Morning Bid: Tech fright calms but Fed pressure grows

Reuters

14 hours ago

LONDON, Aug 21 (Reuters) - What matters in U.S. and global markets today
By Mike Dolan, opens new tab, Editor-At-Large, Finance and Markets
U.S. tech stocks seem to have found a level following two days of sharp pullbacks, but the Treasury market was unnerved by the latest Federal Reserve drama just as everyone awaits the central bank's annual Wyoming jamboree.
U.S. stock futures ended in the red again on Wednesday, driven by a whole host of AI and tech sector jitters ahead of Nvidia's big earnings release next week. But stock futures seemed to find a foothold ahead of today's bell, with attention turning back to the Fed following President Trump's demand for the resignation of another Fed board member - Lisa Cook - over allegations of mortgage fraud that she insists she will contest.
* If Cook were forced out, Trump would then likely secure a majority of his appointees on the seven-person Fed board by next summer. If Chair Jerome Powell, who gives his keynote Jackson Hole speech on Friday, steps down as a board member when his chairmanship ends in May, then a majority of deep rate cut advocates could well emerge on the Fed's policymaking committee with the support of just one regional Fed boss.
* Despite the board machinations, minutes from the Fed's last meeting showed two policymakers - Christopher Waller and Michelle Bowman - were alone in voting for a rate cut and it recounted how "almost all" favored holding the policy rate steady last month. Fed futures pricing for September's meeting slipped back to show less than an 80% chance of a rate cut and Treasury yields nudged higher, with a mixed review of the latest 20-year bond auction. The dollar was steady but gold firmed after the Cook story, giving up some of that today.
* The big economic releases around the world today were early August business surveys, which came in above forecast in Europe and Japan - propping the euro, sterling and yen even though stocks in all three areas fell back. U.S. equivalent surveys are due later, with the Philadelphia Fed's August survey also released alongside closely watched jobless claims updates and existing home sales data for July. Walmart tops the earnings diary in a busy week for big retailers.
In today's column, I look at the extraordinary moves by the Trump administration to propose taking stakes in big chipmaking firms, which would radically shift U.S. industrial policy and raise questions about what might next be seen as "strategic"., opens new tab
Today's Market Minute
* Financial markets are taking in a collective breath ahead of Jerome Powell's eighth and final keynote Jackson Hole speech as Federal Reserve Chair. If the moves following his last seven are any guide, writes ROI columnist Jamie McGeever, investors should buckle up for a bumpy ride.
* China is considering allowing the usage of yuan-backed stablecoins for the first time to boost wider adoption of its currency globally, sources familiar with the matter said, in a major reversal of its stance towards digital assets.
* Indian companies have seen the steepest earnings downgrades in Asia, with analysts slashing forecasts as steep U.S. tariffs heighten risks to growth even if proposed domestic tax cuts help cushion the impact.
* Chinese artificial intelligence startup DeepSeek on Thursday released DeepSeek-V3.1, an upgraded model with hybrid inference structure, faster thinking speed and stronger agent capability, the company said in a statement published on WeChat.
* U.S. power generation capacity is evolving at the fastest pace in decades, as utilities scramble to ensure that supplies keep up with rapidly growing electricity demand. ROI columnist Gavin Maguire lays out current expectations for the U.S. power generation mix through the next 10 years.
Chart of the day
The week's latest tech shakeout, with heavy losses for high flyers such as Nvidia and Palantir, comes as the sector's price-to-earnings ratio recently reached about 30 times expected earnings for the next 12 months, its highest level in a year, and tech's share of overall S&P 500 market value is close to its highest since 2000.
Seeds of doubt over such heady valuations were sown over the past week by a study from researchers at the Massachusetts Institute of Technology that found that 95% of organizations are getting no return on AI investments, and comments by OpenAI CEO Sam Altman that investors may be getting overexcited about AI and some bubbles would emerge and pop.
Today's events to watch
* Philadelphia Federal Reserve's August business survey (8:30 AM EDT), U.S. weekly jobless claims (8:30 AM EDT), S&P Global flash U.S. business surveys for August (9:45 AM EDT) U.S. July existing home sales (10:00 AM EDT); Canada July producer prices (8:30 AM EDT); Euro zone August consumer confidence (10:00 AM EDT)
* Fed's annual Jackson Hole symposium gets underway; Atlanta Fed President Raphael Bostic speaks
* U.S. corporate earnings: Walmart, Ross Stores, Workday, Intuit
* U.S. Treasury sells $8 billion of 30-year inflation protected securities
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