US equities are heading into September as expectations for an early rate hike emerge as a headwind. Following remarks by Federal Reserve Chair Powell, the market is viewing the outlook as more hawkish, and the probability of a rate hike at the September FOMC has risen.
Following remarks by Federal Reserve Chair Powell at the Jackson Hole meeting, views have strengthened that uncertainty remains over progress in underlying inflation, reviving expectations for an early rate hike. In response to comments made during the meeting, expectations have spread that the probability of a rate hike at the FOMC meeting on 15-16 September will exceed 50%. Depending on upcoming economic data, the market may begin pricing in a faster pace of rate hikes.
Historical tendencies suggesting that September is prone to weaker monthly performance are drawing attention. Semiconductor maker Nvidia provided a sense of relief with its post-earnings performance, while Marvell Technology shares at one point plunged following the company's earnings announcement. Next week, market attention is expected to focus on individual stock performance after Broadcom's earnings announcement, amid expectations that its expanded collaboration with Samsung Electronics will be a market factor. Palo Alto Networks' earnings will also be in focus.
The economic data release schedule includes July JOLTS job openings, the ISM Manufacturing Index, July factory orders, the August ADP employment report, the Beige Book and the August ISM Services Index. Next week's jobs report could trigger a significant market reaction, depending on the results.
Key earnings announcements are scheduled for 1 September from Medtronic, Dell Technologies and Palo Alto Networks; on 2 September from Broadcom, Snowflake and Hewlett Packard Enterprise; and on 3 September from Ciena, DocuSign and Lululemon. Semiconductor-related and information software stocks are expected to attract market attention next week.