“A good trader watches his capital as carefully as a professional scuba diver watches his air supply.” – Anonymous

1. Fed Minutes Reveal Divide Over Outlook for Interest-Rate Cuts — Officials largely agreed that a recent slowdown in job growth outweighed lingering concerns over sticky inflation when they cut their benchmark rate by a quarter-point last month, to a range between 4% and 4.25%. Most of them thought “it would likely be appropriate to ease policy further over the remainder of the year,” according to minutes of the Sept. 16-17 meeting. But the written account said a few of them thought a rate cut wasn’t necessary last month or could have also supported holding rates steady. The minutes indicated that support for a larger half-point cut was limited to one official, Fed governor Stephen Miran, who dissented from the decision. Miran was appointed by President Trump and sworn in on the morning of the first day of the meeting.
2. Trump Renews Threats With Congress Mired in a Shutdown Brawl — There was no sign of progress as government workers and military personnel prepare for missed paychecks and the general public begins to feel the effects of the closure on everything from taxpayer services to air travel. Trump has repeatedly threatened to fire federal workers, withhold back pay for some government employees and cut funding for programs favored by Democrats, but so far none have materialized. Some Republicans have questioned that strategy, saying it distracts from their messaging to blame Democrats for the shutdown effects. The Senate has canceled plans for a recess next week to stay in Washington if the shutdown persists, a person familiar with the decision said. Speaker Mike Johnson, however, has declined to call House lawmakers back since before the shutdown started, insisting that the House did its job by passing a stopgap funding bill that would reopen the government through Nov. 21.
3. Americans Are Falling Behind on Their Car Payments — Since the pandemic, buyers on auto-dealer lots have encountered surging sticker prices and smaller incentives from automakers to lessen the blow. To afford an automobile, more consumers, especially lower-income families, have resorted to buying used cars and taking out longer loans. The percentage of new-car buyers with credit scores below 650 was nearly 14% in September, roughly one in seven people, J.D. Power said last month. That is the highest for the comparable period since 2016. And the portion of subprime auto loans that are 60 days or more overdue on their payments hit a record of more than 6% this year, according to Fitch Ratings, while delinquency rates for other borrowers have remained relatively steady.
4. China Widens Rare Earth Curbs Ahead of Key Xi-Trump Meeting — China has unveiled broad new curbs on its exports of rare earths and other critical materials, as Beijing moves to shore up its trade war leverage ahead of a high-stakes meeting this month between Donald Trump and Xi Jinping. Overseas exporters of items that use even traces of certain rare earths sourced from China will now need an export license, the Ministry of Commerce said in a statement Thursday, citing national security grounds. Certain equipment and technology for processing rare earths and making magnets will also be subject to controls, according to a separate release.Separately, the ministry later announced plans to expand export controls to a range of new products in measures that will be enforced from November 8. The newly-affected products include five more rare earths — holmium, europium, ytterbium, thulium, erbium — plus certain lithium-ion batteries, graphite anodes and synthetic diamonds, as well as some equipment for making those materials.

The week ahead — Economic data from Econoday.com:

The best trading strategy in the world won’t do you any good if you allow emotions to trump logic.

1. Government Shutdown Begins as Funding Lapses — Government funding lapsed early Wednesday morning after the White House and lawmakers failed to reach a spending deal, triggering a shutdown that is expected to halt some federal services and put hundreds of thousands of federal workers on furlough. The shutdown could be more consequential than those that have happened in the past. Trump administration officials have said they plan to use the shutdown to reduce the size of the government, moving to cut jobs across agencies. That effort is already being challenged in court. The funding lapse will have far-reaching ramifications. For the duration of the shutdown, the Labor Department is expected to pause the release of economic data—likely including a highly anticipated jobs report that was set to be made public on Friday. The Centers for Disease Control and Prevention will stop analyzing surveillance data for reportable diseases. Many planned workspace-safety inspections will be canceled. And workers won’t trim grass and install headstones at national cemeteries.
2. U.S. Factory Activity Contracts at Slower Pace — The Institute for Supply Management said Wednesday that its purchasing managers’ index of manufacturing activity edged up to 49.1 in September from 48.7 in August. Economists polled by The Wall Street Journal expected an index of 49.0.
With the reading still below 50, it points to contraction in activity in the sector for a seventh month in a row, though a score above 42.3 on the index generally tallies with expansion in the wider U.S. economy. However, the combined drops in the indexes for new orders and inventories exceeded the increase in the production index, rendering the overall improvement negligible, she said.
3. Trump Eyes Firing ‘Thousands’ of Federal Workers Over Shutdown — President Donald Trump is weighing slashing “thousands” of federal jobs ahead of a meeting with his budget director, Russell Vought, as the White House looks to ratchet up pressure on Democrats to end a government shutdown that has entered its second day. Republicans have sought to use the threat of permanent cuts to the federal bureaucracy to encourage Democrats to vote to reopen the government, and the White House has said firings could happen imminently. But some budget experts have argued that spending money to conduct permanent layoffs during a shutdown is illegal.
4. Trump Explores Bailout of at Least $10 Billion for U.S. Farmers — President Trump is considering providing $10 billion or more in aid to U.S. farmers as the agriculture sector warns of economic fallout from his far-reaching tariffs, according to people familiar with the discussions. The president and his team are weighing using tariff revenue to fund much of the aid, the people said, adding that distribution of the money could start in the coming months. A senior administration official said the discussions have centered on $10 billion to $14 billion in aid. The aid likely would go toward helping soybean producers, as well as other parts of the farm economy. Trump said earlier this week that he planned to push Chinese leader Xi Jinping to buy U.S. soybeans to help struggling American farmers. The two leaders are scheduled to meet on the sidelines of a summit in South Korea in the coming weeks. A deal with China to buy soybeans could change Trump’s calculation about providing aid to farmers, the official said.

The week ahead — Economic data from Econoday.com:

“Do More of What Works and Less of What Doesn’t”

1. US New-Home Sales Unexpectedly Jump Over 20% in Broad Advance — New-home sales in the US unexpectedly surged in August to the fastest pace since early 2022, likely lifted by builders’ rampant price cuts and sales incentives. The surge in demand helped put a significant dent in what’s been a vast oversupply of new homes on the market. Last month, the inventory of new homes for sale decreased to 490,000 units, the lowest this year.
2. US Economy Grows at Fastest Pace in Nearly Two Years on Consumer Spending — Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a revised 3.8% annualized pace, a Bureau of Economic Analysis report showed Thursday. That was stronger than the previously reported 3.3% advance and followed an outright contraction in the first quarter.
The BEA also issued its annual update of the national economic accounts, which showed real GDP still increased at an average annual pace of 2.4% from 2019 to 2024. The revisions paint a picture of an economy that quickly rebounded from the initial shock of the pandemic and has since transitioned to period of steadier, trend growth with lingering inflation.
3. PCE Inflation Report: Numbers Come in as Expected, Paving Way for Rate Cut — Consumer spending, adjusted for changes in prices, increased 0.4% last month, according to Bureau of Economic Analysis data out Friday. The consecutive strong gains in consumer spending add to evidence of a solid economy in the current quarter, building upon even greater growth in the prior period than previously thought. However, maintaining such momentum hinges in large part on the labor market, which has shown signs of faltering with slower hiring and more moderate wage gains. Spending on merchandise climbed 0.7%, reflecting discretionary purchases like furnishings, clothing and recreational goods. Outlays for services advanced at a more tempered pace.
4. Daly Says More Rate Cuts Likely But Fed Should Move Cautiously — Policymakers last week lowered interest rates for the first time since December, cutting their benchmark by a quarter percentage point. Daly said she “fully supported” the decision as growth, consumer spending and the labor market have slowed. She added that inflation has accelerated less than she and her colleagues expected, and that price pressures have mainly been confined to parts of the economy directly impacted by tariffs. Before this month’s rate reduction, Fed officials had left rates on hold this year to assess how new policies, including those on trade, would affect the economy.

The week ahead — Economic data from Econoday.com:

“Successful investing takes time, discipline and patience.”

1. US Retail Sales Rise in Sign of Solid Summer Spending — US retail sales rose in August for a third month in a broad advance, adding to evidence that consumers are still spending for now even as tariffs boost the cost of some goods, sentiment remains subdued and the labor market shows signs of faltering. The value of retail purchases, not adjusted for inflation, increased 0.6% after a similar gain in July, Commerce Department data showed. That beat all estimates in a Bloomberg survey of economists. Excluding cars, sales climbed 0.7%. Nine out of 13 categories posted increases, led by online retailers, clothing stores and sporting goods, likely reflecting back-to-school shopping.
2. Fed Trims Rates by Quarter Point and Sees 2 More Cuts This Year — The Federal Reserve on Wednesday approved a widely anticipated rate cut and signaled that two more are on the way before the end of the year as concerns intensified over the U.S. labor market. In an 11-to-1 vote signaling less dissent than Wall Street had anticipated, the Federal Open Market Committee lowered its benchmark overnight lending rate by a quarter percentage point. The decision puts the overnight funds rate in a range between 4.00%-4.25%.
Newly-installed Governor Stephen Miran was the only policymaker voting against the quarter-point move, instead advocating for a half-point cut. In the post-meeting statement, the committee again characterized economic activity as having “moderated” but added language saying that “job gains have slowed” and noted that inflation “has moved up and remains somewhat elevated.” Lower job growth and higher inflation are in conflict with the Fed’s twin goals of stable prices and full employment.
3. Government Shutdown Looms & Stock Market Performance — If past is prologue, stocks have actually risen in most cases as Washington has deadlocked over spending, taxes or border-security issues. The latest fight is over the exclusion of healthcare money sought by Democrats, and prediction markets see a 56% chance of a shutdown as of Thursday. The below table compiled by Stifel’s chief Washington policy strategist, Brian Gardner, shows six government shutdowns since 1978 that lasted five or more trading days, with the S&P 500 index

4. Democrats Dig In on Shutdown Stance After White House Threatens to Fire Workers — House Republicans are planning to vote by Friday on legislation to avert a shutdown. It would fund the government through Nov. 21 and also includes extra money for lawmakers’ security in the wake of the killing of conservative activist Charlie Kirk last week.
The measure excludes an extension of expanded Affordable Care Act subsidies, and Democrats have threatened to withhold votes over the exclusion. Republican leaders have been open to the idea of keeping the enhanced subsidies but say they need more time to iron out details, according to the Wall Street Journal. The U.S. government is hurtling toward a shutdown in a matter of days with no exit ramp in sight, as Republicans and Democrats latch onto starkly different positions and the White House threatens to lay off more federal workers.

The week ahead — Economic data from Econoday.com:

“There is a time to go long, a time to go short and a time to go fishing.” – Jesse Livermore

1. US Payrolls Marked Down a Record 911,000 in Preliminary Estimate— Annual revisions to nonfarm payrolls data for the year prior to March 2025 showed a drop of 911,000 from the initial estimates, according to a preliminary report from the Bureau of Labor Statistics. The total revision was on the high end of Wall Street expectations, which ranged from a low around 600,000 to as many as a million. The numbers, which are adjusted from data in the quarterly census and reflect updated information on business openings and closings, add to evidence that the employment picture in the U.S. is weakening. Most of the time span for the report came before President Donald Trump took office, indicating the jobs picture was deteriorating before he began levying tariffs against U.S. trading partners. The largest markdowns came in leisure and hospitality (-176,000), professional and business services (-158,000) and retail trade (-126,200). Most sectors saw downward revisions, though transportation and warehousing and utilities had small gains. Almost all the revisions were confined to the private sector; government jobs were adjusted down by 31,000.
2. US Producer Prices Unexpectedly Drop, First Decline Since April — The producer price index decreased 0.1% from a month earlier and July’s figure was revised down, according to a Bureau of Labor Statistics report out Wednesday. From the year before, the PPI rose 2.6%. Goods prices excluding food and energy rose 0.3%. Services costs fell 0.2%. Within services, margins at wholesalers and retailers fell 1.7%, matching the biggest drop in data going back to 2009 and reversing an outsize increase in July. Margins have been volatile from month to month so far this year, underscoring uncertainty around the impact of trade policy on prices and demand.
3. US Core CPI Rises as Expected, Keeping Fed on Track for Rate Cut — The core consumer price index, excluding the often volatile food and energy categories, increased 0.3% from July, according to Bureau of Labor Statistics data out Thursday. When incorporating those components, the overall CPI rose 0.4%, the most since the start of the year. Goods prices, excluding food and energy, accelerated 0.3%, matching the biggest climb since May 2023. That reflected increases in new and used cars, apparel and appliances, which some economists pointed out as possible impacts of tariffs. But analysts were generally divided as to how much of a role the duties played in the report, with others more focused on surges in travel-related services like airfares and hotel stays. Several household expenses also picked up, including groceries, gasoline, electricity and car repairs.
Taken together, the report suggests inflation continues to linger. President Donald Trump’s global tariffs are impacting prices of some goods, while ongoing increases in services costs may present a more persistent pressure to overall inflation.
4. Jobless Claims Rose Sharply Last Week — In the week through Sept. 6, jobless claims filings rose to 263,000, up from 236,000 a week earlier. Economists polled by The Wall Street Journal were forecasting 235,000 claims. Continuing claims, an indicator of the size of the total unemployed population, came in at 1.94 million in the week through Aug. 30, level from a week earlier. The continuing-claims data lag the initial-claims data by a week.The pace of job creation has fallen off significantly over the summer, prolonging workers’ job searches. But so far this year, there hasn’t been much sign of a big increase in layoffs.

The week ahead — Economic data from Econoday.com: