Fed Cuts, Markets Rally, Now What? – Sep 20 Market Recap
Indices
- Dow 42,063 (new record closing high), +670 or +1.62%.
- Nasdaq 17,948, +265 or +1.50%.
- S&P 5,702 +76 or +1.35%.
- MSCI EAFE 2420.93, +10.12 or +0.42%.
- USD10Y 3.728%, +7.8bp or +2.14%.
- WTI Crude $71.25 bbl, +$2.01 or +2.90%.
Fed Cuts, Markets Rally, Now What?
At the time of writing this publication last week, prediction markets were almost evenly split as to whether the Fed would cut rates by 25 or 50bp. On Monday, odds shifted dramatically in favor of the larger cut for no apparent reason. Come Wednesday, the CME Fed Watch Tool was proved prescient as the Fed instituted the larger rate cut. In addition, they indicated another 50bp of cuts forthcoming prior to the year-end, 100bp of cuts in 2025 and a further 50bp of cuts in 2026.
Markets rallied significantly on Wednesday post rate cut but surprisingly sold off prior to the close. However, with an evening to digest the news and Fed Chair Powell’s comments, markets roared higher with both the Dow and the S&P setting new all-time closing highs on Thursday.
While investors will continue to parse inflation and economic data, with the cutting cycle now in effect, we believe market observers will shift their focus to the Presidential election.
The Upcoming Week: Sep 23 – Sep 27
While economic data is light this week, there are several interesting reports highlighted by the Fed’s preferred gauge of inflation, the Personal Consumption Expenditure (PCE). The second revision of Q2 GDP, August Durable Goods Orders, and our first look at September Services and Manufacturing numbers are also on tap. Earnings are extremely light with only Micron Technology (MU) and Costco Wholesale (COST) of import.
Economic Calendar
- Monday – September S&P Flash Services and Manufacturing PMI.
- Tuesday – N/A.
- Wednesday – N/A. Earnings: Micron Technology (MU).
- Thursday – Initial Jobless Claims, August Durable Goods Orders, Q2 GDP (2nd Revision). Earnings: Costco Wholesale (COST).
- Friday – August Personal Consumption Expenditure (PCE). Earnings: N/A.
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Last Week‘s Daily Trading Recap…
Monday – Dow +228 to 41,622 (record closing high), Nasdaq -91 to 17,592, S&P +7 to 5,633, USD10Y -2.9bp to 3.621%
- Nine of eleven S&P sectors traded higher today, led by Financials, Energy, and Materials.
- Intel (INTC) popped +6.36% post close after announcing that it will make its foundry business a separate entity and consider spinning it off.
- September Empire State Manufacturing rebounded strongly to 11.5 vs expectations of -5 and vs last month’s print of -4.7.
Tuesday – Dow -15 to 41,606, Nasdaq +35 to 17,628, S&P +1 to 5,634, USD10Y +2.1bp to 3.642%
- Six of eleven S&P sectors traded higher today, led by Energy, Consumer Discretionary, and Industrials.
- August U.S. Retail Sales increased +0.1% month over month vs –0.2% expected and vs last month’s +1.1% increase.
Wednesday – Dow -103 to 41,503, Nasdaq -54 to 17,573, S&P -16 to 5,618, USD10Y +4.3bp to 3.685%.
- Nine of eleven S&P sectors traded down today, led lower by Utilities, Technology, and Consumer Staples.
- The Federal Reserve Open Market Committee cut the discount rate by 50bp, an aggressive start to its first easing campaign in four years.
- The FOMC noted that both inflation and tightness in the labor market have eased.
- The FOMC dot plot chart indicated another 50bp of cuts prior to year-end, another 100 bp of cuts in 2025, and a further 50pb of cuts in 2026.
- General Mills (GIS) beat top and bottom-line forecasts and reaffirmed 2024 guidance; GIS traded up slightly post close.
Thursday – Dow +522 to 42,025 (new record closing high), Nasdaq +440 to 18,013, S&P +95 to 5,713 (new record closing high), USD10Y +5.5bp to 3.74%.
- Nine of eleven S&P sectors traded higher today, led by Technology, Consumer Discretionary, and Communication Services.
- Jobless claims fell to 219,000 vs 230,000 forecast and vs. last week’s slightly revised higher print of 231,000 (originally 230,000).
- The September Philadelphia Federal Manufacturing Survey beat expectations at 1.7 vs expectations of -1.1 and vs last month’s -7.0 print.
- Earnings: FedEx (FDX) missed both top and bottom-line estimates and cut 2024 guidance; FDX traded down -9.0% post close.
Friday – Dow +38 to 42,063 (new record closing high), Nasdaq -65 to 17,948, S&P -11 to 5,702, USD10Y -1.2bp to 3.728%.
- Eight of eleven S&P sectors traded down today, led lower by Industrials, Materials, and Technology.
If you know of any friends or family members who could benefit from our services and these types of communiques, we are accepting new clients and offer a complimentary one-hour review.
Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ACHR, AVGO, and BITB.