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Briefing.com Summary:
*New records all around.
*Bank of Japan holds its policy rate and announces plan to sell ETFs and J-REITS.
*House Republicans looking to force a yes vote in the Senate on continuing resolution bill.
The stock market finished yesterday's session on a solid note, producing fresh record highs in all the major averages, including the Russell 2000 and the ultra-broad Wilshire 5000. More records could be in store today with equity futures pointing to a largely flat open that could easily translate into a push to new record territory.
The final session of the week follows a night that featured a policy meeting at the Bank of Japan, though a rate cut was not announced today. The central bank announced a plan to sell its ETF holdings at JPY330 bln per year while J-REITS will be sold at a pace of JPY5.5 bln per year. The market sees the potential for a rate hike to be made in October, but that hike is not fully priced in until January.
Meanwhile in Europe, expectations for a rate cut from the Bank of England have continued retreating after the release of a solid Retail Sales report for August. This reflects the BoE's ongoing hesitancy to act without data that clearly signals disinflation ahead.
Similarly, the FOMC Statement and Fed Chairman Powell's press conference also communicated to the market that the Fed wants to see more weakening in the economy before cutting again. That view is not all that surprising, given the slide in Treasuries since Wednesday's rate cut announcement. The 10-yr yield hovered near 4.05% just ahead of the rate cut announcement and it is at 4.14% this morning. The 2-yr yield has also increased, rising from 3.55% before the rate cut announcement to 3.58% today.
Given today's empty economic calendar, the Treasury market deserves some attention, as continued weakness in that space, especially in the long end, could cause equity investors to reconsider their bullish posture.
The market received just two quarterly reports since yesterday's close with FedEx (FDX 228.50, +2.00, +0.88%) beating expectations and issuing above-consensus revenue guidance for its fiscal year while homebuilder Lennar (LEN 128.52, -4.35, -3.27%) beat EPS expectations on below-consensus revenue.
FedEx is seeking a higher start while shares of Lennar are indicated lower in pre-market, likely due to a lack of post-FOMC dip in mortgage rates. In fact, a 30-yr fixed rate, which has a much stronger correlation with the 10-yr Treasury yield than the fed funds rate, increased about 25 basis points over the past two days after falling in the weeks that preceded Wednesday's announcement.
Finally, reports from Washington indicate that House Republicans intend to pass a continuing resolution today and recess until October, which will force the Senate to pass the bill or shut down the government.
