Those figuring that the Fed still might hike rates in September are getting one more bite at the apple.
As the week drew to a close and the Fed's "quiet period" before meetings was about to settle in, investors recoiled over news that the central bank's most dovish official, Governor Lael Brainard, will be delivering a previously unannounced speech Monday at The Chicago Council on Global Affairs.
The news sent a chill through markets Friday, with major stock market averages taking a beating and short-term government bond yields and the U.S. dollar moving higher, and it set off yet another round of speculation over whether the Fed is ready to come off its historically loose monetary policy. The S&P 500 was down more than 1 percent Friday afternoon, on track to close with its biggest percentage move since July 8.
"When a market is quiet, it's susceptible to rumors, whether we're talking about a path to freeze oil production or whether the Fed is going to raise rates in September," said Quincy Krosby, market strategist at Prudential Financial. "This may be a market that has too much time on its hands right now."
Indeed, the guessing game over whether the Fed might enact its first rate rise since December and only its second tightening in more than a decade has set off a fever pitch of horse trading.
At one point Friday morning, markets put the chance of a hike later this month as high as 30 percent before backing off. The probability had been reduced amid a week's worth of poor economic data, including the worst services reading in six years, a contraction in manufacturing and a weaker-than-expected nonfarm payrolls report.