STRAIGHT FROM THE TRADING FLOOR
by Michael P. Reinking, CFA
Published on 9/17/26 (a/o 9:00 am)
Good morning,
Yesterday, for the first time since July 2023, the FOMC unanimously hiked rates by 25bps, which the Committee said “will support a timelier return” of inflation to their stated 2% target. The Summary of Economic Projection had a dovish tilt. The Committee projected inflation to ease significantly next year, largely in line with the June SEP, but it was notable that the Committee does not see core returning to target until 2029, which stretches the meaning of “timely”. The DOTS showed broad support for an additional hike this year but for rates to hold steady throughout 2027. Chair Warsh’s press conference was short, ending abruptly at the 30 minute mark, and a bit more hawkish. The Chair suggested that the rate hike comes at a time when the economy seems to be strengthening and reiterated, “I would be hard-pressed to describe broad financial conditions as restrictive. This view was widely shared by the Committee. So, we removed a dose of accommodation.” This seems to suggest that the Committee is looking to unwind some if not all of the late 2024 cuts. Yields were lower ahead of the decision but reversed sharply. There was a flattening of the curve with the 2yr up ~7bps, a ~14bp reversal from the lows. The long end also ended off the lows closing around unchanged. Equities gave up early gains selling off during Chair Warsh’s press conference. The S&P 500 was down ~1% at the lows testing its 100d ma before bouncing in the final 30 minutes of trade to close the session down 0.4%.
Futures have been moving higher throughout the overnight as there is some geopolitical optimism and following some positive corporate updates reinvigorating the AI trade. Oil prices are down ~3% on a mix of headlines. President Trump is reportedly going to meet with Gulf leaders on the sidelines of the UN meetings next week, there are reports the East-West pipeline could come back on line in the coming days and that China has privately pushed Iran to throttle back the Houthis. The pullback in oil is also sending Treasury yields down >5bps across the curve. S&P futures are at morning highs up ~1.2%, trading just above yesterday’s highs recouping all of the post Fed weakness. Keep in mind tomorrow is triple witch expiration which may add to some of the volatility.
On the AI front there were positive updates from chip companies (ARM/NVDA) and companies exposed to the data center buildout (ETN) highlighting strong demand. Neoclouds are moving higher after reports of price increases and new customer announcements (NBIS/CRWV/BTDR). Generac (+>25%) is rallying sharply after announcing a supply agreement with Amazon.
This morning’s claims data continued to point to a strong labor market with initial claims falling back below 200k and continuing claims falling to 1.73ml from 1.78ml last week. Building permits and housing starts came in a little bit light. The Philly Fed index gave back some of the big jump last month with a moderation in new orders and employment while price components moved higher. After the open pending home sales will be released. Treasury yields are near morning lows down between 5 - 9bps with the 10yr retesting yesterday’s lows. The USD index is giving back some of yesterday's move higher.
European equities are trading higher and at best levels with autos leading and most groups higher. The EU may limit Chinese EVs to ~15% of the market versus over 30% today. The BOE held rates as expected with a hawkish lean and updated its plans to unwind gilt holdings. Longer tenors are down over 10bp on the news. In Asia, Japan’s Nikkei rose 0.3% with broad gains, though tech saw some pressure. The US and Japan are discussing plans for building a ~$15B semiconductor factory in the US as part of the $550B investment agreement the two sides came to during the tariff negotiations. The factory would be operated by Global Foundries (+4% pre-market). Mainland China and Hong Kong were both lower. China reportedly has asked Iran to rein in the Houthis in Yemen, which pushed oil down and US futures higher. Huawei introduced 11 AI chips unveiled next-gen AI chips at its conference, taking aim at NVDA, AMD and INTC.
The energy complex is pulling back. ICE Brent is down ~3.5% at $102.25. Nat gas prices are pulling back modestly. Metals are moving higher reversing yesterday’s weakness. Gold is up ~0.5% reclaiming 4,400. Copper is up nearly 2%. Ag is pulling back. Crypto also has a bid. Bitcoin is up ~1% trading just under 77k while Ethereum is outperforming up ~2%.
Economic Data:
US:
Yesterday, for the first time since July 2023, the FOMC unanimously hiked rates by 25bps, which the Committee said “will support a timelier return” of inflation to their stated 2% target. The Summary of Economic Projection had a dovish tilt. The Committee projected inflation to ease significantly next year, largely in line with the June SEP, but it was notable that the Committee does not see core returning to target until 2029, which stretches the meaning of “timely”. The DOTS showed broad support for an additional hike this year but for rates to hold steady throughout 2027. Chair Warsh’s press conference was short, ending abruptly at the 30 minute mark, and a bit more hawkish. The Chair suggested that the rate hike comes at a time when the economy seems to be strengthening and reiterated, “I would be hard-pressed to describe broad financial conditions as restrictive. This view was widely shared by the Committee. So, we removed a dose of accommodation.” This seems to suggest that the Committee is looking to unwind some if not all of the late 2024 cuts. Yields were lower ahead of the decision but reversed sharply. There was a flattening of the curve with the 2yr up ~7bps, a ~14bp reversal from the lows. The long end also ended off the lows closing around unchanged. Equities gave up early gains selling off during Chair Warsh’s press conference. The S&P 500 was down ~1% at the lows testing its 100d ma before bouncing in the final 30 minutes of trade to close the session down 0.4%.
Futures have been moving higher throughout the overnight as there is some geopolitical optimism and following some positive corporate updates reinvigorating the AI trade. Oil prices are down ~3% on a mix of headlines. President Trump is reportedly going to meet with Gulf leaders on the sidelines of the UN meetings next week, there are reports the East-West pipeline could come back on line in the coming days and that China has privately pushed Iran to throttle back the Houthis. The pullback in oil is also sending Treasury yields down >5bps across the curve. S&P futures are at morning highs up ~1.2%, trading just above yesterday’s highs recouping all of the post Fed weakness. Keep in mind tomorrow is triple witch expiration which may add to some of the volatility.
On the AI front there were positive updates from chip companies (ARM/NVDA) and companies exposed to the data center buildout (ETN) highlighting strong demand. Neoclouds are moving higher after reports of price increases and new customer announcements (NBIS/CRWV/BTDR). Generac (+>25%) is rallying sharply after announcing a supply agreement with Amazon.
This morning’s claims data continued to point to a strong labor market with initial claims falling back below 200k and continuing claims falling to 1.73ml from 1.78ml last week. Building permits and housing starts came in a little bit light. The Philly Fed index gave back some of the big jump last month with a moderation in new orders and employment while price components moved higher. After the open pending home sales will be released. Treasury yields are near morning lows down between 5 - 9bps with the 10yr retesting yesterday’s lows. The USD index is giving back some of yesterday's move higher.
- US 2yr -8bps to 4.67%, 5yr -9bps to 4.80%, 10yr -7bps to 4.95%, 30yr -6bps to 5.31%
- USD index: -$0.15 to $99.83
European equities are trading higher and at best levels with autos leading and most groups higher. The EU may limit Chinese EVs to ~15% of the market versus over 30% today. The BOE held rates as expected with a hawkish lean and updated its plans to unwind gilt holdings. Longer tenors are down over 10bp on the news. In Asia, Japan’s Nikkei rose 0.3% with broad gains, though tech saw some pressure. The US and Japan are discussing plans for building a ~$15B semiconductor factory in the US as part of the $550B investment agreement the two sides came to during the tariff negotiations. The factory would be operated by Global Foundries (+4% pre-market). Mainland China and Hong Kong were both lower. China reportedly has asked Iran to rein in the Houthis in Yemen, which pushed oil down and US futures higher. Huawei introduced 11 AI chips unveiled next-gen AI chips at its conference, taking aim at NVDA, AMD and INTC.
The energy complex is pulling back. ICE Brent is down ~3.5% at $102.25. Nat gas prices are pulling back modestly. Metals are moving higher reversing yesterday’s weakness. Gold is up ~0.5% reclaiming 4,400. Copper is up nearly 2%. Ag is pulling back. Crypto also has a bid. Bitcoin is up ~1% trading just under 77k while Ethereum is outperforming up ~2%.
Economic Data:
US:
- Building Permits: 1.394 vs. 1.41ml cons., prior 1.433ml
- Housing Starts: 1.275ml vs. 1.31ml cons., prior 1.239ml
- Initial Claims: 196k vs. 208k cons., prior 206k
- Continuing Claims: 1.73ml vs. 1.78ml cons., prior 1.774ml
- Philly Fed: 37.8 vs. 30.5 cons., prior 47.4
- 10:00 Pending Home Sales: vs. 2% cons., prior -2.3%
- Bank of England: Rates left unchanged 3.75%
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