Fed Delivers Expected Rate Cut While Signaling End to Balance Sheet Reduction

Economic Indicators - US MBA mortgage applications increased by +7.1% for the week ending October 24, with the purchase mortgage sub-index rising by +4.5% and the refinancing sub-index up by +9.3% [1] - The average 30-year fixed mortgage rate fell by -7 basis points to a 13-month low of 6.30% from 6.37% in the previous week [1] - US September pending home sales remained unchanged month-over-month, which was weaker than the expected increase of +1.2% [5] Stock Market Performance - US stock indexes are reaching new all-time highs, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 all climbing [3] - The S&P 500 Index is up by +0.13%, the Dow Jones Industrials Index is up by +0.23%, and the Nasdaq 100 Index is up by +0.53% [5] - Strength in semiconductor stocks, particularly a +4% increase in Nvidia, is contributing to broader market gains [2][16] Trade Relations - Easing global trade tensions are supporting stock market gains, with President Trump indicating a potential reduction in tariffs on Chinese goods from 20% to as low as 10% [3] - A tentative trade agreement between US and China was reached, which includes commitments from China not to restrict rare earth metal exports and to purchase a substantial amount of US soybeans [6] - The US and South Korea finalized a trade deal involving $150 billion in shipbuilding investments in the US, with tariffs on South Korean goods capped at 15% [3] Federal Reserve Actions - The Federal Reserve announced a second consecutive interest rate reduction, setting the benchmark rate in the 3.75%-4% range [4] - The Fed will end its quantitative tightening process on December 1, reflecting a significant shift in its balance sheet strategy [4] Earnings Reports - This week is significant for earnings, with 173 S&P 500 companies reporting, including major firms like Alphabet, Meta, and Microsoft [7] - Q3 earnings have been strong, with 84% of S&P 500 companies that reported so far beating forecasts, although profits are expected to rise by only +7.2% year-over-year, the smallest increase in two years [7] - Notable gainers include Bloom Energy, Seagate Technology, and Teradyne, all reporting better-than-expected earnings [17][18][19]