Rate-cut Hopes Reinforced After Fed Minutes Signaled Optimism

Barry Adams
22 Aug, 2024
New York City

Stocks traded higher, and benchmark indexes are set to extend weekly gains for the third week in a row as market sentiment recovers. 

The S&P500 index and the Nasdaq Composite edged higher, and investors confirmed the rate-cut expectations after the latest policy meeting minutes showed policymakers are ready to cut rates if ongoing economic data and inflation trends are supportive. 

Inflation has fallen from a peak of nearly 9% to closer to 3% over the last eighteen months, but prices are still rising faster than the 2% target rate set by the Federal Reserve policymakers. 

Kansas City Federal Reserve President Jeffrey Schmid said that the time to lower the interest rate may be closer than expected, but inflation is still ahead of the Fed's 2% target rate. 

Schmid stressed that current interest rates are "restrictive, but they are not overly restrictive." 

“I still believe quite strongly that we really need to turn this inflation number towards 2%. It has to be sustainable. 

Having the labor market cool some is helping that, but there’s still more work to do,” Schmid told CNBC in a live interview from the Fed’s annual retreat in Jackson Hole, Wyoming. 

Initial jobless claims for the week ending on August 17 increased to 232,000, an increase of 4,000 from the previous week, the Labor Department reported Thursday. 

Continuing claims advanced by 4,000 to 1.863 million in the previous week, as long-term claims data lags by one week and is at its highest level since November 27, 2021. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.01% to 5,620.68, the Nasdaq Composite fell 0.1% to 17,909.30, and the Russell 2000 index fell 0.4% to 2,161.25. 

The yield on 2-year Treasury notes edged lower to 3.99%, 10-year Treasury notes increased to 3.84%, and 30-year Treasury bonds inched higher to 4.11%.

WTI crude oil increased $0.32 to $72.32 a barrel, and natural gas prices edged down 3 cents to $2.13 a thermal unit.

Gold fell by $11.33 to $2,501.31 an ounce, and silver increased by $0.01 to $29.32.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 101.31.

 

U.S. Stock Movers

Agilent Technologies jumped 1.8% to $142.28, and the laboratory supply company reported higher-than-expected fiscal third quarter results. 

Revenue in the quarter increased to $1.58 billion, and adjusted earnings per share rose to $1.32, ahead of expectations of at least $1.25. 

Nordson Corp. gained 0.4% to $248.67, and the adhesive company reported better-than-expected fiscal third quarter results. 

Advance Auto Parts dropped 16.7% to $51.53, and the auto parts retailer reported weaker-than-expected second-quarter earnings. 

The company also lowered its annual earnings per share outlook to between $2.0 and $2.50 from the previous estimate of between $3.75 and $4.25. 

Zoom Video Communications soared 11.7%, and the company reported better-than-expected second-quarter earnings and lifted its annual outlook. 

Revenue increased to $1.16 billion, and earnings per share rose to $1.39. 

Looking ahead, for the third quarter, the company anticipates adjusted earnings per share between $1.29 and $1.31, ahead of the consensus of $1.24. 

The company estimated full-year adjusted earnings per share between $5.29 and $5.32, ahead of market expectations of $5.05.