Stocks Up Modestly and Bonds Down; Investors Await Fed Decision This Week
Good morning
The Dow (+0.5%), NASDAQ (+0.9%) and S&P 500 (+0.4%) each gained modestly for the week. Conversely, taxable bonds fell 0.5% and tax-free municipal bonds fell 0.1%. The 10-year Treasury rose 0.13% to finish the week at 4.14%.
Stocks were up marginally last week and bonds fell. There was little “fresh” economic news, as the gov’t shutdown from October is now providing economic reports from September which are quite stale. As a result, investors are mostly limited to reports provided by non-governmental entities, like the ADP jobs report. Last week, ADP showed a loss of 32,000 private jobs, compared to an expected gain of 40,000 jobs. That’s a stark contrast, which would normally be met with a sharp downturn in stocks. However, like we’ve recently seen a trend of “bad news is good news”, that led investors to have more confidence that the Fed will cut interest rates this week.
Particularly in the absence of recent economic data, the Fed meeting is taking the spotlight right now. At its meeting that concludes this Wednesday, the Fed will make the decision to cut interest rates or leave them the same. The bond market is currently pricing in an 89% chance the Fed cuts rates, so if they don’t, then we can probably expect a sharp decline in the markets. In addition to the rate cut(?) announcement, the Fed will also unveil its “dot plot”, which summarizes each of the Fed member’s expectations of future interest rates. That will provide investors with a sense of what the Fed intends to do in 2026. Of course, that could quickly and easily change with economic data, and with the new Fed chairman expected to replace Chairman Powell in May 2026. It is widely expected that the new Fed Chairman will have a looser monetary policy.
Have a great day and terrific week!
Source: Yahoo Finance
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