US100 falls 0.7% 📉

Strong U.S. data drives declines in American indices ahead of the Wall Street open 🗽

Futures on the U.S. Nasdaq 100 (US100) are falling more than 0.7% after strong U.S. data reduced the chances of an aggressive Fed monetary easing cycle this year. GDP rose 3.8% in Q2, well above the 3.3% forecast and a sharp improvement from the previous -0.5%. Durable goods orders in August also posted a strong gain of nearly 3% MoM, crushing expectations for a -0.3% decline and far better than the -2.7% reading from the prior month.

• Equally significant, consumer spending rose 2.5% in Q2, compared with forecasts of 1.6% and just 0.5% previously. Moreover, jobless claims — which had raised concerns two weeks ago with a reading of 263K — fell to 218K, well below expectations of 233K and the prior 232K. The U.S. dollar strengthened in response to the hawkish data.
• On the other hand, the stance of Scott Bessent and Donald Trump on interest rates is practically “clear”: supporters of a dovish approach are almost certain to take control of the Fed next year, cutting rates. The question is whether the Federal Reserve could “overdo it” if it shifts once again toward inflation risk and decides on a series of rate cuts this fall.
• It seems that uncertainty over the consequences of keeping rates high for too long — out of fear of renewed inflation — is what pushed investors to pull capital out of equities, sending stock indices lower. This comes even though the strong U.S. data should, in theory, be positive for Wall Street, as it reduces the likelihood of a recession or economic crisis at this stage of the cycle.

Fed’s Schmid said today that the U.S. labor market is “balanced,” while inflation remains too high — a fairly hawkish comment. Meanwhile, Goolsbee suggested rates could fall more sharply if U.S. data turn “stagflationary.” Yet with GDP growth at nearly 3% YoY, strong jobless claims, and robust durable goods orders, stagflation is hardly the right term for the current picture.

About 20 minutes before the Wall Street open, US100 was down more than 0.7%, while the US2000 fell even more sharply, retreating nearly -1.5%.

Source: xStation5