U.S. equities traded near the unchanged line on Thursday as investors eagerly await the Jackson Hole speech by Federal Reserve Board Chair Janet Yellen on Friday morning — which will provide clues as to the chances of a rate hike in September and/or December.
In the end, the Dow Jones Industrial Average lost 0.2%, the S&P 500 Index dropped 0.1%, the Nasdaq Composite fell by 11 basis points and the Russell 2000 finished the day 0.2% higher. Treasury bonds were weaker, the dollar was mixed, gold lost 0.4% and oil gained 1.2%.
Energy prices were somewhat volatile after Saudi Arabia’s oil minister Khalid al-Falih told Reuters he didn’t believe it was necessary to make any “significant intervention” in oil markets at this time, lowering expectations slightly for next month’s OPEC meeting in Algiers.
Healthcare stocks again lagged, down 0.8%, amid political fallout surrounding Mylan’s NV (NASDAQ:MYL) decision to raise prices on its EpiPen product. The company sought to downplay the bad press by reducing patient costs through a savings card and the expansion of a patient assistance program. MYL’s CEO tried to shift the blame to the structure of the healthcare system — firing back after criticism from Democratic presidential challenger Hillary Clinton on Wednesday.
Materials led the way with a 0.5% gain thanks to a rebound in precious metals. Tiffany & Co. (NYSE:TIF) gained 6.4% after a second-quarter earnings beat on lower expenses. Homebuilders continued their recent strength with Toll Brothers Inc (NYSE:TOL) up another 0.7% to bring the total gain to Edge subscribers since it was recommended on Aug. 16 to nearly 9%.
All eyes are on Yellen as she takes center stage tomorrow morning, with expectations for a “dovish tightening bias” that talks up the lingering chances of a rate hike (likely in December), but also noting ongoing uncertainty about the inflation and economic growth outlooks.
Deutsche Bank analysts expect her to echo some of the recent themes outlined last week by San Francisco Fed President John Williams about the need to hold interest rates low for an extended period and the need for more aggressive fiscal stimulus measures to avoid a secular stagnation scenario. These sentiments were also recently echoed by NY Fed President Bill Dudley.