By Peter Bergman (MoneyAmped.com)
Wall Street is poised to begin the day on a positive note, although there is a possibility that the latest U.S. retail sales data could dampen the prevailing optimism. Cisco is poised for success following the introduction of a reorganization strategy, while the U.K. economy demonstrated indications of expansion in the second quarter.
Economic Data Slate Takes Center Stage
On Thursday, the ongoing display of U.S. economic data will provide investors with valuable insights into the potential trajectory of the Federal Reserve’s interest rate cuts.
Recent data on U.S. inflation has solidified market expectations that the Fed will reduce borrowing costs in September, marking the first rate cut in over four years. However, there is still ongoing discussion about the magnitude of the cut – whether it will be the typical 25 basis points or a more substantial 50 bps.
Following the release of Wednesday’s CPI data, the likelihood of a 50 bps cut decreased to 36%, a significant drop from the previous day’s 50%. The percentage had increased to 71% at the beginning of this month following the unexpectedly low U.S. payrolls data.
The data docket includes the weekly unemployment claims and the Philadelphia Fed industrial index for August. However, the retail sales release for July will garner the most interest because consumption accounts for nearly two-thirds of the growth in the United States economy.
Given that the previous month’s result remained unchanged, a monthly rise of 0.4% is projected, which represents a minor improvement over the prior instance.
Following a 525 basis point hike in its policy rate since 2022, the Federal Reserve has maintained its benchmark overnight interest rate within the range of 5.25% to 5.50% since July of last year.
Futures Rise in Anticipation of a Data Release
On Thursday, U.S. stock futures enjoyed an upward trend, which was propelled by increased hope that the Federal Reserve will begin decreasing interest rates in the coming month due to good inflation conditions.
A 100-point increase, which is comparable to a 0.3% increase, was seen in the Dow futures contract at 04:20 Eastern Time (08:20 GMT). For the S&P 500 futures, there was a slight gain of 8 points, which is equivalent to 0.1%, while the Nasdaq 100 futures showed a 52-point increase, which is comparable to 0.3%.
Following the release of the consumer price index for July, which showed an annual inflation rate of 2.9%, the major Wall Street indices finished the day with gains on Wednesday. This was the lowest level of inflation since 2021.
The Dow Jones Industrial Average, a major stock index, witnessed a large increase of almost 240 points, which is comparable to a rise of 0.6%. The Standard & Poor’s 500 Index, a benchmark that is widely watched, also recorded a rise of 0.4%. The Nasdaq Composite, which is well-known for its concentration on technology firms, also saw some advances, but not very significant.
On Thursday, investors will be paying particular attention to the statistics about retail sales for July, which will be announced. These data will give insights into the general soundness of the economy, particularly in light of the fact that inflation has been decreasing. If the data shows that there is a positive trend, then the Federal Reserve could consider lowering interest rates in September if the trend continues with the current trajectory.
It is expected that Walmart (NYSE:WMT) will announce its profits before the market opens. This announcement will provide more insights into the current status of consumer spending.
Additionally, on the announcement that Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) had completed the acquisition of a new investment in the cosmetics firm, the shares of Ulta Beauty (NASDAQ:ULTA) suffered a massive rise in premarket trading. Similarly, Nike’s shares (NYSE:NKE) went up when the investors at Pershing Square, which Bill Ackman owns, declared their ownership stake in the athletic footwear retailer.
Cisco Makes Progress With Its Restructuring Strategy
Following the announcement of Cisco Systems (NASDAQ:CSCO) outstanding profits for the fourth quarter and the disclosure of a strategic restructuring project, the shares of Cisco Systems (NASDAQ:CSCO) saw a substantial increase in trading after the company’s regular business hours on Wednesday.
Cisco shares have increased by more than 6% since the beginning of premarket trading at 8:20 Eastern Time.
The corporation’s revenue for the fourth quarter, which ended on July 27, was $13.64 billion. This result is somewhat higher than the projected figure of $13.54 billion generated during the same period. The earnings per share after adjustments came in at 87 cents, which was higher than the projection of 85 cents that was placed on the table.
Additionally, Cisco has declared its desire to downsize its workforce, suggesting that it intends to lay off seven percent of its employees worldwide. This decision is anticipated to result in a charge for severance and other one-time termination payments that might amount to up to one billion dollars before taxes. During the first three months of the fiscal year 2025, the business anticipates incurring charges that range from roughly 700 million to 800 million dollars.
According to Chuck Robbins, the acclaimed chair and CEO of Cisco, “We finished the fiscal year 2024 on a high note.” During the most recent quarter, we witnessed an increase in orders across all aspects of our business, which indicates that we were able to meet the steady demand from our customers. This demonstrates the confidence that customers have in Cisco to deliver all-encompassing connectivity and security solutions for their enterprises in this day and age of artificial intelligence.
The UK Economy Expanded by 0.6% in the Second Quarter
There is also a significant amount of ambiguity regarding whether the Bank of England will decrease interest rates at its upcoming meeting. This follows its initiation of a campaign to lower rates earlier this month in a narrowly made decision.
A flood of earnings reports published earlier Thursday has yet entirely to dispel the uncertainty.
The U.K. economy experienced a growth of 0.6% in the second quarter of the year, building on the previous expansion of 0.7% in the first quarter. This indicates a steady recovery from the recession.
Nevertheless, June saw no significant economic growth, a decline from the 0.4% growth observed in the previous month. Additionally, industrial and manufacturing production experienced a substantial decrease compared to the same month last year.
Britain’s economy has experienced sluggish growth in the wake of the COVID-19 pandemic, with a modest expansion of only 2.3% from the fourth quarter of 2019 to the second quarter of 2024.
