Major indices have steadied modestly beneath their flatline and consolidated, following an earlier sell-off driven by mega-cap weakness and shifting rate cut expectations.

The CME FedWatch tool is now showing an 85.5% probability of a 25-basis point cut in October, from 91.9% yesterday, following stronger unemployment claims data this morning.

The rate debate in the Federal Reserve continues to intensify as policymakers continue to deliver their views today. Kansas City Fed President Schmid and Fed President Goolsbee both noted discomfort to cut rates further due to concerns about inflation. On the contrary, Fed Miran still favors a proactive approach that would include near-term rate cuts.

In other news, there are reports indicating that Secretary Lutnick is attempting to secure more funding in the South Korean trade deal. Secretary Lutnick is aiming to get the $350B existing pledge closer to Japan’s $550B pledge, he also wants the funds to be in cash as opposed to loans.

Only two sectors are in the green with Energy (XLE) once again in the lead. On the flip side, Health Care (XLV) is the laggard, as the US announced probes into medical technology imports.

Economic Data

Existing home sales eased 0.2% M/M to a seasonally adjusted annualized rate of 4M in August from 4.01M in July and came in above estimates of 3.96M.

The Kansas Composite Index rose to 4 in September from 1 in August, marking its highest reading since September 2022. This was driven mainly by improvement in the Employment Index and the Manufacturing Production Index.

Notable Points:

• Employment Index rose to 7 from 0
• Manufacturing Production Index advanced to 4 from 0
• New Orders Index fell to 2 from 5
• Prices Paid Index declined to 40 from 43
• Prices Received eased to 13 from 21
• Shipments Index increased to 7 from 6
• Backlogs of orders increased to -13 from -15
• The Future Composite Index fell to 7 from 11

Overall, today’s action reflects a market caught up between solid economic results and reduced prospects for additional rate cuts, which is leaving the Street cautious after the major indices reached record highs.