Guest Commentary by Matt Zeller, Senior Market Intelligence Analyst
September 19 – The market got what it wanted yesterday as the Fed cut interest rates by a full half-percent; the benchmark Dow Jones Industrial Index hit an intra-day high following the move but then cooled into the close, actually marking the second straight decline since Monday’s record closing number. However, futures are indicating more than a 500-point increase this morning, with the NASDAQ and S&P 500 seeing even strong gains on a percentage basis, as the equities trade digests the Fed move.
The Federal Reserve yesterday declared its first interest rate cut since early in the COVID-19 pandemic, in an aggressive move that matched the trade’s expectations, following a softening employment market and cooling inflation. The last time the FOMC cut rates by a full half-point was during the global financial crisis in 2008. Fed Governor Michelle Bowman did cast the lone dissenting vote, preferring a quarter-point move; that dissenting vote was the first by a Fed governor since 2005, though her thinking was in line with plenty of regional presidents and a slew of economists. The median view of the Fed Funds rate is now down to 3.4% by the end of 2025, compared to 4.1% previously, with the goal by the end of 2026 at 2.9%, compared to 3.1% previously.
Initial Jobless Claims came in at 219k for the week ending September 14, below the average 230k trade estimate and 231k the week prior (that was revised a tick higher from 230k previously) as well as a four-month low; continuing claims for the week ending 9/7 also fell below expectations at 1829k, below the 1850k guess, with the week prior revised lower from 1850k to 1843k as well. This morning’s figures still point to a decently healthy jobs market despite a slowdown in hiring and rise in unemployment – key metrics driving the Fed’s current thinking.
U.S. exporters sold 64.2 million bushels of soybeans on the week ending September 12, ten million ahead of the week prior and a few million above even the most optimistic trade estimate. However, cumulative sales stand at 588 mbu, still 39 mbu behind last year’s pace despite the stronger two-week start, thanks to lower carryover sales into this marketing season. The USDA is still expecting a 150 mbu year-over-year increase from last season’s 1.7 bln bu number, potentially an optimistic view unless a production issue derails Brazil’s supply pipeline to major buyer China.
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