Group 1 - Treasury yields are increasing as investors adjust their growth and inflation expectations following a quarter-point interest-rate cut by the Federal Reserve [1][2] - The Federal Reserve has raised its GDP growth estimates for this year and next, with stronger growth anticipated in 2027, while also slightly lowering its unemployment forecast [2] - Fed officials indicated the possibility of two additional quarter-point rate cuts by the end of the year and another reduction in 2026, highlighting concerns over softer job growth despite inflation risks [2]

Economic Outlook - The Federal Reserve is expected to cut rates by 25 basis points now, with potential for two more cuts by the end of the year, leading to a year-end target for Fed funds at no higher than 3.63% [2][3] - Concerns are raised about the near disappearance of job growth in the US economy, which may necessitate continued rate cuts unless satisfactory job growth resumes [3][10] Consumer Spending and Sentiment - Consumer spending is projected to slow, with expectations of disinflation resuming in early 2026, despite recent reports indicating growth in retail sales for August [4][8] - A significant drop in consumer sentiment was noted, with early September readings from the University of Michigan in the bottom 1.5% of all monthly readings since 1878, indicating increased consumer worry about the future [7][10] Labor Market Dynamics - There is a disconnect between the labor market and consumer sentiment, with consumer spending remaining resilient despite weak job growth readings [10][14] - For consumer spending to remain robust, job growth needs to increase by approximately 100,000 jobs or more per month; otherwise, it may negatively impact consumer spending [14] Holiday Season Expectations - The holiday season is anticipated to be average, with upper-income households likely to perform better, while middle and lower-income households may face spending challenges due to inflation and stagnant income growth [12][13] - The impact of tariffs and price hikes is expected to affect consumer behavior, particularly among households with multiple children who may be more conservative with their holiday spending [12][13]

Economic Overview - Pre-market futures show slight increases with Dow up +20 points, S&P 500 up +8, and Nasdaq up +50, following positive economic news [1] - Q2 GDP growth outperformed expectations at +3.0%, rebounding from a -0.5% decline in Q1, marking the strongest quarter for jobs growth since Q3 2024 [7][8] - Consumption increased to +1.4% from +0.5% in Q1, while the Core PCE Price Index rose to +2.5%, indicating robust economic growth without runaway inflation [8][10] Employment Data - ADP reported +104K new private-sector jobs in July, a significant recovery from the revised -23K in June and exceeding the consensus estimate of +64K [3][6] - Job growth was led by the Leisure & Hospitality sector with +46K jobs, while Education & Healthcare saw a decline of -38K [4] - Small companies added +12K jobs, while medium and large businesses contributed +46K jobs, indicating a diverse hiring landscape [5] Company Earnings - Kraft Heinz (KHC) exceeded earnings expectations by +7.8%, reporting 69 cents per share [2] - V.F. Corp. (VFC) reported a smaller-than-expected loss, improving by +31.5% [2] - Etsy (ETSY) missed earnings estimates by -53.7%, indicating potential challenges in its business model [2] Market Expectations - The Federal Open Market Committee (FOMC) is expected to maintain interest rates at +4.25-4.50% during its meeting, reflecting a stable economic environment [10] - The upcoming earnings reports from major companies like Microsoft, Meta Platforms, Qualcomm, and Ford are anticipated to impact market sentiment [12]