Traders work on the floor of the New York Stock Exchange (NYSE) during morning trading in New York on August 23, 2024.
Angela Weiss | AFP | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors everything they need to know, wherever they are. Like it? Subscribe here.
What you need to know today
Wall Street Rise
Stock prices rose after Federal Reserve Chairman Jerome Powell said, “It’s time to lower interest rates.” The Dow Jones Industrial Average rose 462 points, while the Nasdaq Composite and S&P 500 rose 1.47% and 1.15%, respectively. For the week, the Dow rose 1.3%, the Nasdaq 1.4%, and the S&P 500 1.45%. Meanwhile, the yield on the 10-year Treasury note fell, and the price of U.S. crude oil rose more than 2% to above $74 a barrel.
“The time has come”
With Chairman Powell hinting at a rate cut, market attention has shifted to the timing and magnitude of the cut. Traders are now expecting a quarter-point cut in September, with hopes growing for a more aggressive half-point cut. The likelihood of a larger cut is growing, especially if August’s employment report mirrors the weakness seen in July’s numbers. As the Fed’s mid-September meeting approaches, CNBC’s Jeff Cox looks at key economic indicators that could influence the final decision.
Return empty
Boeing’s Starliner spacecraft will return from the International Space Station without astronauts on board. NASA astronauts Butch Wilmore and Suni Williams will return aboard SpaceX’s Dragon spacecraft, extending their stay at the ISS by about six months. The decision was made after Starliner’s propulsion system experienced problems during crew flight testing. “We want to further understand the root cause and design improvements to ensure Boeing Starliner can be a key part of reliable crew access to the ISS,” NASA Administrator Bill Nelson said. The setback could threaten Boeing’s involvement in NASA’s Commercial Crew Program, which has already lost more than $1.5 billion.
Activist Defense
Intel is working with Morgan Stanley and other advisers to protect itself from potential activist investors as it struggles to compete with rivals such as Nvidia. Intel is cutting 15,000 jobs as part of a $10 billion cost-cutting program as CEO Pat Gelsinger tries to turn around the chipmaker. Morgan Stanley has worked with Intel before, including on spinning off Mobileye in 2022. The company’s woes stem from missing out on major market trends, including the smartphone boom and now the surge in AI.
Export Control List
China strongly opposes the U.S. decision to add 42 Chinese companies to an export control list for suspected ties to the Russian military. The U.S. also added 63 Russian companies and 18 companies from other countries for sending U.S. electronic equipment to entities linked to the Russian military that built thousands of Shahed-136 drones for use in attacks on Ukraine. China’s Ministry of Commerce said the decision would disrupt international trade and vowed to protect the rights of Chinese companies.
(PRO) Trading Fed Rate Cuts
As the Fed prepares to cut interest rates, Evercore ISI is focusing on several strong-performing regional banks that have proactively reduced asset sensitivity through strategic balance sheet adjustments, positioning them to thrive in a low-rate environment.
Conclusion
“This will be a defining moment for Nvidia,” Wedbush’s Dan Ives told CNBC’s Worldwide Exchange. “Powell, Jackson Hole are very important, but how the market does for the rest of the year and into 2025 will really start with Nvidia’s earnings release.”
On Wednesday, Nvidia, the undisputed leader in AI, will report its second-quarter results after the market closes. The company’s shares are up 161% this year, despite plummeting to a low of $90.69 on Aug. 5 amid a market selloff amid economic uncertainty.
Wall Street remains bullish on Nvidia. As CNBC’s Jesse Pound reports, the options market is betting that Nvidia will make a profit on its earnings report. Enthusiasm for the stock doesn’t seem to have waned, even considering delays to the company’s Blackwell chips, which CEO Jensen Huang said have cost the company $10 billion to develop.
“I view a two- to three-month delay as kind of an asterisk. It’s not going to be game-changing from a demand standpoint,” Ives said.
As a side note, while NVIDIA continues to dominate the AI chip market, its rival Intel is lagging far behind. Intel not only missed the smartphone revolution, but it is also lagging behind in the AI race. Nvidia has overtaken Intel to become the largest chipmaker by revenue, but its market capitalization has fallen to about 35 times that of Intel. Faced with these challenges, Intel has enlisted the help of Morgan Stanley and other advisors to fend off potential activist investors.
Wall Street ended the week on a strong note, comforted by Chairman Powell’s signal that interest rates will be cut, although the timing and size of the cut will depend on upcoming economic data.
Former PIMCO chief economist Paul McCulley expects further 25 basis point cuts over the next few FOMC meetings, and believes a more aggressive 50 basis point cut could be in order if the August jobs report, due on Sept. 6, shows signs of a weakening economy.
“Powell has drawn the line that he doesn’t want to see a further slowdown in the labor market. We’re already at that point,” McCulley said on CNBC’s “Squawk on the Street.” “I don’t think that’s the base case yet, but clearly he’s opened the door to frontloading monetary policy.”
Powell’s dovish tone also sent a strong signal to the market, according to David Russell, head of global market strategy at TradeStation. “This should keep the market in a tailspin through the end of the year, making a retest of this month’s lows less likely,” he said.
—CNBC’s Sarah Ming, Rohan Goswami, Lisa Kaylai Han, Michelle Luhn, Michael Sheets, Jesse Pound, Jeff Cox, Alex Harring, Yun Li, Pia Xin and Spencer Kimball contributed to this report.
