The most anticipated change ever forecasted for the federal funds rate is at hand. The question is how much? At the close of trading last week, the odds of a 50-bps reduction were zero. Yesterday a Bloomberg headline read Traders See Half Point Rate Cut Likelier Than Quarter Point. Swaps tied to tomorrow’s Fed decision … Read more
How much will the Federal Reserve lower interest rates on Wednesday? This is perhaps the most forecasted reduction in history with the initial cut expected/forecasted over 20 months ago. Friday’s comments suggested that inflation data is no longer significant given the Fed’s statements that it is now all about jobs and last week’s muted reaction … Read more
Little attention was focused upon August’s PPI data which was nominally higher than expected. Since the Fed shifted its three-year focus from inflation to jobs, there is little fanfare around the release of any inflation data. Today import/export price data is released and barring any significant aberration, this data point may also be met with … Read more
Underlying inflation unexpectedly picked up in August. The culprit was higher prices for housing and travel, undercutting the chances of an outsize interest rate cut next week. The core CPI—which excluded food and energy—increased 0.3% from July, the most in four months and 3.2% from a year ago. The three-month annualized rate advanced 2.1%, picking … Read more
The markets have fully discounted a 25-bps reduction in Fed Funds at next week’s FOMC meeting. Based upon the most basic definition is monetary policy is restrictive; inflation around 3% and the overnight rate at 5.25%, thus suggesting 225 bps of easing to have monetary neutrality. The 2-year Treasury has fully discounted such to occur. … Read more
The buy on dip strategy was predominate yesterday following the worst week in the S & P 500 since March 2023 and the worst week in the NASDAQ since 2022. According to Dow Jones, this is the worst start for September going back to 1953. September is historically the worst month for the S & … Read more
Hiring fell short of forecasts in August after downward revision to the prior two months, fueling the ongoing debate over how much the Federal Reserve could lower interest rates. Nonfarm payrolls rose by 142,000 in August, leaving the three-month average at the lowest since mid-2020. The unemployment rate edged down to 4.2%, the first decline … Read more
August’s employment data is released at 8:30. Interest rate swap contracts show roughly a 35% chance that the Fed will lower rated by 50 bps when it meets September 17-18. A quarter point reduction is still believed to be the most probable outcome. That split has boosted the scope for big gains and losses in … Read more
FRB Chair Powell stated that monetary policy will be largely dependent upon the jobs market. Yesterday the monthly JOLTS Survey was considerably lower than expected, falling to the lowest level since the start of 2021. Moreover, the prior month was revised marginally lower. Led by the two-year Treasury, Treasuries rallied across the curve. For only … Read more
Equites initially climbed across the board and bonds fell after data indicated the economy is strong despite elevated rates and a disappointing outlook from market leviathan NVDA. As noted several times, the hype around NVDA’s result was intense. The overall immediate ramification was a nothing burger. A late afternoon selloff sent the NASDAQ down about … Read more
