Stock Market Update

Equity futures are modestly higher this morning as the market eagerly anticipates Fed Chair Powell's Jackson Hole speech at 10:00 ET. 

Stocks retreated yesterday as hawkish comments from two different Fed officials, softer economic data, and a rare earnings miss from Walmart (WMT) combined to challenge the assumption of a September rate cut. 

The current probability for a 25-basis point rate cut at the September FOMC meeting stands at 71.5%, down from 75.0% yesterday and 85.4% a week ago, according to the CME FedWatch tool.

There is a palpable hope in the market that Mr. Powell will have a more dovish tone that reaffirms rate cut expectations, but with more inflation reports to come between now and the September FOMC meeting, he is likely to reference a need to wait on the data. 

The other main storyline this week has been the underperformance of mega-cap and tech stocks. Several semiconductor-specific headlines are in the news cycle this morning, including a report from The Information that NVIDIA (NVDA 173.03, -1.95, -1.1%) is halting the production of its H20 chip in China amid the Chinese government's call to companies to buy domestic chips, citing security concerns.

As it stands, the PHLX Semiconductor Index and Vanguard Mega Cap Growth ETF both enter today's session with a 2.6% week-to-date loss. 

There are no consequential economic data releases today.

In corporate news:

• The Trump administration has no plans to take equity stakes in larger semiconductor companies making investments in U.S., according to The Wall Street Journal
• Meta Platforms (META 740.00, +0.90, +0.1%) agrees to a $10 billion cloud deal with Google (GOOG 200.62, +2.25, +1.1%) according to The Information.
• NVIDIA (NVDA 173.03, -1.95, -1.1%) is aiming to halt H20 production following a directive from China, according to The Information. A separate report from The New York Times states that CEO Jensen Huang will hold talks with China on AI chips.
• Starbucks (SBUX 89.12, +0.56, +0.6%) is expected to receive non-binding offers for its China unit in 14 days, according to Reuters. 

Reviewing overnight developments:

Equity indices in the Asia-Pacific region ended the week on a mostly higher note. Japan's Nikkei: +0.1%, Hong Kong's Hang Seng: +0.9%, China's Shanghai Composite: +1.5%, India's Sensex: -0.9%, South Korea's Kospi: +0.9%, Australia's ASX All Ordinaries: -0.5%.

In news:

• Chinese chipmakers had a strong showing amid reports that NVIDIA is halting sales of the H20 chip to customers in China until a new product aimed for the Chinese market is ready.
• Japan's Ministry of Finance is expected to raise its long-term rate forecast to 2.6% from 2.1%.
• Weakness in Japanese debt has sent the JGB 10-yr yield to 1.61%, a level not seen since 2008 while the 30-yr yield set a fresh record at 3.13%.
• South Korea's Finance Ministry lowered its domestic growth forecast for 2025 to 0.9% from 1.8%. Growth in 2026 is expected to reach 1.8%.

In economic data:

• China's July FDI -13.4% YTD (last -15.2%)
• Japan's July National CPI 0.1% m/m (last 0.1%); 3.1% yr/yr (last 3.3%). July National Core CPI 3.1% yr/yr (expected 3.0%; last 3.3%)

Major European indices are looking for a modestly higher finish to the week. STOXX Europe 600: +0.3%, Germany's DAX: +0.1%, U.K.'s FTSE 100: +0.1%, France's CAC 40: +0.2%, Italy's FTSE MIB: +0.5%, Spain's IBEX 35: +0.5%.

In news:

• DHL will temporarily suspend business shipments to the U.S. as de minimis duties are set to make a return at the end of next week.
• Germany's Q2 GDP was revised down to -0.3% from -0.1% in the final reading and Germany's Economy Minister Reiche said that the report shows the urgent need for action.

In economic data:

• Germany's final Q2 GDP -0.3% qtr/qtr (expected -0.1%; last 0.3%); 0.2% yr/yr (expected 0.4%; last 0.3%)
• France's August Business Survey 96, as expected (last 96)