🎬 Fed Flirts with a Rate Cut

Good afternoon! Waymo is cruising ahead in the robotaxi race, now clocking in over 100,000 paid rides per week in the U.S.—a major leap from the 50,000 weekly trips reported in May. That’s Waymo than last month! This surge comes as Alphabet, Waymo's parent company, announced a $5 billion boost to the driverless vehicle venture, aiming to expand its reach beyond its current stronghold in Sun Belt states. With its new "generation 6" self-driving system, Waymo is gearing up to offer services in a broader range of conditions and cut down on costly vehicle components. While domestic competitors face setbacks, Waymo is solidifying its lead, expanding its service areas in San Francisco and Phoenix, and operating the largest autonomous ride-hailing territory in the U.S.

MARKETS

• Stocks were on a wild ride today—starting strong, stumbling over weaker nonfarm payroll growth, and then rebounding after the Fed teased a potential September rate cut in their latest meeting minutes. By the end of the day, all three major indexes managed to close in the green, thanks to the Fed’s dovish tone that hinted at more economic easing if inflation continues to cool.

• The highlight? The Fed minutes showed that a "vast majority" of officials are leaning toward a rate cut next month, assuming the economy plays nice. Investors took that as a sign to keep the rally going, pushing the S&P 500 further into its August comeback after shaking off the longest win streak break of the year.

STOCKS
Winners & Losers

What’s up 📈

• Tempus AI ($TEM) soared 21.73%.

• Keysight Technologies ($KEYS) jumped 13.88% after delivering sales and earnings that significantly surpassed Wall Street's expectations, with forward guidance better than anticipated.

• Trump Media & Technology Group ($DJT) rose 13.00% after mounting a sudden turnaround following weeks of declines.

• Lucid ($LCID) advanced 10.49% after the CEO claimed the company has "taken the mantle from Tesla" in terms of technology, criticizing Tesla as being "distracted."

• Target ($TGT) powered 11.2% higher after posting stronger-than-expected fiscal second-quarter earnings and boosting its full-year profit forecast.

• TJX ($TJX) surged 6.11% after the company reported a "beat and raise" quarter, exceeding analysts' expectations for revenue, gross margin, and EPS.

• MicroStrategy ($MSTR) was up 5.78%.

What’s down 📉

• Macy's ($M) fell 12.91% after the company posted another quarter of declining sales, a month after turning down a $6.9 billion buyout offer.

• Franklin Resources ($BEN) dropped 12.56%, on pace for their largest drop in four years, after the company disclosed that the SEC had sent a Wells Notice to a top executive of one of Franklin’s money management businesses.

• JD. com ($JD) declined 4.15% after Walmart (WMT) decided to offload all of its shares and end its eight-year partnership with the Chinese e-commerce platform.

• Nordstrom ($JWN) decreased 3.16% after announcing its board of directors approved a quarterly dividend of 19 cents.

• H&R Block ($HRB) slipped 3.08% following insider selling activity.

• American Express ($AXP) dropped 2.68% as Bank of America analysts warned of weak consumer spending.

ECONOMY
Fed Flirts with a Rate Cut

The latest Fed minutes have everyone buzzing: Several officials hinted that a rate cut was on the table during their July meeting, but they ultimately decided to keep things steady. With inflation cooling off and unemployment edging higher, the Fed is now eyeing September as the likely time to hit the rate cut button. The central bank’s benchmark rate is sitting at a 23-year high, but the consensus is building that the economy might need a little relief sooner rather than later.

The Inflation-Labor Market Tug-of-War

It’s a balancing act over at the Fed. On one side, inflation is showing signs of backing down, which is music to the ears of policymakers. On the other, the labor market is starting to look a bit shaky, with some Fed members worried that a slow-down in job growth could snowball into something more serious. The debate inside the Fed is shifting, with more focus on managing risks to the job market while keeping a watchful eye on inflation. The big takeaway? If the numbers keep trending the way they are, a rate cut in September seems almost inevitable.

Markets Place Their Bets

Wall Street is already betting big on a September rate cut, and the Fed’s minutes have only fueled the fire. Futures markets are pricing in the first rate cut since the pandemic’s early days, and investors are gearing up for what could be a major shift in monetary policy. But it’s not all smooth sailing—there’s some political tension brewing. A rate cut so close to the presidential election could stir up controversy, especially since former President Trump has already voiced his opinion against it. On the flip side, some Democratic senators are pushing for the Fed to cut sooner, arguing that waiting too long could be just as politically charged.

Recent economic data has been a mixed bag, adding to the Fed’s conundrum. The July jobs report was weaker than expected, with hiring slowing down and unemployment ticking up to 4.3%. To make matters worse, a revision from the Bureau of Labor Statistics revealed that payroll growth over the past year might have been overstated by over 800,000 jobs (more on this below). This paints a less rosy picture of the labor market, suggesting that it’s been cooling off for longer than anyone realized. At the same time, inflation seems to be easing off, giving the Fed some breathing room to consider easing up on rates.

All Eyes on Jackson Hole

The Fed’s next move could set the tone for the economy as we head into the final stretch of the year. Fed Chair Jerome Powell is set to speak at the Jackson Hole symposium, and his words will be under the microscope as markets and analysts try to decipher the Fed’s next steps. With a rate cut looking more and more likely, the focus will be on how quickly the Fed plans to ease up on rates and what that means for the broader economic outlook. Will the Fed go for a modest cut in September, or could we see something more aggressive? Stay tuned—the stakes are high, and the markets are watching closely.

NEWS
Market Movements

• Target ($TGT) reported Q2 earnings of $2.57 per share, surpassing expectations, with revenue of $25.45 billion. Although sales were up 3%, the company issued a cautious outlook.

• Zoom Video Communications Inc. ($ZM) gave a sales forecast for the current quarter that beat analysts’ estimates as the company expands its suite of products.

• Walmart Inc. ($WMT) raised about $3.6 billion by selling its stake in Chinese e-commerce firm JD. com ($JD), winding down an eight-year partnership that appears to be paying diminishing returns amid a challenging landscape for Chinese tech giants.

• Apple ($AAPL)’s head of the App Store is leaving as part of a reorganization of the lucrative division, which has drawn regulatory scrutiny over concerns it wields too much power in the mobile software market.

• Ford Motor Co. ($F) is recalibrating its electrification strategy yet again, canceling plans for a fully electric sport utility vehicle in a shift that may cost the carmaker around $1.9 billion.

• The “Magnificent Seven” aren’t dominating the stock market anymore.

• Disney ($DIS) abandoned its claims that a wrongful death suit shouldn’t go to court because the plaintiff once signed up for a Disney+ trial.

• A federal judge has blocked an FTC rule intended to ban worker noncompete agreements, ruling that the FTC lacks the necessary authority.

LABOR MARKET
Jobs Growth? Not So Fast

Turns out the labor market wasn’t as hot as we thought. The Bureau of Labor Statistics just revised down its previous nonfarm payroll growth estimates by a whopping 818,000 jobs for the year ending in March. That’s nearly a million fewer jobs than initially reported, translating to a 30% cut from the original numbers. Yikes! So much for that robust job market everyone was touting.

The Reality Check

Initially, the BLS reported an average gain of 242,000 jobs per month during that period. Now, the revised figures suggest it was closer to 174,000—still decent, but far less than what was expected. The biggest downward revisions hit sectors like professional and business services, hospitality, and manufacturing. Meanwhile, a few areas, such as private education, health services, and transportation, actually saw slight upward revisions. Overall, though, this marks the steepest revision since the financial crisis in 2009, signaling that the cracks in the labor market may have been forming much earlier than anyone realized.

This labor market revision throws another wrench into the Federal Reserve’s plans. With the job market cooling faster than expected, the pressure is mounting on the Fed to cut interest rates, and soon. Traders are already betting on a rate cut in September, with some even eyeing a half-point reduction. Fed Chair Jerome Powell is set to address this at the Jackson Hole symposium, where all eyes will be on how the Fed plans to navigate this new data while trying to keep the economy on track.

What It Means for the Economy

So, what’s the big picture? While the labor market is lagging, other parts of the economy, like consumer spending, are holding up better than expected. That might be why markets didn’t freak out today, with stocks staying in the green despite the job market bombshell. Economists weren’t entirely caught off guard, especially after the unemployment rate nudged up to 4.3% in July. But the new figures underscore the challenges ahead for Powell and his team as they weigh the risks of inflation against a softening labor market.

Looking Ahead

These revised job numbers are still preliminary, with final revisions expected early next year—long after the Fed has likely made its rate decisions. But for now, the takeaway is clear: The labor market isn’t as strong as it seemed, and the Fed’s task just got slightly trickier. As Powell and other central bankers prepare to meet at Jackson Hole, they’ll need to rethink their strategy to balance a cooling job market with the broader economic outlook.

EARNINGS
Snowflake’s AI Buzz Falls Flat

By the Numbers:

• Revenue: $868.8 million (up 29% YoY)

• Adjusted EPS: $0.18 per share (beat estimates of $0.16)

• Net Loss: $317.77 million (or $0.95 per share)

• Product Revenue: $829 million (up 30% YoY)

Snowflake Inc. tried to win over investors with its latest sales outlook, but the results didn’t exactly dazzle. Despite launching new AI-focused products, the company’s projections for the upcoming quarter came in below some of the more optimistic expectations, leaving investors unimpressed. Shares took a 7% dive in extended trading, capping off a rough year where the stock has already dropped 32%.

Growing Pains

Under the leadership of new CEO Sridhar Ramaswamy, Snowflake has been busy rolling out tools aimed at the booming AI market. But the company is facing stiff competition from heavyweights like Databricks and Microsoft, and the pressure is starting to show. In the fiscal second quarter, Snowflake’s revenue grew by 29% to $868.8 million, marking the first time the company’s growth dipped below 30% since going public. And while product revenue increased by 30% to $829 million, it wasn’t enough to ease concerns about the company’s ability to keep pace in the AI race.

Snowflake did manage to raise its full-year product sales forecast to $3.36 billion, up from $3.3 billion, which sounds like good news—until you consider that some analysts had been hoping for even higher numbers. Meanwhile, the company’s net loss widened to $317.77 million, or $0.95 per share, significantly missing expectations. On the bright side, Snowflake added 1,000 new employees over the past year and now has 510 customers spending over $1 million annually.

The Security Snafu

Adding to Snowflake’s woes, the company has been dealing with the fallout from a hacking incident that compromised client accounts, including big names like AT&T and Ticketmaster. While Snowflake insists its own systems weren’t breached, the negative headlines have done little to help investor sentiment. CEO Ramaswamy acknowledged the challenges, stating, “We obviously had some rough headlines in the quarter,” but emphasized that the issue wasn’t on Snowflake’s end.

The Road Ahead

Snowflake is clearly betting big on AI, but the road ahead is far from smooth. With tough competition, widening losses, and lingering security concerns, the company has a lot to prove. Investors are eagerly waiting to see if Snowflake can leverage its new AI products to regain momentum, but for now, the outlook remains cautious. As Ramaswamy pointed out, there’s a “huge opportunity” ahead, but it’s going to take more than just buzzwords to calm investors’ nerves.

Calendar
On The Horizon

Tomorrow

Before Market Open:

• BJ's Wholesale Club ($BJ) is ready to ride the wave of thrifty U.S. shoppers. With a membership model that boosts its bottom line, rock-bottom prices, and a well-oiled supply chain, BJ’s is ticking a lot of boxes. Management’s been chipping away at debt while keeping cash flow solid, but here’s the kicker: the stock’s price is already hovering around analysts' targets, making it a bit of a tight squeeze. Consensus: $1.00 EPS, $5.15 billion in revenue.

• Peloton Interactive ($PTON) is still struggling to pedal its way out of a post-pandemic rut. The once high-flying fitness brand has been hit by the harsh reality that people are heading back to gyms, leaving its at-home workout gear collecting dust. Cash flow issues and a hefty debt load aren't helping either, and most analysts are taking a cautious approach. Consensus: -$0.17 EPS, $630.48 million in revenue.

After Market Close:

• CAVA Group ($CAVA) has been on fire this year, as health-conscious diners ditch fast food for something fresher without breaking the bank. The company’s impressive revenue growth and healthy margins have shareholders smiling, but the big question is whether there’s any more juice left in this squeeze. Consensus: $0.12 EPS, $218.57 million in revenue.

• Ross Stores ($ROST) is still the place to score a bargain. The discount retailer has had a strong year, with shoppers loving the thrill of the hunt and the low prices. Despite taking on debt during the low-rate years, Ross has been steadily paying it down, while also reinvesting in its business and rewarding shareholders with buybacks. No wonder Wall Street is loving this stock. Consensus: $1.50 EPS, $5.25 billion in revenue.