Group 1 - The ISM services number came in weaker than expected at 50, indicating potential inflationary pressures in the service sector, which constitutes 60% of the CPI index [1][2] - Prices paid by service sector companies increased, suggesting that inflation in services may be more persistent than previously thought [1][2] - Employment index in the ISM report showed a slight improvement at 47.2%, indicating challenges in assessing the true state of the economy without government data [1][2] Group 2 - In the absence of government data, alternative indicators such as Red Book same-store retail sales and OpenTable restaurant data are crucial for assessing consumer health [1][2] - The consensus forecast for inflation is at 3% for the next 12 months, higher than the Fed's target of 2%, raising concerns about inflation risks if the economy does not slow down [2] - The Fed may need to consider rate hikes if inflation remains sticky and does not decrease as expected [2] Group 3 - Consumer spending has been resilient, but persistent inflation could lead to reduced real spending as prices rise [2] - Higher inflation for an extended period may result in higher interest rates, impacting borrowing costs and increasing delinquency rates on consumer credit [2] - The AI sector is becoming increasingly concentrated, with the top companies driving significant market performance, raising concerns about potential overvaluation [5][6] Group 4 - Historical data suggests that government shutdowns have minimal impact on market performance, with markets often rising during shutdown periods [21][22] - The upcoming earnings season is critical, with expectations for a 7% year-on-year gain in Q3 for the S&P 500, particularly strong in technology [29][30] - Valuations are elevated, with the S&P 500 trading at a 42% premium compared to a 20-year history, indicating potential risks for future returns [33][34]

Market Overview - The S&P 500 has reached its 30th record close, driven by prospects for lower interest rates and a strong second quarter earnings season [1][2] - Initial earnings growth estimates for the quarter were around 5% year-over-year, but actual growth was nearly double that [2] - Tariff fears are subsiding, and the recent passage of a significant bill is expected to positively impact earnings and stock prices [2] Economic Conditions - Concerns remain regarding the government shutdown and its potential impact on the economy, although past shutdowns have not significantly affected equity markets [4][5] - The labor market is showing signs of softening, but it is not viewed as a major concern at this time [5] Company Insights - **Levi Strauss**: The company has been added to a value dividend strategy due to its attractive fundamental valuation. It has successfully navigated tariff challenges by diversifying operations and focusing on product lines [6][7] - **Valero Energy**: As a downstream refinery, Valero is less affected by crude oil prices and has benefited from favorable crack spreads. The closure of a refinery in California due to regulatory costs is expected to improve future earnings [8][9][10] - **United Health**: The stock has shown strong momentum, with a five-day winning streak. Analysts are becoming more optimistic about the company following federal investigations, and its recent confirmation in the CMS star program is expected to positively impact revenues and profits [10][12] Market Sentiment - There is a belief that high valuations do not preclude further market advances, with a focus on earnings being crucial for future performance [13][14] - The third quarter earnings are anticipated to show a year-over-year growth rate of about 7%, which could help maintain market momentum [15] - The market is beginning to see a broadening of leadership beyond the top-performing companies [15][16] Federal Reserve Outlook - The Federal Reserve is not expected to make significant moves in the near term, as the economy remains strong and inflation is relatively tame [17][18] - Companies are starting to lay off employees as a response to tariffs, indicating a shift in labor market dynamics [18]

This uptick of inflation that we've been seeing coupled with the jobs payroll jobs numbers deteriorating have put the central bank in a bit of a sticky spot where you're getting deterioration of both sides of the mandate at the same time. If the inflation looks like it's going to be transitory, and I say that word with with with some fear, >> then I think the employment side of the mandate would be dominant. But that you see this uptick in inflation and particularly the uptick in services inflation which is ...

Well, good morning, Steve. Thank you for joining us on this non jobs day. Jobs day.We get no government primary economic data because of the shutdown right now. So let me start by asking if that continues. As a member of the Open Market Committee, would you feel comfortable voting for a significant cut in interest rates if you don't have data on employment and on inflation.Good morning and thanks for having me. Look, I think it's important to recognize, first of all, that as you're pointing out, access to h ...

Monetary Policy & Data Dependency - The Open Market Committee member emphasizes the utmost importance of high-quality data for monetary policy decisions [2] - The member hopes to receive necessary employment and inflation data before the next voting decision in approximately six weeks [2] - The member expresses uncertainty about the continuation of rising food and gas prices [3] Inflation & Housing Costs - The member believes a significant disinflation will be driven by shelter costs, influenced by population growth changes [5] - The member expects to see some reversal of rising prices [4] - Housing costs are identified as the largest component of the inflation process [4] Economic Outlook & Neutral Rate - Current conditions include inflation at approximately 3%, unemployment at 43%, and growth in the third quarter [5] - The member's concept of a neutral rate is around 05% based on a weighted average [6] Policy Impacts & Deregulation - Past policies, such as high population growth and large fiscal deficits, were seen as pushing interest rates higher [6] - Deregulation is expected to accelerate, expanding output by removing regulations [9] - Policies can expand the supply side and potential output [8]

Labor Market Assessment - Chicago Fed is trying to get better real-time measures of what's happening in the job market, rolling out the Chicago Fed labor market indicators using 11 different data sources including official data and high-quality private sector sources [3] - Chicago Fed estimated the unemployment rate to be 43%, unchanged [4] - Goldman Sachs estimated that in the absence of two states' data, the jobs number would have been 224,000 [5] - The best jobs data comes from the Bureau of Labor Statistics (BLS), and the economy still continues to point to a pretty stable labor market [6][7] Monetary Policy Implications - The market believes the trajectory is to cut interest rates, but the Fed's job is to act based on economic conditions on employment and inflation, not just react to market expectations [9] - The underlying economy can afford rates to come down over time gradually, but the uptick of inflation coupled with deteriorating jobs numbers puts the central bank in a sticky spot [11][12] - If inflation looks transitory, the employment side of the mandate would be dominant, but the uptick in services inflation makes the speaker wary about frontloading too many rate cuts [12][13] Data Reliability and Interpretation - BLS is considered the best data source, but all data, both private and public, are subject to bigger revisions and more noise due to falling response rates and question marks on immigration and labor force participation [6][14][15] - Overindexing on monthly aggregates like BLS payroll numbers or ADP as a measure of the business cycle can lead to mistakes, as seen in 2023 and 2024 [15]

Market Overview - Stocks are expected to move higher in early trading, continuing the upward trend seen in recent sessions, with S&P 500 futures up by 0.1 percent [1] - Major averages have reached new record highs despite the ongoing U.S. government shutdown [1] Economic Impact of Government Shutdown - Traders appear to be unconcerned about the economic impact of the shutdown, although Treasury Secretary Scott Bessent warned it could negatively affect U.S. economic growth [2] - Bessent highlighted that the shutdown could lead to a decrease in GDP and impact working Americans [2] - The delay in the release of key U.S. economic data, including the Labor Department's monthly jobs report, is a significant concern for the markets [2][3] Market Sentiment and Predictions - There is an expectation that the government shutdown may last until mid-October, which could hinder the Federal Reserve's ability to make informed interest rate decisions [3] - The ISM's services PMI is anticipated to slightly decline to 51.7 in September from 52.0 in August, but a reading above 50 still indicates growth [4] Stock Performance - Major averages closed higher for the fifth consecutive session, with the Nasdaq up by 88.89 points (0.4 percent), the Dow rising by 78.62 points (0.2 percent), and the S&P 500 increasing by 4.15 points (0.1 percent) [5] - Mixed performance was observed in overseas trading, with Japan's Nikkei 225 Index rising by 1.9 percent and Hong Kong's Hang Seng Index falling by 0.5 percent [5] European Market Trends - Major European markets showed mixed results, with the U.K.'s FTSE 100 Index up by 0.5 percent, while the French CAC 40 Index and the German DAX Index fell by 0.1 percent and 0.2 percent, respectively [6] Commodity Prices - Crude oil futures increased by $0.25 to $60.73 per barrel after a previous decline [6] - Gold futures rose by $17.90 to $3,886 per ounce following a significant drop [6] Currency Exchange Rates - The U.S. dollar is trading at 147.35 yen, up from 147.23 yen, and valued at $1.1730 against the euro, compared to $1.1714 previously [7]

Volatility for yen interest rates has climbed above that of euro ones for the first time in seven years https://t.co/ifrQ63MwmO ...

Bank of Japan Governor Kazuo Ueda kept his policy options open by reiterating the bank’s long-held stance on interest rates, avoiding sending any clear signals about the prospects for a rate hike when the board meets later this month https://t.co/XfNDgQnfOF ...

🇺🇸 UPDATE: FedWatch shows a 99% probability of rates being cut to 375–400 bps at the October 29, 2025 meeting. https://t.co/VxnB5Ep3bZ ...