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FOMC Preview (What Makes It Dovish Enough?)

What’s in Today’s Report:

  • FOMC Preview (What Will Make It Dovish Enough for the Market?)
  • Why Did Stocks Rally on Monday?

Futures are moderately higher again following better than expected economic data overnight.

Chinese economic data was solid as August Retail Sales (0.5% vs. (E) 0.1%) and Industrial Production (5.6% vs. (E) 5.1%) both beat estimates.  In Europe, the German ZEW expectations index also beat estimates (77.4 vs. (E) 69.5).  Bottom line, the data implies the global economic recovery is still on going.

On the vaccine front, headlines were more mixed as the resumption of the AZN trial in the U.S. isn’t expected until the middle of this week, at the earliest.  But, markets still very much expect a vaccine to be approved by Election Day and distributed by year-end (and that remains a very optimistic assumption).

Today the looming Fed meeting (tomorrow) should keep the markets generally quiet, although we do get the September Empire Manufacturing Survey (E: 6.5), which is the first data point for September.  If it’s stronger than expected, that will further confirm the U.S. economy remains resilient despite no more stimulus, and that will help support the early rally in futures.