All Things in Moderation

Vital Statistics:

Stocks are higher this morning as the Fed begins its meeting. Bonds and MBS are up.

Retail Sales rose 0.1% MOM in August, according to the Census Bureau. This was better than the -0.3% expectation. July retail sales were revised upward by 0.1% to 1.1%. On a year-over-year basis, they rose 2.1%. Since these numbers are not adjusted for inflation, retail sales actually fell slightly YOY on an inflation-adjusted basis.

If you strip out vehicles and gasoline, retail sales rose 0.2% MOM and 3.3% YOY. This was a touch above inflation. Overall, it looks like the consumer remains in decent shape as we head into the back-to-school and holiday shopping seasons.

The Fed begins their FOMC meeting today. The Fed Funds futures have been more volatile than I can remember before a Fed meeting. The current handicapping has a 2/3 chance of a 50 basis point cut and a 1/3 chance of 25.

CNBC’s survey of money managers is leaning 86% towards a 25 basis point cut, FWIW. “We believe that the equivalent of eight cuts in six meetings is more than what will happen,″ John Donaldson, director of fixed income, Haverford Trust Co. wrote in response to the survey. “That forecast is more in line with a hard landing than a soft landing.”

Barry Knapp from Ironsides Macroeconomics says, “We suspect the FOMC will either under-promise or under-deliver, perhaps both.”

The December futures are still predicting a total 125 basis points in cuts this year.

Home prices rose 0.5% MOM in August, according to research from Redfin. On a year-over-year basis, they rose 6.7%. “Prices kept creeping up during this unusually slow summer for home sales as mortgage rates came down and supply remained stubbornly low,” said Redfin Senior Economist Sheharyar Bokhari. “If mortgage rates fall further this fall—and we expect they will—price growth will likely pick up as more prospective homebuyers come off the sidelines .”

Filed under: Economy | 24 Comments »