Markets rise as Fed signals rate cuts ahead

Dow went up 462 (above 41K), advancers over decliners an impressive 7-1 & NAZ gained 258.  The MLP index was up 2+ to the 283s & the REIT index rose 8+ to the 425s.  Junk bond funds edged slightly higher & Treasuries continued to be purchased which lowered yields.  Oil jumped 1+ to nearly 75 & gold soared 29 to 2546 on lower interest rates (more on both below).

Dow Jones Industrials 

With Federal Reserve Chair Jerome Powell all but confirming that an interest rate cut is imminent, the market's attention quickly turned to when and by how much.  Traders continued to price in a greater likelihood that the Fed will kick off what is expected to be a protracted easing campaign in Sep with a qtr percentage point, or 25 basis point, reduction.  However, the odds of something even more aggressive, like a ½-point move, grew quickly & were around a 1-in-3 chance of happening, according to pricing in the 30-day fed funds futures market as measured by the CME Group's FedWatch.  Market participants see the chance as particularly likely should the Aug jobs report, to be released Sep 6, prove a repeat of the weaker-than-expected reading in Jul.  The Fed's next meeting kicks off less than 2 weeks later, on Sep 17.  “My base-case scenario is that we are on a journey of 25 basis point cuts, probably for the next eight meetings, a couple hundred basis points cumulative,” economist Paul McCulley said.  “But if we see weaker growth, and particularly weaker jobs, then I think we could have a bit of front-loading and start the process with 50 basis point cuts.”  “I don’t think that’s the base case yet, but clearly he’s opened the door for front-loading of the easing process, just like he had front-loading of the tightening process,” added McCulley, a former managing director at Pimco & now a senior fellow at Cornell & adjunct professor at Georgetown.  Powell's much-anticipated speech at the Fed's annual symposium in Jackson Hole, Wyoming, provided clear indications that a rate cut is in the cards. “The time has come for policy to adjust,” the central bank leader said.

Markets are now wondering whether the Fed might cut by half a point in September

Cava CAVA raised its full-year outlook as its restaurants reported strong traffic, fueling better-than-expected quarterly earnings & revenue.  The Mediterranean restaurant chain reported fiscal 2nd-qtr net income of 17¢ versus 21¢ a year earlier.  Net sales climbed 35% to $233M.  Same-store sales rose 14.4%, topping estimates of 7.9%.  While many other restaurant companies have reported declines in visits as consumers pull back their spending,  CAVA traffic grew 9.5% in the qtr.  CEO & co-founder Brett Schulman credited the chain's new grilled steak option as one reason customers kept coming to its restaurants during the qtr.  Cava opened 18 net new locations during the qtr, bringing its total footprint up to 341 restaurants.  For fiscal 2024, Cava now expects same-store sales growth of 8.5 - 9.5%, up from its prior estimate of 4.5 - 6.5%.  The company is also projecting that it will open 54 to 57 new locations this year, up from its previous forecast of 50 - 54 restaurants.  CAVA also expects to report adjusted earnings before interest, taxes, depreciation & amortization of $109-114M.  Previously, it was projecting adjusted EBITDA of $100-105M for the fiscal year.  The stock jumped 20.05 (20%).

Cava earnings beat estimates as restaurant traffic climbs nearly 10%

Microsoft (MSFT), a Dow stock, will hold a conference in Sep for cybersecurity firms to discuss ways the industry can evolve following a faulty CrowdStrike (CRWD) software update that caused Ms of Windows computers to crash in Jul.  The incident sent internet-connected systems into disarray.   Airlines canceled thousands of flights, logistics companies reported package delivery delays & hospitals delayed medical appointments.  MSFT will meet with CRWD & other security companies at its campus in Redmond, Washington, on Sep 10 to discuss how to prevent similar issues in the future.  The person requested anonymity because they didn’t have approval to discuss internal matters publicly.  The exec said participants at the Windows Endpoint Security Ecosystem Summit will explore the possibility of having applications rely more on a part of Windows called user mode instead of the more privileged kernel mode.  Attendees at the Sep 10 event will also discuss the adoption of eBPF technology, which checks if programs will run without triggering system crashes & memory-safe programming languages such as Rust.  MSFT stock up 1.24.

Microsoft plans September event to discuss changes after CrowdStrike outage

Gold prices gained more than 1% as the $ & Treasury yields retreated following comments from Federal Reserve Chair Jerome Powell that signaled an interest rate cut in Sep.  Spot gold rose 1.2% to $2512 per ounce, but was off a record high of $2531 hit on Tues.  US gold futures settled 1.2% higher at $2546.  Powell said "the time has come" for the central bank to cut interest rates & that inflation was nearing the Fed's 2% target, offering an explicit endorsement of an imminent policy easing.  The dollar index fell 0.8% against its rivals, while benchmark 10-year yields also declined following Powell's speech, making gold more attractive for other currency holders.

Gold Gains Over 1% As Powell Comments Hint At September Rate Cut

West Texas Intermediate (WTI) crude closed higher, advancing for a 2nd day after Federal Reserve Chair Jerome Powell said the central bank is ready to begin cutting interest rates.  WTI crude for Oct closed up$1.82 to settle at $74.83 per barrel, while Oct Brent crude, the global benchmark, was last seen up $1.85 to $79.07.  In a speech to the central bank's annual Jackson Hole, Wyoming, conference, Powell said the central bank is ready to begin lowering interest rates from their current 23-year high as the labor market slows.  Despite today's gains, the odds prices will again test this year's highs are seen as slim because demand in China, the #1 importer, remains subdued as the country's economy stumbles.  At the same time, the risks of a wider Middle Eastern war that could threaten Persian Gulf supplies fade.  Expectations OPEC will begin returning 2.2M barrels per day of voluntary cuts to the market in the 4th qtr are also keeping a lid on prices.  41198?

WTI Crude Oil Rises as Fed Chair Confirms Lower U.S. Interest Rates are Coming

Stocks climbed today as Federal Reserve Chair Jerome Powell said the "time has come" to begin cutting interest rates, offering the clearest signal yet that the central bank is prepared to begin an easing cycle, with major implications for the economy.  Enthusiasm turned buoyant as a day of reckoning for rate-cut bets finally arrived, after a week of mounting anticipation for what Powell would reveal during his speech at Jackson Hole when he said: "The time has come for policy to adjust."  "The direction of travel is clear," Powell added, "and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."  Dow rose 516 to a new record this week.