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August 20, 2019

Dow takes a breather as investors wait for the Fed to save the day again

The Dow and the US stock market was calmer Tuesday following a week and a half of turbulent trading.

With news about trade wars, recessions and economic stimulus abating for the time being, investors are now waiting for Federal Reserve Chairman Jerome Powell's speech at Jackson Hole on Friday to see if he can help boost the market again.

Stocks traded modestly lower. The Dow was down 80 points, or 0.3%. The S&P 500 and Nasdaq Composite are both down 0.5%.

Investors will watch Powell's speech closely Friday morning for signs of further interest rate cuts and his assessment of the US economy.

Expectations for a September rate cut are at 100%, with a 90% chance for a quarter percentage point cut, according to the CME FedWatch tool. Although these high expectations suggest another rate cut is already priced in, stocks could rally if Powell sounds dovish on Friday.

President Donald Trump tweeted Monday that the Fed should cut rates by "at least" one percentage point.

Before Powell takes the stage, Fed Vice Chairman Randal Quarles will give a speech after the Tuesday market close. The minutes of the July Fed meeting, where the central bank cut rates by a quarter percentage point for the first time since 2008, come out on Wednesday.

With all this waiting in the wings, demand for safer assets will likely remain high.

Elsewhere, China signaled further action to boost its economy, with Liu Guoquiang, the deputy governor of the People's Bank of China, saying there was room for rate cuts. Beijing's economic health is crucial for global growth.

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