Will Rate Cuts Boost the Stock Market?

Wall Street, according to a recent Deutsche Bank analysis, has good reason to be optimistic about the market's future.

Analysts evaluated the S&P 500's performance over every Fed easing cycle in the past 70 years and found that rate cuts haven't prevented the stock market from falling in past recessions. However, when the Fed has cut rates outside of a recession, stocks have tended to soar. The S&P 500's median two-year return after that kind of cut has been nearly 50%.

Most economists see only a slight chance that the U.S. enters a recession in the next year. Goldman Sachs' lead economist, Jan Hatzius, in August lowered the firm's 澳洲幸运5官方开奖结果体彩网:recession prediction to 20% from 25%. That adjustment came after the 澳洲幸运5官方开奖结果体彩网:July jobs report triggered the "澳洲幸运5官方开奖结果体彩网:Sahm rule," a historically reliable recession indicator.

Plenty of other economists have 澳洲幸运5官方开奖结果体彩网:discounted recen🍌t recession indiꦦcators, including the steepening of the yield curve out of inversion, noting the peculiarity of the post-COVID economic recovery. 

But a post-rate-cut rally isn't a certainty, and that's in no small part because of stocks' recent strength.

The S&P 500 has risen more than 26% in the past year, its🍰 best performance in the lead-up to rate cuts on record, according to Deut♓sche Bank. Usually, the index is flat over that period. 

"So you could argue that some of a potential 'no recession easing cycle' gains have been borrowed from the future this time," the analysts wrote.

Read the 澳洲幸运5官方开奖结果体彩网:full article here.

-澳洲幸运5官方开奖结果体彩网:Colin Laidley

Biggest S&P 500 Movers on Wednesday

Decliners

• Shares of medical device maker ResMed (RMD) dropped 5.1%, the steepest decline of any S&P 500 constituent after the investment analysis firm Wolfe Research downgraded the stock to "underperform." With the Food and Drug Administration (FDA) likely to approve Eli Lilly's (LLY) blockbuster weight-loss drug Zepbound for the treatment of sleep apnea, analysts expect a disruption in demand for ResMed's devices that treat the condition. Wolfe pointed to a survey showing that half of doctors expect to prescribe fewer sleep apnea devices as patients gain access to Zepbound and other GLP-1 medications.
• Shares of Avery Dennison (AVY), which provides labeling and packaging solutions as well as radiofrequency identification (RFID) tags for various markets, fell 4.9% as the company hosted its 2024 Investor Day. While the company expects the key mega-trends of digitization, sustainability, and personalization to underpin demand for its intelligent labels and other products, Avery Dennison remains sensitive to the availability and pricing of raw materials. Inventory destocking has also weighed on the company's performance, although the issue has shown signs of improving in 2024.
• Addressing a conference on the consumer and retail markets, the chief executive officer (CEO) of wholesale food distributor Sysco (SYY) said global restaurant industry traffic was down around 3% in the recent quarter and is softening further in the current quarter. Although the executive stressed that the company remains confident in its full-year guidance, Sysco shares slid 4.2% on Wednesday.
  

Advancers

• West Pharmaceutical Services (WST) shares notched the top performance in the S&P 500 on Wednesday, jumping 4.5%. In its most recent earnings report, released in July, the supplier of packaging and delivery solutions for injectable drugs reduced its full-year sales and profit outlook, noting reduced demand from biotech customers as they work through existing inventories. However, the company did predict a potential return to organic revenue growth in the fourth quarter, suggesting the destocking headwinds could abate.
• Shares of the discount retailer Dollar Tree (DLTR) added 3.0% on the day. The stock has been under pressure in 2024 as the company navigates a restrained consumer spending environment and considers strategic options for its struggling Family Dollar segment. However, a Wednesday report in The Wall Street Journal highlighted how Dollar Tree and fellow dollar-store chain Dollar General (DG) are pursuing aggressive store-opening targets despite the challenging environment, reflecting confidence that new locations can drive sales growth and market share gains.
  
• General Motors (GM) shares gained 2.4% after the carmaker said it will offer adapters that allow owners of its electric vehicles (EVs) to access the network of charging stations operated by Tesla (TSLA). Drivers of GM EVs will be able to purchase an adapter for $225 through the carmaker's mobile apps. In other positive news for GM, the company struck a tentative deal with workers at an EV and battery plant in Ontario, Canada, reducing the chance of a work stoppage at the facility.

-澳洲幸运5官方开奖结果体彩网:Michael Bromberg

Detangling the Dot Plot

The Federal Reserve’s “dot plot” showed that officials project another half-percentage-point of rate cuts in 2024 after today's half-point cut.

The central bank’s economic projections also showed another full percentage point of interest rate cuts in 2025, while rates are expected to settle near 2.9% in the followin🐻g years.

What it says for 2024: Nine members see at least 50 basis points of cuts through the end of the year, while another seven see just one more cut of 25 basis points before the end of the year, resulting in a median rate of 4.4%. Two believe the rates should stay at their current level of 4.75% to 5% through 🌞the rest of the year, while another member believed steeper cuts were needed by year’s end. 

What it means: If the Fed f🉐ollows the projections, it could m🐷ake a quarter-percentage point rate cut at each of its November and December meetings or perhaps a half-percentage point cut at just one meeting. The result would be interest rates of 4.25% to 4.5% going into 2025.

“It would be odd for the Fed to aggressively cut in September and then take the following meeting off, particularly with interest rates still restrictive,” said Ryan Sweet, chief econ༺omist at Oxford Economics, who forecasts 25-basis-point cuts at the next two meetings.

Federal Reserve Chair Jerome Powell said in his press conference that committee members weren’t in a rush to cut interest rates.

“It's a process of recalibrating our policy stance away from where we had it a year ago—when inflation was high and unemployment low—to a place that's more appropriate given where we are now, where we expect to be, and that process will take place over time,” Powell said.

What it says for 2025 and beyond: At least eight🔯 members believe that interest rates will be between 2.75% and 3.25%, while another nine saw rates upwards of 3.75%. The median rate was a full percentage point below 2024 at 3.4%.🐻 Beyond that, Fed officials projected that interest rates would reach a median level of 2.9%.

What it means: Lowering borrowing costs should help fuel further economic growth and continued gains in the stock market, economists said.

“So long as the economy holds up and inflation doesn’t roar back to life, lower rates and strong earnings growth can continue to drive stocks higher over the long term,” said Bret Kenwell, eToro US investment analyst.

Read the full article about the dot plot here.

-澳洲幸运5官方开奖结果体彩网:Terry Lane

Is Fed's Bold Move Panic or Prudence?

The Federal Reserve typically adjusts its interest rate in quarter-point increments, so Wednesday’s 50-basis point cut was a more decisive move than usual. 💧澳洲幸运5官方开奖结果体彩网:Fed Chair Jerome Powell sought to parry♌ concerns that the Fed has been too slow to cut rates and that the move was a sign that policymakers were in a panic about the job market possibly crashing.

“You can see our𒉰 50 basis point move as a commitment to make sure that we don't fall behin🌊d,” he said in response to a reporter’s question. 

Powell and other Fed policymakers have tried to navigate a tightrope with monetary policy. The Fed moves its key interest rate to push borrowing costs for all kinds of loans up or down. Higher rates discourage borrowing and spending, slowing down the economy and reducing inflation pressures. Lower rates do the opposite, boosting the economy.

In historical instances of high inflation, the Fed’s anti-inflation interest rate hikes have caused recessions. Thꩲis time around, the Fed has sought to guide the economy to a “soft landing” from the post-pandemic burst of inflation a🥂nd has so far managed to do it without an economic downturn or mass layoffs.

Inflation has 澳洲幸运5官方开奖结果体彩🏅网:cooled towards the Fed’s goal of a 2% annual rate, and the unemployment rate has ticked up this year but 澳洲幸运5官方开奖结果体彩网:still isn’t high by historical🧸 stan🐎dards. In other words, things are going as well as Fed officials could hope. 

“The U.S. economy is basically fine If you talk to...business people who are actually out therꦦe doing business,” Powell said. 

-澳洲幸运5官方开奖结果体彩网:Diccon Hyatt

Powell Says Labor Market is Still Healthy

The half-point rate interest rate cut, which was bigger than many market participants expected, underscores the Fed's confidence that inflation is under control but also highlights growing concerns about the health of the labor market.

Fed Chair Jerome Powell said during his press conferen𒅌ce Wednesday that the labor market is still strong.

"The labor market is actually in solid condition, and our intention with our policy move today is to keep it there," he said in response to a question by a reporter. "You can say that about the whole economy—the U.S. economy is in good shape."

The last labor market reading showed that a typically reliable 澳洲幸运🔜5官方﷽开奖结果体彩网:recession indicator was still flashing.

Traders Expect Fed Will Remain Aggressive in Easing Policy

Traders on Wednesday upped bets that the Federal Reserve would continue to aggressively cut interest rates this year after the central bank began its long-awaited easing cycle with a 澳洲幸运5官方开奖结果体彩网:50-basis point cut.

The Fed on Wednesday lowered its federal funds rate target range to between 4.75% and 5% from 5.25% to 5.5%. The cut 澳洲幸运5官方开奖结果体彩网:met many investors’ expectations that the🐬 central bank would begin this rate-cutting cycle with aggressive action as it seeks to bolster a cooling labor market while sustaining inflation’s downward drift toward its 2% annual target rate; the market's perceived odds of a 50-point cut rose from just 14% a week ago to more than 60% earlier this week. 

Wall Street took Wednesday’s policy pivot as a sign of more aggressive cuts to come. Traders now see a more than 50% chance that the Fed will lower its federal funds rate target range by another 75 澳洲幸运5官方开奖结果体彩网:basis points to between 4% and 4.25% by the end of the year. With only two Fed meetings left—one in November and one in December—that implies another 50-point cu💙t at one of those meetings.

Fed officials don’t expect this year’s rate reductions to be quite that dramatic, according to their quarterly economic projections. Nine of the 19 澳洲幸运5官方开奖结果体彩网:Federal Open Market Committee (FOMC) members who submitted forecasts estimated the policy rate would end the year be❀tween 4.25% and 4.5%. Only one member expects the next two cuts to match the market’s expectations. Two members don't expect to cut rates at all later this year.

Policymakers expect interest rates to be slightly lower in the near term relative to their prior estimates, which were published in June. The FOMC's consensus is that the rate will stand at 3.4% at the end of 2025, down from an estimate of 4.1% in June.

-澳洲幸运5官方开奖结果体彩网:Colin Laidley

Powell Focuses on Fed's Dual Mandate in Press Conference

In his prepared statements during a press conference following the Fed's decision announcement, Chair Jerome Powell focused on the balance of the central bank's 澳洲幸运5官方开奖结果体彩网:dual mandate.

"We know that reducing policy restraint too quickly could hinder progress on inflation," he said. "At the same time, reducing restraint too slowly could unduly weaken economic activity and employment. And considering additional adjustments at the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook and the balance of risks."

There's 'Still Room' on the Nvidia Bandwagon, Analyst Says

Nvidia's (NVDA) share price may have already more than doubled in 2024, but analysts at William Blair say it isn't t🔯oo late for investors to get in on the action.

The firm initiated coverage of the semiconductor titan with an "outperform" rating on Wednesday, declaring there's "still room on this train."

William Blair notes Nvidia's data center revenue is expected to more than double in fiscal 2025 after tripling in fiscal 2024. The firm sees Nvidia as the clear frontrunner in the AI space with as much as a one- to two-year lead over its competitors. For that reason, Nvidia's GPUs and AI systems should continue to drive industr💙y-leading revenue and earnings growth, the firm said. 

After Nvidia shares slumped following the company's 澳洲幸运5官方开奖结果体彩网:second-quarter earnings last month, Bank of America called out an "澳洲幸运5官方开奖结果体彩网:enhanced buy opportunity," and Bernstein analysts recently called the company the "澳洲幸运5官方开奖结果体彩网:best way to play AI." All but one of the 23 firms surveyed by Vis𒉰ible Alpha hold a "buy" rating on Nvidia, with an average price target of $151.73.

Nvidia shares were down 0.6% at $114.87 in recent trading, continuing a 澳洲幸运5官方开奖结果体彩网:slight pullback this week after the stock popped last week on 澳洲幸运5官方开奖结果体彩网:encouraging comments from CEO Jensen Huang.

-澳洲幸运5官方开奖结果体彩网:Andrew Kessel

Small Caps Have Lagged Since Last Fed Meeting

Major U.S. stock indexes have been on a rollercoaster ride since the Fed's last meeting on July 31, when officials decided to maintain the influential fed funds rate at a 23-year high.

The S&P 500🍎 has gained nearly 4% since its close on July 30, outpacing the gains of the Nasdaq Composite and Dow Jones Industrial Average over that period. The Russell 2000 small-cap index is down nearly 2% since July 30.

Rate cuts are often seen as a positive for companies and their stocks as long as the economy avoids a recession. Small-cap stocks are thought to benefit more than their large-cap peers from rate cuts because they’re more likely to hold floating-rate debt. The Russell 2000 index was down about 0.1% Wednesday afternoon ahead🥂 of a wi🧸dely anticipated rate cut by the Fed.

Intuitive Machines Jumps on Big NASA Contract

Shares of Intuitive Machines (LUNR) skyrocketed more than 50% Wednesday, a day after the space travel support firm received a contract worth up to $4.82 billion from the 𝕴National Aeronautic♏s and Space Administration (NASA). 

The company announced the agreement will have Intuitive Machines provide "communication and navigation services for missions in the near space region, which extends from Earth's surface to beyond the Moon." The deal includes the deployment of lunar relay satellites for NASA's planned Artemis moon exploration program, which the company believes "is a strategic element in its vision to commercialize lunar activities."

Intuitive Machines shares were u🐻p 55% at $8.40 in late-morning trading and have more than tripled since the start of the year. They reached a peak intraday level of $13.25 on Feb. 21, soon after the company reported its IM-1 mission Nova-C class lunar lander had su꧟ccessfully launched on SpaceX’s Falcon 9 rocket

-澳洲幸运5官方开奖结果体彩网:Bill McColl

GE Vernova Shares Hit Another Record High

GE Vernova (GEV) shares hit another record high in early trading Wednesday after closing higher yesterday 🦩f📖or the seventh straight session.

The stock has benefitted this week from favorable comments from analysts. Analysts at Barclays initiated their coverage of the stock with an "澳洲幸运5官方开奖结果体彩网:overweight" rating and 澳洲幸运5官方开奖结果体彩网:price target of $250, while Bank of America analysts upgraded GE Vernova to a "buy" rating and raised their price target to $300 from $20💙0.

The banks argue that the stock remains undervalued compared to multi-industry peers due to the global energy giant’s greater exposure to the gas and el🍒ectrification sectors, which sit poised for growth as demand for AI data centers and electric vehicle charging infrastructure accelerates in coming years✃.

According to our technical analysis, which you can 澳洲幸运5官方开奖结果体彩网:read here, investors should be mindful of a potential short-term retracement, given the relative strength index points 🥀t🤡o extremely overbought conditions in the stock.

Important retracement levels to watch on GE Vernova's chart sit at $200 and $185, while the measuring principle projects an upside price target of $250.

-澳洲幸运5官方开奖结果体彩网:Timothy Smith

Market Expectations for Big Rate Cut Holding Steady

Traders are holding firm in their belief that the Federal Reserve will start its ra🐲te-cutting cycle with a bang.

Early Wednesday, fed fund futures trading data indicated a 63% likelihood that the Fed will cut its benchmark rate by half a percentage point and a 37% chance of a quarter-point cut, according to the CME Group’s FedWatch tool. The likelihood of a half-point cut that's being priced in is little changed from Tuesday, but up from about 50% on Friday and 15% a week ago.

The 澳洲幸运5官方开奖结果体彩网:lack of market consensus heading into a Fed meeting is unusual, and it means that w🐻hatever the central bank deci𒁃des to do Wednesday could prove disappointing to a large group of market participants.

The Fed has held the influential fed funds rate at a two-decade high since mid-2023 as part of an effort to tame inflation. Fed officials have made clear that rate cuts are coming as inflation has moderated and the labor market cools, but they haven't commented on the pace or depth of the expected easing.

In addition to the decision on rates Wednesday, the Fed's policy committee will release its quarterly economic projections, which include forecasts from committee members on where the fed funds rate will be in the future. Those projections will be closely scrutinized by investors, as will the committee's statement and Chair Powell's comments at the post-meeting press conference, for signals on what the Fed might do in subsequent meetings.

The decision on rates and the economic projections will be released at 2:00 p.m. ET, with Powell's press conference to follow half an hour later.

Microsoft Price Levels to Watch

Microsoft (MSFT) shares, which are riding a seven-session winning streak, a𒁃re rising again in premarket trading Wednesday.

Gains this week have come as the company 澳🍷洲幸运5官方开奖结果体彩网:hiked its quarterly dividend by 10% and approved a $60 billion 澳洲幸运5官方开奖结果体彩网:stock buyback. In addition, Microsoft and the world’s largest asset manager, BlackRock, announced plans late Tuesday to launch a $30 billion AI infrastructure fund to build data cente🏅rs and energy projects aimed at meeting the growing demands for the technology’s computing power.

The stock may pote🐽ntially be carving out a head and shoulders top, a chart formation that predicts a bullish-to-bearish trend reversal.

Investors should monitor important resistance levels on Microsoft's chart at $448 and $468, while eyeing key support areas at $410 and $385.

Read the full 澳洲幸运5官方开奖结果体彩网:technical analysis piece here.

-澳洲幸运5官方开奖结果体彩网:Timothy Smith

Major Index Stock Futures Slightly Higher

Futures tied to the Dow Jon꧟es Industrial Average were up 0.1%.

S&P 500 futures were up also up 0.1%.

Nasdaq 100 futures were up 0.2%.