Wall Street Breakfast: What Moved Markets
It was a historic week for Wall Street, with the benchmark S&P 500 (SP500) taking out and closing above the 5,700 points level for the first time ever. Meanwhile, the blue-chip Dow (DJI) surpassed and ended above the 42,000 points mark for the first time ever.
The advance was driven by what was undoubtedly the most important event of the week, or for that matter, in recent memory – the Federal Reserve on Wednesday delivered its first interest rate cut since the COVID-19 pandemic four years ago. And it was a bumper 50 basis point cut at that!
After taking some time to digest Wednesday’s developments, market participants took heart from the central bank’s willingness to be aggressive in terms of monetary policy and strengthened bets that the Fed would be able to deliver a soft landing. That led to U.S. stocks ripping gains on Thursday and the S&P (SP500) and Dow (DJI) achieving the 5,700 and 42,000 milestone, respectively.
Aside from the Fed, there were some major earnings-related moves as well this week, the most notable of them being a plunge in global economic bellwether FedEx (FDX) after the parcel delivery giant missed quarterly estimates and lowered its annual guidance.
For the week, the S&P (SP500) added +1.4%, while the Nasdaq Composite (COMP:IND) swelled +1.5%. The blue-chip Dow (DJI) climbed +1.6%. Read a preview of next week’s major events in Seeking Alpha’s Catalyst Watch.
What are the boundaries of the First Amendment? At the forefront of the latest free speech debate is TikTok, which could face a U.S ban unless it is divested from its Chinese parent ByteDance (BDNCE). Amid concerns centering around espionage and algorithmic propaganda manipulation, a high-profile legal case was presented this week before a three-judge panel in the U.S. Court of Appeals. The battle is likely to end up at the Supreme Court, which would decide on remedies or uphold a ban that may benefit rivals like Instagram Reels (META), YouTube Shorts (GOOGL) and Snapchat Spotlight (SNAP). (21 comments)
On Tuesday, Secretary of State Antony Blinken traveled to the Middle East for the 10th time since the war in Gaza began nearly a year ago. The conversations in Cairo came after the Biden administration green lit $1.3B in military aid for Egypt, overriding congressional requirements that the U.S. hold back some funding if adequate progress was not made on human rights. Tensions also escalated in the region following deadly pager and walkie-talkie attacks that were widely attributed to Israel and targeted thousands of members of the Lebanese terror group Hezbollah, but oil didn’t appear to price in any risk premium.
The Federal Reserve got aggressive on Wednesday, beginning its new easing cycle with a bang. The jumbo 50-basis point rate cut was geared towards a soft landing, with the eyes of the FOMC firmly trained on the labor market. It took investors a while to digest the news, but Jay Powell’s insistence on “recalibrating” policy helped highlight the central bank’s shift to “lower for longer.” The Dow ended up hitting 42,000 for the first time in its history, the S&P 500 scored its 39th record close of the year, and the YTD gains for the Nasdaq Composite also returned to 20%, fueled by a rally in tech.
Nike (NKE) turned some heads by announcing that its CEO John Donahoe will step down and be replaced by retired insider Elliott Hill. Hill spent his career at Nike in various senior leadership positions across Europe and North America, and then retired following his role as president of Consumer & Marketplace in 2020. The news sent Nike shares soaring 7.6% AH on Thursday, with investors appearing confident in Hill’s leadership as the footwear giant faces profit volatility, guidance shortcomings, competition headwinds, and a lack of strategic long-term clarity. (11 comments)
Looking to meet growing demand, BlackRock (BLK) and Microsoft (MSFT) are planning a more than $30B artificial intelligence investment fund to build data centers and energy projects. The Global AI Infrastructure Investment Partnership would be one of the biggest investment vehicles ever raised on Wall Street through Global Infrastructure Partners. Abu Dhabi-backed investment firm MGX and Microsoft are the fund’s general partners, and Nvidia (NVDA) is providing expertise. The fund aims to mobilize up to $100B in total investment potential when including debt financing. (25 comments)
