Take your pick on what’s the most important economic event of the week:
- Jerome Powell’s speech on Friday in Jackson Hole, Wyo.
- Existing home sales for July on Thursday.
- Two Standard & Poor’s reports on purchasing managers indexes on Thursday.
- Housing starts and building permits on Tuesday.
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The conventional wisdom will vote for the Federal Reserve Chairman’s speech. It will offer a glimpse (but not a promise) into how the Fed might vote on its key interest rate at its September 16-17 meeting.
Powell’s speech is set for 10 a.m. ET, a half-hour after the stock market opens, and you can be sure traders around the world will be listening. He will be speaking at an annual symposium organized by the Federal Reserve Bank of Kansas City.
It’s likely his last speech at the event as Fed chairman at the forum.
President Trump has been demanding big rate cuts since returning to office and will almost certainly will name a new Fed chair when Powell’s term ends next May. Two Trump appointees to the Fed voted for cutting rates at the Fed’s July meeting.
Right now, the betting is on a quarter-point drop in the federal funds rate, the rate the Fed wants banks to charge each other for overnight loans. The rate is now 4.25% to 4.5%.
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A lower fed funds rate doesn’t mean mortgage rates will drop, but it does serve as an indicator on where interest rates are headed.
What really moves mortgage rates is what happens in the bond market and the yield on the 10-year Treasury note. The 10-year yield was at 4.32% on Friday. That’s down from a 2025 peak of 4.8% in January (and its all-time high of 15.82% in 1981). The 30-year mortgage rate was at about 6.6%.
So, if Powell suggests Friday he even hints the Fed will trim the fed funds rate in September, stocks will jump.
Related: What the star-studded Jackson Hole economic meeting means to you
Housing sees a rate cut
Home-building stocks and housing-related stocks already are rallying with investors betting on two, maybe three, rate cuts over the rest of 2025 and more in 2026.
The iShares US Home Construction ETF (ITB) , which tracks home builders and building supply companies like Home Depot (HD) and Lowes Companies LOW, is up nearly 33% since the April market bottom.
D.R. Horton (DHI) and Lennar (LEN.B) received extra boosts this week when Warren Buffett’s Berkshire Hathaway (BRK.A) and (BRK.B) disclosed it has taken positions in both stocks.
This interest in housing may be visible when the National Association of Home Builders Builder Confidence Index comes out at 10 a.m. Monday. The index has been plodding along at around 30, its lowest level since peaking at 81 in 2021.
Another signal may come Friday when the National Association of Realtors releases its Existing Home Sales report for July. The Wall Street estimate is sales will rise to 4 million units (seasonally adjusted annual rate) from 3.9 million a month earlier.
About 90% of all home sales involve existing homes. Growing home sales are good for the economy. They usually translate into more purchases of furniture, appliances and the like.
Existing home sales have been stuck at around 4 million units per year since 2022. The sales rate was at 6 million-plus in 2021 and was running at about 5 million a year between 2015 and 2020.
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The problem in recent years is that the Covid-19 pandemic, high prices and high mortgage rates and a slowing job market have prevented families from moving.
In the 1950s and 1960s, about 20% of families moved every five to seven years. It was still above 16% in 1994 but was down to 8% by 2024, The Wall Street Journal noted, citing the Census Bureau’s Current Population Survey.
More Economic Analysis:
- The StreetPro Weekly Roundup: Moving Ahead of Powell at Jackson Hole
- Trump sends strong message on Federal Reserve Chair decision
- A divided Federal Reserve mulls interest rate cut after wild week
- Federal Reserve reveals latest interest rate cut decision
Two reports deserve attention
We must note that PMI reports from Standard & Poor’s or the Institute for Supply Management do move markets.
They are monthly indicators based on what surveys show of key business activities like new orders, production, and employment. If an index is above 50 or 51, the economy is expanding. Under 50 means contraction.
Manufacturing has been stagnant or declining for several years. Services growth has been declining.
In July, S&P’s manufacturing PMI was at 49.8. The services PMI was at 55.7.
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