- 3 Big Scoops
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- đź—ž The Fed's Rate Cut Impact
đź—ž The Fed's Rate Cut Impact
PLUS: Nike and FedEx report Q2 results
Aditya Raghunath
December 20, 2024
Bulls, Bitcoin, & Beyond
Market Moves Yesterday
S&P 500 @ 5,867.08 ( ⬇️ 0.087%)
Nasdaq Composite @ 19,372.77 ( ⬇️ 0.10%)
Bitcoin @ $97,075/22 ( ⬇️ 5.61%)
Hey Scoopers,
Happy Friday! Here’s what we’re covering today 👇
👉 The Fed lowers interest rates
👉 Nike warns of slowing demand
👉 FedEx finally delivers
So, let’s go 🚀
Market Wrap
Stock futures declined Thursday evening as markets await the Federal Reserve's preferred inflation measure, the PCE index. Dow futures fell 0.3% (119 points), with S&P 500 and Nasdaq 100 futures dropping 0.3% and 0.4% respectively.
The decline deepened after a funding measure backed by Trump failed to pass Thursday night, increasing the likelihood of a partial government shutdown starting Friday night without new funding legislation.
On Thursday, Dow Jones broke its longest losing streak since 1974, gaining 15 points to mark its first positive session since December 5. The S&P 500 and Nasdaq Composite posted minor losses as rising 10-year Treasury yields weighed on markets.
Friday's upcoming PCE price index report has become more critical following Fed Chair Jerome Powell's recent comments suggesting inflation remains above the central bank's 2% target.
Economists expect November's PCE to show a 0.2% monthly increase and a 2.5% annual rise. Core inflation (excluding food and energy) is projected at 0.2% monthly and 2.9% annually.
The markets are still processing the Federal Reserve's latest decision to hold rates steady while projecting fewer rate cuts in 2025 than previously expected.
This announcement triggered significant market declines on Wednesday, contributing to substantial weekly losses – over 3% for the S&P 500 and Dow and more than 2% for the Nasdaq.
Additional economic data expected Friday includes the University of Michigan's consumer sentiment index.
Trending Stocks 🔥
Hims & Hers - Shares of the telehealth company lost over 7% after the U.S. FDA said tirzepatide, the active ingredient in Eli Lilly’s diabetes treatment Mounjaro and weight loss drug Zepbound, is no longer in shortage.
Darden Restaurants - The restaurant stock popped 15% after reporting same-store sales growth at Olive Garden and LongHorn Steakhouse, putting it on track for its best day since 2020.
Mission Produce - Shares of the avocado producer gained 10% after reporting revenue of $354.4 million and earnings of $0.28 per share in fiscal Q4. While revenue rose 37%, earnings more than doubled year over year.
Fed’s Rate Cut Impact
The Federal Reserve has implemented another interest rate reduction, lowering its benchmark rate by 0.25 percentage points to a range of 4.25-4.50%.
This marks a full percentage point decrease since September, reflecting the Fed's ongoing efforts to fuel economic growth amid a cooling job market and moderating inflation.
After maintaining higher rates through 2023 and 2024 to fight inflation—which peaked at 9.1% in June 2022—the Fed has begun easing its stance as inflation has declined to 2.7%.
While the path toward the Fed's 2% target hasn't been smooth, Fed Chair Jerome Powell remains optimistic about continued progress.
The Fed projects rates will fall to 3.75-4% by late 2025, though this outlook could shift if proposed policy changes affect inflation dynamics.
Let’s see how the recent rate will impact individuals and households.
Impact on Consumer Borrowing Costs:
Credit Card Debt ($5,000 balance)
Latest cut (0.25%): $1.04 monthly savings
Total savings since September: $4.17 monthly
Personal Loans ($10,000 over 3 years)
Latest cut: $1.20 monthly savings
Total savings since September: $4.80 monthly
Auto Loans ($35,000 over 5 years)
Latest cut: $4.14 monthly savings
Total savings since September: $16.63 monthly
Home Equity Lines of Credit ($50,000)
Latest cut: $10.42 monthly savings
Total savings since September: $41.67 monthly
Borrowers with adjustable-rate mortgages may see modest reductions, though actual savings will vary depending on the loan amount, credit profile, and current market conditions.
Those facing rate resets may still encounter higher rates than their original terms.
FedEx Targets a Spin-Off
FedEx shares jumped up to 10% in after-hours trading Thursday following the company's announcement that it will spin off its less-than-truckload freight division, a strategic move aimed at streamlining operations and strengthening its core delivery business.
According to analysts, the spinoff could potentially create up to $20 billion in value for shareholders, allowing FedEx to concentrate on improving its core package delivery operations while enabling the new freight business to operate independently.
As the largest provider of less-than-truckload services in the United States, FedEx Freight specializes in combining multiple customers' shipments on single trucks. These shipments move through a network of service centers where they are sorted and transferred to other vehicles heading toward similar destinations.
In its financial results, FedEx reported second-quarter adjusted profit of $990 million ($4.05 per share), slightly down from $1.01 billion ($3.99 per share) in the same period last year. Despite the decline, these earnings exceeded analysts' expectations of $3.90 per share.
The Memphis-based company also revised its full-year profit guidance downward, now projecting adjusted earnings of $19 to $20 per share.
This follows a previous adjustment in September when FedEx reduced its full-year operating income forecast to $20-21 per share from the initial range of $20-22.
Nike Eyes a Turnaround
Nike's new CEO, Elliott Hill, outlined a challenging path to recovery on Thursday, acknowledging that the company's turnaround will take longer than anticipated as it deals with heavy discounting amid slowing consumer demand.
The company reported second-quarter fiscal 2025 earnings that exceeded analysts' expectations:
Revenue: $12.35 billion (down 8% from $13.39 billion last year but above the expected $12.13 billion)
Earnings per share: 78 cents (down from $1.03 last year but above the expected 63 cents)
Net income: $1.16 billion (down from $1.58 billion last year)
Hill, who rejoined Nike after leaving in 2020, revealed that the company's digital platforms are currently splitting sales evenly between full-price and promotional items—a level of discounting he says is harming Nike's brand and its retail partners' profitability.
To address this, Nike plans to:
Move back to a full-price online business model
Clear old inventory through discount channels
Focus on product innovation and brand storytelling
Improve traffic at both digital and physical stores
The company's near-term outlook remains challenging, with Nike projecting:
Holiday quarter sales to decline by low double digits
Gross margins to drop 3-3.5 percentage points
Both forecasts are worse than analysts anticipated. Hill, who began his Nike career as an intern in the 1980s, expressed a personal commitment to the company's recovery: "I have an irrational love for this company... my singular focus is to help get us back on track, to get back to winning."
The market response was mixed, with Nike shares initially rising after the earnings beat but losing gains following Hill's detailed remarks to analysts about the challenges ahead.
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