S&P nears all-time high, stocks rise ahead of Fed decision

He lives7 updates

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  Tuesday, September 17, 2024 at 11:27 AM EST

  Investors increasingly expect a soft landing.

  From Josh Schafer of Yahoo Finance:

  “Investors are increasingly confident that the global economy can achieve a soft landing, with inflation falling without a significant decline in economic activity.

  In a Bank of America survey of global fund managers in August, released Tuesday, 79% of respondents said a soft landing was the most likely outcome for the global economy over the next 12 months. That’s the highest percentage of respondents expecting such an outcome since May 2023.

  Read the full story >

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  Tuesday, September 17, 2024 at 11:19 AM EST

  Bank of America: Housing stocks face risks despite expected rate cut

  Homebuilder stocks have been rising since early July, driven by relatively low mortgage rates, but a new note from Bank of America outlines three risks after the Federal Reserve starts cutting interest rates.

  First, a weak labor market—if that leads to an economic slowdown. Homebuilder stocks typically outperform during periods of high unemployment and low rates. However, “they typically underperform before a recession,” Bank of America research analyst Raf Jadrosich wrote in a note to clients Tuesday morning.

  Second, “mortgage rates have already been priced in as a big rate cut.” The Fed’s expected rate cut on Wednesday sent the average 30-year fixed mortgage rate to 6.2%, its lowest level in more than a year. Bank of America’s mortgage-backed securities team expects “mortgage rates to be between 5.75% and 6% by year-end.”

  Third, homebuilders are trading at more than twice their price-to-book ratio, which is “high compared to historical multiples and previous periods leading up to Fed rate-cutting cycles.”

  The SPDR S&P Homebuilders ETF (XHB) has jumped more than 27% so far this year, while the iShares US Home Construction ETF (ITB) is up about 24%.

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  Tuesday, September 17, 2024 at 11:08 AM EST

  Stock Trends in Morning Trading

  Here are some of the stocks that topped Yahoo Finance’s financial indicators page during Tuesday morning trading:

  Microsoft (Microsoft): Shares of the tech giant rose in morning trading after its board approved a $60 billion share buyback program and agreed to increase its dividend by 10% to $0.83 per share on Nov. 21. The move continues a recent wave of investor return programs among major tech platforms that have initiated or increased share buybacks and dividends.

  Intel (NTC): The tech company gained more than 6% Tuesday morning after its maker secured Amazon (AMZN) as a multibillion-dollar customer for artificial intelligence chips. As part of the deal, which expands an existing partnership between the two companies, Intel will build custom AI chips for Amazon’s cloud computing business.

  Shopify (place): Shares of the online shopping platform rose 2% after Redburn Atlantic upgraded the company to a buy and raised its price target to $99 per share, citing growth in social e-commerce. That represents a more than 30% gain from Monday’s closing price.

  ICAN FoundationIndividualized Education Program): Shares of the company named after activist investor Carl Icahn rose about 10% after it said a judge had dismissed a proposed class action lawsuit against the company. Short seller Hindenburg had sued Icahn Enterprises, alleging it artificially inflated its stock price by issuing unsustainably high dividends to allow the billionaire investor to secure large personal loans.

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  Tuesday, September 17, 2024 at 10:00 AM EST

  Homebuilder confidence rises in September ahead of expected rate cut

  Homebuilders are feeling more confident about the housing market as mortgage rates hit their lowest level since February 2023.

  The National Association of Home Builders (NAHB)/Wells Fargo housing market index rose two points to 41 in September from the previous month, breaking a streak of four straight monthly declines.

  The September reading was in line with economists’ estimates of 41, according to Bloomberg data.

  “Thanks to lower interest rates, builders now have a positive outlook on future new home sales for the first time since May 2024,” said Carl Harris, chairman of the National Association of Home Builders, a custom home builder from Wichita, Kansas, in a news release.

  Mortgage rates have fallen in recent months, hitting their lowest levels in more than a year as investors anticipate a rate cut by the Federal Reserve this month. The central bank is due to release its next policy decision on Wednesday.

  Builders benefited from lower mortgage rates as they scaled back on concessions. The survey found that 32% of builders cut home prices to support sales in September, compared with 33% in August, and that the average price cut was 5% — the lowest since July 2022.

  Meanwhile, the six-month sales expectations index rose 4 points to 53. The potential buyer movement index and the National Association of Home Builders current sales conditions index also rose 2 points and 1 point, respectively.

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  Tuesday, September 17, 2024 at 9:58 AM EST

  Reflections from Dream Force

  SAN FRANCISCO – Greetings from Dreamforce, the big annual Salesforce (CRM) conference. This is my fifth conference, I think, and each one is more amazing and different than the last.

  Take my experience last night.

  I was sipping water while having cocktails at the Time AI 100 dinner (note: Time is owned by Salesforce CEO Marc Benioff and his wife Lynne) when I saw AMD (AMD) CEO Dr. Lisa Su standing in the corner with her husband. So, of course, I went over to her and said hello.

  Somewhere in the conversation, I mentioned that I should quit my job and go back to school to learn more about AI. In fact, Su advised me against it, acknowledging that technology is advancing so rapidly that the industry is learning too quickly in many ways.

  This left me with concerns about the safety of AI (something that was exacerbated during dinner-table conversations) and the impact this rapidly unfolding technology could have on jobs. But it also reinforced the idea that even a year from now, many companies across industries will see significant gains as AI becomes more widely deployed internally through their workflows.

  The question I wonder is: Has the market priced all of this into the stock?

  Anyway, here’s what Sue told me last week about the future of AI at the Goldman Sachs Technology and Media Conference:

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  Tuesday, September 17, 2024 at 9:40 AM EST

  Retail sales beat Wall Street estimates in August

  Retail sales beat Wall Street estimates in August as investors closely watched for signs of slowing consumer spending. The data comes as the Federal Reserve begins a two-day policy meeting in Washington, where the central bank is widely expected to cut interest rates as economic growth data slows and inflation declines.

  Retail sales rose 0.1% in August. Economists had expected spending to fall 0.2%, according to Bloomberg data. Meanwhile, July retail sales were revised up to a 1.1% gain from a previously reported 1% gain in the month, according to Bloomberg data. Statistics Office data.

  “The stronger-than-expected August retail sales data suggests that consumers, supported by rapid wealth gains and lower energy prices, continue to spend freely despite a slowing labor market,” Olivia Cross, North America economist at Capital Economics, wrote in a note to clients on Tuesday.

  The release comes as investors widely expect the Federal Reserve to cut interest rates for the first time since 2020 when its next policy decision is announced at 2 p.m. ET on Wednesday.

  “I don’t think this really changes anything. It’s pretty insignificant,” Stephen Juneau, a U.S. economist at Bank of America Securities, told Yahoo Finance.

  On Tuesday morning, markets were pricing in a 67% chance that the Fed would cut rates by 50 basis points, compared to a 33% chance that the Fed would opt for a smaller cut of 25 basis points. According to the CME FedWatch tool.

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  Tuesday, September 17, 2024 at 9:31 AM EST

  Stocks open higher ahead of key Fed decision

  Stocks rose on Tuesday, with technology companies leading the advance, as investors assessed fresh retail sales data ahead of a Federal Reserve meeting that will be pivotal to cutting interest rates.

  The Dow Jones Industrial Average (^DJI) rose about 0.2%, after a record high close for the blue-chip index. The S&P 500 (^GSPC) added about 0.4%, while the technology-heavy Nasdaq Composite (^IXIC) rose about 0.7%.