Powell balances inflation and jobs, yields stay above 4%

• The FED has spoken and we got the 25 bps we expected.
• The future path remains just a bit cloudy, but optimistic.
• Markets ended mixed, but this morning it is on fire.
• Bonds hold 4%, oil flat and Gold suffered some profit taking.
• Try the Onion Tart (inspired by another ‘cowboy’)

Well, that was a dud…So was it hawkish or was it dovish?

Yes, we finally got the 25-bps cut we’ve been talking about ad nauseam, and yes, the dot plot does suggest that two more cuts are likely. But JJ’s tone at the presser told a different story. He made it clear he’s not just flipping the switch — he’s still cautious about inflation risk while remaining concerned about the labor market – which puts him and the fed in an awkward position, if they cut they risk rising inflation, if they hold steady, they risk higher unemployment or less job creation.

Translation: he pushed back against the bond market’s bet that the Fed would open the door to a series of “aggressive” cuts. He didn’t cave to the White House either — no 50-bps chop. (Remember, Petey Navarro told Maria just yesterday he expected 50 now and 50 again in October…not happening.).

JJ emphasized the two-sided risk: softer employment and sticky inflation. While he did cut, he didn’t roll over and promise anything more. He didn’t take cuts off the table, but he didn’t confirm them either — telling the market: nothing is a done deal.

The vote? 11–1 in favor of a 25 bp cut. No surprise, the lone dissenter was the newest member, Stevey Miran, voting for a bigger cut.

And the dot plot?

9 of 19 see two more cuts, 2 of 19 see one more, 6 of 19 see none, 1 sees a hike and 1 sees five cuts (wanna take a stab at who that might be?).

Now, the dots are anonymous for a number of reasons… Protects individual FOMC members, Emphasizes the distribution not the individual, avoids locking anyone in, Preserves Fed credibility (yeah we can discuss that).

The point is that the FED wants policy decisions to be seen as collective and data-driven, not as the preference of one or two big personalities. That said — Fed-watchers play the guessing game based on public speeches, known hawks/doves, and voting history. Over time, you can often triangulate which dots belong to which players, but officially, the anonymity is meant to keep the focus on the Fed as a body. And so, I like many others are ‘going out on a limb’ (note the sarcasm) when we say the lone cowboy calling for five cuts was none other than Stevey Miran.

In the end the FED confirmed that they are an independent body and expect to remain so.

And how did stocks react? The Dow gained 260 pts, the S&P lost 7, the Nasdaq lost 72 pts, the Russell rose 4, the Transports lost 145, the Equal Weight S&P gained 7 pts while the Mag 7 gave back 130 pts.

Of the 11 sectors it wasn’t really a barn burner…. – Financials took the lead – up 1%, Consumer Staples gained 0.6% (that’s interesting), while Utilities, Communications, Energy, Healthcare and Basic Materials all rose by about 0.25%, we saw weakness in Industrials – 0.5%, Tech – 0.4% and Consumer Discretionary lost 0.25%.

Further down the chain – Homebuilders lost 1%, Retailers gained 0.2%, Airlines gained 0.5%, Metals & Miners lost 0.5%, Cyber – 0.3%, Disruptive Tech gave up 0.5%, Semi’s flat, Aerospace & Defense gave up 0.7%, Oil & Gas Exploration/Production ended flat, Big Pharma up 0.2%.

The contra trades – they were confused: The DOG lost 0.5%, the PSQ gained 0.25%, the SH +0.1%, the VIXY lost 3.6%, the SPXS (triple levered shorts) gained 0.8% while the SPXL (triple levered longs) lost 0.4%.

Eco data yesterday showed mortgage apps exploded higher…. up 29.7%, housing starts disappointed – 8.5% vs. the -4.4% expectation. Building Permits also disappointed – falling 3.7% vs. the +0.6% expectation.

Today’s eco data – Initial Jobless Claims, Cont. Claims – both expected to be inline. The Philly FED Business Outlook and the Leading Index – which is expected to come in at -0.2%.

Bonds lost a little ground on the news yesterday — the TLT and TLH both off about 0.25%. That kept yields from collapsing. The 10-yr ended the day 8 bps higher at 4.08%, while the 30-yr pushed up to 4.68% from 4.62%.

This morning, we’re seeing a little giveback: the 10-yr is down 3 bps at 4.05%, the 30-yr also down 3 bps at 4.65%.

But here’s the point: we did not break below 4% on the 10-yr. And that matters. Why?

A break below 4% would have unleashed a whole new narrative — think “yields in freefall” — which could have fueled a risk-on surge in equities, particularly the Mag 7 and other high-beta names. By holding the line above 4%, the market is signaling that while easing is expected, inflation concerns still put a floor under yields. It also shows that bond buyers are still cautious — they’re not ready to bet on an “all-clear” from the Fed just yet.

For equities, this sets up a tug-of-war: Growth names love falling yields, but without a decisive break below 4%, the move is muted. Value and cyclicals aren’t hurt as badly here while Financials (think banks) quietly benefit from yields holding up, since margins don’t get squeezed as quickly.

Bottom line: The 4% line on the 10-yr is becoming the “psychological pivot.” If we break it decisively, equities will run. If we hold above it, the rally will be more selective and choppier.

Oil is trading at $63.56. It remains within the trendlines…$62.92/$64.86 suggesting nothing has really changed.

Gold lost $30 during the FED presser to end the day at $3659……as gold traders turned a bit cautious after JJ’s commentary….but they also did exactly what we discussed – they hit the sell button to lock in profits after this latest surge higher, +40% ytd and +10% since July. This morning gold is up $9 as they continue to digest the news.

US futures surging higher this morning as investors get comfortable with the latest FED decision or is it all that money on the sidelines that remained cautious as we moved into the fall now looking for a home? Look – either way it is what it is and now that all of this drama is over and we have a sense of where we are going – investors can now put more money to work ‘strategically’. Remember – you were never out of the market, so you have enjoyed this move, and you had your ‘dry powder money’ sitting in the gov’t money market fund earning at least 4.25% - so don’t despair. The road is a bit clearer now.

Dow futures are up 320 pts, the S&P up 56, the Nasdaq up 253 and the Russell ahead by 40….That usual September ‘selloff’ has eluded us this year as the market continues to surge….Year to date - the Dow up 8%, the S&P up 12.2%, the Nasdaq up 15.2%, the Russell up 8%, the Transports down 2.5%, the Equal Weight S&P up 7%, while the Mag 7 is ahead by 18%.

Bonds have also gone from negative to positive on the year – the TLT now up 3.2%, the TLH is up 4.1% while the AGG is up 3.8%.

European markets are higher on the back of the excitement. The Euro Stoxx in the lead, up 1.3% followed by Germany up 1.2%. The BoE is expected to make their policy announcement today – no change is expected. That state dinner at Windsor Castle last night was beautiful – anyone who was anyone was in attendance. A little tidbit - 1400 pieces of silverware were used, and it took the staff one week to set the table. Today, The Trumps are visiting the PM Kier Starmer out in the countryside.

The S&P closed at 6,600 down 6 pts. Based on what the futures are doing – we can expect to create new highs everywhere…. the Dow, S&P, Nasdaq and Mag 7 on the opening trade. It will be interesting though to see how it ends today.

Remember – it’s about ‘the plan’ – make sure you have one. It’s about time in the markets, discipline, and risk management more than trying to time every move.

Try the onion tart

If you’ve been paying attention this week, you’ll notice my recipes have had a bit of a Wild West market flair — stories of cowboys who weren’t riding horses, but cornering markets.

Today’s recipe keeps that theme alive: The Classic Onion Tart. And yes, it’s tied to one of the wildest chapters in market history — the great Onion Corner of 1955.

Picture this: an onion grower from New York (Vince Kosuga) loads up warehouses with onions, piles into onion futures, and for a brief shining moment, he controlled nearly every onion that could be delivered in Chicago. Prices soared, then collapsed, and the outrage was so strong that in 1958 Congress actually banned onion futures trading altogether. To this day, onions are the only commodity you cannot trade in the U.S.

So, while he cornered the market, you can corner your kitchen — and instead of a scandal, you’ll end up with a rich, caramelized onion tart. Here is my version of -

The Jolly Inn Classic Onion Tart

You need: Pizza dough, butter, 4 large yellow onions, thinly sliced, s&p, ½ tsp thyme leaves (fresh or dried), ¾ cup heavy cream, ½ cup grated Gruyère (or Swiss cheese)

Preheat your oven to 450 degrees.

Caramelize the onions:

In a large skillet over medium heat, melt butter. Add onions, salt, and thyme. Cook slowly, stirring often, until onions are soft, golden, and jammy (about 25–30 minutes). Remove from heat and stir in the cream. Let it cool.

Now roll out the pizza dough – making it thin.

Spread the cooled caramelized onions evenly over the dough. Top with the Gruyere cheese.

Place in the oven and bake – 15mins or so…. You want the crust to be nice and brown.

Remove and let cool for 5–10 minutes before slicing. Serve warm, not hot.