Monday – September 30, 2024
UMBS continued their red run this morning, down 6 bps. S&P futures are down 11.75 points.
US equity futures started the week on the backfoot after last week’s record highs, with traders already looking forward to key data on the American labor market due Friday and its impact on Federal Reserve interest-rate cuts. S&P 500 and Nasdaq 100 contracts dropped while Treasury yields climbed, led by the policy-sensitive two-year note. The dollar was little changed. As they gauge the outlook for Federal Reserve rate cuts, investors must also ponder a cocktail of risks, including rising tensions in the Middle East.
The week ahead will be dominated by the jobs report on Friday, however we will get ISM data and a lot of Fed speakers. The Street is looking for payroll growth to slow and for the unemployment rate to be steady at 4.2%. Jerome Powell is speaking at 1:00 pm today.
Federal Reserve Chair Jerome Powell said the central bank will lower interest rates “over time,” while again
emphasizing that the overall US economy remains on solid footing. Powell also reiterated his confidence that inflation will continue moving toward the Fed’s 2% target, adding that economic conditions “set the table” for a further easing of price pressures.
“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral
stance,” Powell said in a speech in Nashville at the annual meeting of the National Association for Business Economics. “But we are not on any preset course,” he said, noting that policymakers will continue to make decisions meeting by meeting based on incoming economic data. A neutral policy is one that neither stimulates nor holds back the economy.”
In the lexicon of market watching, the Fed is considered to be dovish when they’re saying things that are generally friendly for rates. When the opposite is the case, the term is “hawkish.” Relative to expectations, the market felt Powell was hawkish at the press conference 2 weeks ago. Because of that, and because of the bond losses that followed, there was some false hope for a dovish counterbalancing act today. It wouldn’t exactly be fair to say Powell was hawkish, but he certainly wasn’t feeling compelled to throw the bond market a bone. The comment earning the most focus was essentially a reminder that the Fed is not in a hurry to cut rates and will be guided by data. This isn’t really anything new, but bonds were modestly disappointed nonetheless.
UMBS closed the day down 18 bps at 101.18
