(Boursier.com) — Wall Street consolidates slightly on its pre-market highs this Friday. The S&P 500 returns 0.1%, the Dow Jones loses a few points and the Nasdaq is expected to fall by 0.1%. Operators are a little more cautious, having welcomed in recent days the start of the Fed’s rate cut cycle and resilient American economic indicators, dispelling for the moment the specter of a painful landing. Stimulus measures in China also supported the markets.
In economic news across the Atlantic this Friday, household income and expenditure for the month of August will be known at 2:30 p.m. Personal income is expected to increase by 0.4% month-on-month, while spending is expected to increase by 0.3%. The adjusted price index known as “core PCE” is expected to increase by 0.2% compared to July and by 2.7% over one year according to FactSet. This is therefore an important test, while the markets take victory against inflation for granted, which also justifies that the Fed can make significant rate reductions to normalize its policy.
The balance of international trade in goods for the month of August is also expected at 2:30 p.m. (Bloomberg consensus of -$100 billion), as are wholesale stocks for August (advanced reading expected up 0.2% compared to in the previous month).
The final University of Michigan consumer sentiment index for September will be released at 4 p.m. (FactSet consensus 69.3, almost in line with the preliminary reading of 69).
According to the CME FedWatch tool, the Fed is expected to further reduce its rates by a quarter of a point (probability of 50.6%) or a half of a point (49.4%) on November 7, following the end of of the future FOMC meeting. The dominant hypothesis for December 18 and the last monetary meeting of the year is that of a range going from 4 to 4.25% on the federal funds rate, with more than 50% probability. This represents a drop of three-quarters of a point compared to current levels.
Note also that Michelle Bowman, governor of the Fed and the only dissident at the last monetary meeting, is speaking again today. She indicated earlier this week that she would have favored a quarter-point rate cut following the FOMC meeting. She believes that inflation remains “uncomfortably” above the 2% target. She would, however, support a policy adjustment if the labor market weakens. In any case, she remains cautious regarding the approach to future monetary actions. For the moment, she sees more risks regarding inflation than employment, which is why she seems to disagree with her comrades. For now, Bowman sees resilience in GDP and consumer spending, with no signals of fragility. As for the job market, it would show “no clear trend of weakness”. Bowman judges that she cannot exclude that progress will stagnate on the inflation front…
Yesterday, the dissident spoke in favor of reducing the Fed’s balance sheet. She also said banks should use the Fed’s discount window to respond to emergency situations rather than more usual liquidity needs. A vision of the mechanism which contrasts with recent pressure from banking regulators to encourage banks to use it.
In corporate news on Wall Street, while the good figures for Micron had supported the Nasdaq yesterday, operators are today interested in Intelon multiple rumors, but also Costco which has just published mixed quarterly results. Chinese stocks listed on Wall Street remain under surveillance after yesterday’s rally, which notably saw Alibaba soar by 10%, JD.com by 14% and Baidu soar by 9%. Investors also flocked to these issues, against a backdrop of economic recovery in China with measures targeting banks, consumption and real estate.
