Stock Market Hits Highs On Big Fed Rate Cut: Weekly Review

The stock market soared in a delayed reaction to the Federal Reserve’s decision to cut rates by 50 basis points, starting off the easing cycle with a bang. The S&P 500 and Dow Jones hit record highs, the Nasdaq cleared key levels and dozens of leading stocks flashed buy signals. Apple (AAPL) rebounded amid mixed signals on demand for the iPhone 16, which officially began sales on Friday.

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Fed Cuts Interest Rates By Half Point: What Traders Should Do Now

Stock Market Jumps On Fed Rate Cut

The stock market initially faltered on Wednesday’s half-point Fed rate cut, but jumped Thursday. The S&P 500 and Dow Jones set record highs, while the Nasdaq and Russell 2000 ran higher from their 50-day lines. Breakouts and buy signals were plentiful. Crude oil and Treasury yields bounced from 52-week lows.

Big Fed Rate Cut Shows ‘Commitment’

The Fed came out swinging, starting its rate-cutting cycle with a half-point move to demonstrate its resolve to avert recession and a steady rise in unemployment. Fed Chairman Jerome Powell called the big opening move “a sign of our commitment not to get behind” the curve. Fed projections signaled a likelihood of another quarter-point cut at each of the year’s final two meetings, bringing the Fed’s benchmark overnight bank lending rate to a range of 4.25% to 4.5%. Policymakers currently see another percentage point of rate cuts over the course of 2025. The half-point initial move partly reflected how restrictive the Fed has kept policy. There was room to cut, which is why Powell could convince all but one voting member of the policy-setting committee to back the aggressive first step. However, another big rate cut will likely require clear softening of the labor market, and the Fed could ease less than projected if the economy exceeds expectations.

Economic Data Resilient

The latest batch of economic data is showing resilience, not deterioration, with better-than-expected numbers for retail sales, jobless claims and building permits.

Retail sales edged up 0.1% in August, defying expectations of a slight dip, even as strong July spending was revised up to a 1.1% gain. Sales at gas stations fell 1.2% amid lower prices that should help keep consumers in the game. New jobless claims fell 12,000 to 219,000 in the week ended Sept. 14, with the four-week average at a three-month low. Housing starts jumped 10% to 1.356 million, rebounding from a weather-hit July. Meanwhile, building permits grew nearly 5% to 1.475 million, including a 2.8% rise in permits for single-family homes, likely boosted by the fall in long-term mortgage rates.

Intel Gets Lifelines From Amazon, Pentagon

Struggling chipmaker Intel (INTC) announced funding from the U.S. government and an alliance with Amazon.com (AMZN). It will get up to $3 billion in direct funding from the federal government to supply chips for U.S. Defense Department programs. Intel will design and produce custom AI chips for Amazon Web Services. Intel also announced moves to shore up its operations, including establishing an independent subsidiary for its foundry business and pausing plans to build manufacturing plants in Poland and Germany. Plus, it plans to cut its real estate holdings and sell a stake in its Altera business. Intel stock jumped after hitting long-term lows in the prior week.

Apple iPhone 16 Handsets Hit Stores

The iPhone 16 series, officially went on sale Friday following a week of preorders. Investors received mixed signals from analysts and industry officials about demand for the new handsets during the preorder period. Some analysts said demand for the iPhone 16 was weaker than last year’s iPhone 15 series. But others noted that shorter wait times were likely due to Apple (AAPL) building more handsets for better availability at launch. Meanwhile, the CEO of T-Mobile US (TMUS) said his firm is seeing more sales of iPhone 16 handsets than it did for the iPhone 15, especially the premium Pro versions.

FedEx Earnings

FedEx (FDX) reported fiscal Q1 EPS fell to $3.60 a share, far below views for a small rise to $4.77. Revenue edged down 0.5% to $21.6 billion, also missing. The shipping giant also cut full-year fiscal guidance, citing softer-than-expected demand for package deliveries. FedEx stock plunged Friday, ending a nine-day win streak.

Falling Prices Hit Lennar

The homebuilder giant reported fiscal Q3 earnings grew 10% while revenue rose 8% to $9.4 billion, both beating. Home deliveries increased 16% to 21,516 homes. But the average sales price per home was $422,000, down about 6% compared to a year ago, suggesting increased discounts and incentives used to effect sales. Lennar also ended the quarter with a backlog of 16,944 homes with a dollar value of $7.7 billion. The homebuilder expects to deliver between 22,500-23,000 homes in Q4 with an average price of $425,00 per home. In Q4 2023, Lennar delivered to 23,795 homes for on average $441,000. Shares fell modestly Friday, pulling back from record highs.

In Brief

TG Therapeutics (TGTX) rose Wednesday after the biotech said 92% of patients who took its multiple sclerosis drug, Briumvi, for five years didn’t progress to disability. Over five years, the annualized relapse rate was 0.02. That’s equivalent to one relapse occurring in 50 years. The relapse rate also improved over time.

Microsoft (MSFT) announced late Monday that it will buy back up to $60 billion of its stock and hiked its quarterly dividend by 10% to 83 cents a share. MSFT stock rose for the week.

Darden Restaurants (DRI) reported weaker-than-expected fiscal Q1 earnings and sales. But the parent of Olive Garden and several other chains announced an exclusive delivery deal with Uber (UBER). Darden gapped out of a buy zone while Uber flashed buy signals.

Nike (NKE) CEO John Donahoe will step down on Oct. 13, with longtime company veteran Elliott Hill returning to take over. Nike stock jumped Friday.

Constellation Energy (CEG) will restart Three Mile Island nuclear plant and sell the power to Microsoft to meet its AI data center energy needs. The nuclear power giant jumped.

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Here’s How Much Stocks Historically Rise On The First Fed Rate Cut.