Stocks Higher Ahead Of Fed Rate Decision

SPEAKER_1 (0:00)

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Rob Black (0:12)

It's Fed Day, Kevin Warsh on the hot seat, if you will. I think he's damned if he does and damned if he doesn't. But I think he has to do the one that's the right choice for the economy. Not necessarily the stock market or the president. I think he's gonna raise interest rates. And the question is, will this lead to a rate hike cycle, which many argue tend to lead towards recessions? That's interesting. Gook me up with that one. So it's a pivotal interest rate decision day for the Federal Reserve. It could mark the beginning of that new hiking cycle over the next few months. But generally speaking, we expect Warsh to be one to try to keep rate steady or lower going forward as it's what his publicity has had a lot of over the last year.

Let's look for a colorful tweet from Mr. Trump this morning after the Fed announced their decision. I think we're going to get one. The American consumer is back in the malls as retail sales jumped 1.2% in August. The share of Americans with a side hustle has jumped from 19% in 2017 to 27% in 2020

Do you have a side hustle?

I had a side hustle 25 years ago. College educated workers grew from 35% of multiple job holders in the 1990s to over half by 2024 Consumers are facing a double whammy right now of jumping oil prices and treasury yields. Consumers are increasingly cash strapped. Crude prices have reaccelerated in recent weeks to over $100 a barrel. This is going to lead to higher prices at the pump. The 10-year treasury yield also jumped over 5% to its highest level in 19 years. The total bill per household since the US-Iran conflict war began is about $1,760, which is more than the tax bump that Trump enabled with his one big beautiful bill for individual families. Of that $1,760 extra we've paid, $930 comes from higher energy cost like energy, gas, diesel and jet fuel. Another $425 of that comes from higher interest rates on our credit card purchases and mortgages. The average gallon of gas exceeded $4.32 up 36% from a year ago level. Fairfair prices up 23% in August from the same month a year ago. So we're getting hit pretty hard on a year over year basis. How do you feel? Taking a look at the markets, we're up. This is the weird month of September and it's turning into a very weird month.

We're seeing the S&P 500 trading up one third of one percent. The Dow is flat. The NASDAQ is up 81 basis points. Russell 2000 up 41 basis points. Taking a look at some individual names that are, tend to be big movers and shakers. Micron and SanDisk up just a fractionally. Apple up $2.25 cents to $333. Alphabet's up one half of one percent. Meta up one percent.

So not a lot of pin action today. I would say this feels kind of, let's wait and see what the Federal Reserve does.

So gold's sitting up 1.4% to $43.93 an ounce. The VIX is showing no volatility. Bitcoin's down 1.1% to $75,600. Crude's slightly lower by about 3%, but still above the $100 handle. The 10-year treasury sits at 4.95%. The 30-year at 5.3%.

How will they react after the Federal Reserve makes their move? American consumers back at the mall. Retail sales jumping 1.2% in August, much better than the 8.10% economists were expecting. Core retail sales, that strips out autos, gas, building materials and restaurants, it climbed 1.4%. It's a pretty resilient consumer.

I don't think the Fed will look at that and say, okay, then we can, if they're gonna shop, then we can raise interest rates on them. I don't think it's that one-to-one.

Strong spending supports corporate earnings. Persistent inflation, higher bond yields can put pressure on stock valuations. Ed Yardeni just cut his S&P 500 target from 8,400 to 7,900 because there's higher yields. I'll talk more about Ed Yardeni coming up. But after two back-to-back days of losses on the S&P 500, we're seeing some relief this morning. Yet again, there's a lot of concerning signs. Mortgage demand dropped 4% last week, and that was before the 30-year fixed rate loan jumped above 7%.

Truist is cutting the price target on Lennar from $80 to $75, citing cost increases and interest rates. Again, this hits companies like Home Depot and Lowe's, and we are an economy that has portions that are very economically sensitive to interest rate moves. Then we have not only the interest rate inflation debate going on, but we also have the AI safety debate and two camps have emerged. The divide comes down to a pretty simple question. Do we need more regulation or do we need companies to do a better job making their products safe? It is a trillion-dollar industry without any regulation that's concerning. If later this afternoon an LA traffic controller decides, hey, I want to get home super fast. I'm going to use AI to reprogram the system to give me green lights all the way home. Traffic gets snarled except for this one guy. People would freak out.