Labor momentum continues to decelerate, with job growth slowing significantly in August, implying that the inflation-ridden, red-hot services sector may finally be reaching supply and demand balance.
Interactive Brokers Traders Insight
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The recent rise in long-term yields and the health of the banking sector will be top of mind for investors while Powell and the committee consider how high and how long the fed funds rate should be.
Amazon's Prime Day sales event propelled ecommerce sales up 1.9%, while strong retail sales across the economy, led by sportswear, restaurants, and apparel, rose 0.7% month-over-month and 3.2% year-over-year.
The Federal Reserve's aggressive monetary policy tightening is slowly helping to moderate inflation, but it has more work to do to tame price increases in the sticky services components which will likely require further slowing in the labor market. Wage pressures remain strong driven by a tight labor market and consumption is slowing while GDP growth is easing.
The idea that stocks go up more often than not should not be surprising, but the fact that August tends to be a down month in the S&P 500 is a well-known phenomenon.
The economy appears to have missed the Federal Reserve Bank memo telling it to slow down, with today's GDP and durable goods data exceeding expectations while initial unemployment claims point to persistent labor market tightness.
The recent softness in residential construction is largely due to mortgage interest rates of nearly 7%, making homes less affordable for buyers, with permits for new home construction falling 3.7% from the previous period.
Surprisingly strong results from this morning's ADP jobs report illustrate that travel, entertainment and restaurant businesses are struggling to meet the robust demand that is supporting persistent inflation.
The recent market reaction to the Russia-Ukraine crisis serves as a reminder that global events can have a significant impact on markets, highlighting the importance of staying informed and flexible.
Ultimately, one will prove more correct than the other, but a major divergence can persist for quite some time. The pools of investors have different enough viewpoints to allow the divergent theses to co-exist for a while.
There is an old saying that stocks take the stairs to the roof but the elevator to the basement. As with many market adages, it's not exactly true, but there is sound behavioral logic behind it.
The Fed's recent actions have led to a reevaluation of what it means to 'fight the Fed,' and it's crucial for investors to understand the difference between a trading opportunity and an investable rally.