Markets
On Wednesday at 2pm, the Federal Reserve will most likely announce another rate cut of ¼ point. But what investors want to hear is the path going forward.
So often I say that the market acts like a spoiled 5 year old (think Veruca Salt in the Willy Wonka movie). And if the market doesn’t get its way, like that spoiled child, you might see a tantrum.
Stock prices pushed higher last week, notching multiple records along the way as employment and inflation data took center stage in anticipation of the Fed’s upcoming meeting.
The Standard & Poor’s 500 Index rose 0.31 percent, while the Nasdaq Composite Index picked up 0.91 percent. The Dow Jones Industrial Average gained 0.50 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, added 0.72 percent.1,2
Fed in Spotlight, they will most likely cut interest rates
Stocks fell to start the week as all three averages snapped a five-day win streak.3
Megacap tech stocks then led a recovery rally, which continued its momentum midweek as ADP’s November report showed a decline in private-sector payrolls. Investors welcomed the report, believing it might prompt an interest rate adjustment at the Fed’s upcoming meeting. All three major averages posted modest gains over both Tuesday and Wednesday.4,5
Stocks then largely went sideways, with small gains for the S&P and Nasdaq while the Dow fell slightly. Meanwhile, the Russell 2000, which measures the performance of small-cap stocks, has cracked a fresh record high.6
Markets rallied on Friday after a delayed inflation report showed that prices rose at a slightly slower annualized rate in September. The S&P closed out a four-day winning streak.7
Economy Watch
The Fed’s preferred measure of inflation stayed cool. The Personal Consumption Expenditures (PCE) Price Index rose 2.8 percent in September from a year prior, cooler than the 2.9 percent expected. The annualized core inflation rate of 2.8 percent also came in just under expectations.8
The ADP private-sector jobs showed employers cut 32,000 jobs in November. Two things to remember: (1) this report is only based on the first two weeks of November, and (2) small business payrolls declined by 120,000, while employers with 50 or more workers added 90,000 jobs.9,10
An optimistic inflation report but a sluggish jobs update added to growing speculation that the Fed will adjust rates at its next (and last) meeting of the year.
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