While Friday’s jobs report hinted at a soft landing, it also strongly suggested a more modest rate cutting path than the Fed’s initial 50 bps cut had indicated. After all, Powell has gone out of his way to Fedsplain how employment is the most important mandate now that inflation is licked. But, what if the recent runup in oil/gas brings inflation fears back into vogue?

As the chart below shows, the warning signs were already there even before Iran fired a single missile.

The bond market certainly seems to recognize the shifting tides, with the 10Y back over 4% for the first time since Aug 8. Can equities hold their recent support in the face of a more complicated rate environment? The answer lies in the timing of the price increases.

The recent increases in RB and CL futures haven’t shown up in the retail market just yet. So, they won’t be reflected in CPI until the October print which (conveniently) won’t be released until Nov 13 – after the election.

This is also conveniently after the next Fed meeting occurs (Nov 6-7.) Bottom line, Powell will be able to say – with a straight face – that the FOMC is waiting on the data before altering their rate cut plans.

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NFP came in a nearly double expectations: 254k versus 130k expected. The unemployment rate dropped from 4.2% to 4.1%. Altogether, it was a very hot report that might have been expected to dampen expectations regarding the next FOMC rate cut. But, the algos are currently in a “good news is good news” mood, so futures are up sharply.

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In a week fraught with geopolitical danger, the market has managed to thread the needle thus far – holding support when it counted. Even if it manages to shrug off tomorrow’s nonfarm payroll print, it still faces CPI and PPI next week.

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Futures are trading near yesterday’s lows, with tensions still high after Iran’s attack on Israel yesterday. Iran says the flareup is over, but Israel says otherwise.

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Futures are flat on the first day of Q4. There’s no critical data due out today other than manufacturing ISM (10am ET) which has lately been tracking the economic slowdown.continued for members… (more…)

The PCE price index, core PCE, real disposable income, real PCE, and goods all increased 0.1% in August Services increased 0.2%.  The print was largely in line with expectations, with the YoY PCE registered 2.2% (2.7% core) as expected.

These data support the Fed’s recent actions and expectations of further cuts into the year end. Futures, having already priced in these data, are up slightly.

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China’s Politburo has pulled out all the stimulus stops, sending the CSI300 4.2% higher and an index of Chinese developers over 15% higher. Perhaps even more importantly, David Tepper, in a CNBC interview this morning, characterized the move as extremely stimulative and supportive of stocks not only in China but around the world.

US futures are up sharply, answering the question as to whether we’ll get a pullback after SPX recently reached our IH&S target.

This move, which will likely be echoed by the Japanese, should give equity investors confidence to remain long through the US election.

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Futures are flat as we approach the open.

It’s a little surprising, given that the 2s10s is breaking out again.

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