Navigating the Economic Landscape: Fed Rate Cuts and Market Reactions

Let's get to the big story breakdown on the heels of weak labor market data.

The CPI report is shaping up to be one of the most closely watched economic releases of the month.

Now all eyes are on whether inflation is cooling enough to justify rate cuts at the Fed Reserve's meeting next week.

As of this morning, the CME Fed watchtch reading showing about 90% chance of a 25 basis point cut.

Now Feter Jay Powell recently highlighted rising risks to the job market.

Signaling a shift in focus from fighting inflation to supporting employment.

Joining me on this Monday morning is Peter Tuchman, senior floor trader at Trademoss.

Good morning, Peter.

Well, the countdown is on until the next Fed meeting, and given the fact that we saw that weak jobs figures, but we are looking at futures pointing to a higher open.

So how much is that rate cut already priced in?

Oh, you know what, look, I mean, I don't know if it's, you know, I find that a strange term when we say is it priced in. that the market is already trading at a level that will reflect what a 25 basis point move.

You know what my gut is?

No, I think that we are going to see a little bit if we get a 25 basis point move, I really think that the market is going to have a little bit of a positive move.

However, if we do more, the question is going to be, are we overdoing it?

Are we playing catch up?

What's the mentality and psychology behind it?

You know, we know that this has been a long time coming, although we also are clear.

At least I am clear, very many people believe that Mr.

Powell's move was in reflection to the pressure by the president.

I kind of really believed that it was the economic data that came out post the last meeting, those couple of Wednesdays ago, that the Fed, the August meeting, where there was no no guidance or no clarity about when what was going to happen.

And amazingly, literally every day from that following Friday until now we've been seeing economic data whether it's inflationary, whether it's Related to job creation and non-avro nonfarm payroll, hard to say 3 times, that is going to uh that set the stage for these cuts.

And of course as we kick off the trading week, we have key events in terms of economic data and Apple's event happening in California tomorrow, but as we head into the rest of this week, what do you think is key to watch and why?

I think all eyes.

Mentioned that PPI CPR are going to be coming out this week to really identify whether the impact of tariffs on the marketplace, right?

We're not we're just now starting to see that, right?

I mean, think about it.

If you go back to February, March, April, we started to see the initial aggressive impact on the talk of tariffs on the marketplace and now we're starting to see the actual implications whether we see it in retail, whether we see it in consumer spending, whether we unemployment wherever we're seeing it, we've seen it tick up from 4.1 to 4.3.

That is significant from the employment point of view.

And so it's going to be a matter of where is Mr.

Powell's focus, whether it's inflationary, whether it's jobs.

You just brought that point up and I and I'm glad you did because that's that's kind of serious.

It's a matter of where he's going to go and how the market is going to respond to it.

Obviously we're looking at levels in the market.

Are we going to there's there's a big There's a big bet out there that that the market is a little bit frothy here and that even though we know that bad news economically is good news for the cut, that maybe the bad news is mounting up a little bit and and and and about and sort of identifying that the market, the economy is a bit fragile.

Right now and that perhaps this is a point of resistance technically in the markets and that we may see a pullback.

I'm not really clear about it yet.

Yeah, and as you mentioned, we're watching levels for the major US stock averages, but at the same time when we're thinking about valuation, right, things are expensive, so where do you go?

You know, it's really hard.

I mean, where do you put it?

If today's highs are tomorrow's lows, then you're still buying the market at reasonable valuations.

Yes, are the mag 7 stocks really highly, highly valued?

Yes, as the S&P trading at, I don't know, 10 times forward earnings and all those wild crazy numbers they come up with.

I never understand that part of it, but yes, it is.

It's just, you know, I don't think it's irrational.

I think the market has set the stage for, look, the lifeblood of this market or earnings 80+% of the S&P reported fees.

The response has been favorable, really guidance for the first time since, you know, we had that that really disappointing last quarter where we were not able to give guidance in so many.

Names now we are.

We have a different comfort level about these companies giving solid guidance going forward.

That's that's building a foundation for the next move higher.

Is there going to be somewhat of a pullback?

It's, it's possible because look, when markets trade at record highs for a long period of time, it's a matter of do are we building a foundation to go higher based on interest rate cuts based on Earnings or are we going to pull back and and see a little bit of a retracement of the last big move because we are trading still at record highs in the light of everything, but you know the market never disappoints.

Something is bound to happen between now and then.

February September 17th is not far off.

It will be fascinating to see whether we get a quarter of a point or more and what his what what.

What the talk is, you know, whether how does he set the stage for going to, you know, this going into the end of his career here, you know, at the Fed, are we going to have another 75 basis point which has been called for by Bessin and some of the other advisers into the end of the year?

Well, Peter, you and I will be back here bright and early on Friday morning, so we'll see what happens between now and then I look forward to training everybody.