Schwab Center for Financial Research

Stocks rebounded slightly overnight but remain down sharply for the week and month as the dollar, Treasury yields, and oil remain elevated. New worries center on Washington as Congress made no progress toward preventing a shutdown. Nike and Micron report next week.

Stocks are falling back toward mid-August lows as investors contemplate sharp gains in Treasury yields following the Fed meeting yesterday. A pause in rate hikes didn't soothe the market, because the Fed's projections essentially removed two expected 2024 rate cuts.

Fed leaders concluded a two-day policy meeting by leaving interest rates unchanged, as expected, but signaled another rate increase later this year could be necessary.

The Fed's rate decision today holds little suspense as the market bakes in 99% chance of a pause. The drama lies in the Fed's rate and economic projections, which could give clues into whether another hike is likely this year and whether rates will stay "higher for longer" in 2024.

The recent narrow and choppy trading could continue Tuesday and early Wednesday as investors anticipate a Fed interest rate pause tomorrow. The central bank's economic and interest rate projections will be under close scrutiny for clues about the future path of rates.

With the Fed meeting looming, trading might continue its recent choppy ways early this week. Mega-cap stocks continued their weakness early Monday, potentially hurting market-cap weighted indexes. The Fed's rate and economic projections loom large, but no hike is expected.

Stocks are on pace for a positive week, but threats to the rally include a firm dollar, rising Treasury yields, and expensive crude oil. Better-than-expected Chinese data provided an overnight lift, but the UAW strike against U.S. automakers may drag shares of those companies.

Investors face a full plate this morning as they plow through an ECB rate hike, more Chinese stimulus, a slightly hotter-than-expected wholesale inflation report, and decent August Retail Sales data. Stocks initially maintained overnight gains and yields remained in check under 4.3%.

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