Stanley Druckenmiller said central banks move markets, so watch Powell.

Tesla could be a big determiner for how stocks perform from here, says Simon Ree, founder of Tao of Trading, on X. “If we see aggressive dip-buying in TSLA Thursday, that would be a bullish tell. Conversely, if the market fades the pop in NFLX, that would signal overriding bearish sentiment.”

And get that third eye cranking as Chairman Jerome Powell gathers the Economic Club of New York for a fireside chat on Thursday.

Watch MarketWatch’s live coverage of Powell’s speech

On that note and in the thick of earnings season, it’s worth reflecting on what widely followed investor and hedge-fund manager Stanley Druckenmiller has said about why central banks factor importantly in your investments. (h/t to quant researcher Wifey on X for the reminder).

“Earnings don’t move the overall market; it’s the Fed, focus on the central banks, and focus on the movement of liquidity, most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets,” Druckenmiller said at the Lost Tree Club in 2015. Note, he’s expressed wariness on stocks this year, as well as predicting a hard economic landing.

Our call of the day from Macro Tourist newsletter editor, Kevin Muir would tend to agree, as he says Powell’s comments have important bearing on markets for the next two months.

Muir believes some investors way too caught up in recent data that shows a strong economy. “I will not disagree with the analysis that the U.S. economy appears to be running at full steam with no signs of slowing,” Muir writes in his latest blog.

“However, I think they are mistakenly looking solely at the economic data and not considering financial conditions,” and given post-FOMC meeting moves in asset prices, it’s easy to see that the Fed sees the market doing its tightening work for it, he says.

What investors tend to forget, crucially, is that the Fed is a “supertanker that takes a long time to start and stop,” says Muir. And it doesn’t shift direction due to a couple of data points, but rather looks at the whole enchilada and figures out “gradual starts and stops.”

The big debate right now? As economic data has been a little too hot, the bond market thinks the Fed will leave chances of a December hike on the table. Muir says nope, the Fed has paused and it will take some seriously strong economic data to get that hiking campaign restarted.

On Thursday, Muir expects Powell will be more dovish than many investors expect, and confirm what other members have been saying over the past week, suggesting he will echo what Fed Vice Chair Philip Jefferson said recently.

Jefferson: “I will remain cognizant of the tightening in financial conditions through higher bond yields and will keep that in mind as I assess the future path of policy. I will be taking financial market developments into account along with the totality of incoming data in assessing the economic outlook and the risks surrounding the outlook and in judging the appropriate future course of policy.”

A more dovish Fed may not be a green light to buy stocks, said Muir, though he’s considering buying some inflation protected bonds and gold and selling the dollar, and he’s also not sure how bond yields will react due to so many variables. “However, I don’t think betting on a hawkish Powell is the correct play.”

The markets

Stock futures
ES00,
-0.12%

NQ00,
+0.04%
are struggling as bond yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
climb. Gold
GC00,
-0.23%
and the dollar
DXY
are slipping and oil
CL.1,
-0.71%

BRN00,
-0.87%
is also falling after the U.S. relaxed Venezuela sanctions. The Israeli shekel
ILSUSD,
-0.11%
hit fresh lows on fears of a protracted war.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

Reporting early, American Airlines
AAL,
-4.86%
stock is slipping as revenue fell short, AT&%
T,
-1.78%
is up after the cell carrier lifted its free cashflow outlook. Blackstone
BX,
-2.88%
and Fifth Third Bancorp
FITB,
-2.65%
will also report.

Tesla shares
TSLA,
-4.78%
initially shook off earnings disappointment, but fell after CEO Elon Musk said the Cybertruck would take 18 months to turn into a “cash-flow contributor.” Some analysts were talking silver linings in the aftermath.

Opinion: Tesla’s Cybertruck has Elon Musk sounding unusually cautious

Netflix shares
NFLX,
-2.68%
are headed toward the biggest gain in nearly three years after a big jump in subscribers and price hikes. Disney
DIS,
-1.76%
offered a peek at its ESPN financials, and analysts were relieved by what they saw.

Nokia shares
NOK,
-2.87%
are down after the telecom equipment maker said up to 14,000 jobs would go as profit dropped 69%.

Elsewhere, Las Vegas Sands shares
LVS,
-1.59%
are up after the casino group said it would buy back $2 billion in stock. Equifax
EFX,
-3.15%
is sinking after the credit-score agency cut its outlook.

Weekly jobless claims and a Philly Fed manufacturing survey are due at 8:30 a.m., followed by existing home sales and leading economic indicators. Fed Chair Powell will speak at noon, with Chicago Fed President Austan Goolsbee at 1:20 p.m., Fed Vice Chair for Supervision Michael Barr at 1:30 p.m., Atlanta Fed President Raphael Bostic at 4 p.m. and Dallas Fed President Lorie Logan at 6:40 p.m.

Best of the web

Want to beat your return-to-office mandate? Try ‘coffee badging’ at your own risk

How hundreds of U.S. government employees became gun industry sales reps

A U.S. State Department official resigned over what called “blind support for one side,” in the Israel-Hamas war.

The chart

The best of the stock relief rally may be over and it’s time to buy fear, says trader Tom, who writes the Lines On A Chart substack:

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

Random reads

Citadel’s Ken Griffin is building the most expensive home on the planet.

Costco — which announced a CEO change — has a bargain $4,500, 157-piece Le Creuset set.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.