The market moved higher out of the gate, but there was no momentum, and major indices immediately moved lower.

Only three S&P 500 sectors moved higher:

• Consumer Discretionary (XLY): +0.61%
• Consumer Staples (XLP): +0.45%
• Energy (XLE): +1.68%

Consumers Ignore Their Own Noise

I mentioned on Making Money yesterday that I’ve always said, if you stood outside a mall with a clipboard and asked 100 people entering about the state of the economy, you’d see 98 of them walk out with a bunch of shopping bags. The backdrop coming into today’s retail sales and Johnson Redbook reports was one of consumers in peril.

70% said that their paychecks won’t keep up with higher prices for the next couple of years.

Moreover, consumer spending had been edging lower since the spike to get in front of new tariffs.

Retail Sales

However, we saw retail sales that exceeded consensus. The report doesn’t allow for the impact of higher prices, but the bottom line is that they are being paid. The bifurcated economy masks the fact that a handful of people are making half the purchases.

GDP Estimate Edges Higher

The Atlanta Fed GDPNow forecast now sees GDP at 3.4% from 2.1% as of August 1, 2025.

Handicapping The Fed

JP Morgan (JPM) laid out potential market reactions to today’s Fed decision.  I’m inclined to agree with them, but think a 50 bps cut should be viewed as the Fed waking up to the fact it's very late.

Whatever the initial reaction is, do not panic.

Today’s cut is just the first of many more to come. As long as the economy can avoid recession, this should be ambrosia to the rally, which is already champing at the bit.

Today’s Session

Housing starts and permits both missed consensus and continue to trend lower. The action on permits is particularly worrisome, considering the recent decline in lumber, which was supposed to be much more expensive in the wake of tariffs.  Mortgage rates are racing lower, and we could see a sharp reversal; however, this is a warning sign.

Holding on for the Fed.

Check out my live coverage with some of the best thinkers on the Street today on Fox Business at 2:00 p.m. ET.

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