Federal Reserve Chair Jay Powell is being pulled like “Stretch Armstrong” and will have to go out today to be a superhero to everyone. It will take a one-two punch of the rate cut and messaging that says the Fed is still in control and a soft landing is possible. Or perhaps begin limiting the depth and duration of recession already baked in some measures.

I think 25 basis points (bps) will suggest that the Fed is too arrogant or tepid to address the lag effect, which poses a tremendous daily threat to society. In other words, the hiking cycle has held too high for too long.

By the same token, many folks suggest 50 bps sends the wrong message about the possibility of a soft landing.

Labor Laboring

Jay Powell began talking about “labor shocks” last year during the Federal Open Market Committee (FOMC) press conference, often even when it wasn’t the question or topic.  This is his “Precious,” and the U-3 Unemployment Rate is already past the Fed projection for this year and next.

Meanwhile, payroll growth has lurched into freefall mode; I say this is today’s key talking point.

In the Starting Blocks

Although the S&P 500 peaked at its all-time high intraday yesterday, the index returned to the starting blocks.

Poised to Go on Offense

The most intriguing aspect of the session was the continued weakness in defensive sectors, including the largest declining sector: Consumer Staples (XLP).

Buyers rotated into Consumer Discretionary (XLY), focusing on some of the industry's most beaten-down names. Investors are looking for a broad market pop to reward bottom fishers.

The Market Usually Loves Rate Cuts

A rate cut should be good for stocks unless the economy is in, or heading into, an “official” recession.

Today’s Session

Housing starts and permits are out this morning with noticeable improvement from the prior month and edging out of consensus. This has no bearing on the Fed, but the housing market is stuck, and lower rates and more supply are needed.

Starts

Permits

Just counting the minutes until 2PM.

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