Short On Time… Executive Summary
The Fed meeting is all that matters this week. Most expect a quarter of a percent rate cut. A handful say half a percent, but I think that could spook the market. I think Jay Powell tipped his hand purposefully in his speech at Jackson Hole last month. While 25 basis points (1/4 of 1%) doesn’t really change much it does change the tone of the Fed and that is what markets are looking for. Once the Fed starts cutting it is expected that they will keep cutting. Who knows? They said they will be data dependent. Unemployment has ticked up a bit and they don’t want it to get out of hand. Time will tell. One thing I am sure of is that whoever Trump chooses to be the next chairperson of the Fed is going to be someone who is apt to cut rates, at least for a little while until their honeymoon period is over. Then, they will probably assert their independence just as Powell has (rightfully thus far) done. So, we’ll find out more Wednesday afternoon.
The Week On Wall Street
Stocks posted a solid gain last week, riding a rally in megacap tech stocks while overcoming interest rate anxiety, a downward revision to jobs data, and mixed inflation reports. The Standard & Poor’s 500 Index rose 1.59 percent, while the Nasdaq Composite Index climbed 2.03 percent. The Dow Jones Industrial Average added 0.95 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, gained 1.18 percent.
Stocks At New Highs
Stocks rose to start the week on renewed AI enthusiasm, with the Nasdaq hitting a new record intraday high. Stocks continued to push ahead on Tuesday despite fresh data showing large downward revisions to job creation for the 12 months through March.
The rally continued midweek after an unexpected drop in wholesale inflation appeared to boost investors' hopes for Fed rate moves before the year's end. Investors cheered Thursday’s consumer inflation report, anticipating that the reading wouldn't be enough to derail a Fed rate move this month. The S&P and Nasdaq posted record intraday highs and closes three days in a row, while the Dow Industrials cracked 46,000 for the first time.
The Nasdaq hit a new record close on Friday, while the S&P 500 flattened out and the Dow posted a modest loss on the week’s last day of trading.
Fed Meets After Mixed Inflation Reports
Wednesday’s Producer Price Index (PPI) report showed wholesale prices fell 0.1 percent in August after a 0.7 percent increase in July. Then, on Thursday, fresh Consumer Price Index (CPI) data showed that retail prices rose a hotter-than-expected 0.4 percent in August—faster than July’s 0.3 percent gain. All eyes will be on Fed Chair Powell this week. He is expected to outline his plan to adjust rates at the Fed’s scheduled two-day meeting, which ends on Wednesday, September 17. Investors will be looking for insights about how he plans to guide the economy through this period of sluggish job growth and stubborn consumer inflation.
This Week: Key Economic Data
Tuesday: Retail Sales. Import Price Index. Industrial Production. Business Inventories. Home Builder Confidence Index.
Wednesday: Housing Starts. Building Permits. Federal Reserve Interest Rate Decision. Fed Chair Powell Press Conference.
Thursday: Weekly Jobless Claims. Leading Economic Indicators.
This Week: Companies Reporting Earnings
Wednesday: General Mills, Inc. (GIS)
Thursday: FedEx Corporation (FDX)
Stay tuned...