Morning in New York: political factors limit the rally

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The attention of the participants of the upcoming trades will be focused on the political signals around the Fed and the White House, which can increase volatility.

World central banks fear that Donald Trump's pressure on the Fed will not only undermine the independence of the U.S. regulator, but also create an undesirable precedent for Europe and Japan. At the symposium in Jackson Hole, the head of the U.S. regulator Jerome Powell received public support from colleagues, his speech was accompanied by applause. At the same time, the forum discussed the vulnerability of the global monetary policy system to political attacks. For the markets, the risk here is obvious: in case of the Fed's "capitulation", investors will demand a higher premium for owning treasury securities, and confidence in the dollar and U.S. government debt as the anchor of the global financial system may decline.

On the macro calendar, a significant event will be the release of new home sales data for July (consensus: 650k, June: 627k) and the final estimate of building permits (preliminary figure: 1.354 million). Confirmation of stable demand in the real estate sector will signal its healthy state, despite tariff risks and still high rates. Also of interest will be the Business Activity Index statistics from FRB Dallas, which will allow to assess the impact of the US foreign trade policy on its regional industry.

Trading participants will have to evaluate the speech of FRB New York President John Williams at the conference of the Bank of Mexico, which will be held after the closing of the main session. It is assumed that the speaker will outline the regulator's view on the current inflationary and monetary challenges. The rhetoric of the representative of the Fed leadership is important for the market as an opportunity to predict the rate decision in September.

PDD Holdings (PDD) will report quarterly results before the open of trading. Heico (HEI) and Semtech (SMTC) will publish their results at the post-market.

Futures on US indices demonstrate moderately negative dynamics. We assess the balance of risks for the upcoming session as neutral with an average level of volatility. We focus on the S&P 500 movements in the range of 6400-6500 points (from -1% to +0.5% to the closing level of the previous session).

- Beijing is hoping the White House will approve the sale of Nvidia's "stripped-down" Blackwell-based chip (NVDA) to China.

- Spotify (SPOT) will raise the price of premium subscriptions in some regions from $12.90 to $14.05 from September. The company explains this decision by expanding its services. Its goal is to increase its user base to 1 billion. Earlier, the increase in prices and cost cutting helped Spotify to reach annual profit.

- Keurig Dr Pepper (KDP) may finalize its $18 billion acquisition of Netherlands-based JDE Peet's (JDEP.EU) in the coming days. After the merger, the companies intend to segment the business.

- Coca-Cola (KO) is considering the sale of Costa Coffee, which it bought in 2018 for $5 billion. The decision is linked to a strategy review of the coffee drinks division. Offers from buyers are expected to start arriving this fall.

- Boeing (BA) and the IAM union will resume contract negotiations on August 25. The strike of 3.2 thousand employees in St. Louis continues. The workers demand to raise their salaries and pension payments, as it was done at the concern's plant in Seattle.

- H&M (HMB.EU) has opened its first store in Brazil and launched online sales. The company relies on local production and plans to expand in the country in the coming months.

- SpaceX postponed the tenth Starship launch until August 25 due to problems with ground systems. The success of this program is key to the implementation of Elon Musk's lunar and Martian projects.

- Thoma Bravo plans to buy Verint Systems (VRNT) for $2 billion including debt. The deal will strengthen the fund's position in the customer experience automation software market, where Verint partners with companies such as Alphabet (GOOGL), Microsoft (MSFT) and Lyft (LYFT).

August 22 trading on American stock exchanges ended in a steady plus. The S&P 500 rose 1.52%, the Nasdaq 100 climbed 1.54, the Dow Jones added 1.89%, and the Russell 2000 soared 3.86%. The Magnificent Seven stocks closed in positive territory, lending support to the broad market. Tesla (TSLA: +6.04%) and Amazon (AMZN: +3.22%) were the strongest performers, adding to the positive momentum in the technology segment. Ten of the 11 sectors comprising the S&P 500 closed in the plus. Energy (XLE: +3.04%) emerged as the leader of growth amid the recovery in oil prices. FMCG producers (XLP: 0.00%) showed about zero dynamics.

The trades were set by the speech of Jerome Powell at the symposium of the heads of central banks in Jackson Hole. The head of the Fed noted that "shifting balance of risks" may require adjustment of monetary policy, emphasizing the strengthening of risks to employment and slowing economic growth. At the same time, he pointed out that the impact of tariffs on inflation will be short-term. Markets perceived Powell's speech as softer than expected. As a result, the estimate of the probability of a rate cut in September again exceeded 80%. The futures market put in its forecasts a 90% chance of easing of the MPC. This was the main factor that supported a broad-based rise in equities and a return of risk appetite.

- Alphabet (GOOGL: +3.2%) has signed a six-year, $10 billion contract with Meta (META: +2.1%) to collaborate on cloud services. According to media reports, the corporations will focus on infrastructure for AI.

- Intel (INTC: +5.5%) will sell a package of 10% of its shares to the U.S. government. This intensified interest in the chipmaker's securities given its strategic importance.

- Ubiquiti (UI: +30.9%) reported successful results for the last quarter. The Enterprise Tech platform had a particularly strong performance. The company increased its quarterly dividend by 33% to $0.8 per share and announced a buyback of up to $500 mln.

This article was AI-translated and verified by a human editor