The main indexes made modest moves Friday as market participants looked ahead to next week’s key Fed meeting.
The central bank is widely expected to resume rate cuts following a string of weak jobs data – and Wall Street will be tuned into the Summary of Economic Projections (SEP) to see where the Fed expects the interest rates to be by year’s end.
The Federal Reserve’s September meeting will conclude this Wednesday afternoon at 2 pm Eastern Standard Time with its latest policy announcement. According to CME FedWatch, futures traders are currently pricing in a 95% probability that the central bank will cut rates by a quarter-percentage point this time around.
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More importantly, perhaps, will be Fed Chair Jerome Powell’s post-meeting press conference and the quarterly release of the SEP, or “dot plot,” which summarizes where each member expects monetary policy to be going forward.
In June, the Fed’s dot plot indicated expectations that the federal funds rate would be lowered to 3.9% by the end of 2025 – suggesting two quarter-point rate cuts this year.
But following several data points – including the August jobs report – that showed a notable slowdown in the labor market, many are expecting the Fed to cut at each of its three remaining meetings.
Powell’s press conference and the FOMC forecasts could give clues as to whether central bankers feel the labor market slowdown is “the result of a weakening economy or caused more by immigration tightening and deportations,” writes David Payne, staff economist at The Kiplinger Letter, in our live Fed blog. “FOMC members would be more likely to cut more frequently if it were a result of a weakening economy.”
Payne adds that it will be interesting to see whether committee members feel higher inflation is a temporary result of tariffs or in danger of becoming “more sticky as consumer, worker and business expectations shift.” This, he says, could influence rate-cut expectations.
Consumer sentiment slips in September
As for today’s economic data, the University of Michigan said its Consumer Sentiment Index fell 4.8% from August to September, to 55.4. The index is down 21% year over year.
“This month’s easing in economic views was particularly strong among lower and middle income consumers,” says Surveys of Consumers Director Joanne Hsu. “Consumers continue to note multiple vulnerabilities in the economy, with rising risks to business conditions, labor markets, and inflation.”
She adds that while several consumers mentioned tariffs during interviews, sentiment remains above the lows seen in April and May after the Trump administration announced reciprocal tariffs.
The report also showed that year-ahead inflation expectations were unchanged from August, at 4.8%, while long-run inflation expectations ticked up to 3.9%.
WBD stock soars 56% this week on buyout buzz
Warner Bros. Discovery (WBD) has had a tremendous run in recent sessions, climbing 16.7% today and 56% this week.
Sparking the rally is news that Paramount Skydance (PSKY, +7.6%) – the media company formed by the recent merger of Skydance and Paramount and run by David Ellison, son of billionaire and Oracle (ORCL) Chief Technology Officer Larry Ellison – is preparing an all-cash bid for WBD.
This follows news from late last year that Warner Bros. Discovery is planning to restructure into two operating segments – one focused on its cable TV business and the other on streaming and studios.
Neither company has confirmed the reports and no official offer has been made, but a CNBC report suggested one could come as soon as next week.
“In our view, the industrial logic of a deal (e.g. greater scale, a broadcast network, combining premium sports with premium entertainment assets) makes strategic sense,” says BofA Securities analyst Jessica Reif Ehrlich, though she’s still waiting for Paramount Skydance’s strategy to be outlined when it reports earnings in November.
She adds that “access to WBD’s best-in-class library and IP would, in our view, significantly improve the prospects for PSKY, particularly in film and TV,” while “the potential combination of Paramount+ and HBO Max would create an extremely formidable competitor in streaming.”
Adobe edges lower after earnings
Adobe (ADBE) was also in focus Friday, slipping 0.3% despite the Photoshop parent’s beat-and-raise quarter.
“ADBE has been an incredibly frustrating stock for most of the last 12 months [down 40% through the September 11 close],” says Mizuho Securities analyst Gregg Moskowitz, CFA. “Having said that, ADBE is beginning to meaningfully monetize its Generative AI innovations, a recent price increase will be additive.”
The analyst reiterated his Outperform (Buy) rating on ADBE after earnings and $460 price target, representing implied upside of nearly 32% to current levels.
As for the main indexes, Nasdaq Composite (+0.4% at 22,141) did enough to finish today at new record closing highs. The S&P 500 (-0.05% at 6,584) and the Dow Jones Industrial Average, on the other hand, (-0.6% at 45,834) retreated from Thursday’s fresh peaks.
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