Stocks opened lower ahead of an interest rate decision from the Federal Reserve. Later today, the Fed is expected to cut interest rates by a quarter percentage point. The central bank wants to balance domestic concerns against a slowdown in the global economy. It does not seem like the events in the last two weeks will impact the decision to cut rates. Deciding not to cut would create unneeded volatility in the market. The rate announcement is at 2:00 EDT and the press conference will start at 2:30 EDT. In addition, the Fed stepped in Yesterday to calm the repo market. For the first time in a decade, the central bank had to inject cash to keep rates down for short-term borrowing. The U.S. money market showed signs of calming this morning after the Fed injected another $75 billion today and key rates pulled back from alarming levels.
Bond prices are relatively flat, and the 10-Year Treasury is yielding 1.77%. Even though the focus surrounds the Fed today, U.S. home starts reached their highest levels since 2007. Home construction increased in August to the fastest pace since mid-2007 on more apartment projects and single-family houses. Low mortgage rates and a solid labor market has helped to support sales, prompting a pickup in construction activity and permitting. It looks like residential construction may be starting to break out of a prolonged slump. Uncertainty surrounding the economy, a shortage of labor and lots, and higher material costs due to tariffs, can limit the upside potential.