The S&P 500 headed lower after the open as markets position for tomorrow’s Fed decision and Powell presser. The index is trying to hold 6600 and the unchanged line. The equal-weight and the Russell 2000 are down modestly. A 25bp rate cut has likely been locked in since the recent employment reports showed deteriorating labor market while inflation data in the CPI and PPI didn’t show worrying breakouts. Today's advanced Retail Sales gave the FOMC one more piece of data to digest, and came in higher than expected, both for the headline and control groups. However that didn’t elicit much of a response across markets. Among the sectors, Energy is easily the best performer on crude’s gains. Discretionary is also outperforming but Tesla and Amazon are responsible for most of that. Real Estate (broad lower, including data centers) and Utilities (sector-wide) are lagging. Treasury yields ticked slightly higher and were trading flat at the short end and up ~2bp at the long end earlier in the day but have since retreated. The 2y is down 3bp, 10y and30y down 1bp. The 20y auction was solid with a 0.2bp stop-through. The US Dollar Index is down ~0.5% and back near its 1yr low ~96. The Euro has punched through $1.18, a significant area of resistance and the highest in 4 years. The Yen remains range-bound between ¥146-¥148/$. Heading into tomorrow’s Fed rate decision, the Senate confirmed Stephen Miran as Fed governor, replacing Adriana Kugler who stepped down last month. He doesn’t have much time to get his new email set up but should be able to make the policy debate and vote on Wednesday. Brent crude was down earlier but has strengthened off its lows ~$67, up ~2% today, stepping up its gains after the retail sales print. Ukraine hit Russian refineries overnight and an IEA report said the decline of global oil and gas fields is speeding up, necessitating more investment to maintain output. The Treasury Department placed sanctions on several individuals and entities for their roles in Iranian oil sales and funding terrorist groups.

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