Fed Chair Powell Speech Awaited; U.S. Jobs Data in Focus This Week

Fed Chair Powell Speech Awaited; U.S. Jobs Data in Focus This Week; China Announces More Stimulus By Hardika Singh

Federal Reserve Chair Jerome Powell is due to speak this afternoon at the National Association for Business Economics' annual meeting in Nashville, Tennessee at 1:55 p.m. ET. Investors will be looking for clues on the central bank's next steps after it delivered a half-point rate cut earlier this month.

Later in the week, U.S. jobs data will take center stage as investors look ahead to how much and how fast the Fed will reduce interest rates from here. Friday's non-farm payrolls figures for September will be in focus.

Currently, U.S. money markets are pricing in almost 75 basis points of rate cuts at the Fed's two remaining meetings of 2024 in November and December. This implies that one of those would be another half-point reduction, although many analysts continue to predict that the Fed will opt for the more common quarter-point cuts.

Ahead of Friday, investors will look at further clues on the health of the jobs market, with JOLTS job opening data for August on Tuesday, ADP private payrolls figures on Wednesday and weekly jobless claims on Thursday.

Other data which are sure to attract scrutiny are the ISM September activity surveys for manufacturing on Tuesday and services on Thursday, which will provide an up-to-date snapshot of how the U.S. economy is faring. They are expected to show slight expansion in the services sector and continued contraction in manufacturing.

Meanwhile, in Europe, eurozone inflation data will be firmly in the spotlight as speculation grows that the European Central Bank could cut interest rates again in October. And in Asia, focus will be on purchasing managers' surveys and inflation data, with a close eye on any potential further stimulus announcements out of China. Read more .

Top News China to Allow Home Buyers to Refinance Mortgages

China said Sunday that it would allow home buyers to refinance their mortgages, the latest in a weeklong torrent of policy moves aimed at supporting the struggling economy.

The move marks a shift in how Chinese pay off their home loans and could allow policies aimed at addressing a prolonged property-sector slowdown to more effectively filter through to the market. Before this, many Chinese home buyers with existing mortgages have been unable to immediately benefit from interest-rate cuts. Read more .

China's central bank said Monday that it bought a net 200 billion yuan ($28.52 billion) of treasury bonds in September, marking a second consecutive month of purchases it said would replenish liquidity in the financial system. The People's Bank of China said in a brief statement that the purchases were aimed at stepping up the counter-cyclical adjustment of monetary policy and maintaining reasonable liquidity in the banking system. In August, the PBOC bought a net 100 billion yuan of treasury bonds. (Dow Jones Newswires)

More on China:

Chinese Property Stocks Surge as Barrage of Stimulus Continues China Markets Surge in Wild End to the Quarter A Week of Shock and Awe Ignites China's Stock Markets Will China's Surprise Stimulus Work? Nikkei's Message to Japan's New PM: Higher Taxes Are Bad for Stocks

Japan's new leader got an early lesson about the stock market: It hates higher taxes and loves the late Shinzo Abe. The Nikkei Stock Average fell nearly 5% on the first trading day after former Defense Minister Shigeru Ishiba, 67, secured the prime minister's job in a ruling-party vote.

Japan Industrial Output Fell More Than Expected in August U.S. Economy Fed's Preferred Inflation Gauge Cooled in August

The Federal Reserve's preferred inflation gauge showed price pressures cooled last month, rising 2.2% in August from a year earlier.

The personal-consumption expenditures price index, or PCE, came in below economists' expectations for a 2.3% rise. In July, the index rose 2.5% from a year earlier.

The closely watched core index, which doesn't include volatile food and energy prices, rose 2.7% in August from a year ago, matching expectations.

The Fed Made Its Move. Why Didn't I?

Now that the Fed has finally cut interest rates, you'll be hearing a lot of advice that comes with exclamation points: You've got to raise your yield! Take more risk! Buy "alternatives" like private real estate and private credit! Ignore the shouting, writes WSJ's Jason Zweig.

Americans Are More Reliant Than Ever on Government Aid

Americans' reliance on government support is soaring, driven by programs such as Social Security, Medicare and Medicaid.

That support is especially critical in economically stressed communities throughout the U.S., many of which lean Republican and are concentrated in swing states crucial in deciding the presidential election. Neither party has much incentive to dial back the spending.

The big reasons for this dramatic growth : A much larger share of Americans are seniors, and their healthcare costs have risen.

Voters Love the Policies That Economists Love to Hate

As former President Donald Trump and Vice President Kamala Harris compete for any possible edge in a tight election, they have offered a plethora of ideas that, while delighting voters by varying degrees, have appalled economists because they would distort markets or deepen America's fiscal hole.

A Dockworkers Walkout Could Batter the U.S. Economy, Tie Up Trade

Dockworkers are preparing to strike at midnight across dozens of ports from Maine to Texas, threatening to block the movement of a swath of U.S. trade and rattle the American economy five weeks ahead of the presidential election.

Forward Guidance Monday (all times ET)

9:45 a.m.: Chicago Business Barometer (PMI)

1:55 p.m.: Fed Chair Powell speaks

Tuesday

9:45 a.m.: S&P final U.S. manufacturing PMI

10 a.m.: ISM manufacturing

10 a.m.: Construction spending

Research East Coast Port Strike Seen Unlikely to Cause Major Supply Snags

A looming strike by dockworkers along U.S. East and Gulf coast is unlikely to severely disrupt supply chains, amid "fattened inventories and a compelling case for presidential intervention," Wells Fargo economists say in a note. They acknowledge that prolonged port strikes could be a problem, but argue that "controlled chaos has been the norm in the global shipping business throughout this expansion, and smart purchasing managers have adjusted their approach by bringing on critical inputs months in advance." They add that Biden has power to mandate workers to return to their posts during negotiations, which they see the president as likely to do ahead of the election. - Paulo Trevisani

Commentary Stocks Are Riding High on Easy Policy. Here's How to Trade It.

Central banks are priming the pump again. Investors who smartly reshuffle their portfolios could benefit disproportionately, Jon Sindreu writes for The Wall Street Journal.

Earlier this month, the Federal Reserve delivered a jumbo, half-point cut in interest rates. Then, several days later, China's central bank went all in with measures to jolt its economy and the stock market. In the eurozone, lackluster surveys of purchasing managers have sparked hopes that the European Central Bank will soon follow suit.

The S&P 500 hit a record high this past week. The consumer-discretionary sector, which was previously in the doldrums due to it being particularly exposed to economic booms and busts, has taken over leadership and is up 7.3% month to date. It includes carmakers, leisure companies, apparel companies and home builders. Home Depot, Booking.com and McDonald's have been among those bolstering the sector's gains.

The market's message seems clear: Lower borrowing costs should allow consumers to unlock new sources of credit, and this is a good thing. But does the rotation have room to continue?

It might surprise many investors that consumer-discretionary stocks are doing so well in the first place. Historically, they have done best when the economy is heating up and interest rates and bond yields are rising-a pattern that also applies to cheap "value" stocks and to equal-weighted indexes.

But that pattern is backward now because high rates have been used to battle supply-driven inflation. When that happens, it also increases something called dispersion between different sectors in the market. Investors who rotate their portfolios more often tend to do better during such periods. Read more .

Basis Points The second and final reading of the University of Michigan's consumer-sentiment index in September rose to 70.1 - the highest level in five months - from a preliminary reading of 69 released earlier in the month, the university said Friday. (MarketWatch) After hitting the highest levels in more than two years in July, the U.S. trade deficit in goods narrowed 8.3% to $94.3 billion in August, according to the Commerce Department's advanced estimate released Friday. This is the smallest trade gap since March. (MarketWatch) The life trajectories of America's sons and daughters are diverging. Presented with a more-equal playing field, young women are seizing opportunities in front of them, while young men are floundering . Signs that Canada's economy stalled again last month has growth this quarter tracking below the central bank's target and leaves open the possibility of even deeper cuts in interest rates. Grain terminal workers on Canada's West Coast began returning to work over the weekend after a tentative deal was reached to settle a four-day strike that halted crop exports during the busy harvest season. Oil prices rose 1% in early European trading, boosted by China's latest barrage of stimulus measures aimed at stabilizing the country's property market, as well as supply disruption risks in the Middle East. (Dow Jones Newswires) Gold prices edged higher in early European trading, driven by optimism around further U.S. rate cuts and demand for safe-haven assets amid heightened geopolitical tensions in the Middle East. (DJN) About Us

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September 30, 2024 07:16 ET (11:16 GMT)

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