Slowing growth = Fed Pause
As much anticipation as there was for the last Federal Reserve meeting, expectations are low for this week’s central bank confab. There is about a zero percent chance that the Fed is going to act at the second to last policy meeting of the year and the reason is clear: slowing growth and deflationary pressures around the world has washed up on US shores. According to most estimates, when the government releases the first estimate for third quarter growth this week, it will likely show a slowdown to a 1.5 – 1.8 percent annualized pace. And unlike the first quarter’s dismal result, we can’t blame the weather! Although consumers are trying hard to carry the load, the sagging energy sector, weakness in manufacturing and a stronger dollar are all taking a toll on the US economy and as a result, job growth downshifted in August and September. As a result, Fed fund futures contracts suggest that the odds of a rate hike this year have dropped to 30 percent. Meanwhile, the Fed’s likely delay in liftoff, combined with the Peoples Bank of China (a 6th rate cut in the past 12 months) and the European Central Bank’s announcements of more (or potentially more, in the case of the ECB) monetary accommodation, helped push stock markets higher on the week.
MARKETS:
- DJIA: 17,646 up 2.5% on week, down 1% YTD (highest close since 07/31)
- S&P 500: 2,075 up 2.1% on week, up 0.8% YTD
- NASDAQ: 5,031 up 3% on week, up 6.2% YTD
- Russell 2000: 1166, up 0.3% on week, down 3.2% YTD
- 10-Year Treasury yield: 2.09% (from 2.03%)
- December Crude: $44.60, down 5.6% on week
- December Gold: $1,163.30, down 1.7% on week
- AAA Nat'l avg. for gallon of reg. gas: $2.21 (from $2.27 wk ago, $3.07 a year ago)
THE WEEK AHEAD:
Mon 10/26:
10:00 New Home Sales
Tues 10/27:
Ford, Apple, DuPont, UPS
8:30 Durable Goods Orders
9:00 S&P Case-Shiller HPI
10:00 Consumer Confidence
Fed begins two-day policy meeting
Weds 10/28:
2:00 Fed Announcement (no presser)
Thurs 10/29:
Starbucks, Mastercard
8:30 Q3 GDP (1st estimate)
10:00 Pending Home Sales
Fri 10/30:
8:30 Personal Income and Spending
8:30 Employment Cost Index
9:45 Chicago PMI
10:00 Consumer Sentiment