Early Look

Wednesday, September 18, 2024

The day is finally here, the September Federal open Market Committee (FOMC) interest rate meeting is at 2:00 PM this afternoon followed by Chairman Jerome Powell commentary immediately after, and the market is widely expecting a rate cut. What size rate cut is another story, with fed fund futures late yesterday at nearly a 2/3 chance of an outsized 50bps cut while a 1/3 assuming a 25bps cut. Recent economic data outside of jobs numbers has shown improvement in sentiment, inflation, manufacturing, and housing, indicating a 25bps cut may be more appropriate. But markets have felt for a long time that the Fed constantly remains behind the curve (they were so on the way up raising rates creating the inflation issue), and that a more aggressive 50bps cut may be in order. Regardless, the market is anticipating at least 75bps in cuts through the end of 2024, highly unusual ahead of a Presidential election in November. Yesterday, the Dow and S&P 500 each hit intraday record highs before pulling back ahead of today’s FOMC meeting, though the S&P 500 was able to extend its win streak to 7-straight days. Rate cuts are seen positive for higher dividend paying stock sectors, which explains the outperformance of utilities, telecom and REITs in recent weeks (and the year). In Asian markets, The Nikkei Index rose 176 points to 36,380, the Shanghai Index rose 13 points to 2,717, and the Hang Seng Index jumped 237 points to 17,660. In Europe, the German DAX is down a few points to 18,716, while the FTSE 100 is down -48 points to 8,261 following mixed inflation data.

• The Dow Jones Industrial Average fell -15.90 points, or 0.04%, to 41,606.18.
• The Nasdaq Composite gained 35.93 points, or 0.20%, to 17,628.06.
• The Russell 2000 Index jumped 16.30 points, or 0.74% to 2,205.40.

• 8:30 AM ET                  Housing Starts M/M for August…est. 1.31M
• 8:30 AM ET                  Building Permits M/M for August…est. 1.41M
• 10:30 AM ET                Weekly DOE Inventory Data
• 2:00 PM ET FOMC Policy meeting; 25bps interest rate cut expected
• 4:00 PM ET                   Net Long-term TIC Flows for July

• Earnings After the Close: SCS

• DA Davidson 23rd Annual Diversified Industrials and Services Conference, 9/18-9/20 in Nashville, TN
• Goldman Sachs European Communacopia Conference, 9/17-9/18, in London
• Salesforce.com (CRM) Dreamforce Conference 9/17-9/19, in San Francisco, CA

• Japan August exports rise 5.6% y/y, well below the 10.6% estimate (and prior 10.6%); Japan July core machine orders fall (-0.1%) m/m, below the consensus est. for a rise of +0.5%; Japan records trade deficit of 695.29 billion yen in august, missing estimate of -1.432 trillion yen; Japan Aug imports y/y actual 2.3% below 16.6% previous and est. 15.0%.
• British inflation held steady in August but sped up in the services sector, as consumer price inflation of 2.2% last month was unchanged from July, the Office for National Statistics said, matching the median forecast, but was below the BoE’s latest projection of 2.4%. Services inflation rose to 5.6% from 5.2% in July (est. 5.5%).

• VF Corp. (VFC) upgraded to Overweight from Equal Weight at Barclays.
• Victoria’s Secret (VSCO) upgraded to Equal Weight from Underweight at Barclays.

• Casella Waste Systems Inc (CWST) commenced a proposed underwritten public offering of $400M of its Class A common stock.
• Intuitive Machines, Inc. (LUNR) shares surged overnight after saying NASA has awarded the Company a Near Space Network contract for communication and navigation services for missions in the near space region, which extends from Earth’s surface to beyond the Moon.
• Portland General (POR) downgraded to Equal Weight from Overweight at Barclays.
• Nippon Steel (NPSCY) is slated to get an extension in the security review over its proposed $14.1B takeover of U.S. Steel (X), likely pushing a decision on the politically contentious deal past the U.S. elections in November, Bloomberg reported.

• After the collapse of a banking software company, which left users of cash management apps unable to access their money for months, the Federal Deposit Insurance Corporation, FDIC, proposed new rules to prevent similar situations from occurring again.

• AstraZeneca’s (AZN) Fasenra has been approved in the U.S. for the treatment of adult patients with eosinophilic granulomatosis with polyangiitis
• GE HealthCare (GEHC) upgraded to Buy from Neutral at BTIG with 41—tgt saying after a tough first half of 2024 where China hurt results, the setup for GE HealthCare has improved.
• Incyte (INCY) downgraded to Hold from Buy at Truist.

• Roku Inc (ROKU) enters into a credit agreement providing $300M five-year revolving credit facility, including $100M sub-facility for letters of credit and an option to increase by an additional $300M.
• Sirius XM (SIRI) upgraded to Buy from Neutral at Guggenheim.