Stocks open lower as trade hopes diminish. Already low expectations for a breakthrough in U.S.-China trade talks in Shanghai this week are falling further this morning. President Trump called out the Chinese for dragging their feet on prior commitments to purchase U.S. agricultural products, bringing a combative tone to the start of the latest round of face-to-face meetings. Meanwhile Trump administration trade officials called out Vietnam for its trade surplus with the United States. Besides trade talks, market participants will be focused on the start of the Federal Reserve’s (Fed) policy meeting today and another batch of earnings results.
Fed meeting starts today. Treasury yields have been largely range-bound over the past week, but the quiet could break as the Fed kicks off its two-day policy meeting today. Fed fund futures are pricing in about an 80% chance of a 25 basis point (0.25%) cut, and a 20% chance of a 50 basis point (0.50%) cut on July 31.
Core PCE growth still below 2%. Core personal consumption expenditures (PCE) rose 1.6% year over year in June, a slightly quicker pace than May, but below the Fed’s 2% target. Consumer inflation has slowed noticeably this year amid weakening global demand, and dovish policymakers have pointed to lower inflation as the primary justification for looser policy.
U.S. yields and Fed rate cuts. Fixed income investors may get their wish for looser monetary policy tomorrow, but gauging the impact of a rate cut on yields could be difficult. On the LPL Research blog today, we’ll outline our expectations for the fixed income market if the Fed cuts here.
NEW Market Signals podcast. It is a big week for markets, as the Federal Reserve (Fed) is set to potentially cut interest rates for the first time in 10 years. Listen to this week’s episode, in which Senior Market Strategist Ryan Detrick and Chief Investment Strategist John Lynch discuss what this could mean for the economic outlook, and which sectors could benefit from a potential cut. Subscribe to the free Market Signals podcast series on iTunes, Google Play, Spotify, or wherever you get your podcasts!
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