/ September 15 / Weekly Preview
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Monday:
N/A
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Tuesday:
Non Farm Payrolls Annual Revision
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Wednesday:
PPI MoM (0.3% exp.)
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Thursday:
Inflation Rate YoY (2.9% exp.)
Core Inflation Rate YoY (3.1% exp.)
Initial Jobless Claims (240K exp.)
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Friday:
Industrial Production MoM (0% exp.) -
Monday:
N/A
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Tuesday:
Oracle CorporationSynopsys, Inc.
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Wednesday:
Chewy, Inc.
Manchester United Ltd.
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Thursday:
Adobe Inc.
Kroger Company (The)
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Friday:
N/A
Economic Data Weakens
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In the past week, major developments put the economy in focus. There was a trio of market-moving economic releases: CPI, PPI, and the annual employment revisions, all of which collectively shaped investor expectations and positioning heading into this week’s FOMC meeting.
Overall, we are seeing a softening in the economic environment, which is not unsurprising given a still restrictive monetary policy. Headline CPI rose +0.4% month-over-month to a yearly +2.9% figure, mainly driven by the services category. Food and gas were also important drivers of higher CPI, while while shelter costs remained firm, but decelerated compared to previous months. There’s little reason to believe that inflation will rise from current levels due to the fact that housing makes up 42% of the CPI calculation and there’s currently a slump in the real estate market.
Producer Price Inflation is still tracking higher than CPI in 2025. The story we get here is more nuanced and tells that producers are absorbing tariffs, in the face of weaker demand. August PPI declined at the last update, but core PPI (excluding food, energy and trade) still advanced by +0.3% (+2.8% annually).
Inflation continues to normalize, and while better than feared, it is not yet at levels where policymakers want it.
August Non-Farm Payrolls rose by only 22.000 jobs, far short of expectations. Preliminary benchmark revisions, subtracted 911,000 jobs from the prior 12 months in the largest adjustment to the employment situation ever recorded. To a certain extent, the equity market was pricing in a large negative revision, similar to the one in 2024, since the reaction was fairly muted.
Overall, sticky inflation conditions remain less than ideal. The fragility in the labor market is giving FOMC voters an excuse to tilt dovish, and the bond market has certainly noticed. The steep decline in Treasury yields indicates that bond traders anticipate slower economic growth, offering equities some short-term support while increasing worries about the economy’s long-term expansion.
The issue with Fed rate cuts (at least through the lens of the last 25 years) is that they generally precede downturns in the real economy. The Fed is behind the curve and late to act, leading to the cratering of stocks and the economy.
The average return post a rate cut (any rate cut since 2000) is -5.42% 1-Year later.
Different timelines offer different perspectives on this issue however. Carson research did a similar study, going back to 1980, on rate cuts with the S&P 500 within 2% of all-time-highs. All observable instances have seen the market rise 1-Year later, proving that the context around the cut is what matters most.
Yields declined sharply across the curve, with the 2-year Treasury—often a leading indicator of Federal Reserve policy shifts—falling nearly 20 basis points over the week. This reflects market expectations not only of a 25 basis point rate cut on September 17 but also heightened probabilities of further easing through the end of the year. The current 2-year yield implies that the Fed may be lagging behind the market by approximately 80 basis points in its rate reductions.
The long end also responded, with the 10-year yield slipping and flattening the 2-10 curve — a signal of slower growth ahead. TLT, the benchmark long duration bond ETF, surged +1.57% on this rapid repricing. Institutional flows via Dark Pools accumulation and GEX remain highly supportive of the long bonds trade in the short and medium term.
Sentiment in the equity market is not as overbought as one would think given the headlines circulating on social media and mainstream news. While a clear divergence is occurring against the backdrop of record index level highs, there is nothing in the sentiment data that tells us the market is ripe for a pullback.
In other words, the trends that matter remain bullish, simply as a function of non-existent SELL signals. New 52-week highs are fewer relative to all constituents, and many mid- and small-caps lag the large-cap/mega-cap names that continue to lead — this is the only bearish observation.
Technically speaking, resistance stands at $688 (R1) and support lies at the 50-DMA ($636). Though improbable, a close lower than $636 has the potential to send the market significantly lower, at $600 (S1). The bull market remains technically intact this week.
Our Trading Strategy
Traders will be looking to position for the FOMC decision due on Wednesday. Bearish commentators are speculating that a “Sell the News” type event will send stocks lower. The way this could play out is if the Fed takes a more hawkish stance than expected, especially as it relates to cuts later in the year.
There is also a Quadruple Witching event on Friday which could induce extra short term volatility as futures and options contracts expire simultaneously.
Retail Sales, Industrial Production & Capacity utilization data (all due tomorrow) will provide an extra context for the Fed’s “dot plot” projection.
In the interim, we will also be performing our monthly portfolio rebalancing for the Sigma Portfolio (Live). Absent any significant event, we will probably maintain the long & risk-on allocation for now. Tomorrow’s Rebalance session for our automated models will also be influential for the decisions that we will take in the live portfolio.
Signal Sigma Research & PRO members will be notified by Trade Alert of any live portfolio changes (if subscribed). If you’re not on this plan yet, you can get a free trial when you join our Society Forum. If you need any help with your trading strategy (or would like to implement one on your account), feel free to reach out!
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