The Rundown - Fed Surprises with 0.50% Rate Cut, Olive Garden Owner Inks Partnership with Uber

Episode Date: September 19, 2024

Stock market update for September 19, 2024. Subscribe to our weekly newsletter here!

Public.com presents the rundown, your daily market update in five minutes. My name is Zadadmani, and today is Thursday, September 19th. In today's episode, we recap the Fed meeting and talk about the impacts that rate cuts will have on you and your portfolio. We also tell you about strikes happening at Boeing and new perks for being an Amazon warehouse employee. Then stick around to the end of the show to find out why shares of Olive Garden are up and Apple's plans to revamp the Apple cart.

All right, let's go. As predicted, yesterday was a wild one for the markets. Stocks were flat to start the day going into the Fed meeting, and then bam, 2 p.m. Eastern Daylight time, the Federal Reserve decides to cut rates by 50 basis points, and the markets go crazy. Initially, stocks jump right as his announcement was made, then started seesawing up and down through Jerome Powell's press conference and ultimately ended the day in the red, with the S&P and NASDAQ both dropping 0.3%. So let's talk about the Fed's decision to go with an aggressive 50 basis point cut right out of the gate because it was a bit of a shocker.

Hand up, I got it wrong. I thought they were going to go with a 25 basis point cut to start this cutting cycle. In fact, almost every bank on Wall Street also thought that, except for JP Morgan. They were the only bank to predict a 50 basis point cut, and they were right. I guess that's why they're the biggest bank in the world. Now, this is the first rate cut by the Fed since March of 2020. It's been over four years. So why did Jerome Powell and the Fed decide to go with 50 basis points instead of the standard

25 basis point cut? Well, remember, the Fed started hiking rates back in 2022 in reaction to the sky high inflation that we had in 2021 and 2022. The Fed hiked rates all the way up to 5.25 to 5.5%. That's the highest rates have been since 2001. Remember, interest rates have a pretty wide impact on the economy. Higher rates means that borrowing money is more expensive. It means that credit card rates are higher. It means that mortgage rates are higher. It means that mortgage rates are higher, it means that business loans are higher, so higher rates tends to cool off the economy. And it's a tool to help rain in inflation. And the rate hikes work. Inflation is now at 2.5% according to the latest CPI report. And this press conference, Jerome Powell said the Fed is

confident that inflation will continue to move towards the 2% target. In other words, the Fed is taking a victory lap on inflation. They don't seem to be worried about it anymore. Instead, the Fed is now paying more attention to the labor market. The labor market has been trending in the wrong direction. Job growth has been slowing over the last few months and the unemployment rate is now at 4.2%. And Jerome Powell said the Fed's decision to cut rates by 50 basis points is to prevent the labor market conditions from getting worse. And this cut's going to be the first of many cuts. Current projections show the Fed will be cutting rates by 25 basis points in each of the next two meetings this year. So interest rates will be coming down over the next few months. So that's great

news for people that are looking to refinance their high interest mortgage or take out a car loan. Why did stocks go down in reaction to this news? Well, for one, just because the initial reaction by the stock market was negative, doesn't mean this will be the long-term reaction. Like, stocks could make all-time highs next week after the markets have had some time to digest this news. I mean, they might even make all-time highs by the end of this week, but there was this sentiment that if the Fed's initial rate cut is 50 basis points, that could be seen as a panic move by the Fed, because why is the Fed cutting rates so aggressively if everything in the

economy is fine? Jerome Powell tried to relieve some of that panic in his press conference, saying multiple times the Fed thinks the economy and the labor market are in good shape, and these rates. cuts were a way to keep it that way. Jerome Powell also said the Fed will continue to make decisions on future rate cuts meeting by meeting based on the data. So again, I'm a bit surprised by the Fed's decision to start so aggressively. But hey, lower rates are generally good for the economy. They tend to push stocks higher. So I'm not going to complain. Now, one downside for lower rates is that we're going to start seeing lower returns on our savings accounts. Over the last year or

so, high yield savings accounts were returning 5 to 6 percent. Those rates are going to start coming down. But you still have time to lock in high yields using a bond account on the public app. A bond account on public.com allows you to lock in a 6.6% yield and it won't be affected by future Fed rate cuts. So if you want more information on that, go check out public.com. And by the way, for all you guys wondering, yes, Jerome Powell was still rocking his classic purple tie. I thought he might go with something different because the Fed's starting to cut rates now,

but no, still purple. Let's run through some headlines. The Fed meetings seem to be the only thing people can cared about yesterday, but there's still some other stuff that happened. Like Boeing announced that they're furlowing tens of thousands of non-union employees and reducing executive pay as Boeing's largest union goes on strike. A Boeing union of over 30,000 machinists went on strike last week. After the union decline the company's offer to raise salaries by 25% over a four-year period. The workers were seeking a 40% raise instead, and a pension plan. This is according to reporting by CBS. The union and Boeing

have picked up negotiations again this week, but in the meantime, workers are striking across Seattle Oregon, California, which is stalling production on the 737 Max, which is Boeing's best-selling aircraft. Boeing has also implemented a hiring freeze and won't introduce new races. So, yeah, they got a lot to figure out right now. In other worker-related news, Amazon is giving their warehouse employees a wage bump and Amazon Prime for free. Honestly, kind of surprised that Amazon Warehouse workers weren't getting Amazon Prime for free anyways. Starting next month, Amazon Warehouse Workers will get $22 an hour. And then starting next year, they'll get an Amazon Prime subscription for free. I mean, I don't know why they just can't start that now. But hey, I'm glad that Amazon

warehouse workers are getting paid more. I wonder if Amazon got spooked by what's going on at Boeing. Let's talk about some stocks making moves today. Shares of Darden Restaurant are up, even though the company's earnings report weren't that great. The parent company of Olive Garden saw same store sales drop by 2.9%. On the bright side, Olive Garden is bringing back its never-ending postable. I don't know if that's going to help their earnings, but it makes me want to go to Olive Garden. I'm not going to Darden did keep its full year outlook, so there's that. But yeah, investors seem to be pretty happy. Shares of Darden are up 8% on this news. Now, on the flip side, shares of Steelcase are down this morning after the fancy office furniture maker missed on earnings. The revenues came in lower

than expected and their forecasts moving forward, but is also disappointing. Shares are down more than 6% in reaction to these earnings. On a side note, steel case chairs are really, really nice, but they're like $1,000. But the secret is you can find a good used one on Facebook marketplace, for like 150 bucks, maybe 200 bucks. I bought one from an office going out of business for less than 200 bucks. It's the best purchase I ever made. This chair is amazing. That probably doesn't help their business, though.

Let's wrap the show with a fun fact. Apple is talking to J.P. Morgan Chase to be their new partner for the Apple credit card. Previous bank issuing the Apple card was Goldman Sachs, but that ended up being a disaster for Goldman. So Goldman is looking to leave the consumer finance space completely. So Apple needs a new partner, and they're talking with Chase, which is obviously huge in the consumer space. I have a ton of Chase credit cards,

and they're pretty awesome. Now, no deal has officially been announced yet, but I'm not sure if this is going to be enough to really revitalize the Apple card. I mean, the Apple credit card has been a low-key flop. Perks just aren't that good. And unless they change the perks, I don't see the Apple card getting super popular.

Well, all right, guys, that's the rundown for today. We got one more episode for you tomorrow this week. If you guys enjoyed today's episode, don't forget to hit us with a five-star rating on Apple and Spotify. And if you have like 12 more seconds, write a review on Apple. Everybody reads those reviews. So that engagement will really help us out. And if you're on Spotify, don't forget to leave a comment and vote in today's poll. Thank you guys so much for listening. Shout out to Mike and Connor for all the help behind the scenes.

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