Equity Markets Rallied Following Election, Fed Cuts

Investors had plenty to think about last week as they focused on the results of the presidential election and the Federal Reserve’s move to further reduce interest rates. Each of the major benchmark indexes closed up by the end of the week, with consumer discretionary, information technology and financials outperforming. Bond prices ended the week higher, pulling yields lower. Crude oil prices rose to over $72.00 per barrel only to slip back a bit at the end of the week. The dollar inched higher, while gold prices declined. According to Freddie Mac, mortgage rates rose to 6.79% on Nov. 7, the highest they’ve been in nearly four months.

Fed Lowered Interest Rates

By a unanimous vote, the Federal Open Market Committee (FOMC) decided to cut interest rates an additional 25.0 basis points. The federal funds target rate range is now 4.50%-4.75%. The Committee noted that economic activity has continued to expand at a solid pace, labor market conditions have generally eased, and the unemployment rate moved up but remained low. Inflation has progressed toward the Committee’s 2.0% objective but remained somewhat elevated. In sum, the Committee would be prepared to adjust its monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals of 2.0% inflation and maximum employment.

Eye on the Week Ahead

The latest inflation data for October is available this week with the release of the Consumer Price Index, the Producer Price Index, and the report on import and export prices. The CPI rose 0.2% in September but ticked down 0.1 percentage point to 2.4% year over year. Producer prices, on the other hand, were flat in September and up only 1.8% since September 2023.