The second full trading week in September was quite consequential, as August’s inflation numbers were revealed. The Price Producer Index (PPI) was also released, which also provided some final clues before the Fed meets next week to make its latest rate decision. It’s likely that the Fed is going to cut the Funds Rate by at least 25 basis points.

This would bring it down to a range of 5 percent to 5.25 percent. It is also possible that the Fed decides to cut by 50 basis points to get ahead of potential weakness in the labor market. One of the Fed’s mandates is to create policies that lead to full employment. Therefore, it will feel compelled to act when the labor market is in any type of peril even if interest rates haven’t hit 2 percent.

On Wednesday, the August CPI revealed that inflation was 2.5 percent on an annualized basis. This result matched analyst expectations and was down from 2.9 percent a month ago. Overall CPI on a monthly basis increased by .2 percent, which was also in line with expectations. However, when food and energy costs were taken out, CPI actually rose .3 percent, higher than the expected .2 percent.

The fact that CPI minus food and energy prices came in higher than what was expected is fueling expectations that the Fed will go for a smaller rate cut. It is also expected that the Fed will cut rates again this year, which gives it additional opportunities to go large if necessary.

On Thursday, the PPI figures indicated that prices went up more than expected over the past month. On a monthly basis, overall PPI went up .2 percent while the core PPI went up .3 percent. It was believed that overall prices would go up .1 percent while core PPI would increase by .2 percent.

Unemployment claim data was also made public on Thursday morning. Over the past seven days, there were 230,000 requests for benefits, which was slightly higher than the 227,000 projected prior to the release, and it is also roughly in line with the 228,000 claims from last week.

On Friday, the University of Michigan released its preliminary consumer sentiment and inflation expectations report. Consumer sentiment came in at 69 percent, which was slightly higher than the expected 68.3 percent and higher than last month’s 67.9 percent. Inflation expectations came in at 2.7 percent compared to 2.8 percent last month. Essentially, this means that respondents think that inflation will be at 2.7 percent at this time next year.

The Dow finished the week up 1.51 percent to close at 41.393. The low of the week occurred on Wednesday morning when the market dipped to 40,026 while the high of the week of 41,505 was established on Friday afternoon.

The S&P 500 finished the week up 2.5 percent to close at 5,626. It would hit its low of the week on Tuesday when it dipped to 5,410 and would make a high of 5,632 on Friday afternoon.

Finally, the Nasdaq would finish the week up 4.14 percent to close at 17,683. As with the other two major indexes, the Nasdaq would make its low of the week on Wednesday and its high of the week on Friday. The low of the week was 16,802 while the high for the last five trading days was 17,699.

The upcoming week is going to be an interesting one both in the United States and around the globe. On Wednesday afternoon, the Fed will make its latest rate decision, which should be a rate cut of 25 to 50 basis points. Japan will also make its next rate decision late Thursday night or early Friday morning, and it is expected to keep its interest rate unchanged.

Also in the United States, retail sales data will be released on Tuesday while Fed Member Harker is expected to speak on Friday. Retail sales are expected to have dropped .2 percent overall on a monthly basis while core retail sales figures are expected to rise by .2 percent on a monthly basis.

The first full trading week of September provided some clarity as to the state of the economy and its impact on monetary policy. As expected, the nonfarm payroll report released on Friday indicated that hiring is slowing, which means that a rate cut is likely justified. The only question is whether the rate cut will be 25 basis points or 50 basis points.

Friday’s report released by the Bureau of Labor Statistics (BLS) revealed that the economy added 142,000 jobs in August. This was lower than the projected 164,000 new jobs added during that time period. It’s also worth noting that the report issued in August was revised to reflect that 89,000 jobs were added in July as opposed to 114,000 as originally reported.

This continues a trend in which initial reports overstate job gains only to be corrected in the weeks that follow. Although job gains were lower than expected, the unemployment rate ticked down to 4.2 percent, which was in-line with analyst expectations. Average hourly earnings on a monthly basis were up by .4 percent, which beat expectations of a .3 percent increase.

The day before, the ADP nonfarm payroll report indicated that 99,000 new jobs were created in August compared to an expected 144,000. Furthermore, the July job figure released on the final day of that month was revised downward to 111,000 from 122,000 as originally reported.

Also on Thursday, the ISM Services PMI was released and came in at 51.5 percent, which was close to the expected 51.3 percent. Unemployment claim data for the past week was also made public, and in the last seven days, there were 227,000 claims for benefits compared to an expected 231,000.

On Tuesday, the ISM Manufacturing PMI was released and came in at 47.5 percent, which was an increase from 46.8 percent a month ago. However, in the report itself, it was noted that the pace of new orders were slowing and that the pace of hiring was also sluggish. This would likely be seen as further evidence of a broader economic slowdown that could have an impact on how aggressive the Fed decides to be later this month.

On Wednesday, the JOLTS Job Openings report indicated that there were 7.37 million open positions across the United States. This was lower than the expected 8.09 million openings and was also lower than the 7.91 million openings reported a month ago. A lack of available jobs may also indicate that the economy is experiencing the warning signs of at least a mild recession.

The S&P 500 fell 3.6 percent this week to close at 5,408. On Tuesday morning, the index opened at 5,610 and would begin a freefall that lasted most of the week. It would hit a low of 5,403 on Friday morning before regaining some of the ground it had lost during the previous four trading days.

Like the S&P, the Dow finished the week in the red having lost 2.76 percent to close at 40,345. The Dow would start the week at its high and spend the rest of the four trading days losing ground. The weekly high for this index was 41,219 set on Tuesday morning while it closed the week at its lowest point.

Finally, the Nasdaq would finish the week down 5.22 percent to close at 16,690. As with the other two major indexes, the Nasdaq spent most of the previous four trading days in freefall. The weekly high was set on Tuesday morning at 17,566 while the low of 16,687 was set on Friday morning.

In international news, Switzerland reported on Tuesday morning that the monthly CPI figure had not gone up in August. Also on Tuesday, Australia announced its gross domestic product (GDP) had increased by .2 percent in the past quarter. On Wednesday, the Bank of Canada (BOC) announced that the country’s main interest rate was being reduced by 25 basis points to 4.25 percent.

On Wednesday, the CPI report will be released, and it’s expected that the inflation rate will have dropped to 2.6 percent on an annualized basis. On Thursday, the Price Producers Index (PPI) will be released, and it’s expected that prices have increased by .2 percent on a monthly basis.