The S&P/ASX 200 Index (ASX: XJO) is having a day to forget today.
After finishing in the green for the last three trading days, the ASX 200 is down 1.0% during the Friday lunch hour.
That puts the benchmark index down 0.5% for the week.
So, why the dour end to the week?
What's pressuring the ASX 200 today?
Like it or not, the Aussie share market is heavily influenced by moves in United States markets.
And yesterday (overnight Aussie time) saw heavy selling across the major US exchanges.
The S&P 500 Index (SP: .INX) closed the day down 1.4%. And tech stocks fared even worse, with the Nasdaq Composite Index (NASDAQ: .IXIC) dropping 1.9%.
Wall Street, and by connection the ASX 200, have come under selling pressure at the end of the week as US Federal Reserve chairman Jerome Powell prepares to address global central bankers at their annual meeting in Jackson Hole, Wyoming. That speech will come after market close in Australia.
Investors, who've been increasingly banking on an end to the Fed's rate hike cycle, are now getting anxious that Powell may signal the inflation battle has yet to be won. That could mean more interest rate rises on the horizon, pressuring US stocks.
And higher rates in the world's top economy will, in turn, pressure the ASX 200.
Jim Baird, chief investment officer at Plante Moran Financial Advisors, said (quoted by Bloomberg):
In the context of the Fed's dual mandate, the combination of elevated inflation and full employment continues to justify a bias toward tight monetary policy. How tight is tight enough? All eyes are now on Jackson Hole for greater clarity on that point.
Commenting on the market selloff ahead of Powell's speech, Max Wasserman, founder of Miramar Capital, added, "Investors may be realising that we've had such a big run in the market, so let's take a little profit before the Fed throws cold water on it. And if it doesn't, they'll come right back in."
The Fed has raised the US benchmark interest rate 11 times over the past 18 months. The current Fed range of 5.25% to 5.50% is the highest in 22 years.
Will Powell signal more rate hikes ahead?
As for what ASX 200 investors can expect when markets open here again on Monday, that will largely depend on how Powell and company view the outlook for inflation.
While US inflation has been trending sharply lower over the past year, it ticked higher in July to 3.2%.
And the latest jobs data from the US Department of Labor could be adding to investor angst.
That data showed weekly unemployment claims dropped by 10,000 to 230,000 in the week ending 19 August.
Despite the Fed's efforts to cool down the US economy, the unemployment rate remains near 50-year lows at 3.5%.
So, I wouldn't be surprised if we hear a moderately hawkish speech from Powell tonight.
But following on today's sharp retrace, if Powell instead signals a more dovish tilt from the world's most watched central bank, Monday could see a big rebound on the ASX 200.
