Daily Market Color

Stocks Mixed, Treasurys Flat with Fed Meeting Approaching

 

Stocks Mixed to Finish Strong Week

Equity trading volumes surged during today’s session as investors juggled the expiration of stock options and futures (third Friday of September) with the reshuffling of their investments in the various sectors within the S&P 500.  Among major indices, the DJIA managed to post a 0.32% gain while the Nasdaq (-0.51%) and S&P 500 (-0.04%) finished in the red, albeit all three indexes succeeded in reaching new record highs during the week.  US Treasurys were mostly flat on the day, with the yield on the 10-year note closing the week at 3.06%, more than 6bps higher than its opening level this past Monday.  In commodity markets, WTI crude oil futures were weighed down by rumors of increased production among OPEC and other major oil producers around the world.  More clarity regarding future supply is expected this Sunday, when producers will be meeting in Algeria to discuss the future plans for controlling global output.

 

 

Trade Talk

The week comes to a close with little progress to report between the US and its major trade counterparts who have been grappling over trade and tariffs.  The prospects of a trilateral trade agreement between the US, Mexico and Canada grew bleaker today after White House economic adviser Kevin Hassett announced that “We’re still talking to Canada, and we’re getting very, very close to the deadline where we’re going to have to move ahead with Mexico all by themselves”.  October 1st has been set as the deadline for an agreement to be made, and talks between the US and Canada are scheduled to start back up early next week.  Looking east, the Trump administration remains positive in the outlook for negotiations with China despite both sides upping the ante with additional tariffs earlier this week.  “I am still optimistic that there is a positive way forward, and the President wants us to continue to engage to try to achieve a positive way forward,” stated a White House official earlier today.

 

 

The Week Ahead

Financial markets will be gearing up for the FOMC’s meeting announcement on Wednesday, with their 8th quarter point rate hike since rates had bottomed all but certain.  The increase will shift the target range for the Fed funds rate to 2.00-2.25%, the highest it has been in the past decade.  More important will be the guidance provided afterwards via the Fed’s “dot plot” and press conference with Fed Chair Jerome Powell.  We’ve experienced a hike at least quarterly since March 2017, and the Committee is currently trying to determine the “neutral rate” for the economy in the long run.  There are also a number of items up for discussion within the FOMC, including the impact of the recently escalated trade uncertainty with China and Canada, continued flattening of the yield curve, and historic highs in equity markets.  

 

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