Stocks closed mostly lower yesterday with only the Nasdaq eking out a small gain.

Yesterday's MBA Mortgage Applications were up 11.0% w/w with purchases up 1.4%, while refi's were up 20.3%.

New Home Sales came in at 716,000 units (annualized) vs. last month's upwardly revised 751K (from 739K) and views for 700K.

And the Survey of Business Uncertainty showed U.S. firms expecting sales growth to be up 3.87% over the next 12 months, in line with last month's forecast, with employment growth at 4.11% vs. last month's 4.42% estimate.

We also heard from Federal Reserve Governor Adriana Kugler, who said she strongly supported the Fed's 50 basis point rate cut last week. That's in contrast to Fed Governor Michelle Bowman, who the other day said she was opposed to a 50 bps cut in favor of 25 bps instead. But Kugler was in the clear majority as Bowman was the lone dissenter. Kugler also expects more rate cuts to come.

Fed Funds traders are pricing in a literal certainty that the Fed cuts rates again in November. Interestingly, the odds are now at 40.8% for a 25 bps cut in November, and 59.2% for 50 bps. A half percentage point move is not inconsistent with the Fed's 4.4% forecast by year's end. Although, many had expected the Fed to do it in two quarter point cuts in November and December, rather than in one fell swoop.

But the Fed insists it will remain data dependent. And that's why tomorrow's Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge, will be looked at closely. The headline number is expected to be up 0.1% m/m vs. last month's 0.2% pace, while the y/y rate is expected to tick down to 2.3% vs. last month's 2.5%. The core rate (ex-food & energy) is expected to be up 0.2%, in line with last month. The y/y rate is expected to tick up to 2.7% vs. last month's 2.6%.

After that, the market will shift its focus to next Friday's Employment Situation report on 10/4.

With the Fed acknowledging that inflation risks have receded, while labor risks have grown, the jobs report is likely the more important of the two reports at this particular point in time. But both are still important given their dual mandate of price stability (low inflation), and maximum employment. Plus, it was high inflation that got this rate-increase cycle started. And it's important the Fed sees inflation eventually get to its 2% target.

In the meantime, we'll get plenty of other economic data to look at with today's Durable Goods Orders report, the third and final Q2 GDP numbers (3.0% estimate, same as the previous estimate), Weekly Jobless Claims, Corporate Profits, and the Kansas City Fed Manufacturing Index.

We'll also hear from several Fed officials as they speak at their various engagements throughout the day. The most important one is Fed Chair Jerome Powell. He'll give the opening remarks at the 2024 U.S. Treasury Market Conference in NY.

With two more days left in the week, the big three indexes are mixed for the week with the Dow in the red, while the S&P 500 and Nasdaq are both in the green. Another positive week would make it 3 up weeks in a row.

See you tomorrow,