Fed Signals Rate Cut Coming Soon | Business Matters Full Broadcast (July 31)

The Fed keeps interest rates unchanged, but gives its clearest hint yet about what to expect in the next meeting. We have full analysis from a Fed insider coming up today on Business Matters. Good afternoon and thank you so much for being here with me today. On to Wall Street. Seems like traders appear to be happy about what they heard from Fed Chair Jerome Powell today. Markets rallying, S&P 500 seeing its best day since February, up over 1.5% here. And the Nasdaq up over 2.5%, the Dow Jones trailing just a tiny bit, but still in the green. Up for the day, 100 points. We have full analysis on today's Federal Reserve announcement coming up in a few minutes. We'll talk live with Danielle DeMartino Booth. But let's go over some big movers here today in the markets. NVIDIA up a massive 13%. It didn't report earnings, but strong earnings from AMD suggesting things look rosy for NVIDIA's AI ambitions. And the chipmaker Broadcom also riding the wave here. Shares up nearly 12% today on that rosy outlook. Full breaking earnings data later in the show. Mastercard today, shares up over 3.5%. The company reporting robust credit card spending from shoppers. Looks like customers just keep on swiping here. The volume of transactions processed on its network is 10% higher this year. The payment giant has also seen an increase in travel demand. Its gauge for spending on cards outside the country climbed 17% in the same quarter. Consumer sentiment is being weighed down a bit though by elevated interest rates and diminishing wage inflation. Several of Mastercard's peers have flagged slowing growth, particularly with low-income customers. Now on to Delta. $500 million. That's how much the airline says the CrowdStrike Microsoft outage will cost it. Delta shares down today. The massive IT outage earlier this month forced Delta to cancel more than 5,000 flights, leaving hordes of flyers stranded. Its CEO saying that the number includes lost revenue and compensation to flyers, including hotels as well. The carrier would seek damages from the disruptions. A CrowdStrike spokesperson said that it had no knowledge of a lawsuit. The U.S. Department of Transportation has launched an investigation into Delta's response to the outage. Boeing shares up about 2.5% today as it's naming its new CEO. Longtime aerospace industry veteran Robert Kelly Ortberg will succeed David Calhoun. Ortberg is a former CEO at Boeing supplier Rockwell Collins. He's taking the reins at a tumultuous time for Boeing. It's entangled in legal, regulatory, and production problems. The company recently agreed to plead guilty to a federal charge in connection with the 737 MAX jetliner and two crashes that killed hundreds. Ortberg will take over starting August 8th. Inolio prices jumped today over fears of an all-out war in the Middle East. It comes as the killing of Hamas' political leader in Iran could throw the critical region on the planet when it comes to energy into conflict. U.S. oil prices climbed as much as 4% to $7.58 a barrel after the assassination in Iran. The rally has since then eased a bit. Analysts point out it's not a panic situation yet because oil prices remain down for the month. One says if the situation spirals out of control and there's a bigger battle, two to three million barrels of Iranian oil will be suddenly at risk. Some election news now. The United Auto Workers Union is endorsing Vice President Kamala Harris for U.S. President. The 370,000-member UAW said that its executive board voted to endorse her after endorsing President Biden before for his re-election bid in January. This endorsement comes in the swing state of Michigan, where many UAW members live and work. That's where the union is based as well, by the way. The union has traditionally endorsed Democratic candidates. Starting tomorrow, the Department of Education will begin emailing Americans with student loans which may be eligible for forgiveness. The plan was first announced back in April. The government now hopes to finalize its rules by the fall. The total cost of the plan is unclear. Here's the press secretary today. Today, the Biden-Harris administration announced the next major step to cancel student debt for approximately 30 million Americans when combined with the administration's prior actions, providing them with information about how they can stand to benefit from upcoming debt relief programs. In April, the president announced his administration's new plan to deliver relief to millions of Americans, including those whose balances have grown due to runaway interest and those who have been repaying their loans for a very long time. So as the press secretary said, there are certain borrowers eligible for this debt cancellation plan. That's like those who owe more now than they did at the start of repayment or have been in repayment for decades. They are eligible for loan forgiveness but not have applied, enrolled in low financial value programs. But the plan may still face legal challenges. The Biden administration's previous efforts to cancel debt all met with opposition. Opponents of the policy say that Americans without loans shouldn't be forced to pay off the loans of others. In June, the U.S. Supreme Court struck down President Joe Biden's executive orders canceling student loans for millions of Americans. It said the administration overstepped its authority. Now, new data revealing signs of a weakening labor market. According to the Labor Department, wages and salaries increased just under 1% last quarter. And this is the smallest advance in three years. Private sector wages and state and local government salaries both slowed as well. And at the same time, U.S. payrolls increased far less than expected this month. The ADP National Employment Report showed that private payrolls rose by 122,000 jobs. Now, despite recent weak jobs market data, the Federal Reserve today keeping its key interest rate unchanged. The federal funds rate, of course, impacts other interest rates like, for example, what you pay on your credit card balances or the rate you get on a car loan. Chairman Joe Powell today acknowledging potentially some weakness in the job market and the economy. He says that the broad sense among the Fed committee is that things may be deteriorating to a point where the economy will soon need stimulus. And that could come as soon as September in the form of a rate cut. Listen, 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. If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September. So Powell expressed that real progress have been made on inflation. Rising prices are what forced the Fed to begin raising rates in the first place. So during the pandemic, it cut rates to near zero percent. They're now over five percent. So higher rates seemingly help with inflation by slowing down the economy. Powell suggesting that it's not such a big concern anymore. We think we don't need to be 100 percent focused on inflation because of the progress we've made. Twelve month headline at two and a half core at 2.6. You know, it's way down from where it was. The job is not done on inflation, but nonetheless, we can afford to begin to dial back the restriction in our policy rate. The next Federal Reserve meeting is September, where it's expected the Fed will indeed cut rates. And now joining us is Danielle DeMartino Booth. She's the CEO and chief strategist for QI Research. Danielle, so good to see you today. How are you doing? I'm doing great this afternoon. How are you? Thank you for having me. Yeah, I'm doing good. So if you can give us some clarity as to what Powell said today, his language, are we getting a cut in September? Well, it's very difficult to give clarity, given how nebulous he was in so many of his comments and how measured he was. But it does sound like because policymakers did discuss a rate cut as soon as today, that the base case going in to the next seven week period prior to September, the 18th, is that we do indeed anticipate seeing that first rate cut at the September FOMC. So let me ask you this. Of course, we didn't get a cut today, but what is the Fed waiting for? Do you think that it was a mistake to not have cut today? I actually do. I think that the Fed should have pressed forward with a rate cut today, given the, to use Chair Powell's word, the totality of the data. We saw appreciable weakening in ADP job creation. We've seen wage growth slow. Wage growth is actually slowing abruptly. The Fed's favored measure of wage inflation came in lower than what was expected just this morning. And we're also seeing slowdowns in the housing market, as well as increased layoffs. So again, the totality of the data right now suggests that inflation is coming down rapidly and that layoffs are rising at a very fast clip. OK, so let me propose this to you. Officials saying that economic activity growing at a solid pace. So, for example, 2.8% GDP, and they're saying that inflation is coming down. Unemployment is low. So, I mean, it seems like from the Fed's perspective, at least, things couldn't be better, but you see things differently. Well, I think that the Fed is kind of driving through the rearview mirror, which is never recommended, right? That's not a very safe way to drive, especially when you consider that so much of the data that they're relying on is revised downwards and fairly quickly, the revisions are coming in to the downside. So, no, I think that the U.S. economy is slowing at a faster clip. They're looking at GDP data that's being flattered by rising inventories, whereas a lot of American retailers are telling us that they have actually built up too much in the way of inventory, meaning we're going to be seeing discounts going forward. And as you mentioned, prior to my segment, we're seeing one company after another announced weakening in the U.S. consumer. Of course, U.S. GDP is 70% consumption. So, again, I think the data is overwhelmingly in favor of having done the first rate cut today. Excuse me, long Fed day. Well, you know, on the point of consumer, I'm glad you mentioned the consumer because we're all consumers here, right? So let me make this point. Official data says that inflation has come down significantly. But, you know, when I go to the grocery store personally, I'm not feeling that. I don't feel inflation has slowed as much as the official data saying. Tell me why I'm feeling this discrepancy compared to the official data. So I think a lot of what you are feeling depends on where you are in the country. You know, I think a lot of Americans are beginning to pinch pennies, clip coupons. I don't want to get too nitty gritty here, but I bought I bought green grapes a few days ago for seventy two cents a pound. I am seeing a lot more in the way of discounting. McDonald's, for example, has announced that it's starting to see real traction with its five dollar menu items. Starbucks announced that consumers were not spending as much. So I do think that we're going to see continued downside pressure in inflation. And in fact, you've seen other discretionary type of consumer companies, Maytag, Whirlpool announced that they're not seeing the sales that they need to see. So in many ways, the bigger ticket item, bigger ticket items are coming are seeing prices fall at a faster clip than many of the things at the grocery store. But again, I'm seeing the discounts really increase. OK, so taking all the things that we've talked about today, the weaknesses that we're seeing within the economy, if we do, in fact, get a quarter point cut in September, is that going to be enough, do you think? Or is it too late, do you think? Or is it just a drop in the bucket? I think that a 25 basis point, a quarter point, percentage point decline in interest rates really won't move the needle. It's a very small decline, given where what the starting point is north of 5%. And I don't think that it would have a material effect on U.S. consumers ability to access a car loan, as you were saying, or it won't bring down the rate that they're paying on their credit cards. And it certainly won't make things appreciably easier for U.S. companies trying to refinance their debts. I think you'd need to see larger rate cuts and a continuation in the easing policy after the September meeting. And that is typically how easing cycles play out. It's typically not a one and done. All right, Danielle, thank you so much for your time today. Thank you for having me. All right, moving on from that, sentiment is somber, it looks like, among Chinese manufacturers. We have new data here. And it looks like that GE Health and Marriott have both lowered their forecast for the year due to weakness in China's market and the overall economy over there. The hotel operator reports soft domestic travel demand in China and quarterly revenue per available room fell in China as well, while the rest of Asia rose. Now, as for GE Healthcare, it says a year's long medical corruption crackdown has dragged sales. And at the same time, local manufacturers are grappling with plummeting new orders and low prices. The National Bureau of Statistics Purchasing Managers Index shrunk for a third month and is below the mark that separates growth and contraction. All right, some quick headlines here. StubHub is being sued for inflating ticket prices with deceptive fees. Washington, D.C.'s Attorney General says what's called drip pricing violates consumer protection laws. StubHub has said that its practices are consistent with the law, however. TikTok and Google have been fined by Russian regulators, according to Moscow's press service. This is for failing to identify content that is very similar to content that has been previously banned. And hundreds of TiMu sellers protesting the Chinese e-commerce giant for high penalties. One merchant said new penalties can be as high as five times the value of a sale when a consumer returns a purchase for a refund. OK, now taking a break and afterwards, we have big company earnings reports, including Samsung posting a 15-fold increase in operating profits in the last quarter. That and more coming up after the short break. And today's top headlines, the Federal Reserve holding interest rates steady but leaving the door open to reducing borrowing costs as soon as its next meeting in September. This comes as inflation continues to fall in line with the U.S. central bank's 2 percent target. And Boeing names its next CEO after posting a quarterly loss of more than 1.4 billion dollars. Robert Kelly Ortberg will succeed David Cahoon as CEO and president, effective August 8th. He's a former CEO and aerospace manufacturer, Rockwell Collins. And the United Auto Workers Union endorsing Vice President Kamala Harris for U.S. president. Today, in the swing state of Michigan, the UAW has traditionally endorsed Democratic candidates. Now, breaking news just in. Facebook parent company Meta shares up 4.5 percent after the bill. The company beat Wall Street estimates for revenue and profit and issued a better than expected forecast for the current period. And that's despite Meta's virtual reality division losing 4.5 billion dollars in the second quarter. Now, semiconductor designer Arm, its shares falling over 8 percent after hours. And this is after gaining 8 percent during the day. Earnings seemed strong with Arm beating estimates, but investors obviously not happy about something. And earnings from earlier in the day, Samsung is up three and a half percent today. The South Korean giant reporting a nearly 1500 percent jump in operating profit over demand for its advanced memory chips. Chipmaker AMD as well, up four and a half percent. AMD has increased this year's forecast and warned that supplies would be tight now to package foods. Kraft Heinz is up 4 percent as it maintained profit expectations, even though consumers have lost their appetite for its branded snacks. Now, embattled Boeing with some good news, its shares up 2 percent today despite its troubled defense and space business draining funds. Its loss for the second quarter stood at 1.4 billion dollars. Slowing demand for electric vehicles has slowed sales for Panasonic's battery making unit. Its shares falling just a little bit today. Let's talk more about Samsung having a nearly 1500 percent increase in operating profit. This is as clients bought its A.I. training semiconductor chips, investing heavily in generative A.I. Here's the details. Samsung reports a nearly 1500 percent operating profit increase in its second quarter, and the largest net income surge since 2010, mostly from selling semiconductors. The memory market in the second quarter continued to recover due to strong generative A.I. server demands. Samsung executive Jae Joon Kim says there's been high demand for its high bandwidth memory chips, essential for training artificial intelligence. Samsung has for years lagged behind competitor S.K. Hynix in making these chips. S.K. Hynix invented them in 2013. Samsung only started making them afterwards. It didn't invest too much because of low demand at the time. Now, S.K. Hynix has 50 percent of the high bandwidth memory market, and Samsung has 40. Both companies control 90 percent of the entire market. Strong demand is expected to continue. We expect the portion of A.I. servers in the market to continuously increase as major cloud service providers and general enterprises expand their A.I. investment. Money from chips is expected to grow. NVIDIA just a few days ago cleared Samsung's HBM3 chips for use in its graphic processors. Many of these A.I.-centric chips are in low supply and high demand, which means the pricing is way up, which is leading to that huge margin that you're seeing in the Samsung numbers. Business consultant Bob Bilbrook says it's not just Samsung. Many A.I.-related firms are performing well. Meanwhile, Samsung's phone business saw falling sales. Samsung says this was because of new models that launched in the first quarter, and it expects sales to pick up. And last but not least, in ancient Greece, award-winning athletes were crowned with floral branches. An exhibition at Paris Mint Museum got into the origins of these awards and the creation of the games. Take a look. Gold, silver and bronze, all 5,084 medals for the Olympics and Paralympic Games have been forged here at La Monnaie de Paris. This is also the place where the first medal for the Olympic Games was ever created, and it is currently getting into the games history with an exhibition. Delving into the origin of the Olympic Games was a driving force for heritage curator Dominique Anterion to create the exhibition at La Monnaie de Paris, also known as the Mint Museum. The museum has kept centuries-old treasures that have a story to tell, such as this matrix from which were created medals in 1896 in Greece, showing Zeus, god of Olympus. Back in ancient Greece, legend has it, the goddess Nike granted victory to artists, warriors and athletes with a laurel branch, in reference to the sacred olive trees of the Temple of Apollo. This is the goddess Nike, which means victory in Greek, and this goddess rewarded all kinds of victories, military victories, sporting victories, but also artistic victories. All of these fields were totally linked in ancient Greece. The beauty of sports and physical performance were then a time of celebration. The games were a moment of peace between the different cities, which were finally looking to the future while they were all at war, with a youth that had to be beautiful, vigorous, active and fit. And in the end, that's what Pierre de Coubertin wanted to reinstate at the end of the 19th century. In 1894, French historian Pierre de Coubertin began a project of international games honoring Greek traditions. He found crucial support in the US, which hosted the 1904 games. If it hadn't been for the United States, I think Coubertin's efforts would have been in vain. In fact, the United States believed in Olympism very early on. Figures showcased on the medals have changed over the 20th century. The size of medals have significantly increased in the modern era. Ontario says it looks better on camera. The Olympic gold medal must contain at least 6.5 grams of gold as required by the IOC. Most of this gold is mixed with silver in a medal called Electrum. 0.5 grams are plated on the top of the medal. The silver medal is solid silver and the bronze medal is solid bronze. The exhibition will last until November 5th. David Vives, NTD News, Paris. And that's all the stories we have for you today. Thank you very much for watching. See you tomorrow.