Stocks moved higher and rates fell, helped mostly by comments from Fed official Christopher Waller. A fresh round of economic data came out this morning but moved markets very little.
Waller Shifts the Fed Tone
Waller said he favors holding interest rates steady at the September meeting. This is the first clear voice from the other side. Recent tone had been mostly hawkish, and the last vote was 9-3. Waller asked why raise rates when you are finally getting the disinflation you wanted. Inflation numbers have been coming down, maybe not as fast as people want, but coming down.
Kevin Warsh is not inclined to raise interest rates. Market odds of a hike had climbed above 60% (around 65%), and those odds should drop sharply after today's comments and the data due tomorrow.
Jobs and Wages Due Tomorrow
The non-farm payroll report lands tomorrow. Expected job gains sit near 55,000, with whispers it may run a bit higher. The unemployment rate is seen ticking up to 4.2%. Wages are the key inflation piece inside the report: 0.3% for the month and 3% year-over-year, down 2/10 from last month. Softer wage growth means less spending, which is the effect the Fed wants in its fight against inflation.
Last month showed two extremes: a big negative jobs number, but unemployment falling, labor force participation falling, and good wage data.
Jobless Claims Stay Low
First-time filers for unemployment insurance came in at 206,000. Last week's 203,000 was revised up to 204,000. The 4-week average is 207.25 thousand. Continuing claims stand at 1.779 million. Claims have been nearly flat for weeks, around 203 to 206 thousand, pointing to a still historically strong labor market.
Crude Oil and the Rate Picture
Crude hit above $93 a barrel overnight and now trades back below $92, up about 1% on the day. The question is simple: are US-Iran tensions easing or escalating? It still feels like they are escalating, and crude oil prices are the final measure to watch. What is pushing rates higher is not overall inflation but the price shock from higher crude.
Nvidia Buys Hugging Face
Jensen Huang paid $12.93 billion to buy Hugging Face for Nvidia (NVDA). In a morning interview, the plan is for all the principals of Hugging Face to stay on with Nvidia. This is an acquisition of an open-face AI model and part of the evolution of AI. Issues at Hugging Face a week or two ago put the company in play, and many buyers wanted it, but the $12.93 billion offer closed the deal. Being tied to Nvidia tends to bring more market support.
Earnings Reactions
Snowflake (SNOW) jumped about $70 after a positive earnings release, a strong recovery after being caught in the earlier software selloff. Broadcom (AVGO) fell about $12 after earnings despite solid numbers. Nvidia (NVDA) was up a little over a dollar even after the Hugging Face purchase. Tesla (TSLA) rose about $6 on the release of the Cyber Cab set for today.
Earnings this season have been spectacular, but many stocks did not rally on the good news. Names like Palo Alto Networks (PANW) that ran up into their reports set a very high bar, so a good report is not good enough to push the stock higher. Broadcom (AVGO) shows the same pattern this morning. Many charts show a parabolic run from the bottom left to the top right, then some smoothing off the highs. The earnings are fine and growing; the market is trying to figure out the correct pricing for companies that already ran up. Stocks can sell off or come under pressure even on objectively strong results, and the market tends to over-read every detail in these reports.
