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👋 Good morning! Tech roared back Wednesday, bringing the S&P 500 and Nasdaq up 1.6% and 2.6%, respectively. Crude also jumped sharply, rising 5%. Thursday's another big day as the market digests Meta's report and awaits two from Apple and Amazon. |
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| What we're watching | | ⚖️ The Fed looks both ways before September: The Federal Reserve held rates steady at the conclusion of its meeting Wednesday but seemingly telegraphed a September rate cut, noting that the central bank is back to evaluating both sides of its dual mandate — inflation and employment. Still, the "we're watching the data" and "we have made no decisions" mantras that Chair Jay Powell has been repeating all year still made an appearance at the press conference. But with an "uncertain" economic outlook, as the Fed put it, Powell stressed that the central bank is in a strong position to move quickly and decisively when the data says it's time.
📈 Meta breaks the streak: After disappointments from Tesla, Alphabet, and Microsoft, Meta's Q2 financial results beat expectations Wednesday afternoon, with the company noting it would invest heavily in infrastructure in 2025 — specifically citing AI in its statement. The stock jumped in after-hours trading, and the evolving narrative to watch will be whether investors continue to read this as a bullish sign from a company confident in its ability to monetize the investment. But AI revenue or not, the company's Family of Apps is certainly being monetized well.
💰 Apple, Amazon take the stage: The next two tech titans to report results do so Thursday after the bell. For Apple, the focus is on China, specifically news about the iPhone 16 — set for release in September — and any details on its Apple Intelligence AI product. On the Amazon side, the diversified business touching retail, cloud (with AI!) services, and a growing advertising business should provide a lot to chew until the next and last of the Magnificent Seven, Nvidia, reports at the end of August.
🐂 Nvidia gets a bullish call: Nvidia may not be reporting for a month, but the stock jumped 13% after Morgan Stanley issued a bullish call for the world's third-most-valuable company and chip colleague AMD issued strong guidance. The stock is still around 13% off its all-time high, but some momentum has returned to the AI trade after the recent painful rotation.
📆 A full calendar Thursday: Besides Apple and Amazon, Thursday features quarterly reports from Block, Coinbase, ConocoPhilips, Crocs, DraftKings, Moderna, Wayfair, and more. On the economic side, investors will get manufacturing data as well as the final appetizers of labor market data before the July jobs report: the Challenger job cuts and initial jobless claims. |
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| The Fed inches closer to inevitable cuts | | Today's Takeaway is by Hamza Shaban, Senior Reporter.
The Fed is delivering on rate cut hopes.
The initial reactions from analysts and investors following Wednesday's meeting, statement, and press conferences pointed to what amounted to near certainty of the Fed delivering a September rate cut.
As Lazard's chief market strategist Ronald Temple wrote, "The FOMC has clearly telegraphed a September rate cut."
Powell, for his part, said that a rate cut is very much on the table for September. But while a coming easing cycle might be inevitable, the timing of the first cut still remains at least a little uncertain, despite what the market might suggest.
"Certainty is not a word we have in our business," Powell said during the press conference that wrapped the July meeting. "We get a lot of data between now and September. And it isn't going to be one data read or even two, its going to be the totality of the data," he said.
Powell once again leaned on his data-driven refrain that nothing is set in stone because there's always more information to analyze.
But again, ask pretty much anyone not named Jerome Powell and they'll tell you that July's Fed meeting was likely the last under the pandemic tightening regime.
Investors might as well have been on the podium in Paris, belting the national anthem. The Nasdaq Composite's daily gains somersaulted up 3% following Powell's remarks (before eventually closing 2.6% up).
"The broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate," he said. And the Fed softened its policy statement to reflect newfound optimism. A clause from the Fed's statement that previously read "modest further progress" on tackling inflation turned into "some further progress" on Wednesday. Wall Street translated the dense Fedspeak into "U-S-A! U-S-A!"
If officials continue to see encouraging signs of cooling inflation, reasonably strong growth, and a resilient labor market, Powell said, "I think a rate cut could be on the table in September."
But he pumped the brakes to say that if price pressures remained stubborn, the Fed would consider a range of factors. "It's not going to be just any one thing."
Market bets didn't bother to take the Fed's qualifying statements seriously. The CME FedWatch tool registered a 0% chance that rates remain the same in September.
Even if Powell says he can't rely on the concept of certainty, everyone else is. Let the easing begin. |
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| Chart of the day | | The pay gap between job stayers and job changers narrowed in July in the latest sign that the US labor market is cooling.
New data from ADP released Wednesday showed that the median year-over-year pay increase for job switchers fell to 7.2% in July, down from the 7.7% increase seen in June. Meanwhile, pay for workers who stay in the same job rose 4.8%, its slowest rate of increase since July 2021.
The gap between the two numbers is slimming, indicating the benefits workers saw from leaving their jobs during the post-lockdown hiring boom continue to erode.
"The payoff from switching jobs has dropped tremendously," ADP chief economist Nela Richardson said on a call with reporters Wednesday morning. |
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 | | While it may be a less attractive outcome for workers, Richardson added the easing in wage growth is a welcome sign for the Federal Reserve in its fight against inflation.
"Wages and pay are the bridge from the labor market to the inflation data, and we are certain, after three years of looking at these numbers, that if inflation picks up — and no one thinks that's likely right now — it won't be because of labor," Richardson said. "We're seeing continued steady declines in wage growth that fits with the overall inflation picture also cooling, along with the labor market." |
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| Earnings and economic calendar | | Thursday
- Economic data: Challenger jobs cuts, year-over-year, July, (+19.8% prior); Unit labor costs, second quarter (+4% prior); Nonfarm productivity, fourth quarter (+1.6% expected, +5.2% prior); Initial jobless claims, week ending July 27 (235,000 prior); S&P Global US manufacturing PMI, July final (49.5 prior); Construction spending, month-over-month, July (+0.2% expected, -0.1% prior); ISM manufacturing, July (49 expected, 48.5 prior); ISM prices paid, July (52.1 prior)
- Earnings: Apple (AAPL), Amazon (AMZN), Block (SQ), Booking Holdings (BKNG), Canada Goose (GOOS), Coinbase (COIN), ConocoPhillips (COP), Crocs (CROX), DraftKings (DKNG), Marathon Digital Holdings (MARA), Mobileye (MBLY), Moderna (MRNA), Roku (ROKU) SiriusXM (SIRI), Wayfair (W)
Friday
- Economic calendar: Nonfarm payrolls, July (+175,000 expected, +206,000 prior); Unemployment rate, January (4.1% expected, 4.1% previously); Average hourly earnings, month-over-month, July (+0.3% expected, +0.3% prior); Average hourly earnings, year-over-year, July (+3.7% expected, +3.9% prior); Average weekly hours worked, July (34.4 expected, 34.3 prior); Labor force participation rate, July (62.6% previously); Factory orders, June (+0.5% expected, -0.5% prior); Durable goods orders, June final (-6.6% prior)
- Earnings: Chevron (CVX), Exxon Mobil (XOM)
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