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SPEAKER_00: Big cut.
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SPEAKER_00: My weekly market review, September 22nd, 2024.
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SPEAKER_00: The main focus of markets was on the week's interest rate announcements from the
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SPEAKER_00: heavyweight central banks in London,
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SPEAKER_00: Tokyo,
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SPEAKER_00: and of course,
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SPEAKER_00: a highly consequential one in Washington,
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SPEAKER_00: D.C.
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SPEAKER_00: on Wednesday afternoon,
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SPEAKER_00: which finally resolved the passionate,
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SPEAKER_00: frenzied,
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SPEAKER_00: will it be 25 or 50 debate of the last few weeks.
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SPEAKER_00: More data over the weekend confirming the accelerating deterioration of the Chinese economy,
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SPEAKER_00: which wasn't helped by the biggest typhoon since 1949 smashing into Shanghai on a
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SPEAKER_00: holiday weekend.
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SPEAKER_00: And another apparent attempt on Trump's life provided a slightly jittery backdrop when U.S.
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SPEAKER_00: markets opened on Monday morning.
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SPEAKER_00: Not much happened in Monday's session, with stocks playing mostly a waiting game.
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SPEAKER_00: The S&P 500 ended fractionally higher for a sixth straight trading day of gains,
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SPEAKER_00: and small caps moved handily upwards.
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SPEAKER_00: Tech and AI stocks, however, reversed course a bit after the previous week's spectacular fiesta.
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SPEAKER_00: The futures market-driven odds of a jumbo half-point interest rate cut over a
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SPEAKER_00: quarter-point one on Wednesday afternoon
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SPEAKER_00: continued to climb rapidly throughout the day and actually moved into the
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SPEAKER_00: ascendancy with a 67% probability by the close,
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SPEAKER_00: having been as low as 15% just a week earlier.
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SPEAKER_00: This renewed optimistic buzz about a possible half-point cut the following day
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SPEAKER_00: bolstered stock prices on Tuesday morning,
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SPEAKER_00: Fed Eve.
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SPEAKER_00: Also helpful was the pre-market release of retail sales and industrial production data,
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SPEAKER_00: which both came in better than expected.
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SPEAKER_00: Later in the session,
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SPEAKER_00: however,
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SPEAKER_00: doubts crept in on fears that only a quarter-point cut might actually trigger
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SPEAKER_00: market disappointment and drag prices lower as a result.
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SPEAKER_00: Stocks retreated to close essentially unchanged on the day.
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SPEAKER_00: Fed Day finally arrived on Wednesday morning,
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SPEAKER_00: along with developing fears of a further escalation in the Middle East resulting
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SPEAKER_00: from two days of deadly electronic device attacks in Lebanon.
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SPEAKER_00: Traders managed to sit on their hands in advance of the 2 p.m.
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SPEAKER_00: Eastern rate announcement and the 2.30 p.m.
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SPEAKER_00: Eastern Fed Chair Jerome Powell's press conference.
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SPEAKER_00: The Fed went with the big cut of 0.5%,
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SPEAKER_00: lowering the Fed funds rate to 4.875% and released its projections for the months
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SPEAKER_00: and years ahead.
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SPEAKER_00: There was a note of dissent from committee member and Fed governor Michelle Bowman,
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SPEAKER_00: who voted for only a quarter point cut.
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SPEAKER_00: The Fed committee's median estimate for where interest rates will be by the end of
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SPEAKER_00: 2024 after two more meetings was 4.375 and then down to 3.375 by the end of 2025.
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SPEAKER_00: That's two more quarter point cuts before year end and then another four more next year.
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SPEAKER_00: The median projections for the unemployment rate were for an imminent slight
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SPEAKER_00: increase to 4.4% and then staying there unchanged in 2025.
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SPEAKER_00: There was an inevitable bounce in markets immediately following the announcement.
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SPEAKER_00: Powell went out of his way in the press conference to emphasize that nobody should
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SPEAKER_00: assume that this is the new pace for rate reductions going forward.
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SPEAKER_00: Fears resurfaced that the decision to make the bigger cut could indicate that the
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SPEAKER_00: Fed was just scrambling to recover lost ground,
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SPEAKER_00: having waited too long and may have lost control of the economy.
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SPEAKER_00: Despite Wall Street having apparently gotten exactly what it wanted,
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SPEAKER_00: stocks still finished the session in the red,
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SPEAKER_00: and mortgage interest rates that are tied more closely to the 10-year Treasury rate,
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SPEAKER_00: not the Fed funds rate,
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SPEAKER_00: actually shifted higher on the day.
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SPEAKER_00: As expected,
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SPEAKER_00: the Bank of England left local interest rates unchanged but promised gradual cuts
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SPEAKER_00: going forward.
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SPEAKER_00: In something of a delayed reaction, upon further review of the Fed's jumbo cut the day before, U.S.
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SPEAKER_00: stock markets sent prices skyrocketing out of the gate on Thursday morning,
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SPEAKER_00: with tech and AI names in charge of ripping higher.
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SPEAKER_00: The cheery mood continued all day,
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SPEAKER_00: and we closed at another new all-time record high for the S&P 500,
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SPEAKER_00: the 39th such milestone this year.
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SPEAKER_00: The euphoria faded somewhat on Friday.
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SPEAKER_00: A dreadful earnings report and dismal outlook from economic bellwether stock FedEx
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SPEAKER_00: caused the company stock to plunge,
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SPEAKER_00: and ever-growing Middle East tensions didn't help.
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SPEAKER_00: The Bank of Japan ended up leaving interest rates unchanged.
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SPEAKER_00: Stocks in general gave back a small part of Thursday's big gains in an ultra-high
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SPEAKER_00: volume session brought about by index rebalancing and mass futures and option
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SPEAKER_00: contract expirations.
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SPEAKER_00: But the major indexes still managed to show respectable gains for the week.