Market Snapshot
| Dow | 45631.74 | +846.24 | (1.89%) | | Nasdaq | 21495.14 | +396.22 | (1.88%) | | SP 500 | 6466.91 | +96.74 | (1.52%) | | 10-yr Note |
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| | NYSE | Adv 2528 | Dec 269 | Vol 1.09 bln | | Nasdaq | Adv 3815 | Dec 720 | Vol 9.44 bln |
Industry Watch
| Strong: Communication Services, Real Estate, Financials, Industrials, Consumer Discretionary, Mateials, Information Technology |
| | Weak: Consumer Staples |
Moving the Market
Strong upward momentum after Fed Chair Powell's address bolsters September rate cut expectations
Buy the dip interest after continued mega-cap weakness
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Markets surge on Fed Chair Powell’s Jackson Hole remarks
22-Aug-25 16:30 ET
Dow +846.24 at 45631.74, Nasdaq +396.22 at 21495.14, S&P +96.74 at 6466.91
[BRIEFING.COM] The stock market rallied today after Fed Chair Powell's speech at the Jackson Hole symposium bolstered the probability of a September rate cut, resulting in broad-based gains that largely made up for a previously challenging week.
The DJIA (+1.9%) soared past its record high levels, posting a new record intraday (45,757.84) and closing high (45,631.74). Meanwhile, the S&P 500 (+1.5%) came within three points of its own all-time high level before finishing just shy of its record close. The tech-heavy Nasdaq Composite (+1.8%) still has some ground to cover before it goes record hunting again due to losses incurred earlier in the week.
In particular, the market was enthused by Mr. Powell's line noting that "with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," which the market took as an open-mindedness to easing.
The probability of a 25-basis point rate cut at the September FOMC meeting now stands at 83.1%, up from 75.0% yesterday, according to the CME FedWatch tool.
It is worth noting that this probability did decrease somewhat from a probability in the low 90s earlier in the day, as there are still lingering inflation concerns that could stifle a rate cut.
Cleveland Fed President Beth Hammack (non-voting FOMC member) expressed a more hawkish view in a CNBC interview, in which she stressed that while she is open-minded heading into September, her focus remains on inflation, where she feels the Fed is still missing badly on its mandate.
However, this did little to thwart the stock market off its strong upward course.
Small-cap stocks, with their greater domestic focus and higher sensitivity to borrowing costs, performed exceptionally well.
The Russell 2000 advanced 3.8% today, making it the top performer among the major averages for the week after starting the session with a modest week-to-date loss.
Homebuilders also excelled with the prospect of a friendlier rate environment, with the iShares U.S. Home Construction ETF posting a 5.6% gain.
The S&P Mid Cap 400, for its part, added 2.7%.
The Invesco S&P 500 High Beta ETF added 3.3% today, reinforcing the market's strong risk-on sentiment.
While the Vanguard Mega Cap Growth ETF (+1.5%) performed more in line with the broader market, mega-cap gains were a welcome sight after a tough week that saw the mega-cap index finish with a 1.1% week-to-date loss.
Tesla (TSLA 340.02, +19.91, +6.22%) was a notable standout among the cohort, surging past its 200-day moving average (328.40) and helping the consumer discretionary sector (+3.2%) capture the widest gain today.
In total, ten S&P 500 sectors finished with gains, with the energy (+2.0%), communication services (+1.9%), materials (+1.7%), and financials (+1.7%) sectors among the best performers.
The PHLX Semiconductor Index advanced 2.7% after several choppy previous sessions, getting back to its unchanged level for the week.
Only the defensive consumer staples sector (-0.4%) saw a modest loss.
Breadth figures denote the scope of today's rally, with advancers outpacing decliners by a nearly 10-to-1 margin on the NYSE and a greater than 5-to-1 clip on the NASDAQ.
Today's rally reinforces investor optimism for potential policy easing and sets a positive tone as traders position for the final stretch of August.
U.S. Treasuries enjoyed a strong Friday outing that lifted the 10-year note and shorter tenors into positive territory for the week while the long bond added to this week's gain.
The 2-year note yield settled down ten basis points to 3.69%, the 10-year note yield settled down seven basis points to 4.26%, and the 30-year note yield settled down four basis points to 4.88%.
There was no economic data of note today.
- Nasdaq Composite: +11.3% YTD
- S&P 500: +10.0% YTD
- DJIA: +7.3% YTD
- Russell 2000: +5.9% YTD
- S&P Mid Cap 400: + 4.3% YTD
Hard to find weakness amid broad-based advance
22-Aug-25 15:30 ET
Dow +862.93 at 45648.43, Nasdaq +406.41 at 21505.33, S&P +97.57 at 6467.74
[BRIEFING.COM] As the market enters the final half hour of the session, the major averages look to close in on stout gains that negate much of this week's earlier pressures.
Today's advance featured nearly every corner of the market, making it harder to find pockets of weakness amid resounding strength.
Still, some names were left out of today's advance.
Several defense stocks, such as GE Aerospace (GE 266.74, -1.97, -0.73%), Northrop Grumman (NOC 591.79, -5.42, -0.91%), and Lockheed Martin (LMT 445.30, -1.90, -0.42%), traded lower, resulting in a relatively modest gain for the iShares U.S. Aerospace and Defense ETF (+0.7%).
Cellphone carriers also faced pressure, with T-Mobile US (TMUS 252.41, -5.75, -2.23%), AT&T (T 28.71, -0.73, -2.46%), and Verizon (VZ 44.30, -0.72, -1.61%) all expanding upon yesterday's losses.
Major averages look to higher finish amid broad-based gains
22-Aug-25 15:00 ET
Dow +865.79 at 45651.29, Nasdaq +405.90 at 21504.82, S&P +98.91 at 6469.08
[BRIEFING.COM] The major averages are little changed from previous levels, trading in a tight range near session highs that were first reached around 11:00 ET.
The consumer discretionary sector (+3.1%) has continued to widen its gains today, with several cruise line companies among its top-performers, including Norwegian Cruise Line (NCLH 25.01, +1.65, +7.06%) and Carnival (CCL 31.22, +1.96, +6.68%).
Tesla (TSLA 338.85, +18.74, +5.85%) also captures a solid gain, making it the best performing "magnificent 7" stock today.
In the information technology sector (+1.4%), Intel (INTC 25.12, +1.62, +6.91%) is among the best-performing names, with CNBC reporting that CEO Lip-Bu Tan will meet with President Trump again at the White House this afternoon.
S&P 500 jumps 99 points, but tech and homebuilders steal the show on rate cut hopes
22-Aug-25 14:30 ET
Dow +849.54 at 45635.04, Nasdaq +416.79 at 21515.71, S&P +99.03 at 6469.20
[BRIEFING.COM] The S&P 500 (+1.55%) is up 99 points this afternoon, but with more aggressive gains elsewhere those marks are only good enough for third place.
Briefly, S&P 500 constituents Enphase Energy (ENPH 38.00, +3.42, +9.89%), Builders FirstSource (BLDR 143.89, +10.67, +8.01%), and Mohawk (MHK 133.09, +8.92, +7.18%) pepper the top of the standings. Rate-sensitive solar stocks, like ENPH, move higher today on the prospect of a rate cut in September becoming more likely, with BLDR and other homebuilders moving higher as the prospect of rate cuts from the Fed could translate into better demand for mortgages and, by extension, new homes.
Meanwhile, Intuit (INTU 662.99, -34.77, -4.98%) is at the bottom of the average as some called the FY26 guidance conservative.
Dovish Fed signals, weak dollar drive gold to weekly gain
22-Aug-25 14:00 ET
Dow +910.97 at 45696.47, Nasdaq +431.70 at 21530.62, S&P +105.46 at 6475.63
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+2.05%) is atop the major average this afternoon, up about 430 points.
Gold futures settled $36.90 higher (+1.1%) at $3,418.50/oz, ultimately up +1.1% on the week; the rally reflects sentiment toward Fed Chair Jerome Powell's speech at Jackson Hole, where Mr. Powell gave dovish signals that served to weaken the U.S. dollar. This comes amid economic softening, rising jobless claims, and persistent inflation above target. With rate-cut expectations still elevated despite some pullback, and continued geopolitical uncertainty fueling safe-haven demand, the gold market is positioning for potential further upside.
Meanwhile, the U.S. Dollar Index is now down -1.1% to $97.58.
Ross Stores higher on Q2 results; tariffs a headwind, but back-to-school shows early strength (ROST)
Ross Stores (ROST +1%) is ticking higher today after reporting its Q2 (Jul) results last night. This off-price retailer reported EPS above expectations. EPS included an $0.11 negative impact from tariff-related costs, though that was less than expected. Revenue was in line with consensus estimates, growing 4.6% yr/yr to $5.53 bln. It was also nice to see ROST provide Q4 EPS and comp guidance, providing extra visibility towards the end of the year, after withdrawing its annual guidance in Q1 (Apr).
More generally, this is similar to what we saw in TJX's (TJX) Q2 report earlier in the week, as both retailers are benefitting from value-seeking consumers drawn to their lower prices.
- ROST saw a sequential improvement in sales trends relative to the first quarter, with a positive change in trend in nearly all major merchandise categories and most regions. As a result, Q2 comps came in at +2%, above the midpoint of its prior guidance of flat to +3%. Encouragingly, management noted sales rebounded sharply in July, primarily due to the early sales performance related to back-to-school season, which bodes well for Q3 (Oct).
- In particular, cosmetics was its best merchandise area, while the Southeast and Midwest were its strongest markets. Notably, comp sales at dd's DISCOUNTS were ahead of Ross Stores, highlighting consumer focus on value. That said, both chains saw growth in both traffic and basket size, with strong momentum exiting the quarter.
- For Q3 and Q4 (Jan), ROST sees comps of +2-3%. Management noted that it is looking toward the 2H25 with some cautious optimism, so there is some conservatism embedded in the guide. That said, they also noted that Q3 compares against a softer quarter last year than Q2, which could provide a relative tailwind.
- On the other hand, tariffs are proving to be a bit of a headwind. Its operating margin decreased 95 bps yr/yr to 11.5%, which included an approximate 90 bps negative impact from tariff related costs, while merchandise margin slipped 30 bps. Encouragingly, it does see tariff pressures easing in 2H25, with modest pressure in Q3, further mitigated in Q4, reflecting merchant progress and increased use of closeout deals.
Overall, this was a solid Q2 for ROST and continues the trend of what we saw with TJX earlier in the week. Investors are encouraged to see the sequential improvement from Q1, capped by a sharp rebound in July tied to early-back-to-school demand, which bodes well for Q3. Its Q3 revenue guidance of 5-7% growth (computes as $5.32-5.43 bln) sits above the mid-point of consensus estimates. Looking ahead, another off-price retailer, Burlington Stores (BURL), reports next week on Thursday.
NVIDIA halts H20 production amid China’s security concerns, eyes B30A launch to recover sales (NVDA)
NVIDIA (NVDA) has reportedly halted production of its H20 AI chip, specifically designed for the Chinese market to comply with stringent U.S. export controls, following security concerns raised by Beijing, according to The Information. The H20, less powerful than NVDA’s flagship AI chips, was a critical component of the company’s strategy to maintain its foothold in China. Recall that in mid-July, NVDA announced expectations to resume H20 sales to China after a U.S. export ban in April 2025 halted shipments, but no export licenses have been granted in the weeks since, leaving the company’s plans in limbo.
- The Chinese government, through its Cyberspace Administration of China, has expressed concerns over potential “backdoors” in the H20 chip that could enable remote access or control, prompting Beijing to instruct major tech firms like Tencent, ByteDance, and Alibaba (BABA) to suspend purchases pending a national security review. NVDA CEO Jensen Huang has firmly denied these allegations, stating in Taipei that “there are no backdoors” in the H20 and emphasizing that the chip is not intended for military or government infrastructure use.
- Prior to the April export restrictions, the H20 was a significant revenue driver in China, NVDA’s second-largest market. The company incurred a $4.5 bln charge in Q1 due to unsellable H20 inventory and was unable to ship $2.5 bln in produced chips, with projections of an additional $8 bln in lost H20 sales for Q2, highlighting the severe financial impact of the restrictions and the urgency of resuming sales.
- Also today, Huang revealed that NVDA is in discussions with U.S. authorities to secure export licenses for a new chip, the B30A, based on the company’s advanced Blackwell architecture, intended for AI data centers in China. The B30A, while more powerful than the H20, operates at approximately half the speed of NVDA’s top-tier B300 chips, aligning with U.S. export control requirements to limit China’s access to cutting-edge AI technology. This move signals NVDA's intent to adapt its offerings to navigate the complex regulatory landscape while addressing China’s demand for AI infrastructure, though the chip’s approval remains uncertain.
- The potential launch of the B30A could help offset the substantial revenue losses from the H20 by providing Chinese customers with a compliant, higher-performance alternative for AI workloads. However, significant uncertainties persist, including whether Chinese regulators will accept the B30A given ongoing security concerns and whether the U.S. will grant export licenses, especially as geopolitical tensions and U.S. proposals for chip location-tracking systems fuel skepticism in Beijing.
- The lack of clarity on the B30A’s bill of materials, production timeline, and regulatory approval adds further risk, potentially disrupting NVDA’s supply chain and customer commitments in China if delays or rejections occur.
NVDA's business in China remains in flux as security concerns and halted H20 production create headwinds, with the proposed B30A chip offering a potential lifeline contingent on regulatory approvals. This uncertainty casts a shadow over the company’s outlook as investors await its pivotal Q2 earnings report on August 27, which will likely provide further insight into the financial impact and strategic path forward.
Intuit ends FY25 on a down note as FY26 guidance was fairly lackluster (INTU)
Intuit (INTU -6%) ended FY25 with a solid earnings beat for Q4 (Jul), although it was not nearly the blowouts we saw in Q2-Q3. The guidance is the main reason why the stock is lower today. The mid-point of Q1 (Oct) was above range but revenue was light. We also got our first look at FY26 guidance, which was just in-line and some of the segment guidance was a bit weak. INTU focuses on SMBs and consumers (QuickBooks, TurboTax, Credit Karma, Mailchimp).
- Outside of tax season, its largest segment is usually its Global Business Solutions Group (mostly QuickBooks and Mailchimp). GBSG revenue jumped 18% yr/yr to $3.0 bln. INTU says its all-in-one platform is resonating with customers, particularly as it moves up market. INTU is making progress consolidating customers' data and spending. Robust growth in Online Ecosystem revenue was driven by both Online Accounting (+23%) and Online Services (+19%), fueled by higher prices, customer growth, and mix shift.
- Mailchimp has been a bit of a drag on GBSG segment revs. In Q4, Mailchimp revenue was down slightly yr/yr, in-line with expectations. Nevertheless, INTU is confident in delivering an all-in-one platform that integrates Mailchimp and QuickBooks. INTU expects Mailchimp to exit FY26 growing double digits.
- Its Credit Karma segment was a laggard in FY23, but recovered nicely in FY24 and that continued in FY25. Credit Karma revenue in Q4 grew 34% yr/yr to $649 mln. Personal loans accounted for 15 points of growth, credit cards 13 points, and auto insurance 5 points. INTU reiterated its long-term CK revenue growth expectations of 10-15%, reflecting the current size and scale of the business.
- Penetrating the mid-market has been a big focus for Intuit and it made good progress. It wants to serve large and more complex customers ($2.5-100 mln annual revs), which represent an $89 bln TAM. INTU believes it's just scratching the surface with its penetration in that addressable market.
So, why is the stock lower? There were definitely some positives, but Q4 is INTU's smallest revenue quarter each year, so maybe it gets a little less weight. Also, the upside was less impressive than Q2-Q3. More importantly, we think investors are viewing the Q1 and FY26 guidance as disappointing.
Q1 guidance was mixed while FY26 was just in-line. And when we drill down to the segments, it is a bit disappointing as well. GBSG guidance is for revenue growth of +14-15% vs 16% in FY25. Consumer Group growth at +8-9% in FY26 vs +10% in FY25. And probably most disappointing was Credit Karma with FY26 guidance of +10-13% in FY26 vs +32% in FY25. The stock had been declining in recent weeks before the report on concerns about FY26 guidance and it seems those concerns were well-founded.
Workday beats EPS expectations yet again, but cautious subscription revenue guidance weighs (WDAY)
Workday (WDAY) reported solid 2Q26 results, surpassing earnings expectations with EPS of $2.21, reflecting a robust 26% yr/yr increase, consistent with the company’s historical trend of beating earnings forecasts. However, despite this positive performance, the stock is trading sharply lower as subscription revenue of $2.169 bln merely met consensus expectations, and Q3 subscription revenue guidance of $2.235 bln, implying 14% yr/yr growth, disappointed investors expecting a stronger outlook.
- The slowing growth in WDAY’s subscription revenue, a critical driver of its business model, has been a persistent concern for investors, contributing to the stock’s lackluster performance. In Q2, subscription revenue grew 14% yr/yr, down from 17% in 2Q25 and 16% in 3Q25, with 3Q26 guidance also projecting 14% growth.
- This deceleration may stem from macroeconomic pressures, including customers tightening IT budgets and reassessing spending amid economic uncertainties. Additionally, increased competition in the human capital management and financial software sectors -- particularly from Oracle (ORCL) -- may be pressuring WDAY’s market share, as enterprises prioritize cost optimization over expansive software investments.
- WDAY’s strategic focus on AI innovation remains a key growth pillar, with the company reporting an impressive 100% net-new AI annual contract value (ACV) growth in Q2. Recent AI product launches include Workday Developer Co-Pilot, which simplifies AI integration for developers, and the Workday Agent Partner Network, enabling third-party developers to build AI-driven applications on its platform.
- Additionally, WDAY’s acquisitions of Flowise, a low-code AI agent builder, and the planned acquisition of Paradox, a conversational AI platform for recruiting, enhance its capabilities in automating tasks like job application screening, interview scheduling, and workforce planning. Despite these advancements, the new AI tools have yet to significantly boost subscription revenue growth, suggesting that monetization and broader adoption may take time to materialize.
- The acquisition of Paradox, a company specializing in AI-powered recruiting automation, represents a strategic move to bolster WDAY’s talent acquisition offerings, though financial terms were not disclosed. Paradox’s technology, which leverages conversational AI to streamline job applications and improve candidate response times, aligns well with WDAY’s focus on enhancing HR efficiency for high-volume frontline industries. The acquisition, expected to close in 3Q26, could strengthen WDAY’s competitive positioning in the talent management space, particularly as enterprises prioritize streamlined hiring processes.
- However, with guidance indicating the deal’s inclusion in the modestly raised FY26 subscription revenue forecast to $8.815 bln from $8.80 bln, the acquisition appears to have limited immediate revenue contribution.
- A bright spot in WDAY’s Q2 performance was its continued margin expansion and profitability growth, with non-GAAP operating margin improving to 29.0% from 24.9% in the prior-year period. This 410 bps increase was driven by operational efficiencies, disciplined cost management, and a favorable revenue mix skewed toward high-margin subscription revenue, which accounted for 92% of total revenue. The company’s raised FY26 non-GAAP operating margin guidance to 29% from 28.5% underscores its ability to balance AI-driven investments with profitability.
WDAY delivered solid Q2 results, particularly in earnings growth and margin expansion, reinforcing its operational strength. However, the in-line subscription revenue and cautious Q3 guidance fueled concerns about slowing growth, contributing to the stock’s post-earnings decline.
Nordson beats Q3 expectations, boosts share repurchase program amid robust ATS performance (NDSN)
Nordson's (NDSN) 3Q25 earnings report is propelling the stock sharply higher as the industrial technology company surpassed EPS and revenue expectations while reaffirming its full-year sales and EPS guidance. Additionally, NDSN announced a new $500 mln share repurchase authorization, bringing its total repurchase capacity to approximately $800 mln, signaling confidence in its financial health and commitment to enhancing shareholder value through disciplined capital allocation.
- The company's 12% yr/yr revenue growth was driven by an 8% contribution from acquisitions, notably the May 2024 $800 mln acquisition of Atrion Corporation, a supplier of medical devices and components, which significantly boosted the Medical and Fluid Solutions segment. The Atrion acquisition contributed to a 31% sales increase in this segment, with reported sales reaching $219 mln, though organic growth was flat when including the contract manufacturing business slated for divestiture.
- Overall, NDSN's sales grew by 2%, underpinned by the company’s diversified portfolio and operational execution across its precision technology offerings. On that note, the Advanced Technology Solutions (ATS) segment emerged as the standout performer, with revenue climbing 17% to $171 mln. The strong growth in ATS was fueled by heightened demand for electronics dispense product lines, particularly for semiconductor packaging applications, where NDSN’s Spectrum S2 system has solidified its position as an industry standard.
- This demand reflects a rebound in electronics markets exiting a cyclical downturn, with NDSN capitalizing on its technological leadership and close-to-customer business model to capture market share. The segment’s operating profit rose by $11 mln to $37 mln, and its EBITDA margin expanded to 24%, up from 21% a year ago, demonstrating strong conversion on incremental sales and operational efficiencies.
- The ATS segment’s strength helped offset sluggishness in NDSN’s largest segment, Industrial Precision Solutions (IPS), which saw a 2% organic sales decline, with total sales remaining nearly flat yr/yr. The weakness in IPS was primarily driven by softer demand for polymer processing systems, impacted by cautious customer spending amid economic uncertainty and higher interest rates affecting capital-intensive projects. This was partially offset by growth in nonwovens, precision agriculture, and packaging product lines, but the segment’s performance reflects broader market challenges in industrial end markets, particularly in polymer processing applications.
- NDSN reaffirmed its FY25 guidance that was initially provided in December 2024 within its 4Q24 earnings report. Specifically, NDSN had guided for EPS of $9.70-$10.50 and sales of $2.75-$2.87 bln at that time. With a 5% sequential decline in backlog following a strong Q3, the company remains confident in achieving these targets, contingent on the completion of the medical contract manufacturing business divestiture in 4Q25, which is expected to streamline operations and enhance EBITDA margins in the Medical and Fluid Solutions segment.
NDSN’s 13% adjusted EPS growth, driven by exceptional performance in the ATS segment, underscores its ability to capitalize on high-growth electronics markets while navigating challenges in its IPS segment. The new $500 mln share repurchase program, combined with a healthy balance sheet and strategic divestiture, positions NDSN to enhance EPS growth and deliver long-term shareholder value.
The Big Picture
Last Updated: 22-Aug-25 12:52 ET | Archive
No fire in the (Jackson) hole
Briefing.com Summary:
*Hawkish fears fizzled after Fed Chair Powell's speech signaled a nod toward policy easing.
*Fed Chair Powell leaned more on employment risk than inflation risk.
*The market had a textbook response to a speech it viewed as being more dovish-minded.
Leading up to Fed Chair Powell's speech at the Jackson Hole Symposium, a fuse had been lit in the fed funds futures market that was burning away at the probability of a 25 basis-point rate cut at the September 16-17 FOMC meeting. Specifically, the probability had been trimmed to 71.3% from 92.1%, as there was a budding fear that Fed Chair Powell might ignite a bomb with a hawkish-sounding speech.
That fear began to build after the release of the July Producer Price Index, and it continued to build following recent remarks from other Fed officials signaling their reluctance to cut rates and the release of the minutes for the July 29-30 meeting, which stipulated that the majority of participants judged the upside risk to inflation as greater than the downside risk to employment.
That was before the release of the July Employment Situation Report, which showed large downward revisions for May and June that left the three-month average for nonfarm payrolls at a lowly 35,000.
In listening to Fed Chair Powell's speech, he sounded more attentive to the downside risk to employment than the upside risk to inflation. Accordingly, he snuffed out the fuse, and the only bomb that went off was the one that got dropped on short sellers.
A Handshake Deal
The stock market has been clamoring for a rate cut, and it now believes (again) that it will get one at the September FOMC meeting, barring some real inflation shock in the August CPI and PPI reports or a major upward surprise for August nonfarm payrolls, all of which will be released before the September FOMC meeting.
In the wake of Fed Chair Powell's speech, the probability of a 25 basis-point rate cut in September returned to north of 90.0%, stock prices surged, with small-cap stocks leading the charge, the 2-yr note yield dropped 10 basis points to 3.68%, and the U.S. Dollar Index declined 0.9% to 97.70.
Those are textbook responses for a market anticipating a friendlier interest rate environment. Just how friendly the Fed gets remains to be seen, but the market effectively has a handshake deal with Fed Chair Powell on a rate cut in September.
So, what was said that prevented things from blowing up?
- Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.
- Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising.
- GDP growth has slowed notably in the first half of this year to a pace of 1.2 percent, roughly half the 2.5 percent pace in 2024. The decline in growth has largely reflected a slowdown in consumer spending.
- A reasonable base case is that the effects [of tariffs] will be relatively short-lived—a one-time shift in the price level.
- Given that the labor market is not particularly tight and faces increasing downside risks, that outcome [workers demanding and getting higher wages] does not seem likely.
- Measures of longer-term inflation expectations, however, as reflected in market- and survey-based measures, appear to remain well anchored and consistent with our longer-run inflation objective of 2 percent.
- Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance.
- In the absence of inflationary pressures, it might not be necessary to tighten policy based solely on uncertain real-time estimates of the natural rate of unemployment.
These remarks are not arranged in any specific order, although it is fair to say that the remark following the first bullet point is what kept the bomb from detonating. That was Fed Chair Powell's tacit signal to the market that he is on board with a rate cut in September based on what he knows today.
Briefing.com Analyst Insight
It is possible that the employment and inflation reports for August light the fuse again, yet that determination will have to wait.
Fed Chair Powell reminded everyone, however, that the Fed cannot take the stability of inflation expectations for granted and that it will not allow a one-time increase in the price level to become an ongoing inflation problem. That was a nod toward the understanding that tariffs, and any related price adjustments, could still become problematic if they force a shift in inflation expectations, meaning the Fed would operate with a restrictive policy if that was the case.
That case will be litigated at another time. The market wanted one thing and one thing only out of the Jackson Hole speech. It wanted a signal that a September rate cut is more likely than not.
Fed Chair Powell delivered the goods in that respect. Consequently, the stock market rallied, feeling a great deal of relief that Fed Chair Powell didn't ignite a fire in the hole.
-- Patrick J. O'Hare, Briefing.com
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