Dallas Fed’s Logan backs a ‘more gradual’ pace of rate cuts
Dallas Federal Reserve President Lorie Logan on Wednesday recommended a gradual easing of interest rates as she worries that inflation could get “stuck” above the central bank’s 2% goal.
In a speech delivered in Houston, Logan asserted that a “more gradual path back to a normal policy stance will likely be appropriate from here to best balance the risks to our dual-mandate goals.”
Specifically, she said she worries that persistently high levels of demand and easing financial conditions — lower mortgage rates, higher stock prices and more accommodative credit backdrop — could stall the progress made in bringing down the inflation rate.
“These risks suggest the [Federal Open Market Committee] should not rush to reduce the fed funds target to a ‘normal’ or ‘neutral’ level but rather should proceed gradually while monitoring the behavior of financial conditions, consumption, wages and prices,” said Logan, who will not be an FOMC voter until 2026.
—Jeff Cox
Investors should look for opportunities to position for a fourth-quarter rally, Canaccord Genuity says
Market volatility has escalated in recent days as fear has risen over mounting geopolitical tensions, another hurricane and the start of a rate-reduction cycle. The U.S. presidential election, less than four weeks away, has also contributed to the current atmosphere of uncertainty.
But in a Wednesday note, Canaccord Genuity pointed out that the market has a lot going in its favor including that third-quarter earnings growth is expected to be positive, albeit slow down. Analyst Michael Welch also noted that the fourth quarter of an election year has been positive 81.3% of the time, and positive 83.3% of the time when the S&P 500 has been up at least 10% prior to the last quarter. The benchmark index had risen 20.8% in the first three quarters of 2023.
“With a Fed rate cut cycle in place, a favorable seasonal period, a positive earnings trajectory, and the recent highs in both the S&P 500 Index and S&P 500 Equal Weight Index, we continue to believe now is not the time to fight the Fed or the tape, but it is an opportunity to position for a potential fourth-quarter rally, especially on any pullback,” the analyst wrote.
— Lisa Kailai Han
Stocks open little changed
Stocks opened little changed on Wednesday.
The S&P 500 and Nasdaq Composite hovered near the flatline, while the Dow Jones Industrial Average declines 60 points, or 0.15%.
— Samantha Subin
Boeing, Alphabet, Blackstone among stocks making biggest premarket moves
Check out the companies making headlines before the bell.
- Boeing — Shares slipped 1.8% after the aerospace company withdrew a pay raise offer it made to 33,000 machinists on strike since mid-September. With the talks again breaking down this week, the continued strike will cost Boeing more than $1 billion per month, S&P Global Ratings said Tuesday as part of a negative outlook for Boeing’s credit ratings.
- Alphabet — Shares dropped about 1% after the Justice Department submitted a court filing on Tuesday that gave a federal court a range of options, including setting restrictions or ordering a breakup, to end what it called an unlawful monopoly in search.
- Reddit — Shares rose more than 2% after Jefferies initiated research coverage with a buy rating and a Sreet-high price target. The investment firm cited advertising and data licensing tailwinds.
For the full list, read here.
— Pia Singh
Hurricane issues have historically been a headwind to Disney’s operating income, says Raymond James
As Florida braces for the impact of Hurricane Milton, Raymond James says the storm could be a headwind to Disney’s Orlando theme park if history is any guide.
“While hurricane issues are generally seen by investors as nonrecurring events, they do impact headline reported numbers, and Disney traded down ~3% on Monday as the potential magnitude of Hurricane Milton began to take shape,” analyst Ric Prentiss wrote on Tuesday.
Past hurricanes have been meaningful headwinds to Disney, with Hurricane Ian just two years ago resulting in a roughly $65 million impact on the company’s experiences operating income and forced its parks to close for two days. Hurricane Dorian in 2019 resulted in an around $50 million impact to operating income, while Hurricane Irma in 2017 hitting Disney’s operating income for roughly $100 million and closed parks for two days.
— Brian Evans
China Shenzhen notches worst day since May 1997
An electronic screen displays the Shanghai Composite Index and Shenzhen Composite Index on October 8, 2024 in Shanghai, China.
VCG | Visual China Group | Getty Images
Alphabet falls as DOJ considers Google breakup
Alphabet shares were down more than 1% after the U.S. Justice Department indicated it was considering a breakup of the tech giant following a monopoly ruling.
The changes are necessary to “prevent and restrain monopoly maintenance could include contract requirements and prohibitions; non-discrimination product requirements; data and interoperability requirements; and structural requirements,” the department said in a filing.
— Fred Imbert
European markets strengthen after lackluster open
A man walks through the lobby of the London Stock Exchange in London, Britain, May 14, 2024.
Hannah Mckay | Reuters
European markets edged higher on Wednesday after a lackluster start to the day, with defensive sectors, including utilities, food and beverage and healthcare, in positive territory.
Defensive sectors tend to perform better in times of economic uncertainty, with market participants assessing the risks of Chinese market volatility, conflict in the Middle East and the trajectory for central bank interest rate cuts and inflation.
Mid-morning, the Stoxx 600 index was trading 1% higher, as all sectors rose except for banks, which dipped by 0.3%.
Looking at individual stocks in Europe, the biggest losers on the pan-European Stoxx index were pharmaceutical and biotechnology company Bayer, which was down 6.4%, along with Dutch lender ING, which shed 3%.
The best performer on the index was Continental, up 6.5% after the German car parts maker said on a pre-close call on Tuesday that it expects the profitability of its automotive business to improve in the third quarter despite lower sales, Reuters reported.
— Holly Ellyatt
China’s CSI 300 plunges 7%, snapping 10-day winning streak amid mixed trading in Asia
Chinese stocks sold off in a volatile day of trading amid mixed Asia-Pacific markets Wednesday.
The mainland CSI 300 dropped 7.05%, snapping a 10-day winning streak and closing at 3,955.98, while Hong Kong’s Hang Seng index tumbled 1.7% as of its final hour of trade in a choppy session.
On Tuesday, the HSI recorded its worst day in 16 years, closing 9.41% lower.
Other Asian markets climbed Wednesday, with Japan’s Nikkei 225 rising 0.87% to 39,277.96, and Australia’s S&P/ASX 200 edging up 0.13% and closing at 8,187,4.
— Lim Hui Jie
Fed lowered rates to maintain labor market’s strength, says Vice Chair Philip Jefferson
Federal Reserve policymakers sought to keep the labor market strong when they decided to trim the fed funds target range by a half point in September, according to prepared comments from Fed Vice Chair Philip Jefferson.
He spoke at an event at Davidson College in North Carolina on Tuesday night.
“The [Federal Open Market Committee] has gained greater confidence that inflation is moving sustainably toward our 2 percent goal,” he said. “To maintain the strength of the labor market, my FOMC colleagues and I recalibrated our policy stance last month, lowering our policy interest rate by 1/2 percentage point.”
The target range for the fed funds rate now sits at 4.75% to 5.00%.
Jefferson added that he will “carefully watch incoming data, the evolving outlook, and the balance of risks when considering additional adjustments to the federal funds target range.”
—Darla Mercado
Wholesale inventories data due out Wednesday
Shoppers at the Econ World Trading restaurant equipment warehouse/distribution facility in Fremont, California, US, on Thursday, Aug. 1, 2024.
David Paul Morris | Bloomberg | Getty Images
Wholesale inventories — which refers to the unsold inventory held by wholesalers — is expected to have risen 0.2% in August, according to economists polled by Dow Jones. That’s in line with the 0.2% increase in the previous reading.
The data is due out 10 a.m. ET.
— Sarah Min
Stock market risk grows as yield curve steepens, Bank of America says
The risk that stocks will weaken increases as the Treasury yield curve between 2- and 10-year notes steepens, according to Bank of America technical analyst Stephen Suttmeier in a note to clients Tuesday.
The S&P 500, for example, “is vulnerable to bigger corrections when the yield curve is steepening,” Suttmeier wrote. “The biggest correction the SPX has had since the yield curve bottomed in June 2023 is the late July 2023 into late October 2023 drop of 10.3%. This compares to the average and median biggest corrections of 26.5% and 20.3%, respectively, during yield curve steepening cycles.”
Ten out of the last 12 steepening cycles coincided with U.S. recessions, the analyst noted.
The 10-year Treasury note yielded 4.01% in late trading Tuesday, versus 3.96% for the 2-year. On May 31, the 10-year yielded 4.51% while the 2-year yielded 4.89%.
— Scott Schnipper
U.S. stock futures open lower
U.S. stock futures opened lower Tuesday night.
Dow Jones Industrial Average futures fell by 13 points, or 0.03%. S&P 500 futures and Nasdaq 100 futures dipped 0.05% and 0.06%, respectively.
— Sarah Min
