Slowing labor demand will lead the Fed to deliver rate cuts later this year: JPMorgan's Kelsey Berro
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CNBC
12 minutes ago
- CNBC
What a September rate cut would mean for stocks, plus a bullish call on AI spending
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets: Wall Street is putting together a strong bounce-back session Monday after wrapping up last week on a sour note thanks to a weak jobs report. All three major benchmarks — the S & P 500 , tech-heavy Nasdaq and 30-stock Dow — added more than 1% in afternoon trading. It's a broad-based rally, with 10 of the 11 sectors in the S & P 500 in the green. Energy is the laggard, weighed down in large part by declines in shares of ExxonMobil and Chevron , by far the two largest constituents in the sector. We took advantage of the positive day to lighten up on shares of Abbott Laboratories , our third sale since July 21. If not for our trading restrictions, we would've used some of the cash raised in that sale to buy more Starbucks , consistent with what Jim said last week following the coffee chain's post-earnings decline. BLS drama: President Donald Trump on Monday was again posting on social media that last week's big July nonfarm payrolls miss and the massive combined downward revisions to May and June were rigged. Those comments echoed the ones that came Friday as he fired the head of the Bureau of Labor Statistics. On CNBC Monday morning, National Economic Council Director Kevin Hassett, one of Trump's top advisers, was asked directly if the BLS numbers were rigged. Hassett pivoted. He acknowledged the longstanding problem of jobs data collection that pre-dated Trump but said, "All over the U.S. government, there have been people who have been resisting Trump everywhere they can." Hassett, who has been talked about as a possible Trump choice for Federal Reserve chairman, also said, "To make sure that the data are as transparent and as reliable as possible, we're going to get highly qualified people in there that have a fresh start and a fresh set of eyes on the problem." Ironically, the weak jobs numbers bolster Trump's case for the Fed to cut interest rates. Jim Cramer said Monday that he is not here to opine on whether Trump is doing the right thing or not. However, Jim said he is here to help Club members make money. He concluded that the jobs numbers point to a weakening economy and suggest the Fed should not wait any longer to cut rates. If the Fed cuts rates at its September meeting, as the market expects, Jim said the stock market should go up, even ahead of the move, and investors should make money. Keep on spending: The generative AI boom isn't slowing down anytime soon, according to Morgan Stanley's analysis of capital expenditure (capex) plans. In a note to clients, analysts said the 11 largest hyperscalers — including Club holdings Meta Platforms , Microsoft , Amazon and Apple — are projected to significantly increase their spending on cloud computing and other AI-related infrastructure into next year. Analysts expect the global capex from these companies to grow 56% year over year in 2025 and 31% in 2026. The estimates are based on second-quarter earnings reports from the aforementioned tech giants, along with those from Alphabet -owned Google, IBM , CoreWeave and Oracle , along with the Chinese tech firms Tencent , Alibaba , and Baidu . Additionally, Morgan Stanley analysts said they wouldn't be surprised to see 2026 capex commitments "move materially higher" by this time next year due to the continued growth in AI model output and cloud providers still mentioning that demand for compute is outstripping supply. "This earnings season, most management teams highlighted the need to accelerate infrastructure deployment timelines/address tight supply and support increasingly complex cloud/AI workloads, and executives across MSFT, META, AMZN and GOOGL signaled: (1) greater confidence in generating a return on these investments; and (2) a willingness to sustain elevated levels of spending into 2026," the analysts wrote. This is all promising news for the generative AI trade. As these hyperscalers pour billions into AI infrastructure, it signals that management teams are taking the technology — and the demand for it — even more seriously than before. We hope this means improved AI offerings from our portfolio companies, too. Apple, in particular, is in desperate need of one, which is why we were pleased to hear CEO Tim Cook say on the conference call that the company is "significantly growing" its AI investments. Apple has comparatively spent much less on capex in recent years compared with the likes of Meta, Microsoft and Amazon. The iPhone maker has had a lackluster rollout of its suite of AI tools called Apple Intelligence since last year. Buzzy new AI features could mean more upside in device sales and revenues in its high-margin services unit. With Apple, "we're actually trying figure out what they really want to do," Jim said during Monday's Morning Meeting. As for Microsoft, Amazon and Meta, we've been largely impressed by their AI plans. "The market wanted to see a lot of [AI] spend because that's where the return is," Jim said. He continued, "You may think they spent too much money. That doesn't matter. People want to see a lot of spend." It's not just Big Tech and their cloud customers that benefit from all the AI outlays. Industrial stocks and Club holdings like Eaton , GE Vernova and Dover all benefit in their own ways from the continued construction of data centers and the electricity infrastructure needed to fuel the power-hungry buildings. Earlier Monday, we published an in-depth look at how GE Vernova's gas turbines became such a hot commodity in the AI race. Up next: Club name Coterra Energy is among the companies reporting earnings after the close Monday, with its conference call set for Tuesday morning. We'll wait for the call before publishing our earnings analysis, given management's comments, particularly on its planned fix for problematic wells in part of the Permian Basin, will help shape our thinking on the results. Some other notable companies reporting Monday night include high-flying Palantir , obesity drug compounder Hims & Hers , Taser maker Axon Enterprise , e-commerce marketplace MercadoLibre and non-opoid pain medication maker Vertex Pharmaceuticals . On Tuesday morning, we'll get results from Club names DuPont and Eaton. Economic bellwether Caterpillar, private-equity giant Apollo Global Management and hotel operator Marriott International also are on the docket. It's an overall quiet week of economic data, though on Tuesday the Institute for Supply Management's monthly look at activity in the U.S. services sector is due out at 10 a.m. ET. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Business Insider
2 hours ago
- Business Insider
Why the market is shrugging off Trump's firing of the BLS chief
August kicked off with a shocker, with Donald Trump firing the head of the Bureau of Labor Statistics after a less-than-rosy July employment report. The move sparked prognostications about untrustworthy government data going forward and comparisons to China, which some believe is uninvestable due to issues with data quality. Then why is the market unfazed as trading kicks off on Monday? Stocks rallied to start the week, with the Dow up almost 500 points at midday and the Nasdaq Composite jumping as much as 2%. For now, markets are focused on other things, like the higher odds of a September rate cut after the employment picture suddenly soured. "Obviously, the firing was unconventional. That's pretty much everything with this administration compared to previous administrations, but at this point, there is so much private data that the market can look at other sources," Paul Hickey, cofounder of Bespoke Investment Group, told Business Insider. Apart from the BLS statistics that investors already parse, there's a patchwork of private and public data, including ADP data, hiring and firing data from a range of consulting firms, and labor market sentiment indicators from sources like the Conference Board. "There are private sources of data, and if they are moving in the opposite direction from the government data, then it becomes an indicator that something is off with the statistics,"Aleksandar Tomic, Associate Dean, Strategy, Innovation, & Technology at Boston College, told Business Insider. Trump said Erika McEntarfer's firing was justified and that the July data had been manipulated to make the administration look bad. He did not offer evidence for this claim, though White House economic advisor Kevin Hassett said the revisions in the data are "hard evidence." The July revisions were substantial, showing that the US added nearly 260,000 fewer jobs in May and June than had been initially reported. Trump and Republicans have also criticized earlier revisions, including last year's that showed over 800,000 fewer jobs added in the 12 months leading up to March 2024. The irony of Trump's anger over the July jobs numbers is that the weak report has pushed up the odds of the September rate cut to nearly 90%, getting the president closer to seeing the Fed loosen monetary policy as he's been demanding all year. But for investors, things like the robust GDP report for the second quarter and solid corporate earnings, particularly among mega-cap tech giants, are boosting the outlook for the market even as Trump's move stirs some uncertainty. For Sergio Altomare, a former senior enterprise architect at the Fed, the next big question is who will replace McEntarfer at the helm of the BLS. "I think the ultimate impact is going to take time to sort itself out, but I think really the immediate thing is, who gets appointed? What is their background? What does the data show? Is it dramatically different from what we're seeing?" Altomare said that it will be difficult to properly assess the impact of Trump's decision on financial markets until these questions have clear answers. Luckily for markets, some answers could come soon. Trump has said that in the coming days, he'll nominate a new BLS chief, as well as a replacement for Fed Gov. Adriana Kugler, who resigned on Friday. Both positions require confirmation by the Senate. It is also worth noting that some agree with the president's decision. For his part, investing legend Ray Dalio said on Monday that he, too, would probably fire the BLS chief. In a post on X, he described the agency's process for making key economic estimates as "obsolete and error-prone," with no plan to fix it. "The revisions brought the numbers toward private estimates that were in fact much better," Dalio said.
Forbes
3 hours ago
- Forbes
Don't Miss Out: Best High-Yield Savings Accounts And CDs To Lock In Before Possible Fed Rate Cuts
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. The Federal Reserve held interest rates steady again at its July meeting, resisting pressure to cut rates despite growing signs of an economic slowdown. The federal funds rate still remains at a high level when looking over the past decade—between 4.25% and 4.50%—keeping the window open for savers to earn elevated returns on high-yield savings accounts (HYSAs) and certificates of deposit (CDs). But that window may not stay open for much longer. With the Fed's next decision scheduled for mid-September, and market analysts expecting a rate cut before the end of the year, locking in high rates now could be a savvy move for those looking to grow their cash with minimal risk. At its July meeting, the Federal Reserve held rates steady for the fifth time, pointing to stubborn inflation and a desire to gather more data ahead of its September decision. But cracks are starting to show inside the Fed. Several Fed officials are now signaling it might be time to start cutting rates, especially as inflation cools and job growth loses steam. This shift adds attention to the September meeting, which could mark a turning point toward a more dovish policy. In the meantime, savers can earn better returns on their cash. High-yield savings accounts offer rates well above most regular savings accounts, making them ideal for emergency funds or short-term savings you need quick access to. If you're willing to set money aside for a bit longer, certificates of deposit usually pay even more—but you'll need to keep your cash tied up for a set period, like six months or a year. Both are smart ways to take advantage of today's higher rates while keeping your money safe. With interest rates still at historically high levels, now may be your best opportunity to lock in top-tier APYs before the Fed makes its next move. If you want to start with a HYSA, several strong options are available, including the American Express® High Yield Savings Account or the Capital One 360 Performance Savings Account™ . American Express® High Yield Savings Account: This account offers a 3.50% APY with no minimum deposit and zero monthly fees. Plus, with daily compounding interest, your savings can grow quickly, and interest is deposited into your account each month. This account offers a 3.50% APY with no minimum deposit and zero monthly fees. Plus, with daily compounding interest, your savings can grow quickly, and interest is deposited into your account each month. Capital One 360 Performance Savings Account™: This is another solid option, offering 3.50% APY with no minimum deposit requirement on top of no monthly maintenance fees—ideal for anyone looking to dip their toes into a HYSA without needing a large starting balance. If you're considering a CD, here are some options to explore. Discover® 6-Month CD : This CD offers a 4.20% APY with no minimum deposit requirement. It's a simple way to earn higher interest, but you'll have to let your cash sit for six months to avoid any early withdrawal penalties. This CD offers a 4.20% APY with no minimum deposit requirement. It's a simple way to earn higher interest, but you'll have to let your cash sit for six months to avoid any early withdrawal penalties. Marcus by Goldman Sachs High-Yield Certificates of Deposit: Marcus by Goldman Sachs offers a six-month CD with a 4.40% APY, but this option does require a minimum deposit of $500. Keep in mind that CDs also come with terms longer and shorter than six months. Banks usually offer varying APYs depending on the CD's term length. For example, Marcus by Goldman Sachs High-Yield Certificates of Deposit offer a 4.40% APY for a six-month term and a 4.20% APY for a 12-month term. Rates and details accurate as of 08/4/2025 Even if the Fed cuts the federal funds rate later this year, you'll still earn those higher rates for the term of your CD. With a HYSA, your interest rate is variable, so it is best to take advantage of a higher interest rate now so you earn more interest if your account's interest rate takes a dive. The Fed held off on cutting interest rates in July, but September could bring a different story. While no one can predict policy changes with total certainty, current economic signals point toward at least one rate cut before the end of the year. For savers, that means time is of the essence. Locking in a high APY on a CD or moving funds into a high-yield savings account can help you take full advantage of today's elevated rates before they begin to drop in response to the Fed moving in the opposite direction. As always, your savings strategy should match your personal goals. But if you're aiming to grow cash with little to no risk, the time to act is now.
