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September 21, 2015
FED POSTPONES RATE MOVE, SIGNALS ONE SOON
The September interest rate hike Wall Street had long anticipated did not occur, as the Federal Open Market Committee voted 9-1 against raising the federal funds rate Thursday. In their September 17 policy statement, Federal Reserve officials noted that recent “global economic and financial developments” had “somewhat” impeded the U.S. economy and reduced inflation pressures, lessening the need to tighten. The central bank’s latest dot-plot chart projected the benchmark interest rate at 0.40% by the end of 2015 – hinting that an upward move might come as early as October.1
INFLATION HARDLY PRESENT IN AUGUST
Last month, the headline Consumer Price Index retreated 0.1% while the core CPI advanced 0.1%. Through August, the headline CPI had risen just 0.2% during 2015 while the core CPI was up just 1.8% in the past 12 months – not quite the inflation pressure that might prompt the Federal Reserve to tighten.2
A MINOR GAIN IN RETAIL SALES
Last month, Americans bought 0.2% more from retailers than they had in July, and only 0.1% more with car and truck sales factored out. In July, overall retail sales rose 0.7% with core retail sales up 0.6%.3
HOUSING STARTS DECLINE, BUT PERMITS INCREASE
August saw 3.0% less groundbreaking according to the Census Bureau, but overall housing starts were up 16.6% annually. Building permits rose 3.5% last month.4
INVESTORS RESET EXPECTATIONS
The Fed’s decision to leave interest rates unchanged left the market with more questions than answers, yet stocks ended the week about where they began. Across five days, the S&P 500 went -0.15% to 1,958.03, the Dow -0.29% to 16,384.79, and the Nasdaq +0.10% to 4,827.23.5
THIS WEEK: Monday brings August existing home sales numbers plus quarterly results from Lennar and Red Hat. On Tuesday, AutoZone, Carnival Cruise Lines, ConAgra Foods, CarMax, Darden Restaurants, and General Mills all release earnings news. A new factory PMI reading from China appears Wednesday. Thursday offers reports on August new home sales and durable goods orders, initial jobless claims and earnings from Accenture, Bed Bath & Beyond, Cintas, Jabil Circuit, KB Home, Nike, and Pier 1; in addition, Fed chair Janet Yellen speaks on monetary policy in Massachusetts. Friday, Wall Street considers the final government estimate of Q2 GDP and the University of Michigan’s final September consumer sentiment index.
| % CHANGE |
Y-T-D |
1-YR CHG |
5-YR AVG |
10-YR AVG |
| DJIA |
-8.07 |
-5.10 |
+10.89 |
+5.52 |
| NASDAQ |
+1.93 |
+5.09 |
+21.69 |
+12.50 |
| S&P 500 |
-4.90 |
-2.65 |
+14.79 |
+5.91 |
| REAL YIELD |
9/18 RATE |
1 YR AGO |
5 YRS AGO |
10 YRS AGO |
| 10 YR TIPS |
0.58% |
0.61% |
1.00% |
1.70% |
Sources: wsj.com, bigcharts.com, treasury.gov - 9/18/156,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
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