Stocks closed mostly lower yesterday. The big three indexes (Dow, S&P 500 and Nasdaq) were down a little more than a quarter of a percent, while the small-cap Russell 2000 and the mid-cap S&P 400 eked out a small gain.

Stocks were modestly higher before the Fed announcement, then immediately shot up when it was announced that they had cut by 50 basis points. The S&P at its best was up by 0.98%, while the Russell was up 2.40%. But after Fed Chair Jerome Powell's Press Conference ended, those gains gave way before finishing mostly lower by the close.

The concern regarding what the first rate cut would look like (25 or 50 basis points) was about whether 25 bps would look tame and cause worry that the Fed did too little and possibly too late to stem a potentially larger economic slowdown, while a 50 bps cut could signal that the Fed is more worried about a slowing economy and that they indeed waited too long and therefore are being more aggressive out of the gate.

Of course, that line of thinking set the market up to be 'disappointed' no matter what they did. But I see that as being nothing more than a short-term reaction to the announcement. Longer-term, whether they went 25 bps first or 50 bps, probably doesn't matter. What matters is, after 14 long months of holding rates steady, and 4½ years since their last rate cut, they finally began their rate cutting cycle.

At Mr. Powell's press conference, he said "our economy is strong overall and has made significant progress toward our goals over the past two years. This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate growth and inflation moving sustainably down to 2%."

As for whether the Fed waited too long, he said "I would say, we don't think we're behind. We think this is timely, but think you could take this as a sign of our commitment not to get behind."

When asked about a possible recession, he said "I don't see anything in the economy right now that suggests that the likelihood, of a downturn, is elevated. I don't see that. You see growth at a solid rate, you see inflation coming down, and you see a labor market still at very solid levels."

With the midpoint Fed Funds rate now at 4.88% (4.9%), Fed officials are forecasting rates to come down to 4.4% by year's end (which likely means two more cuts in November and December of 25 bps each), and then get down to 3.4% by the end of next year. Pretty much what the market had been expecting.

In other news, yesterday's MBA Mortgage Applications rose 14.2% w/w with purchases up 5.4% and refi's up 24.2%.

And the Housing Starts and Permits report showed Starts at 1.356 million units (annually) vs. last month's 1.237M and views for 1.300M. Permits came in at 1.475M vs. last month's 1.406M and estimates for 1.410M.

Today we'll get Weekly Jobless Claims, the Philadelphia Fed Manufacturing Index, Existing Home Sales, and Leading Indicators.

We'll also see if the market has a better reaction to what it has been wanting all along -- the long-awaited rate cutting cycle to begin. Because stocks typically perform well when interest rates are lowered. And now it's finally happening.

See you tomorrow,