Stocks Down On Profit Taking Ahead Of Jerome Powell’s Jackson Hole Speech On Friday

Plus 5 New Strong Buys for Today Stocks Down On Profit Taking Ahead Of Jerome Powell’s Jackson Hole Speech On Friday [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks Down On Profit Taking Ahead Of Jerome Powell’s Jackson Hole Speech On Friday [Stocks Down On Profit Taking Ahead Of Jerome Powell’s Jackson Hole Speech On Friday]Image: Shutterstock Stocks closed lower yesterday with all of the major indexes in the red. After a sharp rally over the last 2 months (23% for the Nasdaq and Russell 2000, and 17% for the S&P), there was bound to be some profit taking eventually. And with the effective end to earnings season last week, that's essentially what we're seeing now. While the Fed's next FOMC meeting isn't until September 20-21, we'll get a chance to hear from Fed Chair, Jerome Powell, this week when he gives a speech at the Jackson Hole conference on Friday, August 26. Traders will be listening to every word Mr. Powell has to say to glean any insight on how big they'll raise rates in September, along with any hints on what comes after that, as we have 2 more meetings on November 1-2 and December 13-14. There's been plenty of debate on how high the Fed will raise rates. Will they do another 75 basis points? Or scale that back to 50 basis points? Even though the Fed has been consistent in their messaging that they will raise rates until inflation goes meaningfully lower (i.e., on its way back down to 2%), traders have remained skeptical of their resolve. One look at the 10-year Treasury yield shows this doubt. Although, that appears to be changing. Just prior to the Fed's July meeting, when they raised rates by 75 basis points, the yield hit a high of 3.483. But since then, it has fallen to a low of 2.618. That's a decline of -24.8%. It has bounced off its lows and is now at 3.037 (helped by another 1.61% increase yesterday). And that's closer to the level previously floated by the Fed when they said they expect to see the Fed Funds rate between 3-3.5% (the midpoint is at 2.38% now) by year's end. Had traders believed it then, yields would not have dropped as they did. But with yields back on the rise, it looks like traders are starting to believe it. Further influencing yields (and potentially stocks as well), is the fact that the Fed's quantitative tightening is expected to double next month with $60 billion in Treasuries and $35 billion in Mortgage Backed Securities being allowed to runoff. So all eyes and ears will be on Mr. Powell's speech on Friday. In the meantime, we have plenty of economic reports to get thru first. That includes today's PMI Composite report, New Home Sales, and the Richmond Fed Manufacturing Index. See you tomorrow, [Kevin Matras - Signature] Kevin Matras Executive Vice President, Zacks Investment Research Sponsor [Urgent: 27 Cryptos to Sell Now]( The crypto crash is far from over. These 27 cryptos could lose all of their value in the months ahead. Are you holding any of them in your portfolio? [Click here to learn their names now.]( Most Popular Articles from Zacks.com [Time to Buy These 3 Stocks as Natural Gas Bulls Run Rampant]( Given natural gas prices are expected to stay strong, the upward trend should aid these gas-weighted producers. [Read More »]( [4 High-Flying Stocks With Rising Cash Flows to Buy Now]( Each of these picks carries a Zacks Rank #1 (Strong Buy) and has seen a positive trend of increasing cash flow. [Read More »]( [Beat the Market the Zacks Way: Dillard's (DDS), Sotherly Hotels (SOHO), Casey's (CASY) in Focus]( Our time-tested methodologies were at work to help investors navigate the market well last week with these stocks. 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