Jackson Hole Day: Powell's Fed Summit Speech and the Markets 8/23/24

Jim Cramer (0:00)

It's Jim Cramer here. You're listening to the opening bell of CNBC's Squawk on the Street. Don't miss a minute of the action.

Carl Quintanilla (0:07)

Live shot of Jackson Hole, Wyoming, home of the event that markets have been waiting for. Fed Chair Powell said to address the Kansas City Fed's annual summit, and of course, we will bring it to you live. Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Sara Eisen at Post 9 of the New York Stock Exchange. Cramer has the morning off. Stocks do look to recover some of Thursday's losses. Yields are pretty tame. Ahead of Powell, we got Bostic in our pocket now. Two-year has a three-handle once again. Healthy diet of single-ticker upgrades today as well. But we will begin with the Fed chair's speech, which comes just days after the Fed minutes indicated that policy makers do see a September rate cut as likely. Now, Sara, we got Bostic saying that passive tightening is a thing, and that it might make some sense for him to bring his rate cut view forward.

Sara Eisen (0:52)

Yeah, but he wasn't as dovish as he could have been. He also said that inflation is not close to target, and we've still got more work to do, which doesn't exactly channel where the market is right now. Look, as far as Jackson Hole is, it's hard to imagine that the Fed chair can go into any kind of specifics as to what the market really wants to know, which is how big is the first cut going to be? He's not going to pre-commit to that. He has no incentive to do so, especially with another PCE report coming next week on inflation and a jobs report coming before the Fed meeting. Then what does the path of the Fed cuts look like after the first one? He also can't really do that yet because it's hard for them to know how much they have to do and what the path is going to look like. So those are the big market questions and it's hard to envision, David, that the chair can be very specific on that. The expectation is that he will give a nod to the fact that they have transitioned into a place where they're more worried about jobs, for instance, and feeling good about the inflation risk, and that they are looking to move to cut rates as soon as September. But that's already in the market.

David Faber (2:00)

Right. Right. What's changed between the last time we heard from him at the press conference and now?

Sara Eisen (2:06)

More evidence that inflation is looking benign. Got the CPI report. Inflation expectations continue to come down to more normalized levels. Look, the last PCE, and this is what it fed targets, is two and a half percent. Their target is two percent. And that has continued to move in a good direction now, four months in a row. And then the jobs numbers have gotten increasingly soft, not sort of collapsing in terms of, not seeing a pile up of layoffs, we're not seeing extreme stress, we're seeing a tick up in the unemployment rate, as it should be with the Fed being so restrictive on policy. And so they have two mandates. It's to keep inflation in check, and to keep joblessness from coming from skyrocketing, or from going up, to keep jobs intact. And so now we're a little more worried about the job side of their mandate, and that's the backdrop to this whole speech, which is why the market is all excited in pricing in 100 basis points of cuts before the end of the year. I mean, one surprise could be if he expresses confidence in the economy, and then maybe the market walks back some of its 100 basis points of cuts. Let's bring in senior economics reporter Steve Leesman, who is there at the Jackson Hole Fed Summit. He's been speaking to other Fed policy makers. What's your expectation at this point, Steve?

Steve Leisman (3:22)

So I think Powell will lay down something of an important marker here, Sara. Whether or not that marker is priced in is a different conversation from where we are in the chronology of things. Look, the Fed has been out there fighting inflation for, if you counted up, 30 months. I counted from the November 21st speech. I remember it was a Thursday at 430 where he dropped the word transitory and kind of said, hey, we got to start reversing course. So we've had 11 hikes from March 22 to 23, 525 basis points, restrictive, higher for longer period, 2 trillion off the balance sheet. I think this whole process we're looking at here has come to an end. You're right, Sara. A lot of it's priced in, maybe not all of it, because I think what he does today is really say, hey, we are much more confident that inflation is headed to 2%.