You might have heard that there is an FOMC meeting this week. It begins today and concludes on Wednesday with the release of the policy directive, updated Summary of Economic Projections (SEP) and dot plot, and Fed Chair Powell’s press conference.
The interest rate decision is effectively a foregone conclusion. According to the CME FedWatch Tool, there is a 1.0% probability of a 25 basis points rate hike on Wednesday. The intrigue surrounding this meeting relates to the messaging of the SEP and dot plot, and the tone Fed Chair Powell adopts in explaining the policy decision and the Fed’s forecasts.
Today, however, is Tuesday, so we’re not there yet. Accordingly, the wait-and-see stance that permeated Monday’s trading looks to have carried over today.
Currently, the S&P 500 futures are down five points and are trading 0.1% below fair value, the Nasdaq 100 futures are down 28 points and are trading 0.1% below fair value, and the Dow Jones Industrial Average futures are down 37 points and are trading 0.1% below fair value.
Other news factors carrying over today include a bump in market rates, a bump in oil prices, and a bump in the UAW’s rhetoric to include a warning that there will be strikes at more plants if there is no serious progress in negotiations by noon on Friday.
The 2-yr note yield is up four basis points to 5.08%, the 10-yr note yield is up four basis points to 4.36%, and the continuous contract for WTI crude futures is up 1.4% to $91.82 per barrel.
Those moves have been deterrents for investors worried about their implications for growth and spending, which are interconnected. On a related note, the OECD published a new outlook that projects slower global growth in 2024, noting there are significant downside risks. Specifically, the OECD expects 3.0% global growth for 2023 and 2.7% for 2024; its U.S. outlook calls for 2.2% growth in 2023 and 1.3% in 2024.
There was a lack of growth in housing starts in August. Total starts declined 11.3% to a seasonally adjusted annual rate of 1.283 million units (Briefing.com consensus 1.435 million). Single-unit starts were down 4.3% to a seasonally adjusted annual rate of 941,000. There was better news on the permits front. Total building permits increased 6.9% to 1.543 million (Briefing.com consensus 1.442 million) with permits for single units up 2.0% to 949,000.
The key takeaway from the report is that starts were clearly weak in August, yet the strength in permits — a leading indicator — lends some hope that September will feature better news on the home construction front, which is needed given the tight supply of existing homes for sale.
Originally Posted September 19, 2023 – Fed forecast angst carries over
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