Fed Minutes and Payrolls Revision: A Critical Window into Rate Cuts
Investors are eagerly anticipating the release of the minutes from the Federal Reserve’s last meeting, scheduled for today, as they seek deeper insight into the potential for an imminent rate cut and its likely magnitude. The Fed opted to keep rates steady during its late July meeting, maintaining the benchmark overnight interest rate within the 5.25%-5.50% range.
However, subsequent comments from Fed officials have leaned towards the likelihood of a rate cut in September, and the upcoming minutes are expected to reinforce this dovish outlook. Notably, Federal Reserve Governor Michelle Bowman, known for her cautious stance, hinted at the possibility of rate cuts if inflation continues to show progress. Bowman acknowledged the persistent upside risks but suggested that gradually lowering the federal funds rate might become appropriate to avoid excessively restrictive monetary policy.
In addition to the Fed minutes, investors are also closely watching the preliminary revisions to U.S. labor data, which are expected later today. These revisions could reveal a significant downward adjustment, potentially as much as 800,000 jobs, which would cast doubt on the previously perceived strength of the labor market and add further justification for cutting interest rates.
U.S. Stock Futures Edge Higher Amid Fed Speculation
U.S. stock futures have moved slightly higher this morning as investors await the release of the Fed minutes and payrolls data revisions. By 04:20 ET, Dow futures had gained 45 points, or 0.1%, while S&P 500 and Nasdaq 100 futures also edged up by 0.1%.
The Wall Street indices saw minor losses on Tuesday, ending a series of healthy gains. The S&P 500 dipped by 0.2%, the Nasdaq Composite by 0.3%, and the Dow Jones by 0.2%. With little economic data on the slate for today, market participants are focusing on the upcoming Fed-related releases, as well as Fed Chair Jerome Powell’s much-anticipated speech at the Jackson Hole symposium on Friday.
On the corporate front, homebuilder Toll Brothers saw its stock rise in premarket trading after exceeding earnings expectations for the fiscal third quarter and raising its full-year deliveries guidance. Meanwhile, Keysight Technologies experienced a 10% surge in premarket after posting strong guidance for its fiscal fourth quarter.
Walmart to Sell Stake in JD.com Amid Strategic Shift in China
Walmart is making a strategic pivot in the Chinese market by selling its stake in JD.com, focusing instead on its own operations in China. The retail giant aims to raise approximately $3.74 billion from this sale, with Morgan Stanley acting as the broker-dealer.
“This decision allows us to focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities,” Walmart stated.
Walmart’s partnership with JD.com began in 2016 when the U.S. retailer sold its Chinese online grocery store, Yihaodian, in exchange for a 5% stake in JD.com. Despite the shift, Walmart has seen robust growth in its China business, with a 17.7% year-on-year revenue increase to $4.6 billion in the second quarter, driven by the success of Sam’s Club and its digital platforms.
JD.com recently reported better-than-expected profits for the second quarter, although China’s retail market continues to struggle with a downturn in consumer confidence.
Retail Earnings in the Spotlight as Season Draws to a Close
As the U.S. earnings season winds down, investors still have key reports from the retail sector to digest. Target Corporation and TJX Companies are both slated to release their quarterly results today, with attention on whether they can capture market share during the back-to-school season.
The National Retail Federation’s data from early July indicated that expected back-to-school spending per household would slightly decrease to $875, down from last year’s record of $890. Meanwhile, Lowe’s cut its full-year forecast on Tuesday, reflecting ongoing challenges in the retail environment.
According to FactSet data, about 93% of S&P 500 companies have reported their second-quarter earnings, with 79% surpassing profit estimates, though only 60% have beaten revenue expectations.
Gold Prices Near Record Highs as Rate Cut Expectations Rise
Gold prices have slipped slightly today but remain close to record highs as the prospect of lower U.S. interest rates continues to weaken the dollar, driving more investors towards the yellow metal. By 04:20 ET, spot gold fell 0.2% to $2,509.52 an ounce, while December gold futures declined 0.1% to $2,547.40 an ounce.
Gold has enjoyed a remarkable rally this year, with prices up over 20% year-to-date and more than 30% over the past 12 months. The primary catalyst for this surge has been the expectation of lower interest rates, which reduce the opportunity cost of holding non-yielding assets like gold.
However, geopolitical tensions have also played a significant role. The freezing of Russia’s foreign currency reserves in 2022 has made Western bonds less attractive to non-democratic countries, increasing gold’s appeal as an alternative. Additionally, significant budget deficits in major economies like the U.S., U.K., and France have further driven investors towards gold.
The current political climate in the U.S., with proposals for increased tariffs, price controls, and large subsidies, is also contributing to gold’s rise as investors seek safe-haven assets amid growing economic uncertainty.
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