The major stock market averages fell on Friday after reports Chinese trade officials cut their visit to the U.S. short, reducing hopes that the US and China are any closer to a trade deal. For the week as a whole, stocks posted modest losses and had their 3-week winning streak broken. The Dow Jones Industrial Average dropped 1.1%, the NASDAQ Composite fell .7%, while the S&P 500 Index declined .5%.
Besides trade negotiations, another major point of focus for the market is Federal Reserve policy. As generally expected, the Fed cut interest rates by ¼ point last week. Chair Powell said “we took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks”, citing weakness in global growth and trade policy as weighing on the economy. Powell stated “moderate” moves should be sufficient going forward, and does not expect a long sequence of deep cuts will be necessary to maintain the US expansion.
To that point, futures traders are expecting one more ¼ point rate cut later this year. The CME FedWatch Tool is currently assigning an approximately 57% probability of another rate cut at the October 30 meeting. Expectations (currently) are for rates to remain at that level throughout the rest of the year. Before all of that however, get ready for earnings season, which kicks into high gear in a couple of weeks. To get us warmed up though, several notable companies are scheduled to report in the week ahead, including Nike, Autozone, Micron Technology, and Conagra Brands. As always, call us with any questions or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC