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Stock bulls are running again after Federal Reserve Chair Jerome Powell indicates that rate cuts are on the table at the central bank’s September policy meeting, which is what most on Wall Street have been anticipating.
But the overall comments from Powell where about as dovish as you could get and that's what has the bulls wanted to hear. I think when Powell made the comments that the Fed is now in position to cut rates quickly if and when the economy stumbles, makes the bulls feel like the "Fed put" is back in place and takes a major break out of play.
Bottom line, the odds of the the Fed cutting three times by year end has now jumped to over +60%.
Bears are warning that the Fed is already behind the curve and that Wall Street’s optimism may be short-lived if the labor market suffers a more serious slowdown and the economy starts to tip.
Several Wall Street economists have recently warned that waiting until September to cut rates may be too late for American jobs. They point to this year’s steadily increasing unemployment rate and slowing job gains and caution that once these measures start to deteriorate, they tend to keep going until an outside force - such as Federal Reserve policy - successfully intervenes.
For what it’s worth, ADP’s private payroll report yesterday showed a smaller-than-expected employment gain of +122,000 for July versus +154,000 forecasted. Wall Street expects the Labor Department’s official jobs report on Friday will show the economy added around +180,000 jobs with the unemployment rate holding steady at 4.1%.
Economic data today includes the ISM Manufacturing Index, Construction Spending, and Productivity & Costs.
Today is another critical day for earnings with tech giants Apple and Amazon scheduled to report earnings after the market close.
Bulls are hoping that better-than expected results from Facebook-parent Meta after the close yesterday can help extend yesterday’s rally that was in part led by chipmakers tied to AI. While Meta did report a more than +33% increase in expenses related to AI and the “metaverse,” the company’s net profit also soared more than +70%. Meta’s stock was up more than +6% at one point in after hours trading.
Also releasing key results today will be Anheuser-Busch InBev, Coinbase, ConocoPhillips, Intel, Regeneron, and Shell.
For what it's worth, the Fed raised rates from June of 2004 to June of 2006, from 1.25% to 5.25% (about where we are at today). Then started cutting rates in September 2007 through April 2008.
The stock market didn't come under heavy pressure until June 2008 and continued to tumble until March 2009 when it finally bottomed. Below are a few charts and graphics to provide better illustration. |
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Why Recent Events Have Oil Traders Attention: U.S. crude oil futures jumped more than 3% on Wednesday after Hamas political leader Ismail Haniyeh was assassinated in Tehran, Iran, renewing fears that the Middle East is teetering on the brink of a regional war. To this point, oil markets have absorbed the shocks of inching escalations in the Middle East, which were intermittently exacerbated by trade disruptions caused by Yemeni maritime attacks and by episodes of direct hostilities between Israel and Iran or Hezbollah. Clay Seigle, director of the global oil service at Rapidan Energy Group, told CNBC’s Emily Tan that oil traders have been “mispricing” the geopolitical risks in the Middle East, with the market left “a bit sanguine” by an expected disruption of barrels in the wake of Russia’s war in Ukraine that “never materialized,” along with a 10-month simmering conflict in the Gaza enclave. But now we’re moving into a phase of deterioration into the Middle East that we believe is going to capture oil traders’ attention and get them to return some material risk premium into the price of Brent. At least $5 per barrel to start, even before we see a potential physical supply disruption, he said. The events that we’ve seen over the past 1-3 days have marked a fairly sharp deterioration that has the potential to break us out of this phase of contained escalation between the sides that we’ve seen really since Oct. 7 and take us into new territory for oil and gas markets, he added. Source CNBC
"Paris and Farnborough Airshow's" Report Fewer NEW Jets Being Ordered, Perhaps a Sign for What's Ahead? Airshows in Paris and Farnborough, are chances for the aerospace industry to catch up and do business. More than 10,000 orders for new Boeing and Airbus jets have been announced at both shows since the turn of the century. This year, however, wasn’t a big one for new orders, as firm orders for Boeing and Airbus totaled just 242 jets, according to Vertical Research Partners. That makes the 2024 show the worst for new orders since 2006. Interesting. Source Barrons
NEW Way to Do Blood Work is Coming: Theranos’s ambitions for a finger-prick blood test are finally being realized but by other companies. Since May, needle-phobic people in Austin, Texas, have been able to visit pharmacies for routine medical tests, having only drops of blood squeezed from their fingertips, rather than the usual way of plunging a needle into a vein in the arm and drawing large vials of blood. Companies, including Becton Dickinson and Babson Diagnostics, which are the companies providing the simple blood tests in Austin, TX, say they have been working to overcome many of the technological kinks that once foiled the company Theranos. If you remember, Theranos was once valued in the billions of dollars based on the promise to test blood using just a few drops. Interestingly, even though Theranos has been dissolved and is gone, the demand for alternatives to standard blood draws never went away. Source WSJ
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