Markets will be focused on FOMC this week

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Published Date 9/16/2024

Overnight the 10 year note yield declined 3 bps, by 8:30 am ET back to unchanged as everything this week will depend what the FOMC policy statement and Powell’s press conference says about the future. Two weeks ago, and even early last week there was still some belief that the Fed would cut rates by 50 bps, that outlook faded as last week progressed.

The first rate cut on Wednesday, 25 bps is priced in; the policy statement and Powell will likely set up additional cuts through the rest of the year. The Fed has two key responsibilities in its charter: employment and inflation. Inflation slowly declining but employment data recently is softening. Shooting for a soft landing is where the Fed hopes its policy will achieve. While 25 bps is completely discounted in present levels traders still hanging on the possibility of 50 bps, swaps tied to the Fed’s decision on Wednesday priced in more than a 50% chance of a half-point cut, after virtually discounting the possibility entirely last week. This morning the key 2 year note yield down 1 bps. Economists at JPMorgan Chase & Co. and former New York Fed President William Dudley — are even preparing for a larger, half-point move. Last week the argument for 25 bps instead of 50 was 50 bps would panic markets that the Fed believes the outlook for the economy is worse than markets think presently.

At 9:30 am the DJIA opened +173, NASDAQ -126, S&P -4. 10 year note 3.65% -1 bp. FNMA 5.5 30 year coupon at 9:30 am +3 bps and +3 bp from 9:30 am Friday.

There isn’t anything left on the calendar today, not likely rates will move much in either direction ahead of Wednesday’s FOMC decision.

This Week’s Economic Calendar:

Monday,

8:30 am September NY Empire State manufacturing index (expected at -3.9, jumped to +11.5 from -4.7 in August)

Tuesday,

8:30 am August retail sales (month/month -03%, ex autos +0.3%, ex autos and gas +0.3%)

9:15 am August industrial production and capacity utilization (production +0.1%, cap utilization 77.9% from 77.8% in July)

10 am FOMC meeting begins

September NAHB housing market index (40 from 39)

July business inventories (+0.4%)

1 pm 20 year bond auction

Wednesday,

7 am weekly MBA mortgage applications

8:30 am August housing starts and permits (starts 1.300 million from 1.238 million; permits 1.410 million from 1.396 million)

2 pm FOMC policy statement

2:30 pm Jerome Powell’s press conference

Thursday,

8:30 am weekly jobless claims (230K unch from prior week)

September Philadelphia Fed business index (+2.0 from -7.0 in August)

10 am August existing home sales (annual 3.90 million from 3.95 million)

Friday,

(no data)

Source: TBWS

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