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U.S. Stocks Mixed Close Ahead Of Fed Chairman Powell's Speech

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After failing to sustain an early move to the upside, stocks showed a lack of direction over the course of the trading session on Thursday. The major averages spent the day bouncing back and forth across the unchanged line before closing mixed.

The major averages moved to the downside going into the close, although the Dow still ended the day up 49.51 points or 0.2 percent at 26,252.24. Meanwhile, the S&P 500 edged down 1.48 points or 0.1 percent to 2,922.95 and the Nasdaq fell 28.82 points or 0.4 percent to 7,991.39.

The choppy trading on Wall Street came amid another inversion of the yield curve, with the yield on the two-year note briefly dropping below the yield on the ten-year note.

The yield curve inversion, an indicator of a looming recession, came after the minutes of the Federal Reserve's latest monetary policy meeting failed to provide much clarity about the outlook for interest rates.

The minutes said the Fed intends to remain flexible regarding future changes to rates, with members planning to pay close attention to the implications of incoming data for the economic outlook.

During the meeting last month, the members of the Fed voted 8 to 2 to lower the target range for the federal funds rate by 25 basis points to 2 to 2-1/4 percent.

The decision to lower rates came even though participants generally judged that downside risks to the outlook for economic activity had diminished somewhat since their June meeting.

However, the Fed noted that financial conditions appeared to be "premised importantly" on expectations that the central bank would cut rates.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the Fed minutes left the impression policymakers are just taking their cue from the bond markets.

Traders seemed reluctant to make significant moves as they wait for Fed Chairman Jerome Powell's speech at the Jackson Hole Economic Policy Symposium on Friday for additional clues about the outlook for rates.

"We will hopefully get more clarity on future rate cuts when Powell speaks on Friday but, at this point, there is little sign that the Fed is willing to push back on the markets," Pearce said.

He added, "As such, another 25bp cut in September still looks like a good bet, if only because the Fed will not want to disappoint lofty market expectations."

On the U.S. economic front, the Labor Department released a report before the start of trading showing first-time claims for unemployment benefits fell by much more than expected in the week ended August 17th.

The report said initial jobless claims dropped to 209,000, a decrease of 12,000 from the previous week's revised level of 221,000. Economists had expected jobless claims to dip to 216,000.

A separate report released by the Conference Board showed its reading on leading U.S. economic indicators rose by much more than anticipated in the month of July.

The Conference Board said its leading economic index climbed by 0.5 percent in July after edging down by 0.1 percent in both May and June.

Ataman Ozyildirim, Senior Director of Economic Research at the Conference Board, said the leading economic index suggests the economy will continue to expand in the second half of 2019 but noted "it is likely to do so at a moderate pace."

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Biotechnology stocks showed a significant move to the downside, however, with the NYSE Arca Biotechnology Index slumping by 1.7 percent.

Notable weakness was also visible among steel and natural gas stocks, although selling pressure was relatively subdued.

On the other hand, computer hardware turned in a strong performance on the day, driving the NYSE Arca Computer Hardware Index up by 1.5 percent.

Pure Storage (PSTG) posted a standout gain after the flash storage provider reported an unexpected second quarter profit.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Thursday. Japan's Nikkei 225 Index inched up by 0.1 percent, while Hong Kong's Hang Seng Index slid by 0.8 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.1 percent, the French CAC 40 Index slumped by 0.9 percent and the German DAX Index fell by 0.5 percent.

In the bond market, treasuries recovered from an initial drop only to pull back firmly into the red once again. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.3 basis points to 1.610 percent.

Looking Ahead

Powell's speech is likely to be in the spotlight on Friday, overshadowing the Commerce Department's report on new home sales in July.

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