You’d think the White House would realize that juicing economic data is counterproductive. But, it’s the same brain trust that calculated that massive tariffs wouldn’t punish consumers (or voters.)

Maybe they had hoped they could get the rate cuts they needed before the impact had really been felt and/or the economic data had been recognized as fallacious.  In any case, data which argues the economy is doing great sure doesn’t support the more dovish rate cut scenario floating around Wall Street.

Futures are down again this morning after durable goods and GDP prints far exceeded expectations and initial claims came in well below forecasts. This sets up a “damned if you do, damned if you don’t” scenario for tomorrow’s PCE print.

The equities overshoot is rapidly dissolving, driven largely by the bouncing DXY.

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With markets so far ahead of themselves, particularly among the numerous unprofitable tech stocks which are reaching all-time highs, it’s notable that Jerome Powell finally weighed in.

“We do look at overall financial conditions, and we ask ourselves whether our policies are affecting financial conditions in a way that is what we’re trying to achieve, But you’re right, by many measures, for example, equity prices are fairly highly valued.”

When your goal is reducing inflation by another 100 bps in the midst of an inflation stoking tariff regime, excessive liquidity is not your friend. ES fell about 60 points before bouncing near the 1.272 Fib.

We imagine Powell & Co. has been thinking about financial conditions a lot. There’s very little in the economic data, aside from slumping employment, which suggests the Fed should be increasing liquidity.

A hot new home sales print ordered up by the White House would hurt more than help.

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Futures are flat ahead of the open…

…as the ongoing vol smackdown continues to support equities.

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Futures are off modestly ahead of important economic data due out later this week.

The biggest data point, of course, is PCE due out on Friday. But, we’ll also get new home sales, durable goods and initial claims – all of which could impact markets.

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The S&P 500 has certainly had its ups and downs this year. However, it’s currently bumping up against the channel line that has limited its upside ever since November 8, 2024 – less than 4 points or 0.06% per session. Bottom line, if 2025 is to turn into an impressive year it had better ignore the Sep/Oct bearish seasonal factors and get a move on.

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Futures are moderately higher, but off their overnight highs following a backtest of the 10-day moving average as expected yesterday.

Initial claims came in lower than expected, meaning the Fed’s 25 bps cut yesterday was in line with conditions.

The main story continues to be the steady, daily decline in VIX, seen here in the daily futures chart. Averaging about 2% per session, it has done more to enable the equity meltup than anything else.As David Tepper stated this morning, a 25 or even 50 bps rate cut might help equity markets but will do little to boost the economy.

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The Fed’s big day has finally arrived, with housing permits and starts taking a nose dive just in case the FOMC hasn’t recognized the economy’s weakness.

Our model suggests that CPI is still on the rise and financial conditions are still quite frothy. So, the FOMC really shouldn’t cut more than 25 bps. But, with so many vying for Trump’s favor, there will likely be more dissents than usual and a 50 bps cut can’t be ruled out.

Unless oil and gas prices break down (which we don’t expect) or tariffs are postponed or reduced (quite likely) CPI will remain high and/or continue to increase, giving rise to an increasing risk of stagflation.

Futures are flat ahead of the open.

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Futures are flat ahead of tomorrow’s FOMC rate decision and a hot retail sales print.

Lisa Cook remains a voting FOMC member, while CEA head Stephen Miran was rushed through Congressional approval in order to counter her vote.

Meanwhile, the list of prospective Fed chairmen continues to expand. The way onto the list is simply to profess a desire for large rate cuts, thus increasing the ranks of those supporting Trump’s wishes.

He has done a good job of delaying tariffs just to dampen their impact on inflation. And, the recent huge employment revision (blamed on Biden) has subtly shifted the FOMC’s emphasis toward jobs. A 25 bps rate cut is therefore fairly certain, with some calling for a 50 bps cut.

FWIW, we continue to see an elevated risk of inflation, particularly as the beneficial base effect of oil/gas prices unwinds. Don’t be surprised if the FOMC dot plot reflects a wide dispersion of viewpoints and the vote is anything but unanimous.

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Futures are up moderately in advance of this week’s FOMC rate decision.

Of course, it hasn’t hurt that Elon Musk recently bought over $1 billion of TSLA. From Bloomberg:

The purchase amounts to a show of confidence in Tesla’s prospects after a challenging first half of the year in which vehicle sales slumped 13% worldwide. While Musk has talked up Tesla’s pursuit of robotaxis and humanoid robots, he’s also cautioned that the company could be in for “a few rough quarters” after the US phases out electric-car purchase incentives at the end of this month.

Note that we haven’t had a 3% pullback since May.

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Futures are flat following a strong advance yesterday and ahead of important UMich consumer sentiment.continued for members… (more…)