MARKETS
We Have a Rate Cut Timeline
And Meta is leading the way for Big Tech.
“The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market,” Federal Reserve Chair Jerome Powell said on Wednesday. “If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.”
The Federal Open Market Committee did what was finally expected, maintaining its benchmark interest rate but hinting at a cut to come later this summer.
Labor market health may not have explicitly replaced inflation as the Federal Reserve’s top concern.
But that’s the real-world meaning of a new declaration in the post-FOMC meeting policy statement that the central bank is “attentive to the risks to both sides of its dual mandate.”
The FOMC acknowledged more progress toward its 2 percent inflation target and said risks to its employment and inflation goals “continue to move into better balance.”
It also noted that employment growth has moderated and that the unemployment rate has moved up from historically low levels.
Therein lies the tone shift. And Powell added the lyrics in his post-meeting press conference.
The major equity market indexes extended their strong intraday gains in the immediate aftermath of the FOMC news.
The Russell 2000 dipped a bit, inching back some from a historic move predicated on lower interest rates and a better operating environment for the nuts-and-bolts businesses included in the small-cap index.
The Dow Jones Industrial Average softened a bit too. But the broad theme of bull market expansion remains intact, and even Big Tech felt the love again on Wednesday.
Though Microsoft $MSFT is still living down its disappointing earnings beat, Advanced Micro Devices $AMD delivered impressive earnings results and fresh impetus for chips.
Nvidia $NVDA was up double-digits.
And Meta Platforms $META, rising 2.51 percent ahead of its post-closing-bell earnings release, surged another 9 percent-plus after posting second-quarter numbers.
Mark Zuckerberg’s outfit succeeded where Alphabet $GOOGL and Microsoft $MSFT failed and generated a positive response with its most recent results.
“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” the CEO said in a press release announcing 22 percent revenue growth and 73 percent earnings growth.
The consensus expected revenue of $38.3 billion and earnings per share of $4.80, and Meta reported $39 billion and $5.16.
Costs rose just 7 percent, as Meta’s margins expanded in a big way.
The biggest thing here is third-quarter guidance: Management expects revenue of $38.5 billion to $41 billion. Wall Street expected 15 percent growth; the midpoint here would be 24 percent.
That’s enough to overcome any anxiety that may attach to a new capex budget midpoint of $38.5 billion, up from $37.5 billion.
“We currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts,” CFO Susan Li said.
What a big Wednesday it was.
And it augurs even bigger things ahead.