What’s News in Markets: Rate Cuts, Target Wins, Franklin Templeton Probe
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What is the main topic discussed in this episode?
Access to affordable credit helps me pay my employees, but I don't really need it. The inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
How did Jerome Powell's Jackson Hole speech signal upcoming rate cuts?
Hey, listeners, it's Saturday, August 24th. I'm Jack Pitcher for The Wall Street Journal, and this is What's News in Markets, our look at the biggest stock moves of the week and the news that drove them. Let's get to it. Markets were on a roll again this week. The turmoil we saw earlier this month, investors have all but forgotten about it. After recent data helped reassure investors that the U.S. economy is not on the brink of recession, the Federal Reserve took another step toward delivering the Goldilocks scenario they've been hoping for. In a speech at the annual Jackson Hole Conference on Friday morning, Fed Chair Jerome Powell declared that the time has come for rate cuts. It was his strongest signal yet that the Fed will slash interest rates at next month's meeting.
Friday's speech suggested the Fed had seen enough data to be confident that inflation is coming under control. Powell said that the labor market has cooled and the Fed doesn't want it to cool further. Investors cheered the news that borrowing costs should drop soon, sending the S&P 500 up to trade near a record. Each of the three major indexes built upon their biggest gains of the year posted last week. The S&P 500 gained 1.5% this week, while the Dow Jones Industrial Average rose 1.3%, and the Nasdaq Composite ended 1.4% higher. It's not just the central bank keeping an eye on prices. Target snapped a streak of sales declines in the most recent quarter, and it says that's because price cuts are driving shoppers through its doors more often.
Profit grew more than analysts had expected, and Target boosted its earnings outlook. Target sells a lot of necessities like food, as well as trendy items that help boost its profits. The retailer found itself in an awkward in-between spot as inflation started to bite consumers a few years ago. More shoppers started favoring the ultra-cheap prices at Walmart. The latest quarter showed investors that the push to lower prices is working and consumers still have enough money to spend on some splurge items. Target shares closed up 9.6% on the week after jumping 10% Wednesday when it reported earnings. The retailer was among the S&P 500's best performers this week. It looks like everyone's favorite pandemic exercise bike company is also staging a turnaround, albeit a smaller one.
Peloton shares soared 35% Thursday after it unexpectedly posted growing sales for the first time in more than two years. Subscription revenue was up and losses shrink. Demand for new bikes may have cooled, but it looks like there are enough exercise bike diehards to keep the subscription business afloat. Peloton shares closed 51% higher for the week, but they're still down 97% from their 2021 heyday. Investors were spooked after news that federal regulators are investigating a unit of Franklin Templeton, one of the biggest money management firms in the U.S. On Wednesday, Franklin disclosed that the Securities and Exchange Commission sent a notice that intends to bring an enforcement action against the co-chief investment officer of Western Asset Management Co., one of Franklin's subsidiaries.
Franklin said the executive had been placed on a leave of absence, and it has launched an internal investigation over whether some clients were favored over others. Analysts are concerned that some of Franklin's major clients, like pension funds, could pull their money from the firm if they're concerned about wrongdoing. Franklin shares shed 13% Wednesday and 8% for the week, making them the worst performer in the S&P 500.
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Chapters
3 chaptersSpeakers
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