Markets inch higher when Fed minutes point to ‘likely’ rate cut in Sep

Dow rose 55, advancers over decliners about 3-1 & NAZ gained 102.  The MLP index was flattish at 280 & the REIT index added 1+ to the 415s.  Junk bond funds were mixed & Treasuries saw more buying which lower yields.  Oil was off 1+ to 72 & gold inched up 3 to 2553 (more on both below).

Dow Jones Industrials 

Federal Reserve officials at their Jul meeting moved closer to a long-awaited interest rate reduction, stopping short while indicating that a Sep cut had grown increasingly probable, minutes showed.  “The vast majority” of participants at the Jul 30-31 meeting “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the summary stated.  Markets are fully pricing in a Sep cut, which would be the first since the emergency easing in the early days of the Covid crisis.  While all voters on the rate-setting Federal Open Market Committee voted to hold benchmark rates steady, there was an inclination among an unspecified number of officials to start easing at the Jul meeting rather than waiting until Sep.  The document stated that “several [meeting participants] observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision.”  In the parlance the Fed uses in its minutes, which do not mention names nor specify how many policymakers felt a certain way, “several” is a relatively small number.  However, the summary made clear that officials were confident about the direction of inflation & are ready to start easing policy if the data continue to cooperate.  The sentiment was 2-fold: Inflation markers had shown price pressures easing considerably, while some members noted concerns over the labor market as well as the struggles that households, particularly those at the lower end of the income spectrum, were having in the current environment.  “With regard to the outlook for inflation, participants judged that recent data had increased their confidence that inflation was moving sustainably toward 2 percent,” the minutes stated.  “Almost all participants observed that the factors that had contributed to recent disinflation would likely continue to put downward pressure on inflation in coming months.”  On the labor market, “many” officials noted that “reported payroll gains might be overstated.”  Earlier today, the Bureau of Labor Statistics reported, in a preliminary revision of the nonfarm payroll numbers from Apr 2023 thru Mar 2024, that gains may have been overstated by more than 800K.  “A majority of participants remarked that the risks to the employment goal had increased, and many participants noted that the risks to the inflation goal had decreased,” the minutes said.  “Some participants noted the risk that a further gradual easing in labor market conditions could transition to a more serious deterioration.”  In its post-meeting statement, the committee noted that job gains had moderated & that inflation also had “eased.”  However, it chose to hold the line on its benchmark funds rate, which is 5.25-5.50% range, its highest in 23 years.

Fed minutes point to ‘likely’ rate cut coming in September

Macy's (M) cut its full-year sales forecast, as the department store operator said it is contending with selective shoppers & more promotions.  The retailer posted a mixed qtr, as it topped earnings expectations but missed on revenue.  Macy's now anticipates net sales of $22.1 - $22.4B, which is lower than the $22.3 - $22.9B range it had previously anticipated.  That also would be a year-over-year decline from the $23.1B it reported for fiscal 2023.  Macy's expects comparable sales, which take out the impact of store openings & closures, to decrease of about 2% to a decline of about 0.5%.  It had previously expected comparable sales to range from a decline of about 1% to a gain of 1.5%.  That metric includes owned & licensed sales, which encompass merchandise that Macy's owns & items from brands that pay for space within its stores, along with its 3rd-party online marketplace.  The department store operator said that the new outlook range “gives the flexibility to address the ongoing uncertainty in the discretionary consumer market.”  CEO Tony Spring said customers aren’t spending as freely across all of Macy's brands, even higher-end department store Bloomingdale's.  “We see that there is definitely a softness, a carefulness, a delay in the conversion of purchasing,” he said.  “And people on the things that they want, the things that are priced sharply, on the newness, they’re responding, but even the affluent consumer is not spending like they were a year ago.”  He added “there’s a lot of noise out there,” which is distracting customers or causing them to hold off on spending, including higher interest rates, inconsistent weather patterns & a busy news cycle.  Net sales fell from $5.13B in the year-ago period.  In the 3-month period that ended Aug 3, Macy's EPS was 53¢, compared with a loss of 8¢ per share in the year-ago period.  Yet even when excluding the weaker stores that Macy's is shutting, sales were lackluster.  Comparable sales for its go-forward namesake brand, which includes the Macy's stores that will remain open & online sales, declined 3.3% on an owned-plus-licensed basis, including the 3rd-party marketplace.  The stock fell 2.30 (13%).

Macy’s cuts sales forecast as department stores struggle to draw shoppers

TJX's (TJX) raised its full-year guidance after posting another qtr of strong sales, but its outlook still fell just short of expectations.  The discounter behind Marshalls, HomeGoods & TJ Maxx is now expecting full-year EPS to be $4.09 - $4.13, compared with estimates of $4.14.  For the current qtr, TJX is expecting EPS to be $1.06 - $1.08, compared with estimates of $1.10.  So far this earnings season, retailers that disappoint with guidance haven’t seen much negative impact to their shares, suggesting investors are prepared for uncertainty in the 2nd ½ of the year ahead of the presidential election & a potential rate cut from the Federal Reserve.  EPS in the 3-month period that ended Aug 3 was 96¢ compared with 85¢ a year earlier.  Sales rose to $13.5B, up from $12.8B a year earlier.  Throughout the fiscal 2024 year, which ended in Feb, the company posted strong sales gains & robust guidance, but investors have been keen to see how it will lap those numbers in the qtrs ahead & if it can keep growing.  During the qtr, consolidated comparable store sales increased by 4% & were “entirely driven by an increase in customer transactions,” indicating more shoppers are coming to its stores.  That jump is ahead of the 2.8% uptick that had expected.  “We see excellent buying opportunities in the marketplace and are strongly positioned to ship fresh and compelling merchandise to our stores and online throughout the fall and holiday selling seasons.  We marked a milestone for our Company in the 2nd qtr by opening our 5000th store,” said Herrman.  “Longer term, we are excited about our potential to capture additional market share in all of our geographies and to continue our global growth”  The stock rose 6.88 (6%).

T.J. Maxx owner raises full-year guidance, posts 5.6% sales gain

Gold traded near a record high as Federal Reserve minutes & a downward revision of US payrolls reinforced expectations that policymakers will cut interest rates in Sep.  Several Federal Reserve officials acknowledged there was a plausible case for cutting interest rates at their Jul 30-31 meeting before the central bank's policy committee voted unanimously to keep them steady.  Swap traders now expect a qtr-point cut next month & a roughly 20% chance for a ½-point reduction.  Gold remains above $2500 an ounce after hitting successive all-time highs in recent sessions.  All eyes will be on Fed Chair Jerome Powell's speech at the Jackson Hole symposium on Fri, when he's expected to set the table for an interest-rate cut while reassuring investors that policymakers can stave off a sharp economic slowdown.  Gold has rallied by more than a 5th this year.  It's also been supported by robust purchases by central banks, increased haven demand, as well as healthy buying of physical bars in the over-the-counter market.  Spot gold rose 0.1% to $2516 an ounce. The Bloomberg Dollar Spot Index was 0.07% lower.

Gold Near Record as Jobs Revision, Fed Minutes Support Rate Bets

Oil prices settled down by $1 a barrel after the gov revised sharply lower a set of employment statistics closely watched by investors.  Brent crude futures settled down $1.15 (1.5%) at $76.05 a barrel & US West Texas Intermediate crude futures settled $1.24 lower or 1.7% at $71.93.  US employers added far fewer jobs than originally reported in the year thru Mar, the Labor Dept reported.  The estimate for total payroll employment for the period from Apr 2023 - Mar 2024 was lowered by 818K.

Oil Settles $1 Down After US Job Data Revised Significantly Lower

Stocks are eyeing a return to recovery from an early Aug 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, the highlight in PM trading, 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 today, new data showed the US economy employed 818K fewer people than originally reported as of Mar 2024, showing the labor market may have been cooling long before initially thought.  But economists were pointing out the updated data still reflect a labor market that's softening but not "rapidly deteriorating."  Minutes from the meeting did not inspire inspire a lot confidence by investors.