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Mid-September Shakeup: Three Catalysts, One Afternoon
Most weeks spread their catalysts out. This one stacks nearly all of them into a single day — and the main event is something markets haven’t seen in years.
On Wednesday, investors will get August retail sales at 8:30 a.m. Eastern, the Federal Reserve’s rate decision and updated Summary of Economic Projections at 2:00 p.m., and Lennar’s fiscal third-quarter results after the close. Thursday morning brings August housing starts and building permits.
According to CME Group’s FedWatch tool, futures traders are pricing roughly a 93% probability that the FOMC raises the federal funds rate by 25 basis points to a target range of 3.75% to 4.00%. If it happens, it will be the first rate hike since July 2023. Markets enter the week accordingly jumpy, with volatility measures rising into the seasonally weak month of September.
How Quickly This Flipped
The speed of the repricing is the story in itself. A month ago, a September hike was close to a coin flip at 48%. A week ago it was 59%. Today, that number stands at 93%.
Two inflation reports landed in the interim, and neither showed prices moving back toward the Fed’s 2% target. Chair Kevin Warsh has publicly described the inflation figures as “concerning,” pointing to PCE running at 3.7% over twelve months and 4.1% annualized over six. Barclays now expects two more hikes this year, in September and December.
For a market that spent the first half of this year debating the timing of cuts, that is a wholesale reversal of the framework.
The Unprecedented Wrinkle
Here is what makes Wednesday genuinely unusual, and it has nothing to do with the economics.
At the July meeting, three regional bank presidents dissented in favor of raising rates — the first time three policymakers broke ranks in the same direction since September 2016. Most of the remaining committee is expected to join them this week. Warsh, however, was appointed by a president who has been vocal about wanting lower rates.
In the entire history of the Federal Reserve, the FOMC has never outvoted a sitting chair on a monetary policy decision. If Warsh resists a hike and the committee moves anyway, it would be the first time — an institutional event with implications well beyond this quarter. That possibility is not something the futures market is built to price.
It is worth noting how rarely the Fed defies pricing at this level. Academic work published this year found CME FedWatch predicts FOMC decisions with roughly 88% accuracy a full 30 days ahead of meetings, and that accuracy improves sharply as the meeting approaches, because the Fed actively guides expectations before the blackout period begins. At 93% in the final week, surprises are close to unheard of in the modern era.
Warsh may be the exception. He speaks of not pre-judging meetings and letting a “family fight” settle policy, he has deliberately narrowed forward guidance, and he declined to submit his own dot-plot projections in June. That is a chair signaling a wider range of possible outcomes than his predecessors allowed.
Wednesday Morning: The Consumer Check
August retail sales arrive five and a half hours before the Fed statement, and that timing matters. A genuine surprise in either direction will shape how the market reads everything that follows.
The recent evidence has been mixed in an instructive way. Second-quarter retail earnings showed a consumer who keeps showing up but spends less per visit — Walmart’s transactions grew 1.5% while ticket rose just 1.1%, and Sam’s Club saw traffic up 7.0% against a 2.5% decline in average ticket. Growth has shifted from price-led to volume-led. Meanwhile, the Conference Board’s Expectations Index sits at 68.2, well below the level historically associated with recession risk.
A soft print would hand the doves on the committee their best argument. A firm one removes the last obstacle to hiking.
Wednesday Afternoon: The Dots Matter More Than the Decision
If the hike is 93% priced, the surprise potential sits almost entirely in the Summary of Economic Projections and the press conference.
At the June meeting, nine of eighteen participants projected at least one hike before year-end, with six suggesting multiple hikes — the committee split precisely down the middle. Wednesday’s dots will reveal whether this week’s move is the beginning of a sequence or a one-off adjustment. Futures already imply a second hike by December, so anything short of that in the projections would read as dovish relative to market pricing.
Watch the dissents as well. A hike with two or three dissents in the other direction would signal a committee as divided going forward as it has been coming in.
Thursday Morning: The Housing Reality Check
August housing starts and building permits arrive Thursday at 8:30 a.m., roughly eighteen hours after a rate hike.
Permits are more forward-looking since they signal what builders intend to construct rather than what they have already begun. With mortgage rates tracking a long end of the curve that has backed up sharply, a weak permits number arriving immediately after a hike would be the clearest evidence yet that the housing freeze is deepening rather than stabilizing.
Stocks to Watch
Lennar (LEN - Free Report) is the most exposed stock of the week. The homebuilder reports Wednesday after the close — just hours after the Fed decision. Management has guided to third-quarter earnings of $1.20 to $1.40 per share on 20,500 to 21,500 deliveries, with an average sales price of $375,000 to $380,000 and gross margin near 16%. Consensus sits around $1.30.
The metrics that matter are new orders and sales incentives, which have been running near 12.9% of price. Every additional point of discounting comes straight out of margin, and a rate hike makes that math harder. LEN carries a Zacks Rank #4 (Sell), reflecting sharply negative estimate revisions, and shares trade roughly 40% below their 52-week high. This is a stock to watch, not one our model favors — but sandwiched between a rate hike and housing data, it will likely move.
Image Source: StockCharts
Wayfair (W - Free Report) is the higher-beta expression of the same theme. The online home goods retailer sits at the intersection of Wednesday’s retail sales print and Thursday’s housing data, and it has demonstrated it can move violently — shares jumped roughly 30% in a single session after second-quarter results, when U.S. revenue grew 8.7%, the strongest since 2020, and free cash flow reached $301 million.
Unlike Lennar, Wayfair carries a Zacks Rank #1 (Strong Buy), with the Zacks Consensus Estimate at $0.82 for the current quarter and $2.99 for the fiscal year. Management has argued it is taking share from brick-and-mortar competitors while housing remains stalled — a thesis that gets tested hard if borrowing costs rise again.
Image Source: StockCharts
Bottom Line
A 93% probability is not a certainty, but it is close enough that the hike itself should not be what moves portfolios. The reaction will be driven by the dots, the dissents, and whatever Warsh says in the post-meeting press conference.
The sensible move for investors is neither hiding nor hero-trading. Three genuine binary events land in 24 hours, and this year’s market has repeatedly punished good results delivered into an unfavorable macro tape. High-conviction positions are worth holding through it. Marginal ones deserve a second look before the week’s events unfold.
View the Zacks #1 Rank List
Image: Shutterstock
Mid-September Shakeup: Three Catalysts, One Afternoon
Most weeks spread their catalysts out. This one stacks nearly all of them into a single day — and the main event is something markets haven’t seen in years.
On Wednesday, investors will get August retail sales at 8:30 a.m. Eastern, the Federal Reserve’s rate decision and updated Summary of Economic Projections at 2:00 p.m., and Lennar’s fiscal third-quarter results after the close. Thursday morning brings August housing starts and building permits.
According to CME Group’s FedWatch tool, futures traders are pricing roughly a 93% probability that the FOMC raises the federal funds rate by 25 basis points to a target range of 3.75% to 4.00%. If it happens, it will be the first rate hike since July 2023. Markets enter the week accordingly jumpy, with volatility measures rising into the seasonally weak month of September.
How Quickly This Flipped
The speed of the repricing is the story in itself. A month ago, a September hike was close to a coin flip at 48%. A week ago it was 59%. Today, that number stands at 93%.
Two inflation reports landed in the interim, and neither showed prices moving back toward the Fed’s 2% target. Chair Kevin Warsh has publicly described the inflation figures as “concerning,” pointing to PCE running at 3.7% over twelve months and 4.1% annualized over six. Barclays now expects two more hikes this year, in September and December.
For a market that spent the first half of this year debating the timing of cuts, that is a wholesale reversal of the framework.
The Unprecedented Wrinkle
Here is what makes Wednesday genuinely unusual, and it has nothing to do with the economics.
At the July meeting, three regional bank presidents dissented in favor of raising rates — the first time three policymakers broke ranks in the same direction since September 2016. Most of the remaining committee is expected to join them this week. Warsh, however, was appointed by a president who has been vocal about wanting lower rates.
In the entire history of the Federal Reserve, the FOMC has never outvoted a sitting chair on a monetary policy decision. If Warsh resists a hike and the committee moves anyway, it would be the first time — an institutional event with implications well beyond this quarter. That possibility is not something the futures market is built to price.
It is worth noting how rarely the Fed defies pricing at this level. Academic work published this year found CME FedWatch predicts FOMC decisions with roughly 88% accuracy a full 30 days ahead of meetings, and that accuracy improves sharply as the meeting approaches, because the Fed actively guides expectations before the blackout period begins. At 93% in the final week, surprises are close to unheard of in the modern era.
Warsh may be the exception. He speaks of not pre-judging meetings and letting a “family fight” settle policy, he has deliberately narrowed forward guidance, and he declined to submit his own dot-plot projections in June. That is a chair signaling a wider range of possible outcomes than his predecessors allowed.
Wednesday Morning: The Consumer Check
August retail sales arrive five and a half hours before the Fed statement, and that timing matters. A genuine surprise in either direction will shape how the market reads everything that follows.
The recent evidence has been mixed in an instructive way. Second-quarter retail earnings showed a consumer who keeps showing up but spends less per visit — Walmart’s transactions grew 1.5% while ticket rose just 1.1%, and Sam’s Club saw traffic up 7.0% against a 2.5% decline in average ticket. Growth has shifted from price-led to volume-led. Meanwhile, the Conference Board’s Expectations Index sits at 68.2, well below the level historically associated with recession risk.
A soft print would hand the doves on the committee their best argument. A firm one removes the last obstacle to hiking.
Wednesday Afternoon: The Dots Matter More Than the Decision
If the hike is 93% priced, the surprise potential sits almost entirely in the Summary of Economic Projections and the press conference.
At the June meeting, nine of eighteen participants projected at least one hike before year-end, with six suggesting multiple hikes — the committee split precisely down the middle. Wednesday’s dots will reveal whether this week’s move is the beginning of a sequence or a one-off adjustment. Futures already imply a second hike by December, so anything short of that in the projections would read as dovish relative to market pricing.
Watch the dissents as well. A hike with two or three dissents in the other direction would signal a committee as divided going forward as it has been coming in.
Thursday Morning: The Housing Reality Check
August housing starts and building permits arrive Thursday at 8:30 a.m., roughly eighteen hours after a rate hike.
Permits are more forward-looking since they signal what builders intend to construct rather than what they have already begun. With mortgage rates tracking a long end of the curve that has backed up sharply, a weak permits number arriving immediately after a hike would be the clearest evidence yet that the housing freeze is deepening rather than stabilizing.
Stocks to Watch
Lennar (LEN - Free Report) is the most exposed stock of the week. The homebuilder reports Wednesday after the close — just hours after the Fed decision. Management has guided to third-quarter earnings of $1.20 to $1.40 per share on 20,500 to 21,500 deliveries, with an average sales price of $375,000 to $380,000 and gross margin near 16%. Consensus sits around $1.30.
The metrics that matter are new orders and sales incentives, which have been running near 12.9% of price. Every additional point of discounting comes straight out of margin, and a rate hike makes that math harder. LEN carries a Zacks Rank #4 (Sell), reflecting sharply negative estimate revisions, and shares trade roughly 40% below their 52-week high. This is a stock to watch, not one our model favors — but sandwiched between a rate hike and housing data, it will likely move.
Image Source: StockCharts
Wayfair (W - Free Report) is the higher-beta expression of the same theme. The online home goods retailer sits at the intersection of Wednesday’s retail sales print and Thursday’s housing data, and it has demonstrated it can move violently — shares jumped roughly 30% in a single session after second-quarter results, when U.S. revenue grew 8.7%, the strongest since 2020, and free cash flow reached $301 million.
Unlike Lennar, Wayfair carries a Zacks Rank #1 (Strong Buy), with the Zacks Consensus Estimate at $0.82 for the current quarter and $2.99 for the fiscal year. Management has argued it is taking share from brick-and-mortar competitors while housing remains stalled — a thesis that gets tested hard if borrowing costs rise again.
Image Source: StockCharts
Bottom Line
A 93% probability is not a certainty, but it is close enough that the hike itself should not be what moves portfolios. The reaction will be driven by the dots, the dissents, and whatever Warsh says in the post-meeting press conference.
The sensible move for investors is neither hiding nor hero-trading. Three genuine binary events land in 24 hours, and this year’s market has repeatedly punished good results delivered into an unfavorable macro tape. High-conviction positions are worth holding through it. Marginal ones deserve a second look before the week’s events unfold.