When the Fed Speaks, Investors Listen

All eyes will be on the Federal Reserve this week. Expectations are that the Federal Open Market Committee will not take action yet lay the groundwork for lower rates in the meetings to follow, possibly in July or September. Certainly, the bond market has led the way lower, raising expectations that the Fed will follow. Futures indicate just an 18 percent chance of a rate cut this week, but those odds rise to 70 percent in July and 85 percent in September. But it would seem that the Fed can afford to be deliberative. While the latest reports on jobs, the Consumer Price Index (CPI) and consumer sentiment support the case for lower rates, retail sales rebounded in May and the April increase was revised higher. In addition, industrial production exceeded expectations.

Investors Feeling Optimistic as the Fed Takes a Dovish Tone


Stocks enjoyed their best week in six months, spurred on by dovish remarks by Fed Chairman Powell. The S&P 500 rose 4.2 percent, led by a 9 percent surge in materials stocks, albeit the smallest sector in the index with a less than 3 percent weight. Other groups outperforming the total index included a diversified mix of technology, consumer staples, industrials, consumer discretionary, financials, healthcare and energy stocks. Every sector was positive.

It Was the Best of Times; It Was the Worst of Times

The opening words of Dickens’s classic A Tale of Two Cities might well be applied to today’s domestic economic condition. Depending on where one sits, today’s economy may indeed be the best of times or the worst of times.

Investors Get a Closer Look at Global Economic Growth


The S&P 500 fell for the third straight week, during which time it has fallen 4.1 percent. For the Dow Jones Industrial Average, it was the fifth straight week of losses, totaling 3.7 percent. The extent of the declines is so far surprisingly modest, given both the breakdown in U.S-China trade negotiations and deteriorating economic data. That the declines are not worse betrays an underlying assumption that the concerns currently pressuring stock prices will be resolved favorably. That assumption may be tested in the days ahead.