Markets are coasting after gains the prior day driven by lower bond yields and lower crude oil prices. The mood is wait-and-see, with several tests ahead.
PCE Data and the Fed
PCE inflation data hits in about half an hour. Expected headline is about 3.6% year-over-year. Core is expected near 3.3%, roughly flat. On a month-over-month basis, core is expected to gain 2%. If month-over-month core comes in hotter, closer to 3.4%, that signals inflation is speeding up again, which would give the Fed Chair's Friday speech at Jackson Hole more weight. If inflation instead pulls back and keeps cooling, that gives the Fed a break.
I do not expect much clarity from the Jackson Hole speech. The Fed Chair avoids heavy commentary and dislikes giving dot-plot projections, preferring to take the data as it comes. Watch for whether the tone shifts and what the task forces are doing.
Oil and Iran
WTI sits near $80 a barrel, down about 2% to 2.25%. Both WTI and Brent are pulling back. Iran and Oman are discussing a joint temporary shipping route in the Strait of Hormuz. Oman's foreign minister posted on social media that "future management of the strait and a permanent solution will follow in due course."
I am surprised crude is falling on this. Iran's IRGC spokesperson spoke this morning about sharing revenues for safe passage through the Strait of Hormuz. The problem is the US blockade is still in place, and the US will not allow any revenue generation from international waters and passage through the strait. Iran and Oman can talk all they want, but that plan will not fly.
Coming economic sanctions may be less harsh than some expected, though Treasury Secretary Bessent's comments were tough: the US will go after countries that still trade with and generate revenue from Iran, including China. Nothing has been heard from China yet, and there is no clarity on what the sanctions will actually be. There is speculation that countries bordering Iran in the Middle East are talking about how to distance themselves from Iran while keeping some communication with it. The falling oil price may be the market signaling it expects the sanctions to work and Iran to return to talks. There was speculation the prior day that Qatar and Pakistan were trying to open more communication between the two sides to reach an agreement.
Intuit (INTU) Earnings
Intuit (INTU) reported and the stock is under pressure after already being heavily beaten down. Results looked good at first: a beat on EPS, a solid beat on revenue, full fiscal year revenue over $20 billion for the first time, and a 15% raise to the quarterly dividend.
The pain is in guidance, and stocks are forward looking. Last fiscal year Intuit grew about 14%. It projects only 9% to 10% growth for the upcoming fiscal year, so it lowered revenue guidance. The company said AI-specific tax services are eating into its market share. The CEO said Intuit will likely have to cut prices, which hits margins right away. Intuit cut full fiscal year EPS guidance significantly, lowered full-year revenue guidance, and cut current-quarter EPS sharply as it ramps up its own AI tools to compete. It recently cut 17% of its full-time workforce, just over 3,000 employees.
Investors see this as a reset for the next one to two years, not a single quarter, because AI agents keep getting better and cheaper. TurboTax growth is also expected to slow. Downgrades came in today from JP Morgan (JPM) and Bank of America (BAC). Intuit's price action has been terrible since hitting all-time highs about a year and a half ago. I expect the pain to continue through the session and beyond, since margins and growth rates will keep getting hit in a drawn-out process.
After the Close
Nvidia (NVDA), CrowdStrike (CRWD), and Salesforce (CRM) all report after the close, leaving a lot to digest alongside the geopolitical headlines. Falling crude is providing no lift to the market.
