, “suggests Yellen doesn’t want Jackson Hole to be considered a venue for signaling shifts in monetary policy.” And so those looking for a signal on whether the Fed will begin paring its balance sheet in September or raise rates again in December could be disappointed.
The next most likely outcome for Friday morning’s remarks, however, is more of a policy signal. “We see the next most likely outcome as the hawkish one that signals alertness to financial stability concerns as a reason to continue gradually firming policy,” Feroli writes.
Which means that Yellen could use this speech to make the case for the Fed continuing to tighten monetary policy in the face of below-target inflation, a criticism that has gained steam during the summer months and after June saw the Fed raise rates for the third time in six months.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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