Stock market today: S&P 500, Nasdaq rise as Fed minutes signal 'likely' September rate cut
08/22/2024 01:35
Investors marking time before Jackson Hole will get Fed minutes and jobs data revisions that could shift the needle on rate cut bets.
US stocks were higher on Wednesday after snapping their longest win streak this year as investors digested minutes from the Federal Reserve's latest meeting that showed most officials favored a September rate cut if inflation continued to cool.
The S&P 500 (^GSPC) rose around 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) popped more about 0.6%. The Dow Jones Industrial Average (^DJI) was about 0.1% higher.
Stocks are eyeing a return to recovery from an early August sell-off as focus intensifies on the labor market as a factor in the Fed's policymaking, given inflation seems to be subsiding.
The minutes from the Fed meeting, which were the highlight of the afternoon, said that the "vast majority" of policymakers said it would "likely be appropriate to ease policy at the next meeting" if inflation data kept softening.
Earlier on Wednesday, new data showed the US economy employed 818,000 fewer people than originally reported as of March 2024, showing the labor market may have been cooling long before initially thought. But economists were pointed out the updated data still reflect a labor market that's softening but not "rapidly deteriorating."
Investors are still largely treading cautiously ahead of Jerome Powell's appearance at the Jackson Hole symposium on Friday. Expectations for a September rate cut are running high, and his comments will be closely watched for signs a 0.5% reduction is on the table.
In corporates, quarterly reports from Target (TGT) and Macy's (M) shed light on the retail sector and the consumer before the bell. Target shares jumped after its earnings blew past Wall Street targets, but Macy's shares sank after the retailer posted a sales drop.
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Fed minutes: 'Vast majority' of officials saw a September cut as likely
The minutes from the Federal Reserve's latest meeting on July 30 and July 31, released on Wednesday, revealed that the "vast majority" of officials believed the central bank would likely cut interest rates at its next September if "the data continued to come in about as expected."
The meeting occurred just days before a weak July jobs report helped tilt investor focus toward the slowing labor market. The report showed the second-weakest monthly job additions since 2020 and the highest unemployment rate, 4.3%, in nearly three years.
Still, developments in the labor market had already been on officials' minds.
"Upside risks to the inflation outlook were seen as having diminished, while downside risks to employment were seen as having increased," the minutes read.
Notably, some officials observed that progress on inflation and increases in the unemployment rate had "provided a plausible case" to cut rates at the July meeting.
Following the release of the meeting, investors ramped up bets on the probability of a 50 basis point interest rate cut in September. Markets were pricing in a roughly 39% chance of a 50 basis point cut by the end of the September meeting, up from a 29% chance a day prior, per CME FedWatch Tool.
Another AI stock catches a bid
BigBear.ai (BBAI) shares rose nearly 40% on Wednesday as the company awarded a piece of a $2.4 billion defense contract with the US government.
While a smaller company with a market cap of about $431 million, the move higher in shares of BigBear.ai is the latest in an AI rally across the stock market.
Since the Aug. 5 bottom, 34 of the stocks in AI basket of 36 companies tracked by Yahoo Finance are in the green. More than half of them outperforming the S&P 500's (^GSPC) roughly 7% gain in that time frame.
Nvidia (NVDA), the flagship of the AI trade, is set to report earnings on Aug. 28 and will serve as a test for the fresh bid in AI names.
Source: Yahoo Finance Ford cancels upcoming 3-row electric SUV, delays new EV plant and full-size EV pickup
Ford (F) shares were up more than 1% on Wednesday afternoon after the company announced changes to its EV strategy.
Yahoo Finance's Pras Subramanian reports:
Ford (F) is revamping its electric vehicle strategy, canceling and pushing back some of its projects as the company looks to get a hold on higher EV costs. The changes come as Ford sees smaller, cheaper EVs as the future, with hybrid technology reserved for powering larger vehicles.
Starting off with larger EVs, Ford said it is canceling the upcoming release of a large, three-row electric SUV in favor of leveraging hybrid technology for its next-gen three-row SUVs. The updated changes to this product strategy will result in Ford taking a special non-cash charge of about $400 million for the write-down of certain product-specific manufacturing assets and could result in a further $1.5 billion charge in later quarters, the company said.
“This is about us being nimble and listening to responses from our customers,” Ford vice chairman and CFO John Lawler said in a call with reporters regarding changes to its three-row SUV plans.
“Hybrid tech for those customers is the best solution," Lawler added, saying the cost structure of a three-row electric SUV could not meet Ford’s requirement of profitability in the first 12 months of launch that Ford is targeting with its newest EVs.
Ford also said it is “retiming” the launch of its upcoming next-gen electric truck — code-named “Project T3” — to the second half of 2027. Ford's BlueOval City Tennessee Electric Vehicle Center will still assemble the vehicle after an 18 month delay, Lawler said.
In addition, Ford said it plans to introduce an all-new commercial van that will begin production in 2026 in Ohio, followed by two new pickup trucks in 2027 — a medium-size pickup based on the platform designed by Ford’s California Skunkworks team and a next-generation truck to be assembled in Tennessee. The next generation truck is the Project T3 truck, Lawler said.
The small pickup from the Skunkworks team does not mean there won’t be other products coming off that platform, as Ford said this isn't a change from its plan to launch a small car or other smaller vehicles from this platform.
Target, Macy's, JD.com: Top retail stocks making moves today
US stocks drifted higher on Wednesday, and while some investors were focused on the Labor Department's downward revisions to earlier jobs growth, three key retail names were making big moves — Target (TGT), Macy's (M), and JD.com (JD)
Target
Target stock jumped as much as 12% after the company reported better-than-expected second quarter results, topping Wall Street expectations on profit and revenue. Gross profit margins rose to 28.9%, up from 27% a year ago.
The retail powerhouse also saw a 3% increase in store traffic during the quarter as it slashed prices this summer on 5,000 daily essentials — items where Target was losing market share to rival Walmart (WMT).
Meanwhile the Minneapolis-based company said its hitting its goals on inventory shrink. As Brooke DiPalma reports, on a call with reporters CFO and COO Michael Fiddelke said the company has hit a plateau when it comes to shrink, including retail theft.
Macy's
Macy's shares fell as much as 12% after the company posted another quarter of declining sales, a month after turning down a $6.9 billion buyout offer. The retail chain reported net sales dropped 3.8% year-over-year to $4.9 billion, missing Wall Street expectations of $5.06 billion. Same-store sales also fell 4%.
JD.com
JD.com stock fell as much as 5% in US trading after Walmart sold its stake in Chinese e-commerce giant, raising about $3.6 billion in the sale, according to Bloomberg. JD.com stock tumbled 12% in Hong Kong.
The stake sale puts an end to an eight-year partnership between the two companies amid a challenging landscape for China's economy. The economic landscape has been impact by a falling real estate market, high youth unemployment ,and trade tensions between Washington and Beijing.
US employment falls by 818,000 in latest government revision
The US economy employed 818,000 fewer people than originally reported as of March 2024, showing the labor market may have been cooling long before initially thought.
The revisions are a yearly practice from the Bureau of Labor Statistics; final revised numbers are expected to be released early next year.
The report, released Wednesday morning, showed the largest downward revisions to the professional and business services industry, where employment was revised down by 358,000 during the period. Leisure and hospitality saw the second-largest downward revision of 150,000.
The report lowers the monthly job additions seen in the US economy over the time period to 174,000 from 242,000.
"Despite this big downward revision, that's still a very healthy growth rate in terms of the monthly jobs added to the economy," Omair Sharif, president of Inflation Insights, told Yahoo Finance.
Furthermore, economists cautioned ahead of the release about how much investors should read into the print given its backward-looking nature.
"The realization that the economy created fewer jobs than initially estimated [does not] change the broader trends in GDP growth, stock market and wealth gains, and consumption," RBC Capital Markets US economist Michael Reid wrote in a note to clients on Aug. 16.
Target leads Consumer Discretionary sector higher
Strong earnings from Target (TGT) before the bell on Wednesday are propelling the Consumer Discretionary (XLY) sector higher.
Target rallied more than 13% after the retailer reported earnings per share that topped Wall Street's estimates by $0.39 a share on the back of renewed traffic to stores.
Source: Yahoo Finance Stocks open higher
US stocks ticked higher on Wednesday after snapping their longest win streak this year as investors waited for Federal Reserve minutes and jobs data likely to shape bets on interest rate cuts.
The S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) rose about 0.2%,while the Dow Jones Industrial Average (^DJI) moved up more than 0.2%.
Quick take on Target's $0.39 earnings beat
Target (TGT) is out with a massive earnings beat this morning — $0.39, to be more precise. More analysis on the quarter from yours truly here.
I caught up with Target chairman and CEO Brian Cornell, and overall I came away somewhat impressed by how the quarter unfolded. The consumer responded to the company's new price cuts in food and falling inflation. They shopped in discretionary areas of the store like apparel. And inventory theft is becoming less of a margin headwind.
But I will note this for the many Target bulls who will probably emerge today after this earnings beat: Walmart's (WMT) results were still much better, again.
