Coming off another week of record-setting closing highs across major indexes, pre-market futures this Monday. Overseas markets were mixed, but currently the Dow is selling off -170 points, the S&P 500 -22, the Nasdaq -92 and the small-cap Russell 2000 -5.5 points. Bond yields are flat with the end of last week: 4.13% on the 10-year and 3.58% on the 2-year.
We don’t see any major earnings reports before or after today’s normal trading session, as we are in between quarterly earnings seasons, nor do we see economic data hitting the tape today. What we will see today are public speaking engagements from Fed officials, including New York Fed President John Williams, St Louis President Alberto Musalem, Cleveland President Beth Hammack and Richmond President Tom Barkin.
Hammack and Barkin were not voting in this latest round of monetary policy decision last week, and the others voted in-line with Fed Chair Jerome Powell and nearly all the others to cut interest rates 25 basis points (bps). The only member to deviate from the norm was the newest installation to the Fed governors, Stephen Miran, who voted for a 50 bps cut.
Miran is on leave from his job as Chair of Council of the President’s Economic Advisors in order to take on this new role, where he was whisked into the Fed shortly before the September meeting commenced. He has been a vocal proponent for bringing down interest rates lower and faster than people like Powell believe; indeed, he also advocates 50 bps cuts at the Fed’s October and December meetings, as well.
While we are in between “earnings seasons,” the next of which begins issuing dozens of reports per day in another three weeks or so, Zacks Director of Research Sheraz Mian considers early Q3 earnings season already underway, with companies like FedEx FDX and others having already put out quarterly numbers. This week also brings us earnings from AutoZone AZO, Micron MU, KB Home KBH and Costco COST, to name but a few.
We’ll also see New & Existing Home Sales figures for August, flash Services PMI from S&P and ISM, Retail/Wholesale Inventories, Durable Goods Orders and the final print on Q2 GDP. On Friday morning, Personal Consumption Expenditures (PCE) for August get released — the Fed’s preferred gauge of inflation.
PCE is well received by the Fed because it incorporates other economic data from throughout the month. As such, it’s less likely to be revised notably month over month. For August, headline PCE year over year is expected to tick up 10 bps to +2.7%, after spending the previous two months at +2.6% and as low as +2.2% back in April.
Core PCE year over year is expected to remain at +2.9%, as it was the prior month and a couple other times over the past 12 months. The last time we saw a “3-handle” on core PCE was back in January of 2024. The Fed’s optimal level of inflation remains +2.0%, but the closest this metric has gotten was +2.6% in April of this year.
