Another Winning Week After Outsized Rate Cut
Another Winning Week After Outsized Rate Cut
It was another strong week for stocks.
Early in the week, gains were fueled by optimism about the Fed cutting rates by 50 basis points. The Fed delivered and gains continued until Friday, when the market closed flattish as participants digested the solid run in equities. Friday's session was also a "quadruple witching" quarterly expiration of stock options, index options, single stock futures, and index futures.
The Federal Open Market Committee (FOMC) voted in favor of cutting the target range for the fed funds rate by 50 basis points to 4.7%-5.00%. It was not a unanimous vote. Fed Governor Bowman preferred a 25-basis points rate cut.
The directive indicated that the Committee has "gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance."
The Summary of Economic Projections showed a shift in the median estimate for the 2024 unemployment rate to 4.4% (from 4.0% in June) and a downward shift in PCE inflation to 2.3% (from 2.6% in June) and core-PCE inflation to 2.6% (from 2.8%). The dot-plot, meanwhile, shows a median estimate for 2024 (4.40%) that implies another 50 basis points of rate cuts this year and another 100 basis points in 2025.
Fed Chair Powell defended the larger, 50-basis points cut as a proper "recalibration" to make sure the labor market and the economy remain in a solid condition and that the intent of the more aggressive move is to make sure they remain there. He also said that the Fed doesn't feel like it is behind the curve with its policy rate and that the larger cut can be construed as a sign of the Fed's commitment not to get behind.
This thinking drew in buyers, along with a fear of missing out on further gains. The S&P 500 and Dow Jones Industrial Average reached fresh record highs in the wake of the Fed's latest decision.
This week's data largely corroborated the market's thinking that the Fed can orchestrate a soft landing for the economy. Retail sales and industrial production were both stronger than expected in August, weekly jobless claims remain steady below recession-like levels, and the Philadelphia Fed Index tipped back into expansion (i.e. above 0.0 reading) in September.
Only three S&P 500 sectors settled lower. The defensive-oriented health care (-0.6%) and consumer staples (-1.2%) sectors were among the laggards.
Meanwhile, the energy (+3.8%), communication services (+3.7%), and financial (+2.4%) sectors were the top performers.
- S&P 500: +1.4% for the week / +19.6% YTD
- Nasdaq Composite: +1.5% for the week / +19.6% YTD
- Dow Jones Industrial Average: +1.6% for the week / +11.6% YTD
- S&P Midcap 400: +2.3% for the week / +11.6% YTD
- Russell 2000: +2.1% for the week / +9.9% YTD
To download the printable version, CLICK HERE.
Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Data and rates used were indicative of market conditions as of the date shown and compiled by Briefing.com. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.
Provided by Briefing.com.
6974283.4 (Exp. 12/24)