December 16, 2024

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Stocks hold steady as world awaits Fed decision #NewsUnitedStates

Stocks hold steady as world awaits Fed decision #NewsUnitedStates

CashNews.co

Stocks finished close to where they started Tuesday as investors expressed uncertainty over the size of the Federal Reserve’s expected rate cut, which is scheduled to be announced Wednesday at the conclusion of the widely anticipated policy meeting.

The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) lost about 0.2%, reversing momentum from earlier in the day, when they were at or near record levels. The Nasdaq Composite (^IXIC), meanwhile, finished just above the flatline.

Stocks were mostly flat as Wall Street keeps guessing at the odds of a 0.5% Fed rate cut, with just one day to go before officials reveal their monetary policy decision. The central bank’s two-day meeting, which began Tuesday, is prevailingly expected to bring the first easing in rates since early 2020. Even as the size of the rate cut remains to be seen, investors and market observers are torn on how the first rate cut will be perceived by the market.

Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut

Investors were weighing data that showed retail sales surpassed Wall Street’s estimates in August, with a focus on signs of a slowdown in consumer spending. The reading is the last piece of data that could factor into the Fed’s thinking on whether to opt for a substantial rate cut rather than a quarter-point move.

A major aspect of the rate-path debate is the possibility that the bigger cut could prompt panic in markets. At the same time, some on Wall Street suggested the smaller move could also disappoint and spark concern.

As of Tuesday, afternoon traders see odds of 65% on a 50 basis point reduction in rates, compared with 62% a day ago. The chances of a 25 basis point cut stand at 35%, per the CME FedWatch tool.

Meanwhile, Intel stock (INTC) popped after its foundry secured Amazon (AMZN) as a multibillion-dollar customer for AI chips. Also helping revive faith in battered tech stocks was Microsoft’s (MSFT) new plan to buy back up to $60 billion in shares and a 10% boost to its dividend.

LIVE COVERAGE IS OVER13 updates

  • Stocks little changed ahead of the Fed’s decision on rate cuts

    Stocks finished close to where they started Tuesday, shedding positive momentum from earlier in the day, as investors expressed uncertainty over the size of the Federal Reserve’s expected rate cut, which is scheduled to be announced Wednesday at the conclusion of the widely anticipated policy meeting.

    The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC) lost about 0.2%, backtracking from earlier in the day when they reached at or near record levels. The Nasdaq Composite (^IXIC), meanwhile, finished just above the flatline.

  • Powell appears set to sidestep politics even as he oversees a likely central bank rate cut

    From Yahoo Finance’s Ben Werschkul:

    “Jerome Powell is set to take plenty of partisan fire this week if he, as expected, sends a signal that the fight against inflation is nearing an end with an interest rate cut — the first one in four years.

    That appears to be just fine with him.

    The political winds can quickly shift, of course. But the Federal Reserve chair has put himself in a stronger-than-expected position: The central bank he oversees appears likely able to neutralize critics in the days ahead, even as it nears the climax of a year where it has had to navigate not only a complex economic picture, but a heated 2024 election as well.”

    Read the full story >

  • JPMorgan in talks with Apple to take over credit card program, WSJ reports

    JPMorgan Chase (JPM) is in talks with Apple to take over the iPhone maker’s credit-card program from current issuer Goldman Sachs (GS), the Wall Street Journal reported Tuesday, in another push to unite a tech giant and a major financial player.

    Apple sought to wind down its partnership with Goldman late last year, bringing an end to the credit card the companies first offered in 2019 and the savings account rolled out in 2023. Since the breakup, Apple has had discussions with other financial partners to take over the credit card program, the WSJ reported, including Synchrony Financial and Capital One.

    If the discussions turn into a deal, it would further unite the biggest bank in the country and one of the premier technology firms. The companies are already connected through deals on Apple products offered to Chase customers and through payments JPMorgan makes to Apple when its card customers use Apple Pay. In turn, the deal would give Apple a new issuer of its credit card, which has more than 12 million users.

  • Walmart’s Sam’s Club to raise hourly pay for 100,000 workers

    Sam’s Club, the Walmart-owned (WMT) warehouse retailer, said on Tuesday it would raise average hourly wages for nearly 100,000 of its workers, which will bring starting pay from $15 to $16. The pay increase is part of a new employee compensation program, which the company says will bring the average hourly rate for associates above $19. The new pay plan will take effect in early November.

    The company said that hourly wages will also progress faster for associates within their pay range, setting predictable pay increases and milestones, rising to between 3% and 6%, based on years of service.

    “In an increasingly competitive retail landscape, attracting, hiring and, more importantly, retaining quality talent has become a true competitive advantage,” the company said in a statement Tuesday.

    The rival to members-only warehouse retailer Costco (COST) touts more than 600 clubs across the US and Puerto Rico.

  • Stocks trending in afternoon trading

    Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Tuesday:

    Microsoft (MSFT): Shares of the tech giant are climbing in afternoon trading hours after the board approved a $60 billion share buyback program and agreed to raise the dividend by 10% to $0.83 per share on Nov. 21. The move continues a recent wave of investor return programs among the major tech platforms that have initiated or boosted stock buybacks and dividends.

    Hewlett Packard Enterprise (HPE): Shares of the IT company rose nearly 5% Tuesday afternoon following an upgrade from Bank of America to a BUY based on the view that profit margins will improve from the acquisition of Juniper Networks (JNPR). The finalization of the $14 billion deal was announced earlier this ear.

    Accenture (ACN): The consultancy sank about 5% Tuesday, in the latest move lower that has rippled through the professional services industry. The slide follows a Bloomberg report revealing plans for the company to delay the majority of its staff promotions by six months. Rival firms have also cut jobs to navigate the slowdown, as clients curtail spending on consulting.

    Intel’s (INTC): The technology company gained more than 6% Tuesday afternoon after its foundry secured Amazon (AMZN) as a multibillion-dollar customer for AI chips. As part of the deal, which expands on an existing partnership between the companies, Intel will build custom AI chips for Amazon’s cloud services business.

  • S&P 500 close to all-time high ahead of Fed decision

    Stocks gained in afternoon trading on Tuesday as tech names led the advance and investors awaited the conclusion of the Fed’s policy meeting and a major interest rate decision expected on Wednesday.

    The S&P 500 (^GSPC) added about 0.3%, close to its own all-time high. The Dow Jones Industrial Average (^DJI) moved up roughly 0.2%, coming off a record-high close for the blue-chip index, while the tech-heavy Nasdaq Composite (^IXIC) put on 0.6%.

  • Investors increasingly expect a soft landing

    From Yahoo Finance’s Josh Schafer:

    “Investors are growing increasingly confident that the global economy can achieve a soft landing, in which inflation retreats without a large drawdown in economic activity.

    In Bank of America’s August Global Fund Manager Survey, released on Tuesday, 79% of respondents said a soft landing is the most likely outcome for the global economy in the next 12 months. This marked the highest percentage of respondents projecting such an outcome since May 2023.”

    Read the full story >

  • Housing stocks face risks despite expected rate cuts: BofA

    Homebuilder stocks have been rallying since early July, driven by relatively lower mortgage rates, but a new note from Bank of America detailed three risks after the Fed starts cutting interest rates.

    First, a weakening job market — if it leads to an economic downturn. Homebuilder stocks generally outperform during times of rising unemployment and declining rates. However, “they typically underperform ahead of a recession,” Rafe Jadrosich, research analyst at Bank of America, wrote in the note to clients Tuesday morning.

    Second, mortgage rates “have already priced in significant rate cuts.” Wednesday’s expected Fed rate cut has led to the average rate on a 30-year fixed mortgage being at 6.2%, its lowest level in over a year. The BofA mortgage-backed securities team “forecasts mortgage rates of 5.75%-6% by year end.”

    Third, homebuilders are trading at over two times their price-to-book ratio, which is “elevated compared to historical multiples and prior periods heading into Fed rate cut cycles.”

    The SPDR S&P Homebuilders ETF (XHB) has jumped more than 27% year to date, while the iShares US Home Construction ETF (ITB) has surged nearly 24%.

  • Stocks trending in morning trading

    Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Tuesday:

    Microsoft (MSFT): Shares of the tech giant are climbing in morning trading hours after the board approved a $60 billion share buyback program and agreed to raise the dividend by 10% to $0.83 per share on Nov. 21. The move continues a recent wave of investor return programs among the major tech platforms that have initiated or boosted stock buybacks and dividends.

    Intel’s (INTC): The technology company gained more than 6% Tuesday morning after its foundry secured Amazon (AMZN) as a multibillion-dollar customer for AI chips. As part of the deal, which expands on an existing partnership between the companies, Intel will build custom AI chips for Amazon’s cloud services business.

    Shopify (SHOP): Shares of the e-commerce shopping platform climbed 2% after Redburn Atlantic upgraded the company to Buy and raised its price target to $99 per share, citing its social e-commerce growth. That represents a more than 30% upside from Monday’s closing price.

    Icahn Enterprises (IEP): The conglomerate named after activist investor Carl Icahn rose almost 10% after it said that a judge dismissed a proposed class-action lawsuit against the company. The short-selling firm Hindenburg had brought a lawsuit against Icahn Enterprises, alleging that it artificially inflated its share price by issuing unsustainably high dividends in order to allow the billionaire investor to secure large personal loans.

  • Homebuilder confidence rises in September ahead of expected rate cut

    Homebuilders are feeling more confident about the housing market as mortgage rates sit at their lowest level since February 2023.

    The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index rose two points to 41 in September from the previous month, breaking a streak of four consecutive monthly declines.

    September’s reading was in line with economists’ estimates of 41, per Bloomberg data.

    “Thanks to lower interest rates, builders now have a positive view for future new home sales for the first time since May 2024,” NAHB Chairman Carl Harris, a custom homebuilder from Wichita, Kan., wrote in a press statement.

    Mortgage rates have been on the slide in recent months, hitting their lowest level in over a year as investors anticipate rate cuts from the Fed this month. The central bank will issue its next policy decision on Wednesday.

    Lower mortgage rates have benefited builders as they pulled back on concessions. The survey found that 32% of builders cut home prices to bolster sales in September, compared with 33% in August, and that the average price reduction was 5% — the lowest since July 2022.

    The gauge of the sales outlook over the next six months, meanwhile, rose 4 points to 53. The prospective-buyer traffic gauge and the NAHB index of current sales conditions also both rose two points and one point, respectively.

  • Musings from Dreamforce

    SAN FRANCISCO — Greetings from Dreamforce, Salesforce’s (CRM) big annual gathering. This is (I think) my fifth Dreamforce, and each one is more surprising and different than the last.

    Take my experience last night.

    I am sipping water during cocktail hour at the Time AI 100 dinner (note: Time is owned by Salesforce CEO Marc Benioff and his wife Lynne) when I see AMD (AMD) CEO Dr. Lisa Su standing in the corner with her husband. So, of course, I go over and say hello.

    Somewhere in the conversation I remarked that I have to leave work and go back to school to learn more about artificial intelligence. Su actually advised me against doing that, acknowledging that the tech is moving so quickly that the industry is learning on the fly in many respects.

    That left me concerned about AI safety (something further amplified during the chats I had at the dinner table) and the impact on jobs from this rapidly unfolding technology. But it also reinforced the notion that even one year from now, a lot of companies across different industries will see big margin gains as AI spreads internally through their workflows.

    The question I am left wondering: Has the market priced all of this into stocks?

    In any case, below is what Su told me last week about the future of AI at the Goldman Sachs tech and media conference:

  • Retail sales top Wall Street estimates in August

    Retail sales surpassed Wall Street’s estimates in August as investors kept a close eye on any signs of a slowdown in consumer spending. The data comes as the Federal Reserve’s two-day policy meeting kicks off in Washington, with the central bank widely expected to cut interest rates as economic growth data slows and inflation lessens.

    Retail sales rose 0.1% in August. Economists had expected a 0.2% decrease in spending, according to Bloomberg data. Meanwhile, retail sales in July were revised to a 1.1% increase from a prior reading that showed sales increased by 1% in the month, according to Census Bureau data.

    “The stronger than expected retail sales data for August suggest that, boosted by rapid wealth gains and falling energy prices, consumers continue to spend freely despite the labour market slowdown,” Capital Economics North America economist Olivia Cross wrote in a note to clients on Tuesday.

    The release comes as investors widely expect the Fed will cut interest rates for the first time since 2020 when its next policy decision is announced at 2 p.m. ET on Wednesday.

    “I don’t think this changes really anything,” BofA Securities senior US economist Stephen Juneau told Yahoo Finance. “It’s kind of a nonevent.”

    On Tuesday morning, markets were pricing in a 67% chance that the Fed cuts interest rates by 50 basis points, compared to 33% odds that the Fed opts for a smaller 25 basis point cut, per the CME FedWatch Tool.

  • Stocks open higher ahead of key Fed decision

    Stocks rose on Tuesday, with techs leading the advance, as investors assessed fresh retail sales data in the wait for a Federal Reserve meeting pivotal to an interest rate cut.

    The Dow Jones Industrial Average (^DJI) moved up roughly 0.2%, coming off a record-high close for the blue-chip index. The S&P 500 (^GSPC) added about 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) put on 0.7%.

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