Markets rise ahead of Fed decision

Dow rose 170, advancers over decliners better than 3-1 & NAZ gained 147.  The MLP index held steady in the 289s & the REIT index was off fractionally to 403.  Junk bond funds inched higher & Treasuries had a little selling which took yields slightly higher.  Oil was up chump change above 70 & gold slid back 6 to 2602 on profit taking.

Dow Jones Industrials

If Robert Kaplan still had a say in the matter, he'd be pushing for a ½ percentage point interest rate reduction at this week's Federal Reserve meeting.  The former Dallas Fed pres said that making the bolder move of 50 basis points would better position policymakers heading into the latter part of the year & the economic challenges ahead.  “If I were sitting at the table, I would be advocating for 50 in this meeting,” Kaplan added.  “I think the Fed may be a meeting or so late, and if I had a do-over, I might prefer we had started the cutting in July, not September.”  Markets currently are putting about 2-to-1 odds that the Federal Open Market Committee will approve a 50 basis point reduction, as opposed to the 25 basis point cut they had been pricing in leading up to Fri, according to the CME Group's FedWatch tool.  Fed funds, the central bank’s benchmark overnight lending rate, currently stand at 5.25% - 5.50%.  Should the committee decide to make the more aggressive move, Kaplan said it would then be incumbent on Chair Jerome Powell in his post-meeting news conference tomorrow to indicate that additional cuts ahead are “likely to be more measured.”  The Fed’s 2-day policy meeting gets underway today.  “From a risk management point of view, 50 makes the most sense,” Kaplan said.  “If the group is split, a lot of this will depend, actually, on what Jay Powell personally thinks, what is his personal disposition on all this, and then his ability to wrangle everybody to a unanimous decision.”  Kaplan ran the Dallas Fed from 2015-21 and is now vice chair & member of the management committee at Goldman Sachs.

Former Dallas Fed President Kaplan advocates for a half-point interest rate cut

Target (TGT), a Dividend Aristocrat, will hire 100K seasonal employees at the company's stores & supply chain facilities ahead of the holiday shopping period this year.  The company said the seasonal hires are meant to bolster its existing workforce & its tens of thousands of "On Demand" employees that work shifts on flexible schedules.  TGT is seeking people to fill seasonal in-store roles "including guest advocate, front of store attendant, fulfillment expert, general merchandising expert, food and beverage expert and style consultants," it said.  The seasonal supply chain openings support warehouse operations.  The "majority" of the seasonal employees will have jobs in TGT retail locations.  Applications for seasonal store positions open Sep 25.  TGT's announcement made it the latest company to unveil its seasonal hiring targets.  This holiday season's planned 100K seasonal workers match its previous target in 2021, 2022 & 2023.  The stock rose 10¢.

Target to boost its workforce just in time for the holidays

Treasury yields were steady after strong retail sales data & ahead of the Federal Reserve's monetary policy meeting this week.  The yield on the 10-year Treasury yield was near flat at 3.618% & the 2-year Treasury yield was last nearly 3 basis points higher at 3.586%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Retail sales rose 0.1% in Aug, coming out better-than-expected for a 0.2% decline.  Investors' eyes are on the Federal Reserve this week, with an interest rate cut from the central bank all but guaranteed.  The decision will be announced tomorrow when its 2-day meeting ends.  This would be the first rate reduction since the Fed began hiking interest rates in Mar 2022.  Investors will also be looking out for clues about the outlook for interest rates, especially if any further cuts could come this year.  After this week’s meeting, 2 more remain on the schedule for 2024.  The key question across markets remains how big the rate cut from the Fed will be.  Traders were last pricing in a 65% chance of a 50 basis point reduction according to CME Group's FedWatch tool, an increase from last week when a 25 basis point cut was more widely anticipated.  The latest building permit, housing starts & existing home sales figures are also due later in the week.  Elsewhere, monetary policy decisions from the Bank of England & the Bank of Japan are expected this week.

Treasury yields rise after better-than-expected retail sales

Stocks were higher in trading with techs on NAZ leading the advance as investors assessed fresh retail sales data in the wait for a Federal Reserve meeting pivotal to an interest-rate cut.  The stock market is setting up for gains as the odds of a 0.5% Fed rate cut creep higher, a day before officials reveal their monetary policy decision.  The central bank's 2-day meeting, which just began, is widely expected to bring the first easing in rates since early 2020.