Category: Economy

Fed Beige Book Points to Slower Spending and Hiring Ahead

Posted on by slightbourne@noblecapitalmarkets.com

The Federal Reserve’s latest Beige Book, released Wednesday, paints a picture of an economy losing momentum as 2025 draws to a close. With consumer spending weakening, hiring slowing, and businesses facing persistent cost pressures, the report arrives at a critical moment: just two weeks before the Fed’s next interest rate decision — and during a time when official data remains delayed due to a record-long government shutdown.

The Beige Book, which compiles anecdotal insights from businesses across all 12 Federal Reserve districts, showed that consumer spending declined further during the first half of November. Retailers reported softer foot traffic and more price-sensitive consumers, a sign that household budgets may be tightening again after a relatively steady summer.

At the same time, the US labor market — which has remained resilient for years — is now showing clearer signs of softening. According to the report, employers are scaling back hiring, implementing freezes, and trimming hours. Some firms indicated they were only replacing departing employees rather than adding new roles, while others attributed reduced hiring needs to efficiency gains from artificial intelligence, which is increasingly being used to automate entry-level or repetitive tasks.

Rising health insurance premiums are adding to the strain, increasing labor costs even as companies attempt to limit headcount.

Tariffs and Costs Keep Inflation Sticky, Even as Demand Softens

On the inflation front, the Beige Book noted that tariffs have pushed input costs higher for manufacturers and retailers, though companies vary in how much they pass along to consumers. Some are raising prices selectively based on customer sensitivity, while others feel strong competitive pressure to absorb the costs — squeezing profit margins.

However, the report also showed that prices for some materials have declined due to sluggish demand, delayed tariff implementation, or reduced tariff rates. This mixed environment reflects the broader disinflation trend the Fed has been monitoring closely.

Still, most businesses expect cost pressures to continue, even if they are hesitant to raise prices significantly in the near term.

Why the Beige Book Matters: Rising Odds of a December Rate Cut

With many government economic indicators delayed, the Beige Book is now one of the few timely sources of insight available to the Fed ahead of its December 10 policy meeting. And based on the slowdown in both spending and hiring, investors are increasingly convinced that the central bank will act.

Market expectations for a December rate cut climbed above 85%, rising sharply this week following comments from multiple Fed officials. New York Fed President John Williams said there is “room” for a near-term cut, while San Francisco Fed President Mary Daly and Fed Governor Chris Waller both signaled concern about the softening labor market.

However, not all policymakers agree. Boston Fed President Susan Collins and Kansas City Fed President Jeff Schmid have urged caution, pointing to mixed inflation signals and warning against moving too quickly.

With consumer spending cooling, hiring softening, and inflation pressures lingering, the Fed’s Beige Book suggests an economy that is decelerating — but not collapsing. Whether that slowdown is enough to justify a December rate cut will be decided in less than two weeks, making this one of the most pivotal policy moments of the year.

The Most Unhelpful Jobs Report of the Year Complicates the Fed’s Next Move

Posted on by slightbourne@noblecapitalmarkets.com

The Federal Reserve’s December policy decision has become significantly more complicated following the release of the long-delayed September jobs report. After weeks of uncertainty caused by the government shutdown, economists were hoping the data would offer at least some directional clarity. Instead, the report delivered a contradictory mix of signals that has left markets, analysts, and policymakers struggling to determine whether the Fed’s next move will be a rate cut — or simply holding steady.

On the surface, the headline numbers appeared encouraging. Employers added 119,000 jobs in September, more than double what forecasters had anticipated. In a typical environment, that level of job creation would be considered firm evidence that the labor market still retains momentum.

However, the rest of the report painted a more complicated — and in some ways troubling — picture. The unemployment rate nudged higher to 4.4%, and on an unrounded basis reached 4.44%, inching close to the 4.5% threshold that some Fed officials view as a sign that labor conditions may be softening. Layered on top of that is the fact that this data is nearly two months old. Because of the shutdown, the Labor Department will not release an October report at all, and the November report will not be available until after the Fed meets in mid-December. As a result, policymakers are attempting to make a major policy decision with limited, stale visibility.

Another challenge is the unusually choppy pattern of job creation over the last several months. Hiring dipped into negative territory in June, rebounded in July, contracted again in August after revisions, and then jumped higher in September. This volatility makes it difficult to determine whether the labor market is gradually slowing or simply experiencing temporary fluctuations after several years of rapid post-pandemic recovery.

A significant structural factor shaping recent trends is the slowdown in immigration. With fewer new workers entering the labor force, the “break-even” number of jobs needed to maintain a stable unemployment rate has decreased to an estimated 30,000 to 50,000 per month. Since September’s job gains far exceeded that range, it indicates that demand for labor remains healthier than the rising unemployment rate alone suggests.

Sector-level data also highlights a mixed landscape. Industries such as healthcare and hospitality continue to show notable strength, reflecting persistent consumer demand and structural labor shortages. Meanwhile, other sectors have begun to lose momentum, reinforcing the idea that the labor market is no longer uniformly strong but instead is becoming more uneven.

Overall, the economy has added an average of 76,000 jobs per month so far in 2025 — a pace that aligns with the lower growth environment of a cooling, but still functioning, labor market.

Inside the Fed, opinions remain divided. Some policymakers believe easing rates further is consistent with guiding monetary policy back toward a neutral setting. Others see the recent uptick in unemployment, combined with limited fresh data, as reasons to pause. Financial markets reflect this uncertainty as well, with traders now assigning roughly even odds to a December rate cut.

For now, the September report provides more ambiguity than clarity. Without current data and with mixed signals across key indicators, the Fed enters its next policy meeting navigating perhaps its murkiest environment of the year.

Trump Signs Funding Bill, Ending Record 43-Day U.S. Government Shutdown

Posted on by slightbourne@noblecapitalmarkets.com

President Donald Trump has officially signed a bipartisan funding bill that ends the longest government shutdown in United States history. The measure, passed late Wednesday night, restores full federal operations after 43 days of disruption that affected millions of Americans and brought key government services to a halt.

The funding package, approved by both the House and the Senate earlier in the week, will keep the government running through the end of January 2026. It represents the culmination of weeks of political stalemate, public frustration, and mounting economic pressure that forced lawmakers to compromise after nearly a month and a half of gridlock.

The shutdown began on October 1 following a breakdown in negotiations over the continuation of expanded Affordable Care Act (ACA) subsidies. Senate Democrats had refused to pass a short-term spending bill that did not include an extension of the health care tax credits, while Republicans resisted expanding what they viewed as unsustainable federal spending. The resulting impasse left more than one million federal workers without pay and led to widespread delays in public services, from airport operations to food assistance programs.

The newly signed legislation not only reopens government agencies but also ensures that all federal employees will receive full back pay for the period they were furloughed. The measure reverses shutdown-related layoffs and provides emergency funding to several programs, including the Supplemental Nutrition Assistance Program (SNAP), which supports 42 million Americans. Additionally, the Department of Transportation announced that the restrictions on flight operations imposed during the shutdown due to air traffic controller shortages would be lifted, bringing relief to travelers and airlines alike.

Politically, the bill underscores the deep divisions within Congress but also demonstrates the necessity of bipartisan cooperation. The House passed the measure with a narrow 222–209 vote, highlighting the sharp partisan split that defined the shutdown from the beginning. In the Senate, the funding measure narrowly reached the 60-vote threshold required to overcome a filibuster after a small group of Democrats and one independent senator joined Republicans in support.

The temporary funding measure also includes a provision allowing Senate Democrats a future vote on extending ACA subsidies in December, setting the stage for another round of intense debate later this year. The agreement offers only short-term stability, and lawmakers now face the challenge of negotiating a longer-term budget plan before funding expires in early 2026.

The shutdown’s economic and social consequences were far-reaching. Delays in federal benefits strained households living paycheck to paycheck, while disruptions in government contracting and transportation operations weighed on business productivity. The incident also reignited discussions about reforming the federal budget process to prevent recurring shutdowns caused by partisan gridlock.

Federal workers are expected to return to their jobs immediately, with agencies beginning the process of restoring full operations and processing delayed payments. While the passage of the bill provides immediate relief to millions, it also serves as a reminder of the fragility of the nation’s political landscape and the consequences when compromise is delayed.

As Washington returns to normal operations, the focus now shifts toward preventing another crisis when the temporary funding expires early next year.

Graham (GHM) – A Solid 2Q26

Posted on by slightbourne@noblecapitalmarkets.com


Tuesday, November 11, 2025

Graham Corporation designs, manufactures and sells critical equipment for the energy, defense and chemical/petrochemical industries. The Company designs and manufactures custom-engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems. It is a nuclear code accredited fabrication and specialty machining company. It supplies components used inside reactor vessels and outside containment vessels of nuclear power facilities. Its equipment is found in applications, such as metal refining, pulp and paper processing, water heating, refrigeration, desalination, food processing, pharmaceutical, heating, ventilating and air conditioning. For the defense industry, its equipment is used in nuclear propulsion power systems for the United States Navy. The Company’s products are used in a range of industrial process applications in energy markets, including petroleum refining, defense, chemical and petrochemical processing, power generation/alternative energy and other.

Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Overview. Graham put up solid results for the second quarter of fiscal 2026. The Company executed well across all the business lines, driving broad based-growth. Demand across the end markets remains healthy, and the Defense and Space markets continue to see robust activity.

2Q26 Results.  Revenue grew 23% to $66 million, driven by solid performance across all end markets. We were at $59 million. Adjusted EBITDA was $6.3 million, up 12% from the prior year, and adjusted EBITDA margin was 9.5%. We had forecasted $6.2 million and 10.4%. Net income for the quarter was $0.28 per diluted share, and adjusted net income was $0.31 per diluted share. We were at $0.30 and $0.32, respectively.


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Dow Surges 500 Points as Investors Rotate Out of Tech and Into Value Plays

Posted on by slightbourne@noblecapitalmarkets.com

The Dow Jones Industrial Average rallied more than 500 points on Tuesday as investors shifted money away from high-flying technology stocks and toward value-oriented sectors, extending a broader trend of portfolio rotation that’s been building for weeks.

The 30-stock blue-chip index climbed 542 points, or roughly 1.2%, driven by gains in healthcare and industrial names such as Merck, Amgen, and Johnson & Johnson. The S&P 500 edged higher by 0.3%, while the Nasdaq Composite slipped 0.2% as pressure continued to mount on the technology sector.

The day’s market action reflected an ongoing tug-of-war between growth and value equities. While tech stocks have dominated 2025’s rally, recent concerns about stretched valuations have led investors to lock in profits and reallocate capital toward sectors considered more resilient in a high-rate, slower-growth environment.

The AI sector was among the hardest hit. Cloud infrastructure provider CoreWeave sank 16% after issuing disappointing guidance, sparking a broader selloff in artificial intelligence names. Nvidia dropped 2% following reports that SoftBank exited its multibillion-dollar position in the chipmaker, while Micron, Oracle, and Palantir also traded lower. The Technology Select Sector SPDR Fund (XLK) finished the session down about 1%.

Meanwhile, value-oriented sectors like healthcare, energy, and consumer staples gained traction as investors sought stability amid lingering economic uncertainty. Analysts noted that companies with strong balance sheets, consistent earnings, and solid dividends are becoming increasingly attractive as the market recalibrates after an AI-driven surge earlier this year.

The broader sentiment was also supported by optimism that the record-setting U.S. government shutdown may soon end. The Senate passed a bill Monday evening to reopen the government, with the measure now awaiting approval in the House. The latest version of the bill excludes an extension of Affordable Care Act subsidies but includes provisions for a vote on the issue in December.

While the political gridlock has weighed on sentiment in recent weeks, hopes for resolution boosted cyclical sectors that tend to benefit from improved government spending and consumer confidence.

Still, not all economic data aligned with the upbeat tone in equities. A new ADP report showed a slowdown in private-sector job creation for the four weeks ending October 25, falling by more than 11,000 per week on average. Combined with muted hiring trends and rising layoff announcements, the data suggest a softer labor market heading into year-end.

Even so, investors appear willing to look past the near-term softness in economic indicators in favor of more stable growth plays. The move away from richly valued technology stocks toward defensive and dividend-paying equities signals that Wall Street may be entering a new phase of this market cycle—one less driven by momentum and more by fundamentals.

At the close of trading, the Dow stood at its highest level in over two months, marking a strong rebound from October’s volatility. As traders continue to rotate portfolios, the key question heading into the final weeks of 2025 is whether this shift toward value and quality will persist—or if tech’s dominance will once again reassert itself.

Consumer Sentiment Falls to Three-Year Low as Shutdown Weighs on U.S. Economy

Posted on by slightbourne@noblecapitalmarkets.com

Consumer confidence in the United States has dropped to its lowest level in three years as the ongoing government shutdown weighs heavily on Americans’ views of the economy and their own financial situations. The University of Michigan’s preliminary consumer sentiment index for November fell to 50.3, marking a six percent decline from October and nearly a 30 percent decrease compared to the same month last year.

The latest reading reflects widespread unease among households. Many are increasingly worried about the effects of the prolonged government shutdown, which has now stretched past a month and become the longest in U.S. history. The shutdown has disrupted access to key government data on inflation, employment, and growth, leaving businesses and consumers uncertain about the true state of the economy.

Without fresh official data, Americans are relying on private reports that paint a concerning picture. Job cuts have surged, and labor market conditions appear to be softening. A report from Challenger, Gray & Christmas indicated that October saw the highest number of announced layoffs in more than two decades. Job openings have slowed, and many unemployed workers are finding it harder to secure new positions. Together, these trends suggest that confidence in the labor market is fading.

The decline in sentiment is not evenly spread across the population. Wealthier households, particularly those with large stock portfolios, remain more optimistic thanks to record highs in the equity markets. This contrast highlights the widening gap between those benefiting from strong financial markets and those struggling with everyday costs. The result is a divided economic landscape where prosperity is unevenly distributed, reinforcing the perception of a two-speed economy.

For most Americans, persistent inflation, higher interest rates, and the uncertainty caused by the shutdown are combining to erode financial stability. Even though inflation has eased from last year’s highs, the prices of essential goods and services remain well above pre-pandemic levels. Meanwhile, delays in government services such as Social Security payments and student loan processing are adding frustration and stress to households already under pressure.

The timing of this drop in confidence is particularly concerning as the country heads into the holiday shopping season. Consumer spending drives much of the U.S. economy, and a downturn in sentiment could translate into weaker retail sales. Businesses that rely on end-of-year spending may face slower demand if consumers choose to save rather than spend amid the growing uncertainty.

Economists warn that if the shutdown continues and confidence remains weak, growth could slow in the early months of 2026. The longer the political stalemate drags on, the greater the risk of long-term damage to household finances and business activity.

Overall, the latest sentiment data suggests that Americans are growing increasingly uneasy about both their personal finances and the broader economy. Until the government resolves the shutdown and restores a sense of stability, confidence is likely to remain depressed and the economic recovery may continue to lose momentum.

U.S. Job Openings Fall to Lowest Level Since Early 2021 as Hiring Slows

Posted on by slightbourne@noblecapitalmarkets.com

Job openings across the United States have fallen to their lowest level in more than four and a half years, signaling that the once-resilient labor market is losing momentum. According to data from Indeed, employment opportunities dropped sharply in October as the prolonged government shutdown weighed on business confidence and hiring activity.

Indeed’s Job Postings Index fell to 101.9 as of October 24, marking the weakest reading since early February 2021. The index, which uses February 2020 as a baseline of 100, has slipped 0.5% since the beginning of October and is down about 3.5% since mid-August. The decline extends a downward trend that began earlier in the year, reflecting growing caution among employers amid economic uncertainty and tighter credit conditions.

Under normal circumstances, the Bureau of Labor Statistics (BLS) would have released its monthly Job Openings and Labor Turnover Survey (JOLTS) this week, a closely watched gauge of labor market health. However, with the federal government still partially shut down, economists have turned to private data sources like Indeed for real-time insights. The latest official JOLTS report, released in August, showed job openings at 7.23 million—down 7% from January and roughly flat compared with July—confirming that hiring appetite has been cooling for months.

Indeed’s internal dashboard also points to a softening in wage growth alongside the decline in job postings. The firm’s data shows advertised wages rising 2.5% year-over-year in August, compared to a 3.4% pace in January. Slower wage gains suggest that employers are facing less competition for workers than they did during the post-pandemic hiring boom, when labor shortages and rapid inflation pushed pay rates sharply higher.

The Federal Reserve has taken note of the cooling trend. Last week, the Fed’s policy-setting committee voted 10–2 to cut its benchmark interest rate by a quarter point, lowering the target range to 3.75%–4%. Officials cited growing risks to the labor market as a key reason for easing policy, even as inflation remains nearly a full percentage point above the central bank’s 2% target.

Fed Governor Lisa Cook highlighted the slowdown in a recent speech, noting that data from Indeed and other private sources show hiring activity weakening in real time. “We’re seeing a clear deceleration in job postings,” she said. “There’s reason to be concerned because unemployment has ticked up slightly over the summer.”

Economists, unable to rely on the usual stream of government data, have estimated that the October jobs report—had it been released—would have shown a net loss of around 60,000 positions and an increase in the unemployment rate to 4.5%.

Taken together, the latest indicators suggest that the U.S. job market, while still historically strong, is shifting from its rapid post-pandemic recovery into a slower, more cautious phase. If the current trends continue, policymakers may face increasing pressure to balance inflation control with the need to prevent a deeper slowdown in employment growth.

Treasury’s Latest Rate Move Brings Fresh Attention to I Bonds

Posted on by slightbourne@noblecapitalmarkets.com

The U.S. Treasury has announced a new 4.03% rate for Series I savings bonds, effective from November 1, 2025, through April 30, 2026. The rate marks a modest increase from the previous 3.98%, offering investors a slightly higher return on one of the government’s most secure, inflation-linked assets.

The new composite rate is made up of two parts — a variable rate of 3.12% based on recent inflation data and a fixed rate of 0.90%, which will remain constant for the life of the bond. Together, they form the 4.03% annualized yield. While the fixed rate is slightly lower than the 1.10% offered in May, the uptick in the inflation component helped push the total return higher.

I Bonds surged in popularity in 2022 when the rate peaked at a record 9.62%, drawing massive inflows from investors looking for a safe hedge against inflation. Though inflation has since cooled, many savers have continued to hold onto their bonds, while new buyers have taken advantage of the relatively high fixed-rate portion compared to previous years.

For many households, I Bonds remain an appealing middle ground — providing government-backed security while outpacing many savings accounts and CDs. The interest compounds semiannually, and investors can hold the bonds for up to 30 years, though early redemptions before five years forfeit the last three months of interest.

The Treasury adjusts I Bond rates twice a year — in May and November — based on the Consumer Price Index. Each investor’s bond earns the announced variable rate for six months from the purchase date, regardless of subsequent changes. The fixed rate, however, is locked in for the full duration of ownership.

For example, an investor who bought I Bonds in March 2025 would have earned a 1.90% variable rate for the first six months and automatically shifted to 2.86% this September, creating a composite yield of about 4.06%.

The new rate is likely to draw fresh attention from retail investors seeking low-risk returns amid ongoing market volatility and uncertainty around the Federal Reserve’s path on rates. For many smaller investors, I Bonds offer a stable complement to more speculative holdings such as tech or small-cap equities.

However, higher government-backed yields can also divert short-term capital away from small-cap stocks, which often depend on investor risk appetite to attract flows. As safer assets like I Bonds and Treasuries become more rewarding, some investors may opt to park cash in guaranteed instruments instead of chasing growth in volatile small-cap or emerging sectors.

Still, for disciplined investors, this shift could create buying opportunities in undervalued small-cap names as liquidity temporarily moves toward fixed income.

The Treasury’s latest adjustment makes I Bonds slightly more attractive for conservative investors, even as broader market participants navigate mixed signals from the Fed and bond markets. For small investors, they remain a solid inflation hedge — and for opportunistic traders, the reallocation trend could open new value pockets in smaller-cap stocks.

Mortgage Rates Climb Despite Fed Cut

Posted on by slightbourne@noblecapitalmarkets.com

Mortgage rates moved higher this week, even as the Federal Reserve cut its benchmark interest rate — a surprise reaction that’s creating new headwinds for homebuyers and potential ripple effects for small-cap housing and construction stocks.

The average rate on the 30-year fixed mortgage climbed to 6.33% on Thursday, up 20 basis points since Fed Chair Jerome Powell’s rate cut announcement, according to data from Mortgage News Daily. That reversal underscores how market sentiment, rather than Fed policy alone, often drives real borrowing costs.

Markets had largely priced in the rate cut, but Powell’s cautious tone during his press conference tempered expectations for additional easing this year. Investors had been nearly certain of another cut in December, but Powell’s remarks suggested the central bank isn’t fully committed, pushing bond yields — and mortgage rates — back up.

Just two days ago, the average 30-year rate sat near 6.13%, its lowest level in a year. Now, at 6.33%, borrowing costs are again pinching affordability for buyers already facing limited housing supply and elevated home prices.

While the short-lived drop in rates earlier this month sparked a 111% surge in refinance applications year over year, according to the Mortgage Bankers Association, the latest uptick is likely to cool that momentum. Purchase applications have shown little improvement, signaling that demand from homebuyers remains muted despite a softer Fed stance.

Higher mortgage rates can directly pressure smaller publicly traded companies tied to the housing and construction sectors — including homebuilders, materials suppliers, and mortgage lenders. Many small-cap names in these areas have benefited from expectations of sustained lower borrowing costs. If rates stabilize above 6%, those gains could unwind as affordability weakens and transaction volumes slow.

At the same time, investors may see opportunities among regional construction, renovation, and home-improvement firms positioned to serve homeowners who choose to remodel rather than buy new properties in a high-rate environment. Companies in HVAC, roofing, and modular housing technology may be better insulated from the mortgage shock.

Ultimately, the latest rate spike highlights how rate volatility continues to define the post-pandemic housing recovery — and why small-cap investors need to stay alert to shifts in Fed communication as much as Fed policy itself.

If Powell’s cautious tone continues to dampen optimism about future cuts, mortgage rates may remain stubbornly high into year-end, keeping the housing market — and related small caps — in a holding pattern.

Fed Poised to Cut Interest Rates Again Despite Data Blackout Amid Government Shutdown

Posted on by slightbourne@noblecapitalmarkets.com

The Federal Reserve is expected to lower interest rates again this week, even as policymakers navigate an unusually uncertain environment caused by the ongoing government shutdown. With most official economic data unavailable since early October, central bank officials are relying on private-sector reports and anecdotal evidence to guide their decision-making.

This marks the second rate cut of 2025, as the Fed continues to balance the dual challenges of cooling inflation and a weakening job market. The shutdown, which began on October 1, has halted the release of key reports, including the monthly jobs data that typically plays a pivotal role in shaping monetary policy. In the absence of those figures, alternative data sources from payroll processors and research firms suggest that hiring has slowed sharply, pointing to potential cracks in the labor market.

Private-sector reports indicate that U.S. employers reduced jobs in September, marking a significant shift from the steady gains earlier in the year. Sectors like healthcare continue to add positions, but most other areas — including manufacturing, construction, and retail — are showing signs of contraction. Economists believe this slowdown reflects weaker demand rather than a shortage of available workers, signaling that the broader economy may be cooling more rapidly than anticipated.

Adding to the complexity, inflation data remains mixed. The Consumer Price Index showed a slight decline in September, with core inflation rising 3% year over year, down from 3.1% the month prior. While the moderation in prices provides some relief, inflation still sits above the Fed’s 2% target. Economists warn that new tariffs and rising consumer costs could keep price pressures elevated in the months ahead, making it harder for policymakers to strike the right balance.

The Fed’s dilemma is compounded by growing signs of financial strain in certain lending markets. Losses in subprime auto loans and stress in commercial lending have raised concerns about the overall health of the financial system. While analysts don’t view these issues as systemic, they consider them early indicators that consumers and smaller banks are under pressure as growth slows.

Despite these warning signs, most analysts expect the Federal Open Market Committee (FOMC) to approve a 0.25% rate cut this week, bringing borrowing costs further down as part of a broader effort to support the labor market. Markets have already priced in another possible cut before year’s end, though the timing and extent of future moves will likely depend on when official government data becomes available again.

Fed Chair Jerome Powell has acknowledged that the lack of reliable data leaves policymakers in a difficult position, forcing them to rely on partial information and economic models to assess risks. With inflation easing slightly but employment softening, the central bank appears committed to erring on the side of supporting growth — even if that means acting with limited visibility.

The path ahead remains uncertain. If inflation stabilizes and job losses accelerate, the Fed may continue cutting rates into early 2026. But if inflation proves more persistent than expected, the central bank could be forced to pause its easing cycle sooner than markets anticipate. Either way, the current data blackout underscores how fragile the economic landscape remains — and how challenging it is for the Fed to steer policy when flying blind.

Cooling Inflation Keeps Fed on Track for Rate Cut

Posted on by slightbourne@noblecapitalmarkets.com

Inflation eased slightly in September, coming in below economists’ expectations and offering fresh signs that price pressures may be gradually cooling. The latest Consumer Price Index (CPI) report showed prices rising 3% year-over-year, just below the 3.1% forecast, and up 0.3% from August. While inflation remains above the Federal Reserve’s 2% target, investors took the softer reading as confirmation that the Fed is likely to move forward with a quarter-point rate cut at its upcoming meeting.

For small-cap investors, this development could be particularly meaningful. Lower interest rates often translate to cheaper borrowing costs, which can provide a boost to smaller, growth-oriented companies that rely more heavily on credit to fund operations and expansion. In contrast to large-cap corporations with stronger balance sheets, small caps tend to feel monetary shifts more directly — both on the upside and downside.

The report also showed encouraging moderation in key components. Core inflation, which excludes volatile food and energy prices, rose 3% year-over-year, slightly cooler than August’s 3.1%. Meanwhile, shelter costs — one of the stickiest contributors to inflation — increased only 0.2% month-over-month, the smallest gain in over two years. Housing and rent data are often lagging indicators, so any sustained cooling there could accelerate broader disinflation trends heading into the new year.

Still, the data wasn’t uniformly positive. Gasoline prices spiked 4.1% in September, driven by higher crude costs and seasonal demand, while apparel and household furnishings also saw noticeable increases. Yet overall, the direction of inflation remains encouraging for equity markets, particularly for rate-sensitive sectors such as small caps, regional banks, and industrials.

Another notable element of this report is the timing. Released amid a prolonged government shutdown, this CPI print is expected to be one of the last reliable economic data points for several months. Economists warn that future readings may rely more heavily on estimates, increasing uncertainty. That backdrop could heighten market volatility — but for investors with a long-term focus, it may also create tactical opportunities in undervalued areas of the market.

Historically, periods of easing inflation paired with falling interest rates have favored small-cap performance relative to large-cap benchmarks. The Russell 2000, for example, has outperformed the S&P 500 during early-stage easing cycles in more than 70% of past Fed transitions. With inflation holding near 3% and rate cuts on the horizon, investors may soon see renewed rotation into smaller, domestically focused companies — especially those positioned to benefit from lower financing costs and rising consumer spending.

While it’s still too early to declare victory over inflation, September’s CPI data supports the narrative of a “soft landing” — an environment where growth slows without tipping into recession. If that holds, small caps could emerge as one of the biggest beneficiaries in the coming months, offering renewed potential for outsized returns as markets adjust to a lower-rate landscape.

Falling Mortgage Rates Lift U.S. Home Sales — But Prices Remain Stubbornly High

Posted on by slightbourne@noblecapitalmarkets.com

The U.S. housing market gained momentum in September as falling mortgage rates helped drive home sales to their strongest level in seven months. Despite the uptick, prices remain elevated, reflecting the persistent challenges of limited supply and strong demand.

Sales of previously owned homes rose 1.5% from August to a seasonally adjusted annual rate of 4.06 million units, according to the National Association of Realtors. Although slightly below analysts’ expectations, sales were still more than 4% higher than a year earlier, signaling steady improvement in buyer activity.

The increase came as mortgage rates eased during the summer. The average rate on a 30-year fixed loan declined from 6.67% at the start of July to 6.17% by the end of September, making home purchases slightly more affordable for prospective buyers. Improved affordability, combined with rising confidence in the housing market, has encouraged more buyers to return despite lingering concerns about high costs.

Inventory levels also improved modestly, rising 14% from a year ago to 1.55 million homes for sale. However, supply remains below pre-pandemic norms, and at the current sales pace, the market still leans toward sellers. Many homeowners remain financially stable and see little urgency to sell, keeping distressed listings to a minimum.

Prices continued their steady climb in September. The median existing home price reached $415,200, up 2.1% from the previous year and marking the 27th consecutive month of annual gains. Home values are now more than 50% higher than before the pandemic began, underscoring how resilient pricing has remained even in the face of higher borrowing costs over the past two years.

Much of the current growth is being led by the upper end of the market. Sales of homes priced above $1 million jumped roughly 20% from last year, supported by a rise in luxury listings and affluent buyers taking advantage of more favorable borrowing conditions. In contrast, lower-priced homes under $100,000 saw only modest increases, constrained by affordability barriers and limited availability.

First-time buyers are beginning to reappear, accounting for 30% of September transactions compared with 26% a year ago. Lower rates and a modest increase in available homes are helping younger buyers re-engage, although many remain priced out of major metro areas. Roughly 30% of all transactions were completed in cash, highlighting the continued presence of investors and high-net-worth buyers in the market.

Homes are also taking slightly longer to sell, with properties remaining on the market for an average of 33 days compared with 28 a year ago. This may reflect both higher asking prices and a more measured pace among buyers evaluating their options.

Overall, the latest data suggests that easing mortgage rates are breathing some life back into the housing market. However, until supply improves meaningfully and price growth slows, affordability will remain a significant obstacle for many households hoping to buy a home.

Wall Street Boosts S&P 500 Targets on AI Momentum and Earnings Strength

Posted on by slightbourne@noblecapitalmarkets.com

Wall Street’s bullish sentiment is gaining momentum as the S&P 500 hovers near record highs ahead of earnings season. Despite political uncertainty in Washington and lingering concerns about an “AI bubble,” several top strategists are raising their forecasts, pointing to what they describe as “fundamental strength” across corporate earnings and continued support from Federal Reserve rate cuts.

Ed Yardeni of Yardeni Research lifted his S&P 500 target to 7,000, calling the ongoing rally a “slow-motion melt-up” fueled by resilient profits and Fed easing. Similarly, Evercore ISI’s Julian Emanuel maintained a 7,750 base-case target for 2026, assigning a 30% probability to a “bubble scenario” that could propel the index to 9,000 if AI-driven capital investment accelerates.

Signs of that exuberance are already visible. On Monday, OpenAI revealed a multibillion-dollar deal with AMD, granting the ChatGPT maker rights to acquire up to 10% of the chip giant as part of what executives have dubbed “the world’s most ambitious AI buildout.” The announcement sparked renewed optimism in semiconductor and software names, reinforcing the view that AI investment remains the market’s primary growth engine.

Yet, opinions remain divided. Amazon’s Jeff Bezos recently described the AI boom as a “good kind of bubble” that could fuel long-term innovation and economic expansion. In contrast, Goldman Sachs CEO David Solomon urged caution, suggesting that some capital deployed in the AI race may not yield the expected returns, potentially setting up a correction in the next year or two.

That debate is playing out against elevated valuations. The S&P 500 is trading near 25 times expected 2025 earnings, a level DataTrek Research says “reflects complete confidence” that companies will deliver. Analysts project 13% earnings growth in 2026 and another 10% in 2027, driven primarily by the same mega-cap technology stocks that have led markets higher this year.

Big Tech now represents nearly half of the S&P 500’s market cap, with Alphabet, Amazon, Meta, Tesla, and other AI-focused firms comprising 48% of the index. Analysts note that “multiple expansion” in these names is the foundation of the bull case, with a record number of tech giants issuing positive earnings guidance last quarter — a signal that earnings momentum remains intact heading into Q3 results.

Goldman Sachs strategists led by David Kostin argue that Wall Street’s current earnings forecasts are too conservative, citing strong macro data and robust AI-driven demand. Morgan Stanley’s Mike Wilson echoed that optimism, noting that lower labor costs and pent-up demand could spark a return of “positive operating leverage” — where profits grow faster than revenues — not seen since 2021.

While some investors remain wary of inflation’s potential return, Wilson believes it could be a tailwind rather than a threat, with the Fed likely to tolerate higher prices as long as growth remains solid.

As earnings season begins, the question for investors is not whether the rally can continue — but whether it is still being driven by fundamentals or increasingly by momentum.