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The Dow Jones Industrial Average is pointing down a day after the U.S. Federal Reserve cut interest rates by 25 basis points. It signaled that additional cuts could come in the near future. The central bank also announced plans to cut the rate for excess reserves to bolster liquidity.
Today is the third consecutive day that the Fed has injected cash into the U.S. financial system. More on this below.
Here are the numbers from Wednesday for the Dow, S&P 500, and Nasdaq:
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Now, here's a closer look at today's Money Morning insight, the most important market events, and stocks to watch.
The Top Stock Market Stories for Thursday
- Yesterday, the Federal Reserve slashed its benchmark rate by 25 basis points to a range of 1.75% to 2%. Fed Chair Jerome Powell painted an optimistic picture of the U.S. economy, citing buoyant labor markets and inflation nearing targets. However, the 25-basis-point rate cut addressed ongoing risks such as tepid global growth and trade wars. In what is termed a "hawkish" rate cut, Powell insisted that rate cuts were still up for debate: "We are going to be highly data-dependent… We are not on a preset course." But he did say that the Fed stood ready with "a more extensive sequence of rate cuts," should the economy wobble. The Fed voted 7-3 on the decision to lower the overnight rate to a range of 1.75% to 2%. The central bank had previously cut rates in July.
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- This morning, the Federal Reserve announced plans to inject billions of more dollars into the U.S. money market to prevent another spike in interest rates. The Fed will push another $75 billion into the overnight repurchase agreement operation (commonly referred to as repo), which is where Fed member banks go to obtain short-term cash to fund their operations. The expansion of excess reserves is a byproduct of the 2009 financial crisis. However, these reserves have declined as the Fed raised the IOER borrowing rate to encourage banks to lend money. The only problem is that the money market paralyzed early this week and the critical interest rate surged, which created a short-term cash crunch. To be honest, I don't think that markets have taken this story seriously, and it's a signal of something very dangerous. I'll be discussing it later this morning at Money Morning, so please check back very soon.
- Global markets are reacting negatively to news that the OECD has slashed its growth forecasts. The OECD projected its lowest global growth rate in a decade, concerned about the U.S.-China trade war. In addition, the group suggested that the international economy is suffering from late-cycle factors and that governments still don't know how to respond properly. The OECD said that the international economy would expand by 3.6% in 2019 and 3% in 2020. Those figures are the lowest levels since the Great Recession.
Stock to Watch Today: DRI, MSFT, T, DISH
- Shares of Darden Restaurants Inc. (NYSE: DRI) fell more than 2.5% after a disappointing quarterly earnings report. Though the firm beat earnings per share estimates by a penny, revenue fell short of forecasts. In addition, the firm reported same-store sales of 0.9%, a figure that fell short of Wall Street expectations. The company continues to struggle to generate foot traffic to its restaurant locations like Olive Garden, despite aggressive marketing practices.
- Microsoft Corp. (NASDAQ: MSFT) announced a big plan to return money to shareholders. The company plans to expand its buyback program by as much as $40 billion. It will also increase its dividend to $0.51, representing an 11% jump.
- Activist hedge fund Elliott Management recently built a large stake in AT&T Corp. (NYSE: T) and demanded that the company explore strategic options. Now, AT&T might spin off its acquisition of DIRECTV into a separate company with Dish Network Corp. (NASDAQ: DISH). This story is just developing, so check back with us later today and tomorrow as details develop.
- Look for additional earnings reports from Eros International Plc. (NASDAQ: EROS), Steelcase Inc. (NYSE: SCS), and Scholastic Corp. (NASDAQ: SCHL).
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.