See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“We did everything adults would do. What went wrong?” – William Golding. Lord of the Flies

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Historically, when the Fed started a rate-cutting cycle, equity market performance on the day of the first cut was very positive with an average one-day gain of 1.30%. Even that positive bias, however, wasn’t enough to counter the negative pull of the market on Fed days during current chair Powell’s tenure since 2018.  As shown in the chart below, on Fed days under Powell, there has been a clear negative bias for equities in the final hour of trading, which was again on display yesterday.  Even after rallying as much as 0.8% after the statement’s release communicating a 50 bps rate cut, stocks drifted lower and finished with a decline of 0.24% right near the day’s lows.

The negative pull of Powell’s law of gravity may have pulled stocks lower yesterday, but this morning, the S&P 500 is indicated to open sharply higher with the S&P 500 ETF trading up over 1.5% in early trading. If these gains hold through the opening bell, it would be the 16th time since 1994 that SPY has gapped up over 1% on the day after a Fed meeting (scheduled or unscheduled).  In the chart below of SPY, we show each of those prior occurrences using blue (when there was no change in rates on the Fed day) and red dots (when there was a cut in rates). Of the 15 prior gaps higher, just four followed a day when the FOMC cut rates. Three of those were after the 2007 peak and through the Financial Crisis while the fourth was in early March 2020 during the early days of the Covid Crisis.

See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“It’s good to be in something from the ground floor. I came too late for that and I know. But lately, I’m getting the feeling that I came in at the end. The best is over.” – Tony Soprano

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

It’s a quiet morning as investors await this afternoon’s Fed decision.  Overnight in Asia, equities were generally higher with the Nikkei up half of one percent while Hong Kong rallied more than 1%. The tone is more subdued in Europe as stocks are experiencing measured declines. In commodities, crude oil briefly dipped below $70 per barrel but has recouped some of its losses and is now down just 1.5%.

On the economic calendar, it’s a housing-centric day. Weekly mortgage applications were just released and showed an impressive increase of 14.2%. Refinances also surged 24% to the highest level and share of total applications since early 2022.  The only two other reports on the calendar for today are Building Permits and Housing Starts at 8:30.

The day you’ve finally been waiting for is finally here! After several false starts by the market, the Fed will finally cut rates this afternoon. The only question is by how much.  As of this morning, futures markets put the odds at a 50 bps cut at 65% meaning it really could go either way, and while certainly not unprecedented, we can’t remember a time when there has been so much uncertainty regarding which direction the Fed would take this close to a report. This afternoon’s cut will end a streak of 288 trading days where the fed funds rate has been unchanged at a range of 5.25% to 5.50%. While it’s nowhere near the record streak of 1,756 trading days from the Financial Crisis through late 2015, it does rank as the sixth-longest streak without a change since at least 1971.  It’s about time they get back to work!

This period has been more extreme regarding how long it has been since the Fed last cut the Fed funds rate.  At 1,134 trading days (over four years), it will end what ranks as the second-longest period without a cut in rates since at least 1971. Again, the only period that was longer was the 10+ years from late 2008 through July 2019, and only one other streak (mid-2003 through September 2007) lasted longer than four years.