Coffee With Greta: Fed Hangover

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DJIA Futures: -208 (-0.6%)

SPX Futures: -39 (-0.9%)

NASDAQ Futures: -191 (-1.3%)

Good morning friends!

Futures are dropping after the Fed’s hawkish rate pause on Wednesday.

Let’s get right to it!

Fed Recap

The Federal Reserve left interest rates unchanged as expected on Wednesday. 

The federal funds rate remains in a range of 5.25% to 5.5%. 

But the Central Bank signaled it expects one more rate hike before the end of the year. 

The Federal Open Market Committee’s statement said “economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong.”

The Fed also released an updated Summary of Economic Projections, AKA the dot plot, which showed rates remain higher for longer. 

The new dot plot shows just two rate cuts in 2024 with a terminal rate of 5.1% vs previous expectations for four cuts next year.

The Fed sees a terminal rate of 3.9% at the end of 2025 and 2.9% at the end of 2026.

The Central Bank also raised its projections for GDP growth to 2.1% this year and 1.5% in 2024.

Weekly Jobless Claims Fall To 8-Month Low

Weekly jobless claims fell unexpectedly again in a continued sign of strength for the labor market. 

The Labor Department reported 201,000 Americans filed initial claims for unemployment benefits last week. 

That was down by 20,000 from the previous week and lower than expectations for claims to rise to 225,000.

It was also the lowest level of weekly claims in eight months.

Continuing claims fell by 26,000 to 1.66 million in the week ending September 9 vs 1.69 million expected.

Key Factory Gauge Contracts

The Philadelphia Fed’s manufacturing index dropped back into negative territory this month. 

The index tumbled 25.5 points to -13.5 vs expectations for -0.7. 

It is the 14th negative reading in the past 16 months. 

The new orders index plunged 25.8 points to -10.2, shipments index dropped 8.5 points to -3.2, and unfilled orders fell 8.8 points to -13.6.

High prices continued to be an issue with the prices paid index rising 4.9 points to 25.7 while the prices received index rose by 0.7 points to 14.8.

FedEx Earnings Beat

FedEx (FDX) shares are up 4.6% ahead of the open after beating fiscal Q1 profit expectations.

Here’s how the shipping giant’s results compared to analysts’ estimates:

• Adjusted EPS: $4.55 vs $3.71 expected
• Revenue: $21.7 billion vs $21.74 billion expected

FedEx reported operating profit margins of 7.3%, better than 6% expected. 

The CEO said, “FedEx is well-positioned to continue to deliver improved profitability while becoming an even more flexible, efficient, and data-driven organization.”

The company forecast fiscal 2024 full-year earnings of $17 to $18.50 per share up from its previous guidance for $16.50 to $18.50.

Splunk Rallies On Cisco Deal

Splunk (SPLK) shares are rallying 19.6% in premarket trade after Cisco (CSCO) announced a deal to acquire the cybersecurity firm.

Cisco will buy Splunk for $157 per share in an all-cash deal, valuing the company at about $28 billion.

The deal is expected to close in Q3 2024.

If Cisco backs out of the deal or is forced to abandon it because of regulatory intervention, it will owe Splunk a $1.48 billion termination fee. 

If Splunk backs out, it will pay a $1 billion breakup fee to Cisco.

Cisco’s chair and CEO said, “From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient.”