Stocks finished higher Thursday, while a softer U.S. dollar helped pull Treasury bond yields modestly lower, as investors looked to the start of the Fed's Jackson Hole symposium and what could be an important reading of second-quarter growth.
Stocks are still moving in lock-step with interest rate expectations, however, and investors appear to be worried the Federal Reserve Chairman Jerome Powell will double-down on the central bank's inflation fight when he speaks at its annual retreat in the resort town in Wyoming.
However, a series of grim readings for the housing sector, a surging U.S. dollar and slowing manufacturing activity over the month of August may have blunted domestic growth enough to allow for a more dovish outlook on rates, particularly given that fact that some of the biggest economies in the world outside of the United States are likely to slow precipitously over the second half of the year.
Still, bets on another 75 basis point rate hike from the Fed, following two similar increases in June and July, edged higher overnight, to 60.5%, according to the CME Group's FedWatch tool, even as the dollar slipped lower against its global peers.
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The moves could be linked to a surprise reading of second quarter GDP in Germany, Europe's largest economy, which clawed its way to a 0.1% gain over the three months ending in July.
Reaction to that reading was muted, however, by a closely-watched survey of business expectations published by the Ifo Institute, which pointed to a sharp third quarter slowdown.
Here at home, investors got a second estimate of second quarter GDP, which is estimated to have contracted 0.6%, as well as weekly jobless claims data which showed a modest decline prior to the start of trading, each of which is likely to factor into Powell's thinking -- and speech -- tomorrow in Wyoming at 10:00 am Eastern time.
"There is some chance that the Powell speech focuses a bit more energy on quantitative tightening as an important factor from here rather than super-size rate hikes," said Saxo Bank's head of foreign exchange strategy John Hardy.
"But largely, the market may be simply left to its devices and default to look at where the cycle is taking us: toward a looming catastrophe in Europe and the UK this winter and into next year if energy prices stay anywhere within sight of current levels," he added.
Meanwhile, the U.S. dollar index was marked 0.21% lower against a basket of its global peers at 108.45 while benchmark 2-year Treasury note yields were little-changed at 3.378%.
In overseas markets, Europe's Stoxx 600 closed 0.32% higher following the better-than-expected German GDP data, following on from a solid 1.96% overnight gain for the region-wide MSCI ex-Japan index in Asia after China unveiled a new $44 billion stimulus package.
On Wall Street, the S&P 500 finished up 1.42%, while the Dow Jones Industrial Average gained 324 points, or 0.98%, to 33,293. The Nasdaq advanced 1.67%.
Tesla (TSLA) shares slipped 0.35% following the debut for clean-energy carmaker's three-for-one stock split on the Nasdaq.
Salesforce (CRM) shares slumped 3.3% after the enterprise software group trimmed its full-year revenue forecast following stronger-than-expected second quarter earnings.
Nvidia (NVDA) shares, meanwhile, gained 4% after the chipmaker posted weaker-than-expected second quarter earnings Wednesday and forecast more gaming sector weakness in the months ahead.
