Mid-Week Market Minute 9.18.24
Economic Data Beats Consensus; Fed Policy Decision on Wednesday
Stocks continued to build on last week’s momentum as investors look forward to the conclusion of the Federal Reserve’s policy-setting meeting for September. As of Wednesday morning, stocks in the U.S. were up about 0.75% on the week, led by the Russell 2000 (small cap index), higher by more than 1%. In bonds, interest rates were mostly unchanged, with the yield on the 2-year and 10-year Treasury notes trading around 3.63% and 3.68%, respectively.
The Federal Reserve is set to deliver its latest policy decision at 1 p.m. Central on Wednesday. In what might be the most highly anticipated Fed decision of the year, the markets remain divided on whether the central bank will cut interest rates by 25 bps or 50 bps. Currently, the futures markets are pricing in about a 60% probability of a 50-bps rate cut; however, most economists surveyed predict a 25-bps rate cut. It is extremely unusual to see this type of dispersion so close to a Fed decision, and regardless of what the Fed does, it is nearly certain we will see elevated volatility in both stocks and bonds for the remainder of the week.
On the data front, the economy continues to plow forward, as retail sales data on Tuesday came in stronger than expected for August. On a monthly basis, retail sales advanced 0.1%, against expectations for a 0.2% contraction. In addition, industrial production data came in well above consensus, expanding 0.8% in August against expectations for a more modest increase of 0.2%. We also got an update to the Atlanta Fed’s GDPNow model on Tuesday, which puts current estimates for third-quarter real GDP growth at 3%, up from the 2.5% estimate in the week prior.
Source: GSAM, CNBC, JPMorgan, FactSet
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