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Fed Stays on Hold

Financial markets rallied on the news that the Fed decided to leave rates on hold at last week’s policy meeting … at least for the time being. Any chance of a rate increase won’t come until the FOMC gathers for their December policy meeting with the decision of course being data dependent. Equities ultimately finished the week higher with the DJIA and the S&P 500 up 0.76% and 1.2% respectively. International stocks responded positively with the MSCI EAFE index rising 3.15% while emerging markets finished higher by 3.65%. Fixed income also finished the week positive as the yield on the 10 year U. S. Treasury dropped from 1.7% to 1.62%.

This week look for economic reports on durable goods and the 3rd revision to second quarter GDP which is expected to come in at 1.3%. Interestingly, the Fed now only sees long term rates reaching 2.88% vs a prior estimate of 3.0%. This lower projection indicates that the Fed likely believes that the growth rate for the economy is lower than previously thought.

Next month, corporations will begin reporting earnings for the 3rd quarter and expectations are for a decline of 2.3% according to FactSet, which would mark the 6th consecutive quarterly decline. The 3rd quarter was supposed to be when earnings growth returned … lets hope the analysts are wrong. The energy sector will likely be the largest culprit with an expected drop of 66%. On the positive side, revenue growth is expected to be positive.

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Today's Markets