Major indices are searching for gains as oil prices have contributed to concerns that inflation will remain stubbornly high. However, the Fed sets the stage as investors await the rate decision and Fed Chairman Warsh’s press conference.

Technology (XLK) is the best-performing sector, driven by solid performance from semiconductors after news that SK Hynix (SKHY) may ink a deal with Intel (INTC) to manufacture chips domestically. Industrials (XLI) is the second best-performer driven by gains in military contractor names.

Retail investors were aggressively buying into this meeting, going from a near-total capitulation low in August to currently one of the most aggressive buying stretches of the entire year. This is an intriguing move as typically this retail euphoria comes with rate-cut setups not hawkish ones.

Despite markets pricing for a September hike, a further rise in Treasury yields is expected in the short term.

Economic Data

Retail sales out this morning showed consumers are continuing to consume. Core retail sales had their strongest reading since 2024. Notably, twelve of the thirteen major categories rose, led by gas stations and online sales, which reversed the July Prime Day payback. Back-to-school shopping possibly boosted the apparel, sporting goods, and electronics categories.

Homebuilder sentiment declined to its lowest level since 2022 with the index coming in below 50. This is the 29^th consecutive month the index is below 50 and 17^th straight month below 40.

The Atlanta Fed’s GDPNow now expects Q3 GDP growth at 5.1%. It would be the best quarter since Q4 of 2021 if this occurs.