(Bloomberg) — Stocks rebounded as the bond market stabilized, and traders looked to Jerome Powell for clues about how quickly and how far the Federal Reserve will cut interest rates.

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Stocks rose in early New York trading after being boosted by a sell-off in technology companies and speculation that Powell might temper market expectations for aggressive rate cuts. There is speculation in the swaps market that the Fed will ease rates by about one percentage point this year.

As the central bank approaches a crucial turning point, it is hard to overstate how much attention financial markets will be paying to interest rates. First, they are waiting for confirmation that the Fed will cut rates in September. But what will be more dramatic is what happens after that and how fast further rate cuts will be in the coming months as the Fed faces the twin risks to inflation and employment.

A poll conducted by 22V Research shows that 60% of respondents believe Powell will announce a 25 basis point rate cut during his speech scheduled for 10 a.m. New York time. In addition, 42% of investors surveyed believe the market reaction will be “neutral,” 35% think “risk-on” and 24% “risk-averse.”

The S&P 500 futures rose by 0.5 percent. The yield on 10-year US government bonds remained almost unchanged at 3.85 percent. The dollar fell.

What will Powell say?

We remain skeptical that the Chairman will do more than announce that the policy rate will be cut next month and that further cuts will follow when the Committee returns to neutral. None of this will be new information. Moreover, questions about the size of the first cut and the pace of future steps will remain unanswered.

That’s not to say the event is risk-free. Ultimately, Powell could decide that more direct guidance is needed at this stage of the cycle, or that he wants to push back on current market prices. He could do that, but we doubt it, as it would be a departure from the Fed’s recent communication strategy.

I try to put myself in Powell’s shoes and don’t expect anything special from him today. In terms of market movements, it could be a non-event.

He will reinforce market expectations of a rate cut in September by reiterating that the focus is now on the labor market. But with more data to process between now and then, he will have no interest in judging the extent of the rate cut. As for market expectations beyond a full 100 basis points per year and 200 basis points by next year’s Jackson Hole conference, why would he commit to anything in advance today? I believe his thought process from here on out is to play annualized.

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However, if he downplays the likelihood of a 50 basis point increase next month by emphasizing his confidence in the economy, regardless of the consumer price index and wage data he will see shortly, there will be a sell-off at the near end and probably in equity markets as well.

The Fed’s numerous announcements this week have likely largely anticipated today’s speech by Fed Chair Powell, so as long as it is in line with current market expectations (a rate cut in September and further rate cuts after that), the market reaction should not be significant. But there is always the possibility of a surprise.

While we certainly expect the Fed to start cutting rates next month, we are less certain that Powell will feel compelled to stress the likelihood of lower Fed funds in September. Markets are confident that rates will be lower next month, but are not pricing in completely unrealistic expectations of a 50 basis point cut. What would Powell gain by confirming what is already expected?

Based on recent official Fed comments and FOMC minutes, Powell is likely to set the stage for a rate cut in September. However, we expect Powell to emphasize the data-dependent nature of the Fed’s policy decisions, so the risks are more tilted toward him resisting an aggressive easing stance, in our view, than him confirming market prices.

It is unlikely that he will do much more than confirm what the market already thinks it knows: that the first rate cut will come next month. By acknowledging that the economy has broadly performed as the central bank expected, this would provide a gentle counter to speculation about a 50 basis point rate cut. In the current context, a rate cut will not usher in a looser policy, but simply make the current stance less hawkish.

Company highlights:

• Workday Inc. executives said the company will significantly increase its profitability over the next three years.

• Cava Group Inc. raised its full-year outlook after reporting second-quarter results that beat expectations, another indication that diners see good value in fast-casual restaurants.

• Uber Technologies Inc. plans to offer self-driving cars from Cruise LLC to customers on its ride-sharing platform next year.

• Tactical Resources Corp., a rare earth mining company, has agreed to go public on the Nasdaq stock exchange through a merger with a blank check company, according to people familiar with the matter.

Some of the key market movements:

Shares

• S&P 500 futures rose 0.5% (as of 8:28 a.m. New York time)

• Nasdaq-100 futures rose 0.7 percent

• Futures on the Dow Jones Industrial Average rose 0.4 percent

• The Stoxx Europe 600 rose 0.3 percent

• The MSCI World Index remained little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.2 percent

• The euro was little changed at 1.1114 dollars

• The British pound rose 0.2% to $1.3118.

• The Japanese yen rose 0.1% to 146.09 per dollar

Cryptocurrencies

• Bitcoin rose 0.3% to $60,861.36

• Ether rose 1.2% to $2,657.85

Bonds

• The yield on 10-year government bonds remained almost unchanged at 3.85%

• The yield on German 10-year bonds remained almost unchanged at 2.25%

• The yield on British 10-year bonds remained almost unchanged at 3.96%

Raw materials

• West Texas Intermediate crude oil rose 1.9 percent to $74.43 a barrel

• The spot price of gold rose 0.6 percent to $2,500.31 per ounce.

This story was created with the assistance of Bloomberg Automation.

– With support from Alex Nicholson, Robert Brand and Lynn Thomasson.

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