Stocks fell in the first week of September but gained strength leading up to and following the FOMC meeting on September 18th. The S&P 500 rose 2.1% in August, the Dow Jones Industrial Average advanced 2%, and the Nasdaq Composite added 2.8%. Emerging Markets was a big beneficiary of monetary policy easing, jumping 6.7% in September.
Eight of eleven sectors finished September in the black. Consumer Discretionary and Utilities led the way with respective gains of 7.3% and 6.6%, followed by Communication Services at 3.8%. Financials, Health Care, and Energy were the three sectors that went negative in September. Tumbling oil prices pushed the Energy sector 3% lower in September and into the last-place spot among all sectors.
The Federal Reserve cut its benchmark Fed Funds Rate for the first time since March 2020. The Fed Funds Rate was lowered by 50 basis points from 5.50% to 5.00% at the September 18th FOMC meeting. As a result, the 15-year mortgage rate shed 35 basis points down to 5.16%, and the 30-year approached 6%. Inflation fell for the fifth consecutive month, though core inflation inched higher.
Treasury yields fell across the curve with shorter-term durations posting larger declines. The 1-month, 3-month, and 6-month T-Bills all fell around 50 basis points, reflecting the Fed’s half a percentage point rate cut. Declines were less steep further down the curve; the 10-year fell a tenth of a percentage point, and the 30-year dipped six basis points.
Bond funds benefitted from the Fed’s actions and declining yields. The iShares 20+ Year Treasury Bond ETF (TLT) and iShares iBoxx Investment Grade Corporate Bond ETF (LQD) both rose over 1.9%, and the Core US Aggregate Bond ETF (AGG) advanced 1.3%.
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