Fed Could Start Buying Treasuries, says Marlborough's Athey
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Yahoo
12 minutes ago
- Yahoo
Stocks Supported by Fed Rate Cut Hopes
The S&P 500 Index ($SPX) (SPY) today is up +0.90%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.28%. September E-mini S&P futures (ESU25) are up +0.95%, and September E-mini Nasdaq futures (NQU25) are up +1.36%. Stock indexes are moving higher today as they recover from some of last Friday's sharp losses. Strength in the Magnificent Seven technology stocks and semiconductor chip makers is supporting the broader market. Additionally, the expectation that last Friday's dismal payroll and ISM manufacturing reports will prompt the Fed to lower interest rates is underpinning equity prices. The chances of a Fed rate cut at the September FOMC meeting rose to 90% from 40% before the reports were released. More News from Barchart Find Winning Momentum Trades With This Moving Average Stock Screener Tariffs, Earnings and Other Can't Miss Items this Week This Blue-Chip Dividend Stock Is Stuck in the Tariff Crosshairs. Can Cost Cuts Save the Day? Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. In the latest tariff news, President Trump last Thursday raised tariffs on some Canadian goods to 35% from 25% and announced a 10% global minimum, along with tariffs of 15% or higher for countries with trade surpluses with the US, effective after midnight on August 7. According to Bloomberg Economics, the average US tariff will rise to 15.2% if rates are implemented as announced, up from 13.3% earlier, and significantly higher than the 2.3% in 2024 before the tariffs were announced. The markets this week will focus on earnings reports and any fresh tariff or trade news. Later this morning, Jun factory orders are expected to fall -4.8% m/m. On Tuesday, the June trade deficit is expected to narrow to -$61.3 billion. Also on Tuesday, the July ISM services index is expected to climb by +0.7 to 51.5. On Thursday, weekly initial unemployment claims are expected to increase by +3,000 to 221,000. Also on Thursday, Q2 nonfarm productivity is expected to be +2.0% with unit labor costs rising +1.5%. Federal funds futures prices are discounting the chances for a -25 bp rate cut at 90% at the September 16-17 FOMC meeting and 76% at the following meeting on October 28-29. Early results show that S&P 500 earnings are on track to rise +4.5% for the second quarter, better than the pre-season expectations of +2.8% y/y, according to Bloomberg Intelligence. With over 66% of S&P 500 firms having reported Q2 earnings, around 82% exceeded profit estimates. Overseas stock markets today are mixed. The Euro Stoxx 50 is up sharply by +1.35%. China's Shanghai Composite rebounded from a 2-week low and closed up +0.66%. Japan's Nikkei Stock 225 fell to a 1.5-week low and closed down -1.25%. Interest Rates September 10-year T-notes (ZNU25) today are up +4 ticks. The 10-year T-note yield is down -1.4 bp to 4.202%. Sep T-notes today recovered from overnight losses and rallied to a 3-month nearest-futures high, and the 10-year T-note yield fell to a 1-month low of 4.196%. T-notes are climbing on positive carryover from last Friday's weaker-than-expected payroll and ISM manufacturing reports, which boosted the chance of a Fed rate cut at next month's FOMC meeting to 90% from 40% before the reports. Also, today's -2% drop in WTI crude oil prices has reduced inflation expectations, a bullish factor for T-notes. In addition, today's strength in European government bonds is providing carryover support to T-notes. Gains in T-notes are limited by a rebound in equity markets, which curbs safe-haven demand for government securities. Also, supply pressures are weighing on T-notes as the Treasury will auction $125 billion of T-notes and T-bonds in this week's August quarterly refunding, beginning with Tuesday's $58 billion auction of 3-year T-notes. European government bond yields today are moving lower. The 10-year German bund yield fell to a 1.5-week low of 2.638% and is down -3.5 bp to 2.643%. The 10-year UK gilt yield dropped to a 1-month low of 4.502% and is down -1.6 bp to 4.512%. The Eurozone Aug Sentix investor confidence index unexpectedly fell -8.2 to -3.7, weaker than expectations of an increase to 6.9. Swaps are discounting the chances at 16% for a -25 bp rate cut by the ECB at the September 11 policy meeting. US Stock Movers Strength in the Magnificent Seven technology stocks is supporting gains in the broader market. Alphabet (GOOGL) is up more than +1%. Also, Nvidia (NVDA), Tesla (TSLA), Meta Platforms (META), Apple (AAPL), and Microsoft (MSFT) are up more than +1%. Chip stocks are moving higher today, a supportive factor for the overall market. Advanced Micro Devices (AMD), Marvell Technology (MRVL), Broadcom (AVGO), Micron Technology (MU), and ARM Holdings Plc (ARM) are up more than +2%. Also, Lam Research (LRCX), ASML Holding NV (ASML), Applied Materials (AMAT), and Microchip Technology (MCHP) are up more than +1%. Steelcase (SCS) is up more than +46% after being acquired by HNI for $2.2 billion or about $18.30 per share. Idexx Labs (IDXX) is up more than +22% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q2 revenue of $1.11 billion, better than the consensus of $1.07 billion, and raising its full-year EPS forecast to $12.40-$12.76 from a previous forecast of $11.93-$12.43, stronger than the consensus of $12.21. Wayfair (W) is up more than +11% after reporting Q2 adjusted EPS of 87 cents, well above the consensus of 33 cents. Tyson Foods (TSN) is up more than +4% after reporting Q3 sales of $13.88 billion, above the consensus of $13.55 billion. Spotify (SPOT) is up more than +7% after it said it will increase the monthly cost of premium subscriptions in Markets across South Asia, the Middle East, Africa, Europe, and Latin America. Walt Disney (DIS) is up more than +2% to lead gainers in the Dow Jones Industrials after Morgan Stanley raised its price target on the stock to $140 from $120. BJ's Restaurants (BJRI) is up more than +1% after Benchmark Co. upgraded the stock to buy from hold with a price target of $44. Bruker Corp (BRKR) is down more than -11% after reporting Q2 revenue of $797.4 million, below the consensus of $810.2 million. ON Semiconductor (ON) is down more than -7% to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q3 adjusted gross margin of 36.5% to 38.5%, the midpoint weaker than the consensus of 37.7%. Berkshire Hathaway (BRK.B) is down more than -2% after reporting Q2 operating earnings fell -3.8% y/y to $11.16 billion. Waters (WAT) is down more than -2% after forecasting Q3 adjusted EPS of $3.15-$3.25, the midpoint below the consensus of $3.23. Earnings Reports (8/4/2025) Axon Enterprise Inc (AXON), Coterra Energy Inc (CTRA), Diamondback Energy Inc (FANG), Equity Residential (EQR), IDEXX Laboratories Inc (IDXX), Loews Corp (L), ON Semiconductor Corp (ON), ONEOK Inc (OKE), Palantir Technologies Inc (PLTR), SBA Communications Corp (SBAC), Simon Property Group Inc (SPG), Tyson Foods Inc (TSN), Vertex Pharmaceuticals Inc (VRTX), Waters Corp (WAT), Williams Cos Inc/The (WMB). On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on
Business Insider
15 minutes ago
- Business Insider
'On the precipice of recession': A top economist warns that not even the Fed may be able to rescue the US from a downturn
The top economist at Moody's has some thoughts on the economy's future, and they're not particularly upbeat. Mark Zandi, chief economist at Moody's Analytics, said over the weekend that he believes a recession is likely, and that even eagerly anticipated rate cuts from the Federal Reserve probably won't stave off a downturn. The economist said in a series of posts on X that the US economy is "on the precipice of recession," with consumer spending weakening and risks facing both construction and manufacturing. "With inflation on the rise, it is tough for the Fed to come to the rescue," Zandi said. President Donald Trump has repeatedly demanded that the central bank slash interest rates this year, with some officials recently backing those calls. They argue that the Fed risks being too late to support a weakening labor market. But Zandi thinks a recession is coming regardless, and rate cuts won't be able to offset two forces he thinks are pressuring the economy: tariffs and immigration policy. "The tariffs are cutting increasingly deeply into the profits of American companies and the purchasing power of American households," he said. "Fewer immigrant workers means a smaller economy." While Zandi acknowledged that the unemployment rate has remained low, he added that the growth of the US labor force has "gone sideways" as participation falls and the foreign-born workforce continues to shrink. Recent data show that the US labor market is struggling more many observers thought. Figures from the Bureau of Labor Statistics showed that US employers added 73,000 jobs in July, much less than economists were expecting. Many job seekers have also reported bleak prospects as companies scale back hiring.
Forbes
15 minutes ago
- Forbes
Why The Dollar's Reserve Status May Be America's Biggest Liability
The dollar is the global reserve currency. This has long been called the 'exorbitant privilege'. It's considered a huge advantage for the U.S. that the dollar holds this status – or so the story goes. But wait! This sacred cow might not be such a blessing after all. Perhaps the U.S. dollar's 'exorbitant privilege' is actually an exorbitant curse. Firstly, with my tongue firmly in cheek – and with a desire to engage U.S. readers and give them at least a chance to agree with what I'm about to propose – let me point out that the term 'exorbitant privilege' is actually French in origin. That alone might suggest it's not such a brilliant idea after all. Second, consider this: in dollar terms, there are now twice as many Chinese yuan (using M2 as the measure) as there are U.S. dollars. One could say that China has twice the money of the U.S. – which translates to twice the money for four times the people, or half the money per capita compared to Americans. Still, you might wonder: if they have all that liquidity, why don't they want to be the global reserve currency? Let's examine this 'privilege'. Sure, having the global reserve currency allows you to throw your weight around. And yes, you can always print more 'confetti' if you run into a balance-of-payments problem. Printing reserve currency essentially gives you money for nothing – which is nice. But… You also have to export your money to buy stuff. Otherwise, the world must either abandon your currency as the global standard or suffer a liquidity crisis because there's not enough of your money circulating through the system. Here's the rub: exporting money to buy imports requires a persistent balance-of-payments deficit – the very thing former President Trump tried to reverse. Back when the U.S. was running the world after 1946, flush with wealth while Europe was busy destroying itself, this deficit wasn't such a big deal. But as time goes on, and more and more dollars flow out while more and more goods come in, the country starts hollowing itself out. That 'confetti' comes back home in the hands of the folk who sold you stuff, and they use it to buy up your assets. Eventually, all you produce is confetti, and all you own is a printing press. That should sound familiar. A nation that consistently profits from trade has both assets and liabilities on its balance sheet. But a country that constantly prints confetti to fund imports ends up with nothing but liabilities – and a worn-out printing press. Let's look at this chart: It's a 15+ year chart showing how the U.S. dollar has risen 20-25% against the euro and the pound, and nearly doubled against the yen. This dollar strength isn't due to the U.S. running a balanced economy, a responsible government budget, or following sound financial discipline. No – this strength is a byproduct of the dollar's status as the world's reserve currency. That reserve status allows the U.S. to run up enormous debt and massive trade deficits, gradually hollowing out its economy from within. The so-called 'exorbitant privilege' has allowed the U.S. to dissolve into luxury. But – as people like to say these days – it's not sustainable. Woe, thrice woe, if the U.S. loses its global reserve status. So what? Europe doesn't need it. China doesn't want it. Japan isn't asking for it. So what are the actual benefits? So is being the global reserve currency a privilege or a curse? Like all mechanisms, when taken to extremes, what begins as a benefit can become a poison. Given the scale of the U.S.'s deficits, the patient may already be poisoned. The policy of maintaining the dollar's global reserve status may persist, may fade, or may be abandoned. But its role as a channel for economic dissipation is nearing its end, as the sustainability of chronic, rolling deficits is now visibly hitting its limits. Meanwhile, China doesn't want to be the global reserve currency – even though it could be. Their reasoning is simple: they want to keep exporting goods, take your confetti, and turn around and buy up assets in your country. Eventually, they own all the good stuff. If you do this with land, you're called colonial; if you do it with productive assets, you're called rich. As long as the sacred cow of the dollar's global reserve status roams the earth, the U.S. will continue selling off its family silver so its people can fill their double garages with plastic junk – believing this "exorbitant privilege" is a blessing, when in reality, it may be the curse that undoes them.
