Stocks Were Mixed Yesterday After Fed Cut Rates By A Quarter-Point And Eyes Two More Cuts By Year's End Stocks closed mixed yesterday with the Dow up 0.57% and the small-cap Russell 2000 up 0.13%. The S&P and Nasdaq, however, closed modestly lower by day's ends. Yesterday's FOMC Announcement saw the Fed cut interest rates by 25 basis points as expected. And they suggested they'll likely cut 2 more times (presumably by 25 basis points) by year's end. That means another 25 bps in October and another 25 bps in December. Fed Chair Jerome Powell, in yesterday's post-announcement press conference said, "the pass-through of the tariffs into inflation has been slower and smaller, the labor market has softened, so that the case for their being a persistent inflation outbreak is less." That echoed the Fed's talking points leading up to yesterday's cut, and sets the stage for more cuts to come. They also noted that they expect slightly more economic growth this year than previously. Additionally, they expect higher economic growth next year, and slightly higher inflation. But slightly lower unemployment. All in all, it was a slightly better-than-expected announcement and press conference. The Fed cut by 25 bps as expected, suggested two more rate cuts this year (more than the 2 they previously predicted), and raised their economic growth forecast a bit. Stocks got off to a shaky start after China said they were banning their tech firms from buying NVIDIA chips after accusing them of violating the country's antimonopoly law. Some see this as a bargaining chip as they continue trade negotiations with the U.S., since Chinese firms do want and need their chips. Although, the impact should be limited if the ban stays put as China 'only' makes up 6% of NVIDIA's global sales, down from roughly 20% just a few years ago. Nonetheless, NVIDIA shares slumped yesterday by -2.62%. In other news yesterday, MBA Mortgage Applications rose 29.7% w/w with purchases up 2.9%, and refi's up 24.4%. The Housing Starts and Permits report showed Starts at 1.307 million units (annualized) vs. last month's 1.429M and views for 1.370M. Permits came in at 1.312M vs. last month's 1.362M and expectations for 1.370M. And the Atlanta Fed Business Inflation Expectations stayed the same with year-ahead inflation expected at 2.3%, in line with last month's pace. Today we'll get Weekly Jobless Claims, the Philadelphia Fed Manufacturing Index, and Leading Indicators. And we'll see if the market can build upon Monday's gains when they closed at new all-time highs. See you tomorrow, Kevin Matras Executive Vice President, Zacks Investment Research |
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