Markets rise as Fed notes progress on lowering inflation

Dow advanced 99 with profit taking in the last hour of trading, advancers over decliners about 2-1 & NAZ soared 451.  The MLP index was off 1+ to 290 & the REIT index fell 1+ to 406.  Junk bond funds rose along with stocks & Treasuries were bought taking yields lower.  Oil finished up a very big 3+ to 78 on MidEast war fears & gold jumped 39 to a record at 2491 (more on both below).

Dow Jones Industrials 

Federal Reserve officials held short-term interest rates steady but indicated that inflation is getting closer to target, which could open the door for future interest rate cuts.  Central bankers made no obvious indications, though, that a reduction is imminent, choosing to maintain language that indicates ongoing concerns about economic conditions, albeit with progress.  They also preserved a declaration that more progress is needed before rate reductions can happen.  “The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance,” the Federal Open Market Committee's post-meeting statement said, a slight upgrade from previous language.  “Inflation has eased over the past year but remains somewhat elevated,” the statement continued. “In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.”  That language also represented an upgrade from the Jun meeting, when the policy statement indicated only “modest” progress in bringing down price pressures that 2 years ago had been running at their highest level since the early 1980s.  The previous statement also characterized inflation as simply “elevated,” rather than “somewhat elevated.”  There were a few other tweaks as well, as the FOMC voted unanimously to keep its benchmark overnight borrowing rate targeted at 5.25-5.50%. That rate, the highest in 23 years, has been in place for the past year, the result of 11 increases aimed at bringing down inflation.  One change noted that committee members are “attentive” to the risks on both sides of its mandate for full employment and low inflation, dropping the word “highly” from the Jun statement.  The statement kept intact 1 key sentence about the Fed's intentions: “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”  That phrase has underscored the Fed's data dependence.  Officials insist they are not on a predetermined course for rates & won't be guided by forecasts.  Investors will likely be looking for further clues at Fed Chair Jerome Powell's press conference.  Fed officials have vowed to proceed carefully, despite signs that inflation is weakening & worries that the economy won't be able to withstand the highest borrowing costs in some 23 years for much longer.  Their position got some fortification today, when yet another economic report showed that pending home sales surged a stunning 4.8% in Jun, defying expectations for a 1% increase.

Fed holds rates steady and notes progress on inflation

Starbucks (SBUX) reported quarterly revenue that missed expectations as both its US & intl cafes faced weaker demand.  Still, the results weren't as bad as investors feared.  Fiscal 3rd-qtr net income attributable to the company was 93¢, down from 99¢ a year earlier.  Excluding items, EPS was 93¢.  Net sales dropped 1% to $9.1B . Same-store sales fell 3% in the qtr, fueled by a 5% decline in transactions.  Traffic to US stores fell again this qtr, dropping 6%.  Domestic same-store sales fell 2%, boosted by an increase in average ticket.  Last qtr, execs discussed plans to revive lagging US business that included leaning on discounts & new drinks to bring back customers who had abandoned the chain.  CEO Laxman Narasimhan said that more shoppers are buying its packaged coffee at grocery stores, but a “challenging consumer environment” is weighing on sales at its cafes.  Still, the company sees green shoots in the US business already, like the success of new products.  Its Summer-Berry Refreshers drinks with boba-inspired pearls broke the company's record for a week-1 product launch.  Next qtr will also bring the return of its Pumpkin Spice drinks, a perennial favorite since its launch more than 2 decades ago.  SBUX opened 526 net new stores in the fiscal qtr.  The company reiterated the outlook it provided last qtr.  The company projects revenue growth of a low single-digit percentage & EPS growth of flat to a low single-digit percentage.  The stock rose 2.88.

Starbucks revenue misses estimates as same-store sales decline for second straight quarter

Chip giant AMD (AMD) reported its 2nd qtr earnings, beating expectations on the top & bottom lines & posting better-than-anticipated guidance for the 3rd qtr.  AMD is riding the AI hype train, which is powering sales of its data center graphics processing units (GPUs) & central processing units (CPUs).  For the qrr, adjusted EPS was 69¢ & revenue was $5.8B.  The forecast called for adjusted EPS of 68¢ on revenue of $5.7B.  AMD reported adjusted EPS of 58¢ on revenue of $5.4B during the period in 2023.   "Our AI business continued accelerating and we are well positioned to deliver strong revenue growth in the second half of the year led by demand for Instinct, EPYC and Ryzen processors," CEO Lisa Su said.  "The rapid advances in generative AI are driving demand for more compute in every market, creating significant growth opportunities as we deliver leadership AI solutions across our business.”  The stock went up 5.51.

AMD stock rises after earnings beat on chip sales

Gold price exhibited a strong performance in today's session, with investors focusing on the Federal Reserves monetary policy outcome later  in the day. The precious metal climbs to near $2420 as its safe-haven appeal improves amid fears that Middle East tensions would widen further.  Historically, investors find investment in precious metals as safe bet amid geopolitical tensions.  Fears of an all-out war between Israel & Iran deepened after reports showed that Hamas leader Ismail Haniyeh was killed in an Israeli air strike on Tehran.  This has prompted fears of a retaliation move by Iran, which would diminish hopes of a ceasefire significantly.  Meanwhile, the US Dollar slides further on downbeat US Employment data.  The report showed that 122K employees were hired in the private sector in Jul, which was lower than expectations of 150K & the prior release of 155K, upwardly revised from 150K.  This points to easing labor market resilience.  The US Dollar Index, which tracks the Greenback's value against 6 major currencies, skidded below the crucial support of 104.00.  10-year Treasury yields tumbled to a fresh 4-month low at 4.11%.

Gold Price Clings to Gains Above $2,400 on Middle East Woes, Fed Policy in Spotlight

A rally in oil futures comes as no surprise as violence in the MidEast, including the assassination of a Hamas leader in Iran, raises the potential for a wider war in the oil-rich region.  Crude, however, still ended the month with a loss, with worries over a slowdown in Chinese demand & uncertainty surrounding production quotas for major oil producers influencing the Israel-Hamas-Hezbollah tensions rally oil, but Jul weakness hints at long-term worries path for prices in the months to come.  West Texas Intermediate (WTI) for Sep jumped $3.52 to settle at $78.25.

Israel-Hamas-Hezbollah tensions rally oil, but July weakness hints at long-term worries

Today was Powell's day for investors & they liked what they heard.  No great surprises, but his message was well received although there was selling into the close.  He said that a rate cut is on the table.  Meanwhile NAZ had a difficult time this month, falling about 1000 from its Jul peak, picked up fans again today.  However, more price swings may lie ahead given the nature of the new technologies.  Even with serious profit taking this month, Dow finished up 1720 in Jul.