ORLANDO, Florida, Aug 20 (Reuters) - TRADING DAY

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist

Gnawing doubts about the frenzy around artificial intelligence

weighed on tech shares again on Wednesday, pushing Wall Street

into the red as investors cast a nervous eye toward a key speech

from Fed Chair Jerome Powell on Friday.

More on that below. In my column today, I look ahead to Powell's

eighth and final Jackson Hole speech. If market moves following

his previous seven are any guide, investors should be in for a

bumpy ride.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. Trump calls on Fed Governor Cook to resign

2. Fed's dilemma between AI and housing: Mike Dolan

3. Big investors ditch tech ahead of expected

September

stocks slump

4. US tech-stock stumble shows vulnerability in AI

5. UK inflation heat puts Bank of England back in

the

spotlight

Today's Key Market Moves

* STOCKS: Wall Street in the red, again led by tech

selloff. Nasdaq sheds 0.7%. China closes at a 10-year high,

Europe gains too, but benchmark EM falls.

* SHARES/SECTORS: Target slides 6% after firm

announces

insider Michael Fiddelke as new CEO. Intel falls 7% and other

tech firms fall on news the government is eyeing stakes in

chipmakers.

* FX: New Zealand dollar falls 1% after dovish RBNZ

rate

cut, bucking broader trend of U.S. dollar weakness.

* BONDS: U.S. yields down ever so slightly,

recovering

after the Fed minutes. The 20-year auction was mixed.

* COMMODITIES: Safety bid lifts gold 1%, oil

rebounds

around 1.5% on U.S. inventory drawdown.

Today's Talking Points:

* Trump interference. Investors are increasingly concerned

about the involvement - or interference - from President Donald

Trump and his administration in many aspects of the economy,

private sector business, and independent policymaking.

Trump on Wednesday called for Fed Governor Lisa Cook to

resign over mortgage allegations, which could pave the way for

another Trump appointee at the Fed inclined to lower interest

rates. Commerce Secretary Howard Lutnick, meanwhile, is said to

be looking into the government taking equity stakes in Intel and

other chipmakers in exchange for grants under the CHIPS Act.

This comes on the heels of Trump's recent sideswipe at

Goldman Sachs's CEO and chief U.S. economist, criticism of

JPMorgan Chase and Bank of America, his firing of a senior

statistics official, and months of verbal attacks on Powell for

not cutting rates.

* Tech fatigue. After leading Wall Street's charge this year to

new peaks, U.S. tech shares are now losing steam and dragging

broader indexes lower. Whether that's simply rotation and

diversification, unease over the megacap concentration, or

doubts about the huge AI spend, air is coming out of the tech

balloon.

The S&P 500 tech sector is down nearly 5% in the last five

trading days. But a bit of perspective is required - the sector

rallied 60% between April 7 and August 13.

* Fed minutes. With just two days to go until Powell's last

Jackson Hole speech, investors on Wednesday had the minutes of

the Fed's July 29-30 policy meeting to pore over.

The minutes appear to show that the two policymakers who

dissented against the central bank decision to leave rates

unchanged appear not to have been joined by others in voicing

support for lowering rates at that meeting. "Almost all

participants viewed it as appropriate to maintain the target

range for the federal funds rate at 4.25% to 4.50% at this

meeting," the minutes read.

Maybe the bar to cutting rates is higher than thought? But

bear in mind, the weak July payrolls data were released two days

after that decision.

Jackson Hole speech could pack a punch

Financial markets are taking in a collective breath ahead of

Powell's eighth and final keynote Jackson Hole speech as Federal

Reserve chair. If the moves following his last seven are any

guide, investors should buckle up for a bumpy ride.

Fed-watchers will be focused squarely on whether Powell

signals that he's willing to cut interest rates at the central

bank's September 16-17 meeting. His public comments in recent

months have been relatively hawkish, but those were all before

the release of the weak July employment figures that fired up

easing expectations.

Rates futures traders are pricing in an 85% probability of a

quarter-point cut next month, with another 25 basis points of

easing expected by year's end. Powell's words on Friday could

provide significant clarity about whether these positions are

"in the money" or not.

Given that traders are betting so heavily on an imminent

move, the "pain trade" will be if Powell holds the line that

policymakers need to see more incoming data before resuming the

easing cycle put on hold in December.

Investors have reason to be cautious. History shows Powell's

Jackson Hole speeches tend to move markets a lot, especially the

bond market. And even though Powell is often considered a policy

dove at heart, his Jackson Hole set-piece speeches have usually

pushed yields higher, not lower.

WATCH BOND YIELDS

In the month following each of Powell's last seven Jackson

Hole speeches, the 10-year Treasury yield has risen by an

average of 21 bps, according to Reuters calculations. The dollar

has risen 1.4% and the S&P 500 has fallen nearly 2%, on average,

over the same period.

Stretching that out, the S&P 500 has risen an average of

2.3% between the late-August speech and year-end, the dollar has

gained 0.4%, while the 10-year yield has climbed 27 basis points

on average.

But these averages mask some much bigger moves, especially

in the month after the central bank jamboree in Wyoming.

The stand-out example is 2022, when Powell, in his Monetary

Policy and Price Stability speech, invoked former Fed Chair Paul

Volcker, warning of the "pain" that households and businesses

were likely to face from the tight policy needed to slay

inflation.

In the following month, the S&P 500 tanked 12%, the dollar

rallied 5%, and the 10-year Treasury yield soared 75 bps.

Bond yields climbed at least 20 bps in the month following three

other Powell Jackson Hole speeches, in 2018, 2021, and 2023, the

latter being another where Powell signaled a readiness to keep

rates higher for longer.

KEY CONSIDERATIONS

Inflation today is not as lofty as it was two years ago,

but, sitting around 1 percentage point above the Fed's 2% goal,

it is higher than Powell would like. Meanwhile, on the other

side of the Fed's dual mandate, unemployment remains at a

historical low of 4.2%.

This year's theme at Jackson Hole is "Labor Markets in

Transition: Demographics, Productivity, and Macroeconomic

Policy." Powell has stated that the unemployment rate is the

best measure of the labor market. But that does not mean today's

low unemployment rate will automatically lead to a hawkish

speech - history shows that when unemployment starts to rise, it

can move quickly, leaving the Fed woefully behind the curve.

Markets are probably prepared for some large price swings,

whichever way Powell leans.

THE LAST TIME

It's also likely that Powell will use the platform to defend his

tenure, just like his predecessors: Alan Greenspan in 2005, Ben

Bernanke in 2012, and Janet Yellen in 2017. Given the

unprecedented public pressure Trump has placed on Powell to cut

interest rates this year, why would the Fed chair not seize this

opportunity to have his say?

"He may offer some soft guidance that rates may move lower

at a coming meeting. But this is his last speech at Jackson

Hole. He may never again have a platform this influential to

offer his view of how his history should be written," economists

at UBS wrote on Friday.

Will he sign off with a bang? Markets are locked and

loaded.

What could move markets tomorrow?

* Australia, Japan, India PMIs (August, flash)

* South Korea producer inflation (July)

* UK public finances (July)

* UK, euro zone PMIs (August, flash)

* Canada producer inflation (July)

* U.S. weekly jobless claims

* U.S. Philly Fed business index (August)

* U.S. PMI (August)

* U.S. $8 billion auction of 30-year TIPS

* U.S. earnings - Walmart

* Atlanta Fed President Raphael Bostic speaks

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