U.S. equities finished mixed in choppy action after the Fed cut the target for its fed funds rate, as widely expected, but indicated division as to future actions. More upbeat economic data hit the Street, with housing starts and building permits both jumping to highs not seen since 2007. Treasury yields reversed course to end mixed following the rate decision and crude oil prices again pared back from Monday’s spike as Saudi Arabia suggested a return to normal output levels sooner than expected after the weekend attack on some of its key oil facilities. Meanwhile, the U.S. dollar was higher, but gold ended lower. News on the equity front focused on earnings reports from FedEx, Adobe and General Mills.

The Dow Jones Industrial Average (DJIA) rose 36 points (0.1%) to 27,147, the S&P 500 Index added 1 point to 3,007, while the Nasdaq Composite decreased 9 points (0.1%) to 8,177. In moderate volume, 842 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.23 to $58.11 per barrel and wholesale gasoline lost $0.02 to $1.66 per gallon. Elsewhere, the Bloomberg gold spot price decreased $6.84 to $1,494.54 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.3% at 98.90.

At 2:00 p.m. ET, the Federal Open Market Committee (FOMC) concluded its two-day monetary policy meeting, announcing a 25 basis point (bp) reduction to its target range for the Fed funds rate to 1.75%-2.00%. The Committee cited “the implications of global developments for the economic outlook as well as muted inflation pressures” as the primary reason for the move. Information received since it met in July indicates that, “the labor market remains strong and that economic activity has been rising at a moderate rate,” with job gains remaining solid and the unemployment rate low. The Committee added that, “Although household spending has been rising at a strong pace, business fixed investment and exports have weakened, and that overall inflation and inflation for items other than food and energy are running below 2 percent.

The decision was not unanimous, indicating a widening divide among Members over future actions, as St. Louis Fed President James Bullard preferred a 50 bp cut, while Kansas City Fed President Esther George and Boston Fed President Eric Rosengren favored no change to the current target. As well, the Committee’s projected rate increases, known as the “dots plot,” continued to show sharp divisions among Members with regards to the path of rate moves, with nearly half expecting no additional cuts, while a little more than half expect one more cut this year.

Updated economic projections were also released, with the Fed upping its forecast for 2019 GDP and the unemployment rate, while keeping its outlook on inflation unchanged. In his scheduled press conference after the statement, Chairman Jerome Powell reiterated that the outlook for the U.S. economy remains favorable. However, Powell reiterated that the Committee is not on a pre-set course for interest rates, but that it will be aggressive when/if necessary, while also dismissing the notion of the Committee ever using negative interest rates in the future.

Housing starts for August rose 12.3% month-over-month (m/m) to an annual pace of 1,364,000 units, above the Bloomberg forecast of 1,250,000 units. July starts were revised higher to an annual pace of 1,215,000. Moreover, building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, grew 7.7% m/m to an annual rate of 1,419,000, versus expectations of a 1,300,000 pace, and compared to July’s downwardly-revised 1,317,000 rate. For both starts and permits, single-unit activity rose solidly m/m, while jumping for multi-unit structures.

The MBA Mortgage Application Index dipped 0.1% last week, following the prior week’s 2.0% gain. The slight decrease came as a 4.3% drop in the Refinance Index was met with a 6.4% gain for the Purchase Index. The average 30-year mortgage rate jumped 19 basis points (bps) to 4.01%.

Treasuries reversed course to finish mixed following the Fed announcement, as the yield on the 2-year note rose 3 bps to 1.76%, while the yields on the 10-year note and the 30-year bond declined 3 bps to 1.79% and 2.25%, respectively.

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