Traders work on the floor of the New York Stock Exchange (NYSE) during morning trading in New York on August 23, 2024.
Angela Weiss | AFP |
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What you need to know today
Rally on Wall Street
Stocks rose after Federal Reserve Chairman Jerome Powell said it was “time” to cut interest rates. The Dow Jones Industrial Average rose 462 points, while the Nasdaq Composite and S&P 500 climbed 1.47% and 1.15%, respectively. For the week, the Dow gained 1.3%, the Nasdaq 1.4% and the S&P 500 1.45%. Meanwhile, the 10-year Treasury yield fell while U.S. oil prices rose more than 2% to return above $74 a barrel.
“The time has come”
Following Powell’s hint of an impending rate cut, the market’s attention is turning to the timing and magnitude of the cut. Traders are currently anticipating a quarter-percentage-point cut in September, with expectations of a more aggressive half-percentage-point cut. The likelihood of a deeper cut is increasing, especially if the August jobs report mirrors the weakness of the July numbers. As the Fed’s mid-September meeting approaches, CNBC’s Jeff Cox takes a look at the key economic indicators that could influence the final decision.
Empty back
Boeing’s Starliner capsule will return from the International Space Station without astronauts. NASA astronauts Butch Wilmore and Suni Williams will instead return on SpaceX’s Dragon spacecraft, extending their stay on the ISS by about six months. The decision follows problems with the Starliner’s propulsion system during its crewed flight test. “We want to better understand the root causes and understand the design improvements so that the Boeing Starliner can be an important part of our assured access to the ISS for our crew,” said NASA Administrator Bill Nelson. The setback could jeopardize Boeing’s participation in NASA’s commercial crew program, which has already absorbed losses of more than $1.5 billion.
Activist defense
Intel is working with Morgan Stanley and other advisers to defend itself against potential activist investors as it struggles to compete with rivals such as Nvidia. Intel is cutting 15,000 jobs as part of a $10 billion cost-cutting program as CEO Pat Gelsinger tries to turn around the chipmaker. Morgan Stanley has worked with Intel before, including on its 2022 spin-off of Mobileye. The company’s difficulties stem from missing out on key market trends, including the smartphone boom and the current AI boom.
Export Control List
China strongly opposes the US decision to put 42 Chinese firms on the export control list for alleged links to the Russian military. The US has also added 63 Russian and 18 other companies to the list for supplying US electronics to Russian military-linked companies that have produced thousands of Shahed-136 drones for use against Ukraine. China’s Commerce Ministry said the decision disrupted international trade and promised Beijing would protect the rights of Chinese companies.
(PRO) Trading Fed rate cuts
As the Fed prepares to cut interest rates, Evercore ISI highlights several regional banks that are expected to outperform. These banks are actively reducing asset sensitivity through strategic balance sheet adjustments, positioning themselves for success in a low-interest rate environment.
The conclusion
“This is going to be a moment where Nvidia has to drop the mic,” Wedbush’s Dan Ives told CNBC’s Worldwide Exchange. “Powell, Jackson Hole – so important – but the market, what it’s going to do for the rest of the year, and I could say 2025, that starts with these Nvidia earnings.”
On Wednesday, Nvidia – the undisputed leader in AI – will report its second-quarter results after the market closes. The stock is up 161% this year, although it plunged to a low of $90.69 on August 5 as markets capitulated on economic concerns.
Wall Street remains bullish on Nvidia. As CNBC’s Jesse Pound reports, the options market is betting that Nvidia will get a boost from its earnings report. Enthusiasm for the stock seems undiminished, even in light of the delay to its Blackwell chip – a project that cost the company $10 billion to develop, according to CEO Jensen Huang.
“I see a delay of two to three months as a kind of asterisk. From a demand perspective, it doesn’t change anything,” Ives said.
While Nvidia continues to dominate the AI chip market, its rival Intel has fallen significantly behind. Not only has Intel missed the smartphone revolution, but it is also lagging behind in the AI race. Nvidia has overtaken Intel as the largest chipmaker by revenue, with Intel now having about 35 times less market capitalization. Faced with these challenges, Intel has enlisted the help of Morgan Stanley and other advisers to fend off potential activist investors.
Wall Street ended the week on a strong note, reassured by Powell’s signals of imminent rate cuts, although the timing and extent of these cuts will continue to depend on upcoming economic data.
Former PIMCO chief economist Paul McCulley expects a series of 25 basis point cuts at the next FOMC meetings. McCulley also believes an even more aggressive 50 basis point cut could come if the August employment report, due on September 6, shows signs of weakness.
Powell “draws a line by saying we don’t want to see any further slowdown in the labor market – we’re there,” McCulley said on CNBC’s “Squawk on the Street.” “I don’t think that’s the base case yet, but he’s clearly opened the door to bringing forward the easing process.”
Powell’s dovish tone also sends a strong signal to the market, according to David Russell, global head of market strategy at TradeStation. “It keeps the tailwind for the market intact through the end of the year, making it harder to expect a retest of this month’s lows,” he said.
— CNBC’s Sarah Min, Rohan Goswami, Lisa Kailai Han, Michele Luhn, Michael Sheetz, Jesse Pound, Jeff Cox, Alex Harring, Yun Li, Pia Singh and Spencer Kimball contributed to this report.
