Rate-Sensitive Stocks Jump After Powell’s Remarks
US stocks snapped a three-day losing streak on Friday, Aug 23, after the Fed chair Jerome Powell signalled that the central bank was ready to cut interest rates. The S P 500 jumped 1.2 per cent.
Powell’s comments boosted stocks in industries that are highly sensitive to interest rates, including construction materials, ocean cruises and solar power.
Intuit shares tumbled after the financial software firm reported a surprise quarterly loss.
After a choppy week, major US equities indexes closed higher in the final trading session as Federal Reserve Chair Jerome Powell confirmed that lower interest rates are on the way.
At the Jackson Hole Economic Symposium, Powell said conditions are set for an early September cut in the fed funds rate, yet he also made clear that the schedule and pace of cuts would be determined by the way economic conditions evolve.
The S&P 500 was up 1.2 per cent on Friday. The Nasdaq rose 1.5 per cent. The Dow was up 1.1 per cent.
Shares of the construction materials supplier Builders FirstSource (BLDR), the best performer in the S&P 500, rose 8.7 per cent. While lower rates – both through the Fed’s imminent coming interest rate cuts and the promise of lower mortgage payments – will benefit construction activity, the company has more recently attracted some attention for its rapid-fire stock buybacks and acquisitions. The company appears to be on the rise, according to a report in The Wall Street Journal on Thursday that noted how net debt at the company has been declining even as it repurchases shares and buys up competitors. The Journal quoted David M Martin, an analyst at BB& who said that Builders market: the US housingcoaster, but the company is off at Sidewinder speed.
Cruise operators were another clear winner after Powell’s speech, as the market began betting that interest rates were more likely to head down than up. Cruising is a highly discretionary category of holiday, and cruise operators tend to be highly leveraged, making them very sensitive to interest rates. Norwegian Cruise Line Holdings (NCLH) shares rose 7.7 per cent on Friday, while Carnival (CCL) rose 7.4 per cent.
Warner Bros Discovery (WBD) shares jumped 7.3 per cent in the wake of a report about their efforts to redefine their cable network strategy. The entertainment conglomerate is reportedly looking to ramp up spending on programming for their TNT channel next year. The strategy, hinting at a turn away from streaming services, comes after WBD lost their broadcasting deal with the NBA.
Stocks in the solar sector also enjoyed a bright day, with weak interest rates leading to lower financing costs and higher desirability of solar installations. Shares of the solar micro-inverter company Enphase Energy (ENPH) jumped 6.5% – earlier this week, analysts from Truist reaffirmed the ‘buy’ rating they gave to the stock, noting that this could be the beginning of Enphase’s expansion into more widespread operations. Shares of solar panel manufacturing company First Solar (FSLR) increased 5.9% on the day.
Shares in Intuit (INTU) tanked the most of any stock in the S&P 500 index on Tuesday, falling 6.8 per cent in the wake of the financial software company reporting a surprise loss in its most recent quarter and downbeat full-year profit guidance. Intuit, which makes the tax-preparation software TurboTax and the personal finance app Credit Karma, announced last month that it planned to lay off about 10 per cent of its workforce this year, in order to shift resources towards artificial intelligence capabilities. The company will replace cut workers with new hires.
shares of design automation software firm Synopsys (SNPS) fell 1.6% after the company reported its Q3 earnings. EPS beat but revenue was barely in line. Last January, SNPS announced it had agreed to acquire engineering software provider Ansys (ANSS) in a $35 billion cash-and-stock deal. This week, U.K. regulators said they are considering the potential impact on competition in the U.K. if the deal goes through.
Shares of memory and data storage provider Micron Technology (MU) tumbled 1.4% following a price-target cut from analysts at Susquehanna. Their more pessimistic outlook comes after Micron revealed that it now expects DRAM and NAND bit shipments to be roughly flat quarter over quarter. Susquehanna remains bullish on the stock, however, and believes the tight supply and demand dynamics are setting up the market for another memory upcycle.