Market & Economy At Odds

The market did not like several key corporate earnings announcements last week.

The Jobs Report will be eyed this week to see if the economy is holding up among renewed interest rate concerns. There is a divergence between economic data and investor confidence. Third quarter GDP data came in stronger than expected and more than double the rate of growth over the previous quarter. The Fed’s favorite measure of inflation, the PCE Price Index was flat year-over-year for the past 3 months. Both the Fed’s National Financial Conditions Index and the Financial Stress Index show loose financial conditions.

The primary concern appears to be over interest rates.

Since July 31st, the performance of the S&P 500 Index has proceeded lower as the yield on the 10-year Treasury has moved higher. Another pause by the Fed at this week’s FOMC meeting could help shift that dynamic. Current futures on the Fed’s next move point to a 97% probability of no rate hike and a 3% probability of a rate cut. Personal Spending released last week shows a still strong consumer. Markets are at an inflection point that may resolve itself soon.

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