THIS WEEK'S UPDATE

Short On Time…  Executive Summary
Well, we got the rate cut we were expecting, and I think the handwriting is on the wall that there is more to come.  If I’ve learned one thing in the past 28 years of doing this it is that stocks prefer lower interest rates.  So, if rates go down and the economy is still doing relatively well it should be good for stocks.  A shoe doesn’t generally drop when everyone is waiting for it.  Stocks have rallied since the cut, and I would think we will see a continued rally.  Of course, there will be some back and forth along the way.  All good things come to an end eventually.  However, I don’t see that in the intermediate future unless something comes out of left field.  Crypto assets have seen some volatility over the weekend, but those who have held those for a while know this is nothing new and patience, just as in stock investing, has been rewarded.

The Week On Wall Street
Stocks posted solid gains last week, propelled by the Fed’s decision to cut short-term interest rates. The Standard & Poor’s 500 Index rose 1.22 percent, while the Nasdaq Composite Index climbed 2.21 percent. The Dow Jones Industrial Average advanced 1.05 percent. By contrast, the MSCI EAFE Index, which tracks developed overseas stock markets, fell 0.27 percent.

Third Week of Gains for S&P, Nasdaq
Stocks advanced to start the week following the president's positive comments on trade talks with China. The news helped push the S&P 500 to close above 6600 for the first time.
After the Fed announced on Wednesday that it was cutting short-term interest rates by a quarter percentage point, all three major averages fell before rising again in a choppy, mixed trading session. After digesting the Fed decision, all three major averages posted solid gains on Thursday, paced by tech names. But small caps stole the day’s headlines, with the Russell 2000 Index gaining more than 2 percent and hitting an intraday record high. Smaller companies tend to disproportionately benefit when the Fed lowers interest rates, given their greater reliance on outside funding than larger companies. The post-cut momentum continued into Friday; this was the second consecutive week of gains for the Dow Industrials, and the third straight week for the Nasdaq and S&P 500.

Following the Fed
The Federal Reserve decision brought the Federal Funds Rate down to a 4-4.25 percent target range—its lowest level in three years. While widely anticipated, the real news about the cut was in the finer points made by Fed Chair Jerome Powell in the post-meeting press conference. He said the move was essentially a “risk management” cut. This concept confused investors a bit, resulting in scattered markets. Powell also said two more rate adjustments are “penciled in” for this year. He suggested another rate change could occur in 2026, followed by another in 2027.

This Week: Key Economic Data
Monday: Fed Officials speak: John Williams (New York Fed President), Alberto Musalem (St. Louis Fed President), Stephen Miran (Fed governor), Beth Hammack (Cleveland Fed President), and Tom Barkin (Richmond Fed President).
Tuesday: PMI Composite. Fed Officials speak: Michelle Bowman (Vice Chair for Supervision), Raphael Bostic (Atlanta Fed President), and Jerome Powell (Fed Chair) speak.
Wednesday: New Home Sales. San Francisco Fed President Mary Daly speaks.
Thursday: Fed Officials speak: Austan Goolsbee (Chicago Fed President), John Williams, Michelle Bowman, Michael Barr (Fed governor), Lorie Logan (Dallas Fed President), and Mary Daly. Gross Domestic Product (GDP)—third estimate. Durable Goods. Weekly Jobless Claims. Trade Balance in Goods. Fed Balance Sheet. Retail & Wholesale Inventories. Existing Home Sales.
Friday: Personal Consumption and Expenditures (PCE) Index. Consumer Sentiment. Tom Barkin and Michelle Bowman speak.

This Week: Notable Companies Reporting Earnings
Tuesday: Micron Technology, Inc. (MU), AutoZone, Inc. (AZO)
Wednesday: Cintas Corporation (CTAS)
Thursday: Costco Wholesale Corporation (COST)

Stay tuned...