The Cboe Volatility Index jumped 5.1% ahead of the market open as Treasury yield pressure and Middle East tensions rattled equities, pulling S&P 500 futures lower. Treasury Secretary Scott Bessent is due to detail new economic restrictions on Iran, while Federal Reserve Chairman Kevin Warsh's debut Jackson Hole speech carries added weight amid a bond market selloff.
The Cboe Volatility Index, or VIX, jumped 5.1% to 15.91 ahead of the market open. Ongoing yield pressure in long-term Treasuries, alongside Middle East tensions hitting crude oil markets, added extra macro uncertainty to equities. S&P 500 futures slipped 0.27% to 7,670.75 in the same session.
U.S. Treasury Secretary Scott Bessent is set to hold a press conference at 2 p.m. Eastern time, when he is expected to announce details about new economic restrictions on Iran.
Warsh's Jackson Hole test
Federal Reserve Chairman Kevin Warsh delivers his debut keynote Friday at the Kansas City Fed's annual research symposium in Jackson Hole, Wyoming. Warsh has framed the address as a choice between discussing near-term policy or broader principles, but traders and analysts are looking for guidance on the recent jump in bond yields and reassurance of his independence from the Trump administration. He has said he wants to wait for recommendations from five task forces established at the start of his tenure this spring before detailing his plans.
Markets bet on a hike
Markets have already moved toward a view that the Fed's policy interest rate needs to rise, with U.S. inflation above the 2% target for more than five years and some of Warsh's colleagues concerned that failing to deliver a rate hike could hurt the central bank's credibility. According to Reuters: "Both the bond market and the FOMC have clearly decided to wake up," said Adam Posen, president of the Peterson Institute for International Economics.
The scrutiny extends beyond monetary policy. Democrats on the Senate Banking Committee have asked Warsh for details on his communications with President Donald Trump, following a Wall Street Journal report that the two men have held regular calls.
Warsh has not said whether Friday's speech will address the rate outlook directly, leaving markets to parse whatever he chooses to say.
Sources: Barron's, Reuters via Investing.com
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