MPC Morning Call 15th September – Stocks drift lower as investors await this weeks Fed meeting

Overnight – Stocks drift lower as investors await this weeks Fed meeting

Stocks slipped Friday, weighed down by rising Treasury yields and fresh data showing consumers continue to worry about the economy. 

Consumer sentiment in the U.S. weakened in September as the University of Michigan Consumer Sentiment index dropped to 55.4 from 58.2, falling short of expectations. While one-year inflation expectations held steady at 4.8%, the five-year outlook rose to 3.9%, signaling persistent long-term inflation concerns. Meanwhile, Treasury yields moved higher, with the 10-Year climbing 6 basis points to 4.07%, despite markets largely anticipating a Federal Reserve interest rate cut next week.

Pressure continues to build around the Federal Reserve’s September 16–17 meeting, as recent economic data show a mixed picture: inflation came in hotter than expected, but weekly jobless claims climbed to their highest since 2021, reinforcing signs of a weakening labor market. Traders are overwhelmingly pricing in a 25 basis point rate cut, while a smaller chance of a 50 basis point reduction remains on the table. Analysts suggest that while inflation risks remain, the Fed’s focus is shifting toward supporting employment as layoffs and slower hiring begin to weigh on the economy.

On the investment side, global equity funds saw outflows of $3.06 billion in the week ending September 10, their first net withdrawal in over a month. Most of the outflow stemmed from U.S. equity funds, which lost $10.44 billion, while European and Asian funds posted inflows. In corporate news, Adobe raised annual forecasts, attributing the upgrade to strong demand for AI-driven creative tools. In contrast, furniture maker RH missed on revenue, while Super Micro Computer announced the launch of its Nvidia Blackwell Ultra-powered hardware. Additionally, Microsoft and OpenAI disclosed a preliminary agreement regarding OpenAI’s transition to a for-profit structure.