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Powell's Jackson Hole speech ahead, Affirm earnings - what's moving markets

Published 25-08-2023, 03:46 pm
© Reuters

Investing.com -- Federal Reserve Chair Jerome Powell is set to give a pivotal speech at the Jackson Hole economic symposium on Friday, as some policymakers suggest that the central bank may need to keep rates higher for longer to combat inflation. Stock futures edge up ahead of Powell's comments. Elsewhere, buy-now-pay-later group Affirm shares surge on stronger-than-anticipated quarterly results, while Better falls sharply after the online mortgage lender's market debut following a SPAC tie-up.

1. Fed's Powell to speak at Jackson Hole

Federal Reserve Chair Jerome Powell is scheduled to deliver a speech on Friday at an economic symposium in Jackson Hole, Wyoming, with traders keen for any clues about the U.S. central bank's monetary policy outlook.

Powell's comments have been preempted by statements from policymakers this week which tempered some speculation that the Fed was about to step back from a long-standing campaign of interest rate hikes.

Officials flagged worries that inflation - the central focus of the tightening cycle - remains stubbornly higher than the Fed's 2% target despite recently decelerating. Resilient retail sales and consumer confidence data have also exacerbated worries that demand may not yet be slowing enough to tamp down price growth.

On Thursday, initial claims for jobless benefits dipped marginally but clung to a level indicating a robust labor market, while new orders for non-defence durable goods - a gauge of business investment - ticked up by 0.1% in July.

Complicating matters further were numbers on Wednesday that showed that business activity growth was its weakest since February.

How Powell interprets these mixed economic figures and how they could impact the Fed's rate path will likely be closely scrutinized.

2. Futures inch up with Powell speech ahead

U.S. stock futures were slightly higher on Friday as investors awaited Powell's speech.

At 05:33 ET (09:33 GMT), the S&P 500 futures contract added 9 points or 0.2%, Dow futures gained 72 points or 0.2%, and Nasdaq 100 futures edged up 7 points or 0.05%.

The main indices on Wall Street fell in the prior session after Boston Fed President Susan Collins told the Financial Times that more interest rate increases may be needed in order to corral inflation, fueling expectations that borrowing costs may remain higher for longer.

Collins's comments offset initial excitement over results from chipmaker Nvidia (NASDAQ:NVDA), which reported second-quarter revenue that smashed lofty expectations thanks to surging demand for generative artificial intelligence applications.

3. Affirm beats estimates

Shares in Affirm (NASDAQ:AFRM) soared in premarket trading on Friday after the buy-now-pay-later business posted a jump in transactions on its platforms that beat analysts' estimates.

The loss-making firm's results were supported by new deals with travel companies Booking.com (NASDAQ:BKNG) and Cathay Pacific (HK:0293) that aimed to capture a boom in post-COVID consumer demand for experiences. But Affirm said that 2023 has still been a "challenging year" as it confronted a slowdown in online shopping after the pandemic, as well as shifting customer tastes and elevated interest rates.

Gross merchandise value (GMV) - a total dollar measure of all Affirm transactions - surged by 25% to $5.5 billion in the California-based company's quarter ended on June 30, topping Bloomberg consensus forecasts of $5.3B. Revenue climbed to $445.8 million, a 22% gain compared to the same timeframe last year.

Affirm noted that it expects both GMV and revenue to be at similar levels during its current three-month period.

4. Better slumps after SPAC merger

Online mortgage lender Better saw its shares shed 93% of their value on Thursday after making its public market debut through a deal with a blank-check company.

By the closing bell, shares in the Softbank-backed group had slipped to $1.15. The special purpose acquisition vehicle it merged with, Aurora Acquisition Corp (NASDAQ:AURC), was trading at $17.44 when markets shuttered on Wednesday.

Better had been attempting to secure a SPAC tie-up since 2021, although the move was slowed in part by a recent fall in demand for mortgages. The New York-based group, which pledges to offer cheaper and faster home loan approvals, had been boosted by an era of rock-bottom interest rates during the pandemic. But housing loan application volumes have now slipped to their lowest level since 1995 as buyers shy away from rocketing mortgage costs.

Meanwhile, Chief Executive Vishal Garg's leadership practices have come into question, in particular his decision to carry out a mass firing over video conferencing app Zoom in December 2021. Better has also been the subject of an investigation by the U.S. Securities and Exchange Commission over allegations that it misled investors during its push to go public. Better denied the claims and the SEC ultimately chose not to recommend an enforcement action.

5. Oil on pace for lower week

Oil prices moved higher Friday, but remained on course for a second consecutive losing week as fears over slowing Chinese demand and increased U.S. supply as well as a stronger dollar weighed.

The dollar jumped to its strongest level since early June ahead of Powell's speech at the Jackson Hole symposium on Friday. Strength in the dollar weighs on oil markets by making crude more expensive for international buyers.

By 05:52 ET, the U.S. crude futures traded 1.4% higher at $80.18 a barrel, while the Brent contract climbed 1.50% to $84.61. The benchmarks are set to fall between 1%-2% for the week.

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