S&P nears all-time high stocks rise ahead of Fed decision

Stocks rose in early morning trading on Tuesday, as technologies led the advance as investors assessed fresh retail sales data in anticipation of a Federal Reserve meeting that could be key to an interest rate cut.

The Dow Jones Industrial Average (^DJI) advanced about 0.4%, nearing a record-high for the blue-chip index. The S&P 500 (^GSPC) added 0.5%, nearing its all-time high, while the tech-heavy Nasdaq Composite (^IXIC) gained 0.8%.

Stocks are set for gains on the odds of a 0.5% Fed rate cut More creepyThere is only one day left for the authorities to announce their monetary policy decision. The central bank’s two-day meeting starting on Tuesday is expected to bring the first easing of rates since early 2020.

Read More: Fed projections for 2024: What experts say about the possibility of a rate cut

Investors weighed data showing retail sales beat Wall Street’s estimates in August, focusing on signs of a slowdown in consumer spending. The reading is the last piece of data that will factor into the central bank’s thinking in choosing a significant rate cut over a quarter-point move.

Right now, the rate-path debate is focused on the potential for panic in large bearish markets. At the same time, some on Wall Street suggest that little action could fuel disappointment and anxiety.

As of Tuesday, traders see 63% odds on a 50 basis point cut in rates, up from 62% a day earlier. The odds of a 25 basis point cut is 37% CME FedWatch tool.

Meanwhile, Intel ( INTC ) stock took off after securing its foundry Amazon ( AMZN ) as a multibillion-dollar customer for AI chips. Microsoft’s ( MSFT ) new plan is to buy back up to $60 billion in shares and give its dividend a 10% boost.

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Tuesday, September 17, 2024 at 8:27 am PDT

Investors are increasingly expecting a soft landing

From Josh Shafer of Yahoo Finance:

“Investors are growing increasingly confident that the global economy can achieve a soft landing, in which inflation recedes without a major slowdown in economic activity.

In Bank of America’s August global fund manager survey released Tuesday, 79% of respondents said that was the most likely outcome for the global economy over the next 12 months. This represents the highest percentage of people predicting such an outcome after May 2023.”

Read the full story >
Tuesday, September 17, 2024 at 8:19 am PDT

Home stocks face risks despite expected rate cuts: BofA

Homebuilder stocks have rallied since early July, driven by relatively low mortgage rates, but after the Federal Reserve began cutting interest rates, Bank of America’s new note outlined three risks.

First, a weak job market — if that leads to an economic downturn. Homebuilder stocks typically perform best during periods of rising unemployment and falling rates. However, “they generally predate recessions,” Bank of America research analyst Rafe Zadrosich wrote in a note to clients Tuesday morning.

Second, mortgage rates “have already priced in significant rate cuts.” Wednesday’s expected Fed interest rate cut left the average rate on a 30-year fixed mortgage at 6.2%, the lowest level in a year. The BofA mortgage-backed securities group “forecasts mortgage rates at 5.75%-6% by the end of the year.”

Third, homebuilders are trading at more than twice their price-to-book ratio, which is “elevated relative to historical multiples and prior periods of federal rate cut cycles.”

The SPDR S&P Homebuilders ETF (XHB) is up more than 27% year to date, while the iShares US Home Construction ETF (ITB) is up nearly 24%.
Tuesday, September 17, 2024 at 8:08 am PDT

Stocks trending in morning trade

Here are some of the leading stocks on Yahoo Finance’s Trending Tickers page during Tuesday morning trading:

Microsoft (MSFT): The board approved a $60 billion share buyback plan on Nov. The technology company’s shares are rising in morning trading after agreeing to raise its dividend by 10% to $0.83 per share on the 21st. Major tech platforms that have initiated or raised share buybacks and dividends.

Intel (INTC): The tech company gained more than 6% on Tuesday morning after its foundry secured Amazon ( AMZN ) as a multibillion-dollar customer for AI chips. As part of the deal, which expands on an existing partnership between the companies, Intel will build custom AI chips for Amazon’s cloud services business.

Shopify (shop): Shares of the e-commerce shopping platform rose 2% after Redburn Atlantic upgraded the company to buy and raised its price target to $99 a share, citing its social e-commerce growth. This represents a rise of more than 30% from Monday’s closing price.

Icahn Enterprises (IEP): The group named after activist investor Carl Icahn rose nearly 10% after it said a judge had dismissed a proposed class-action lawsuit against the company. Short-selling firm Hindenburg has filed a lawsuit against Icon Enterprises, accusing it of artificially inflating its stock price to allow the billionaire investor to take out large personal loans.
Tuesday, September 17, 2024 at 7:00 am PDT

Homebuilder confidence rises in September ahead of expected rate cut

With mortgage rates at record lows since February 2023, homebuilders are more optimistic about the housing market.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index rose two points to 41 in September from the previous month.

September’s reading was 41, in line with economists’ estimates, according to Bloomberg data.

“Thanks to low interest rates, builders now have a positive outlook for future new home sales for the first time since May 2024,” said NAHB President Carl Harris of Wichita, Kan. The custom home builder from I wrote in a press release.

Mortgage rates have been on the decline in recent months, hitting their lowest levels in a year as investors await rate cuts from the central bank this month. The central bank will release its next policy decision on Wednesday.

Low mortgage rates have benefited as builders withdraw offers. 32% of builders cut home prices to boost sales in September, compared to 33% in August, with an average price cut of 5% – the lowest since July 2022.

The volume of sales outlook for the next six months, meanwhile, rose 4 points to 53. Both the prospective-buyer traffic gauge and the NAHB index of current selling conditions rose two points and one point, respectively.
Tuesday, September 17, 2024 at 6:58 am PDT

Music by Dreamforce

SAN FRANCISCO – Greetings from Dreamforce, Salesforce’s (CRM) big annual meeting. This is my fifth Dreamforce, and each one is more amazing and different than the last.

Take my experience last night.

I was sipping water during cocktail hour at the Time AI 100 dinner (note: Time is owned by Salesforce CEO Marc Benioff and his wife Lynn) when I saw AMD ( AMD ) CEO Dr. Lisa Su standing in the corner with her husband. So, of course, I’ll go and say hello.

Somewhere in the conversation I mentioned that I wanted to quit my job and go back to school to learn more about artificial intelligence. Su actually advised me against doing that, acknowledging that technology moves very quickly and that the industry is learning on the fly in many respects.

This made me worry about AI security (further heightened during my chats at the dinner table) and the impact on jobs from this rapidly emerging technology. But just a year later, it also reinforced the notion that many companies in a variety of industries will see big gains as AI permeates their workflows internally.

The question I wonder is: Did the market price all of these into stocks?

Anyway, here’s what Su told me about the future of AI at the Goldman Sachs technology and media conference last week:
Tuesday, September 17, 2024 at 6:40 am PDT

Retail sales edged higher in August, according to Wall Street estimates

Retail sales beat Wall Street’s estimates in August as investors watched closely for any signs of a slowdown in consumer spending. The data comes as the Federal Reserve begins its two-day policy meeting in Washington, where the central bank is widely expected to cut interest rates as economic growth data slows and inflation slows.

Retail sales rose 0.1% in August. Economists had expected a 0.2% drop in spending, according to Bloomberg data. Meanwhile, retail sales in July were revised to a 1.1% increase from the previous reading, which showed sales increased 1% in the month. Census Bureau data.

“Consumers continued to spend freely despite a slowdown in the labor market, as stronger-than-expected retail sales data for August, faster wealth gains and falling energy prices continued,” Capital Economics North America economist Olivia Cross wrote in a note to clients on Tuesday. .

Its next policy decision is due on Wednesday at 2pm ET, with investors widely expecting it to cut interest rates for the first time since 2020.

“I don’t think it’s really going to change anything,” BofA Securities senior U.S. economist Stephen Juno told Yahoo Finance. “It’s a one-of-a-kind event.”

On Tuesday morning, markets were pricing in a 67% chance the central bank cuts interest rates by 50 basis points, compared to 33% odds the Fed opts for a smaller 25 basis point cut. According to the CME FedWatch tool.
Tuesday, September 17, 2024 at 6:31 am PDT

Stocks open higher ahead of key Fed decisions

Stocks rose on Tuesday, led by an uptick in technology, as investors assessed fresh retail sales data and the wait for a Federal Reserve meeting to cut interest rates.

The Dow Jones Industrial Average (^DJI) rose about 0.2%, coming close to a record-high for the blue-chip index. The S&P 500 (^GSPC) added about 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) added 0.7%.