Fed-Day Technical Tear Sheet (Negative Divergence from Fundamentals)
Fed-Day Technical Tear Sheet (Negative Divergence from Fundamentals): Start a free trial of The Sevens Report.
What’s in Today’s Report:
- Fed-Day Technical Tear-Sheet: Market Technicals Are Diverging Negatively from Still Optimistic Fundamentals
- Economic Takeaways: Retail Sales and Industrial Production Top Estimates
Stock futures are trading tentatively higher as investors digest mostly as-expected inflation data out of Europe overnight and look ahead to today’s Fed decision.
Economically, Eurozone CPI met estimates at 2.2% y/y in August while the Core figure was also as-expected at an unchanged 2.8% y/y last month.
Today, focus will be on the one notable economic data point due to be released: Housing Starts (1.300M) but it is unlikely to materially move markets with the Fed decision looming this afternoon.
The FOMC Announcement will hit the wires at 2:00 p.m. ET followed by Fed Chair Powell’s Press Conference at 2:30 p.m. ET. The consensus expectation is a 25 bp rate cut will be delivered but market-based policy rate expectations are pricing in a 65% chance of a 50 bp rate cut as of this morning.
Bottom line, whether the Fed delivers a 25 bp or 50 bp rate cut today is less important than the guidance provided on future cuts as the market wants to see the framework laid out for a fairly aggressive rate cutting path in the months ahead to shore up soft-landing hopes. So projections and Powell’s speech will be critical for the market reaction late in the session.
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