Stock market today: Stocks rise as Powell declares 'time has come' to begin cutting interest rates

Karen Friar and Hamza Shaban
Updated
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Investors appeared to rejoice on Friday as Federal Reserve Chair Jerome Powell said the "time has come" to begin cutting interest rates, in a declaration that reflected the central bank's confidence in its fight against inflation and the market's widespread belief that the economy no longer needs a restrictive policy.

The S&P 500 (^GSPC) rose about 1.2%%, while the Dow Jones Industrial Average (^DJI) added about 1.1%, or over 400 points. The tech-heavy Nasdaq Composite (^IXIC) led gains, up roughly 1.5%, as all three gauges eyed a strong comeback from Thursday's closing losses.

Spirits turned buoyant as a day of reckoning for rate-cut bets finally arrived, after a week of mounting anticipation for what Powell would reveal during a speech Friday morning at Jackson Hole.

Speaking at the Kansas City Fed's annual economic symposium, Powell said: "The time has come for policy to adjust."

"The direction of travel is clear," Powell added, "and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

Slowing economic data has convinced the market to position for the Fed to lower rates in September, with opinion divided on the depth of the cut. Traders are pricing in around a 64% chance of a reduction of 25 basis points and 37% odds of 50 basis points, per CME's FedWatch tool.

Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut

The benchmark 10-year Treasury yield (^TNX) was down to around 3.8% in the wake of Powell's comments, near its lows of the year.

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  • Hamza Shaban

    Stocks rise after Powell signals that rate cuts will start next month

    Investors cheered on Friday's remarks from Federal Reserve Chair Jerome Powell, who said said the "time has come" to begin cutting interest rates in a declaration that an easing cycle is about to begin.

    The S&P 500 (^GSPC) rose about 1.2%%, while the Dow Jones Industrial Average (^DJI) added about 1.1%, or over 400 points. The tech-heavy Nasdaq Composite (^IXIC) led gains, up roughly 1.5%, as all three gauges eyed a strong comeback from Thursday's closing losses.

  • Dani Romero

    Real estate sector leads S&P 500 higher as Powell solidifies September rate cut

    Real estate stocks led the S&P 500's advance this week, rising 3.5% to serve as the best-performing sector in the index as investors cheered signals from Federal Reserve Chair Jerome Powell that the central bank will begin cutting interest rates next month.

    The SPDR Real Estate ETF (XLRE) gained as much as 1.9% on Friday following Powell's speech, the most among the 11 sectors in the S&P 500. Year to date, however, the sector has lagged the index, rising just over 8% against a nearly 18% gain for the S&P 500.

    This follows a challenging year for commercial real estate, marked by a sharp decline in property values and record-high vacancy rates. However, the outlook for the group appears to have turned a corner for now, according to LPL Financial.

    Quincy Krosby, chief global strategist at LPL Financial, told Yahoo Finance, “There's been movement in REITS and financials, and real estate in general is beginning to inch higher as the market has discounted a September rate cut.”

    In the meantime, the biggest homebuilders in the US continue to have a banner year. The SPDR S&P Homebuilders ETF (XHB) is up over 24% this year, outperforming the S&P 500.

  • Hamza Shaban

    A look at the week ahead

    The final week of August is coming up and the economic calendar has big corporate and economic news on deck.

    The AI darling and king of the chips trade Nvidia (NVDA) is set to report on Wednesday. The AI chip designer has been at the heart of Big Tech's monumental rise this year, showering investors with gains of more than 150% year to date. While earnings season for the rest of the Magnificent Seven proved to be a mixed bag, Nvidia's quarterly report could further propel the growth of companies that have hitched their fortunes to AI development.

    CrowdStrike (CRWD), Lululemon (LULU), and Dell (DELL) are also among the big names set to report.

    The spotlight will also be on the Fed's preferred inflation gauge, the "core" Personal Consumption Expenditures (PCE) index, which excludes the volatile food and energy categories. That figure will arrive on Friday, capping off a volatile August and providing another snapshot of how much progress has been made on tamping down inflation.

    By then markets will have had a full week to digest the strongest signal yet that the Federal Reserve will cut interest rates in September after Fed Chair Powell said "the time has come" for a policy change. Although what's left unclear is the size of the first rate cut and how many times the Fed will lower rates before the end of the year.

    Yahoo Finance's Brent Sanchez has a graphical breakdown of what to watch next week:

  • Hamza Shaban

    Tech bundles turn to the oldest form of upselling for growth: French fries

    A flurry of tech bundles has returned consumers to a fundamental American question: “Would you like fries with that?”

    As Walmart (WMT) chases the industry-defining success of rival Amazon Prime (AMZN), it’s now offering members of its paid loyalty program discounted meals at Burger King. In Walmart’s case, the retail giant is literally prodding its customers with more savory calories.

    Verizon (VZ), in a bid to bolster its own subscription revenue, will now offer 12 months of Netflix's (NFLX) premium plan for free to customers who purchase a year of the National Football League's streaming service.

    Bundling in the app era is an evolved form of upselling that cloaks itself in value. We unbundled cable television only to reconstitute it. Now we're subscribing to cheeseburgers.

    But what at first looks like a soft-pedaled sales pitch from companies (and their executives) that simply want new offers to tout starts to build real animosity when it's price hikes by another name.

    A recent example here would be the $1,700 Snoo Smart Sleeper, whose maker recently introduced a premium subscription model to ply newly sleep-challenged parents with extra smart bassinet features. In recent years, luxury carmakers have sought to charge a fee for features like heated seats, only to backtrack on these plans.

    Ultimately, companies are looking for their own version of a "real bundle," with an offer as good as free shipping on almost anything or unlimited access to almost every song ever recorded. And are the improbable logistics behind realizing you need paper towels and then having someone place them at your front door in the middle of the night even replicable? Probably not.

    As this newsletter has argued previously, sometimes a business just makes sense as a subscription, as in the case of beleaguered exercise bike maker Peloton (PTON), which was done in by the cost of its bikes, not its monthly fee.

    The idea of one-stop shopping, or something close to it, has its benefits. Buying a small mountain of Goldfish crackers followed by a $1.50 hot dog at Costco (COST) sounds like a nice deal. Long-term shareholders for the warehouse operator would agree. But how many versions of that proposition can the market support?

    Too often, recurring add-ons and tit-for-tat pricing schemes feel like hostage-taking. And seen in its most negative light, companies are attempting to take any shot at drawing recurring revenues out of their customers and hoping they stick around merely because they forgot to leave.

  • Hamza Shaban

    Treasury yield falls on rate cut expectations

    The benchmark 10-year Treasury yield (^TNX) was down to around 3.8% after Fed Chair Jerome Powell said that interest rate cuts are on the way.

    Powell sent a straightforward message to markets in a key speech on Friday, saying "the time has come" for the central bank to begin lowering interest rates.

    Even as much of the market anticipated that the Fed would soon lower rates, Powell's remarks offered the clearest signal yet that an easing cycle would soon begin.

    The bond market recoiled, with the 10-year yield moving down to 3.820%, lower than Thursday's 3.862%.

    Powell's speech comes just over three weeks out from the Fed's Sept. 17-18 meeting, which should see the central bank announce its first interest rate cut since 2020.

  • Hamza Shaban

    Investors price in 4 rate cuts from Fed after Powell signals 'ample room' to move

    Investors solidified bets on how deeply the Federal Reserve will cut interest rates this year after Fed Chair Jerome Powell said Friday the "time has come for policy to adjust."

    Powell noted the timing and pace of cuts will "depend on incoming data," but markets quickly moved to fully price in four rate cuts of 0.25% by the end of 2024 on Friday morning after the Fed chair said the central bank has "ample room" to maneuver as policy enters its next phase, reports Yahoo Finance's Josh Schafer.

    Shifts in market pricing of Federal Reserve interest rate cuts
    Shifts in market pricing of Federal Reserve interest rate cuts

    Though with only three Fed meetings left in 2024, the looming question remains when the Fed would cut rates by 0.50% in a single meeting to reach the current investor expectation of four interest rate cuts this year.

    Bets that a larger move will come in September moved up marginally on Friday morning. Markets are pricing in a 34.5% chance the Fed cuts by 50 basis points by the end of its September meeting, up from a roughly 24% chance seen the day prior, per the CME's FedWatch Tool.

  • Hamza Shaban

    Stocks trending in afternoon trading

    Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Friday:

    Workday (WDAY): Shares of the workforce management company surged more than 11% in afternoon trading Friday after beating second quarter earnings estimates and turned its attention to consistent profitability over the next several years.

    Cava (CAVA): The fast-casual Mediterranean restaurant chain rose to a new record Friday after the company lifted its guidance and beat estimates for the second quarter on Thursday. The company also opened 18 new restaurants in the prior quarter. Shares rose 20%.

    Roku (ROKU): Shares of the TV streaming distributor rose nearly 9% Friday as Guggenheim analysts upgraded the stock to Buy from Neutral with a price target of $75. That represents a premium more than 20% up from Thursday's closing price. Analysts cited broadening video inventory for advertising sales and improved monetization for home screens heading into the third quarter.

    Tesla (TSLA): The all-electric automaker rose nearly 3% Friday as the prospect of lower interest rates lifted outlook for the company, as the cost of borrowing for auto loans is expected to drop in the months ahead.

  • Hamza Shaban

    Stocks rise after Powell's 'time has come' rate cut speech

    Wall Street struck a positive note on Friday afternoon as investors cheered on Fed Chair Jerome Powell, who offered a clear signal that the Federal Reserve is ready to start cutting interest rates next month. Speaking at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyo., Powell said "The time has come for policy to adjust."

    The S&P 500 (^GSPC) rose 0.6%, while the Dow Jones Industrial Average (^DJI) added 0.7%. The tech-heavy Nasdaq Composite (^IXIC) led gains, up 0.9%.

  • Hamza Shaban

    DOJ accuses RealPage of driving up rents

    The US Department of Justice sued RealPage on Friday, accusing the property management software company of helping landlords illegally drive up apartment rents through the use of algorithmic collussion.

    The DOJ, along with eight states, accused RealPage of allowing landlords to share rent pricing information with the company's software, which recommended rent prices, and kept landlords from lowering rent or offering deals to attract renters, Reuters reported Friday.

    "Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law," Attorney General Merrick Garland said in a statement.

    The case against RealPage and algorithmic collusion is a first for the Justice Department, as tech companies increasingly use big data to inform pricing services.

    The Justice Department also accused RealPage of monopolizing the market for property management software for multi-family dwellings in the US.

  • Dani Romero

    Lower mortgage rates boost demand for new homes

    Sales of new homes increased 10.6% in July to a seasonally adjusted rate of 739,000 units, up from June’s revised seasonally adjusted annual rate of 668,000, according to the Census Bureau on Friday. Those figures exceeded Bloomberg consensus expectations for sales to reach a 623,000 unit pace.

    The uptick in sales activity likely reflects how lower rates have incentivized many builders to provide more attractive rates for house hunters who may finally see some relief from affordability challenges that have plagued the housing market for the better part of two years.

    In recent weeks, 30-year mortgage rates have dropped below 7% and are now at the lowest level since May 2023. Still, they remain double levels from three years ago.

    "That is a tool that these [builders] have in their toolbox that the existing home market cannot compete with, and frankly, the smaller private builders can't compete with either," UBS US homebuilders & building products equity research analyst John Lovallo recently told Yahoo Finance.

    Still, some buyers are waiting for rates to come down even further.

    Applications to purchase a home decreased 5% last week, marking the lowest level since February, per data from Mortgage Bankers Association (MBA) released Wednesday.

    In the meantime, builders have continued to add more supply, with inventory reaching 462,000 homes in July. At the current sales pace, it would take seven and a half months to sell through this inventory. A six-month sales pace represents a balanced market.

    With rates coming down, however, home prices remain sticky, with the median sales price for a new home rising to $429,800 in July from $416,700 the month prior.

  • Hamza Shaban

    Fed's Powell says 'time has come' to begin cutting interest rates

    Federal Reserve Chair Jerome Powell sent a straightforward message to markets in a key speech on Friday, saying "the time has come" for the central bank to begin lowering interest rates.

    Markets reacted with a surge of gains as investors welcomed the news of a coming easing cycle.

    Speaking at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyo., Powell said: "The time has come for policy to adjust," reports Yahoo Finance's Myles Udland and Jennifer Schonberger

    "The direction of travel is clear," Powell added, "and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

    Powell's speech comes just over three weeks out from the Fed's Sept. 17-18 meeting, which should see the central bank announce its first interest rate cut since 2020.

    Powell acknowledged recent softness in the labor market in his speech and said the Fed does not "seek or welcome further cooling in labor market conditions."

  • Hamza Shaban

    Stocks open higher ahead of speech from Fed Chair Powell

    All three major stock indexes were poised for a bounce back on Friday as spirits lifted on Wall Street ahead of a major speech from Federal Reserve Chair Jerome Powell. The remarks are expected to touch on broad economic points but could shape near-term expectations on the future path of interest rates.

    The S&P 500 (^GSPC) rose 0.6%, while the Dow Jones Industrial Average (^DJI) added 0.4%. The tech-heavy Nasdaq Composite (^IXIC) led gains, up roughly 0.8%.