The market is digesting a dozen or so economic reports Wednesday morning as it awaits comments from Jerome Powell at 1:30 pm ET.
The reports were a mixed bag that reflected some economic slowing but job openings remained strong, and the Fed's preferred inflation measure was a bit higher than expected. The Chicago PMI number was surprisingly weak, but GDP remains strong.
The overall verdict of the data is that there is some slight improvement in inflationary pressures, and the economy is slowing, but there isn't enough progress to cause the Fed to change its current course of action.
Bulls that are hoping for a dovish pivot from the Fed are going to be disappointed, but there is a good chance that the Fed may slow down the pace of rate hikes in order to evaluate the lagging impact of its policy.
The big question in the short term is how the market reacts to Powell. It is unlikely that Powell is going to say anything that we don't already know. He is likely to repeat what he said following the last Fed rate decision, which is that there is a good chance of a 0.5% hike in December, but rates may go higher for longer before the battle against inflation is won.
We already know this, so the reaction to Powell will depend on his tone and some nuance. If he is terse like he was after Jackson Hole, the market will be disappointed, but if he is a bit vague and uncertain, then it may produce a little hope.
Fed Funds show odds of a 0.5% hike at the December meeting are still around 70%. That has not changed much since the last Fed meeting. All of the jabbering from Fed members isn't having much impact on expectations, and Powell isn't likely to cause any big change either.
It is important to note that the Fed does not want a wild market rally as that is inflationary. On the other hand, they don't want to trigger a crash either. The goal is to not move the market much while it puts its monetary policy to work.
The indexes are at the lows of the day as I write, but it is mild action, with breadth running slightly negative so far.