Investors’ anxiety over Fed speech flusters stocks

A wobbly day on Wall Street left stock indexes mostly lower Thursday as investors turned cautious ahead of a speech by the Federal Reserve chairman.

Losses by health care, technology and energy companies, among other sectors, outweighed gains by banks, consumer-goods makers and elsewhere in the market.

The S&P 500 fell 1.48 points, or 0.1%, to 2,922.95. It swung between a gain of 0.5% and a loss of 0.7%. A pickup in Boeing helped drive the Dow Jones industrial average higher. The Dow gained 49.51 points, or 0.2%, to 26,252.24.

The Nasdaq dropped 28.82 points, or 0.4%, to 7,991.39. The Russell 2000 index of smaller company stocks lost 3.85 points, or 0.3%, to 1,506.

Bond prices fell. The yield on the 10-year Treasury yield rose to 1.61% from 1.57% late Wednesday.

Stocks gave up an early gain and then wavered through much of the day after a mixed batch of economic data coupled with remarks from two Federal Reserve bank presidents left investors less certain about the likelihood that the central bank will lower interest rates again next month.

Traders hope for a better read on Fed policy today, when Chairman Jerome Powell is scheduled to speak at the central bank’s annual conference in Jackson Hole, Wyo.

“The market is expecting a rate cut in September, and if Powell doesn’t think that consensus is going to be to cut rates, he needs to start preparing the market for that,” said Willie Delwiche, investment strategist at Baird.

The Fed cut its key policy rate July 31 for the first time in more than a decade, citing a number of “uncertainties” that were threatening the country’s decade-long expansion, from U.S. trade battles to slowing global growth.

Investors have been convinced that the central bank will follow up the July rate cut with further cuts at coming meetings, beginning with one next month.

But remarks from Esther George, president of the Fed’s Kansas City regional bank, and Philadelphia Fed President Patrick Harker, have injected some doubt about what the Fed will do next.

In televised interviews, both said they don’t see a need for another rate cut.

George and Eric Rosengren, president of the Boston Fed, dissented from the 8-2 rate cut vote, arguing that they favored no rate cut at all.

Minutes from the Fed’s July meeting released Wednesday provided little clarity on what the future course for rates will be.

Investors now predict a 91.2% likelihood that the Fed will cut its benchmark rate by a quarter-point next month, according to the CME Group, which tracks investor bets on central bank policy. That’s down from 98.5% the day before.

New economic data also have done little to make clear the Fed’s next move. Positive consumer-related data on home sales, retail spending and jobless claims could argue against the need for lower rates. But a closely watched index that showed manufacturing contracted this month for the first time in a decade could help make the case for another cut.

“The market is trying to figure out what Powell is going to say tomorrow,” said Delwiche. “Any news today [Thursday] is being viewed through that context.”

Investors worried that uncertainty over the U.S.’ escalating trade war with China could cause the economy to stumble, hurting corporate profits.

President Donald Trump’s administration has imposed a 25% tariff on $250 billion in Chinese imports. A pending 10% tariff on another $300 billion in goods would hit everything from toys to clothing and shoes that China ships to the United States, however some 60% of the new tariffs wouldn’t go into effect until mid-December, and others were taken off the table altogether.

Surprisingly strong quarterly results from several big retailers this week have given investors reasons to hope that consumers are still eager to spend despite the cloudy economic outlook.

Traders bid up shares in Nordstrom, BJ’s Wholesale Club and Dicks’ Sporting Goods after the companies reported quarterly results Thursday that topped analysts’ forecasts.

Nordstrom jumped 15.9%, BJ’s Wholesale Club vaulted 17.2% and Dicks’ added 3.6%.