Markets pause as euphoria fades after recent strength

Dow was up 38 in choppy trading, decliners over advancers 2-1 & NAZ crawled fell 61.  The MLP index fell 1+ to the 285s & the REIT index lost 1+ to the 437s.  Junk bond funds continued to fluctuate & Treasuries ended with a little buying which brought slightly lower yields.  Oil was pennies lower in the high 71s & gold soared 29 to 2644, for another record.

Dow Jones Industrials 

Federal Reserve Governor Christopher Waller said he supported a ½ percentage point rate cut at this week's meeting because inflation is falling even faster than he had expected.  Citing recent data on consumer & producer prices, Waller said that the data is showing core inflation, excluding food & energy, in the Fed's preferred measure is running below 1.8% over the past 4 months.  The Fed targets annual inflation at 2%.  “That is what put me back a bit to say, wow, inflation is softening much faster than I thought it was going to, and that is what put me over the edge to say, look, I think 50 [basis points] is the right thing to do,” Waller added.  Both the consumer & producer price indices showed increases of 0.2% for the month & on a 12-month basis, the CPI ran at a 2.5% rate.  However, Waller said the more recent data has shown an even stronger trend lower, thus giving the Fed space to ease more as it shifts its focus to supporting the softening labor market.  A week before the Fed meeting, markets were overwhelmingly pricing in a 25 basis point cut.  A basis point equals 0.01%.  “The point is, we do have room to move, and that is what the committee is signaling,” he said.  The Fed's action to cut by ½ a percentage point, 50 basis points, brought its key borrowing rate down to 4.75-5.00%.  Along with the decision, individual officials signaled the likelihood of another ½ point in cuts this year, followed by a full percentage point of reductions in 2025.  Fed Governor Michelle Bowman was the only Federal Open Market Committee member to vote against the reduction, instead preferring a smaller quarter percentage point cut.  She released a statement explaining her opposition, which marked the first “no” vote by a governor since 2005.  “Although it is important to recognize that there has been meaningful progress on lowering inflation, while core inflation remains around or above 2.5 percent, I see the risk that the Committee’s larger policy action could be interpreted as a premature declaration of victory on our price stability mandate,” Bowman said.  As for the future path of rates, Waller indicated there are a number of scenarios that could unfold, with each depending on how the economic data runs.

Fed Governor Waller says inflation softening faster than he expected put him in half-point-cut camp

Family offices are the most bullish they've been in years, putting their cash to work in stocks & alternatives as the Fed starts to cut interest rates, according to a new survey.  Nearly all family offices, 97%, expect positive returns this year & nearly ½ expect double-digit gains, according to Citi Private Bank's 2024 Global Family Office Survey.  “This is the most optimistic outlook we’ve seen,” said Hannes Hofmann, head of the family office group at Citi Private Bank, which has been conducting the survey for 5 years.  “What we’re clearly seeing is an increase in risk appetite.”  The survey is the latest sign that family offices, the private investment arms of wealthy families, are emerging from 2 years of hoarding cash & bracing for recession to start making more aggressive bets on market & valuation growth.  They especially like private equity.  Nearly ½, 47%, of family offices surveyed say they plan to increase their allocation to direct private equity in the next 12 months, the largest share for any investment category.  Only 11% plan to reduce their PE holdings.  Private equity funds ranked 2nd, with 41% planning to increase their allocation.  With interest rates heading down, family offices are also regaining their appetite for stocks.  More than a 3rd, 39%, of family offices plan to increase their allocation to developed-market equities, mainly the US, while only 9% plan to trim their equity exposure.  That comes after 43% of family offices increased their exposure to public stocks last year.  Public equities remain their largest holding by major asset class, with stocks making up 28% of their typical portfolio, up from 22% last year, according to the survey.   “Family offices are taking money out of cash, and they’ve put money into public equities, private equity, direct investments and also fixed income,” Hofmann said.  “But primarily it’s going into risk-on investing. That is a very significant development.”

Family offices are the most bullish they’ve been in years, survey says

Ford (F) is recalling about 144K of its Maverick pickup trucks over concerns that the rearview camera display could show a frozen image while backing up.  The recalled 2022-2024 model year Maverick trucks have "Connected Touch Radios," according to a Sep 13 recall report submitted to the National Highway Traffic Safety Administration (NHTSA).  In the report, Ford said a frozen rearview camera display image could lead to a "false representation of where the vehicle is relative to its surroundings, increasing the risk of a crash."  The automaker linked the potential issue to "improper memory handling" within the Connected Touch Radio software that has since been resolved in the production process.  The recalled vehicles were built between Feb 2021 & late Nov of last year.  "Our goal is to prevent quality issues from happening in the first place.  When they do occur, our focus is on responding quickly with a recall or service action to prevent our customers from experiencing issues with the least inconvenience possible.  We are proud that our launch quality has reached best-in-class levels, and our long-term quality is showing improvement,"  Ford said.  "Mobile service and pickup and delivery will be available to customers at participating dealerships for this recall," Ford added.  The automaker will inform owners of the recalled vehicles by mail at the end of the month & complete the notification process by Oct 4.  Dealers have already been told about the issue.  Ford began selling Maverick pickup trucks in 2021.  The newest edition of the vehicle is hitting the market later this year.  Ford stock fell 7¢.

Ford recalls 144,500 Maverick trucks due to rearview camera display issue

Gold soared above the $2600 level for the first time, extending a rally boosted by bets for further US interest rate cuts & rising tensions in the Middle East.  Spot gold was up 1.3% at $2620 per ounce, while US gold futures settled 1.2% higher to $2646.  Bullion's latest rally got a fillip after the Federal Reserve initiated an aggressive easing cycle on Wed with a ½-percentage-point reduction, adding to the appeal for gold, which pays no interest.  Prices of the safe-haven asset have climbed 27% in 2024, their biggest annual rise since 2010, as investors also sought to hedge uncertainties spurred by prolonged conflicts in the Middle East & elsewhere.  However, the record rally could be poised for a correction, analysts say.

Gold Breaks $2,600 Barrier as Fed Cut Bets Prolong Historic Run

Oil prices, which eased slightly, were on track to end higher for a 2nd straight week following a large cut in US interest rates & declining global stockpiles.  Brent futures, which were trading 12¢ lower at $73.76 a barrel & gained 4.3% this week & US WTI crude futures, which were down 15¢ at $71.80 a barrel, registered weekly gains of 4.8%.  The benchmarks have been recovering after they fell to near 3 year-lows on Sep 10 & have registered gains in 5 of the 7 sessions since then.  Prices pared some gains today, after rising more than 1% yesterday following the US central bank's decision to cut interest rates by ½ a percentage point on Wed.  Interest rate cuts typically boost economic activity & energy demand, but some also see it as a sign of a weak US labor market.

Oil prices end week higher after US rate cut

The roaring rally is sputtering amid reminders that risks to growth could still lie ahead.  Investors are wondering whether the Fed has fallen behind in keeping the economy on track for a soft landing.  Traders are also pricing in deeper cuts this year than Fed officials' dot plot projects show.  Dow rose 670 this week.