The main U.S. equity indexes traded lower Tuesday but remained near all-time highs heading into the climactic second day of a much-anticipated Federal Open Market Committee meeting. Incoming data indicate the all-important American consumer is still healthy despite signs of weakness in the labor market.
The outcome is hardly in doubt – the target range for the federal funds rate is headed lower from its current 4.25% to 4.50% – but it could be "one of the strangest in years," says Nick Timiraos of The Wall Street Journal.
And the next Fed meeting is well underway, with a decision due at 2 pm Eastern Standard Time and Fed Chair Jerome Powell's press conference to follow at 2:30 pm on Wednesday.
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"The meeting is unfolding during an extraordinary political moment," Timiraos explains, following "months of attacks from President Trump" about interest rates as well as "parallel legal dramas that have cast doubt on who will attend the meeting."
Late Monday, the Senate confirmed Stephen Miran to replace former Fed Governor Adriana Kugler on the central bank's board. Miran, who said he would take an unpaid leave of absence from his position as the director of the Council of Economic Advisers upon confirmation, is present and voting at this FOMC meeting.
So too is Fed Governor Lisa Cook, whose position was secured, for now, by a decision of the U.S. Court of Appeals for the D.C. Circuit to uphold an injunction imposed by a lower court on President Trump preventing him from firing her. The White House said it would appeal the most recent ruling to the Supreme Court.
The probability of a rate cut is 100%, according to CME FedWatch, with the odds of a double, 50-basis-point move down to 3.9% from 5.0% as of Monday's closing bell and 7.0% a week ago.
Follow everything about the FOMC meeting on our live Fed blog. And be sure to take our Fed quiz before tomorrow's big decision.
At the closing bell on Fed Day Eve, the tech-heavy Nasdaq Composite was off 0.1% at 22,334, the broad-based S&P 500 had slipped 0.1% to 6,066, and the blue-chip Dow Jones Industrial Average was down 0.3% to 45,757.
Aerospace brings life to GE stock
GE Aerospace (GE, +2.2%) hit a new all-time high for the first time since 2000, a process more than 9,000 days in the making (and re-making) for one of the most famous industrial stocks.
GE stock traded as high as $294.74 Tuesday, topping the intraday peak at $289.94 it reached on August 28, 2000, and the all-time closing high of $287.55 it set the same day, according to Dow Jones Market Data.
The old General Electric completed its three-way separation, which formed GE Aerospace, GE Vernova (GEV) and GE HealthCare Technologies (GEHC), in April 2024.
Following a recent meeting with GE Aerospace management, Morgan Stanley analyst David Arcaro reiterated his Overweight (or Buy) rating and his 12-month target price of $675 for GE stock, citing "multiple upside opportunities in Electrification to get excited about: share gains, new product launches, and further margin expansion."
Arcaro sees a "healthy" backdrop for the gas turbine market too, including "consistent demand trends" that make "further price upside look achievable." The long-term outlook is positive as well, "with continued top-line growth and EBITDA margin expansion well into the 2030s."
Retail sales surprise to the upside
The Census Bureau said retail sales increased by 0.6% month over month, well above a FactSet-compiled consensus forecast for 0.2% growth compared to July. Sales expanded by 5.0% year over year in August.
"The consumer continues to propel the economy forward," notes Comerica Bank Chief Economist Bill Adams. "Back to school shopping was in full swing in August, with excellent sales for online businesses, clothing, and school supplies."
Adams says weak grocery sales in August are probably a sign that lower and middle-income consumers are retrenching. At the same time, however, "affluent consumers are in better shape, and likely fueled the outperformance of overall retail sales and more discretionary categories in August."
The housing market is stuck
The NAHB Housing Market Index remained at 32 in September, unchanged vs August but below a FactSet forecast for an uptick to 33.
According to the National Association of Homebuilders, readings above 50 on the index indicate "the majority of builders feel confident about the current and near-term outlook for housing."
The current survey shows 39% of builders cut prices in September, up from 37% in August, to the highest level in the post-COVID period and "a sign that the housing market remains soft."
As Raymond James Chief Economist Eugenio J. Alemán observes, "Regionally, conditions remain weak: the South – the nation's largest housing market – reported an unchanged HMI of just 29, while the Northeast bounced back to 44." Alemán adds that "all regions' readings remain below the confidence threshold for most builders."
In addition to headwinds for new home sales due to rising competition, "These trends reinforce our view that the housing sector remains under pressure and that residential investment will likely stay subdued through the third quarter."
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