Stock Markets Agree Rate Cuts Are Coming. How Far the Fed Will Go.

(Alex Wong/Getty Images)

The Federal Reserve’s role is frequently summed up as taking away the punch bowl just as the party gets going. Right now it’s the opposite—the Fed probably needs to add more punch, but it’s not clear how much.

There are plenty of economic warning signs. The Fed’s Beige Book—which compiles anecdotal reports from its 12 regional banks—showed “little or no change” in activity across the majority of districts and warned of wages failing to keep up with price rises. Consumer sentiment is down, even if spending is holding up for now. Hiring data suggests a slowing labor market ahead of Friday’s crucial jobs report for August.

The market is pricing in Fed action. There’s a 98% probability of a quarter-point rate cut this month, according to the CME FedWatch tool. Higher gold prices are another indication, boosted by rate reduction expectations sinking the dollar.

While there is consensus around the need for rate cuts, what’s contentious is how far the cutting needs to go. Fed Gov. Christopher Waller is energetically making the case for multiple cuts over the next six months, and as a front-runner to replace Fed Chair Jerome Powell next year, the market is listening to his words.

A change in tone at the Fed could be amplified by Stephen Miran, President Donald Trump’s pick to join the central bank’s governing board. Miran’s Senate Banking Committee hearing on Thursday will likely inform the market’s views on how a reshaped Fed will react to Trump’s calls for drastically lower rates despite the risk of tariff-driven inflation.

For this month at least, the market is likely to cheer for resumed rate cuts. But even when parties are in full swing and the mood is good, not all are in harmony. Some typically have had enough while others are left wanting more.

— Adam Clark

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Senate Takes Up Miran Nomination as Fed Decision Nears

The Senate Banking Committee is set to consider Stephen Miran’s nomination to serve on the Federal Reserve’s Board of Governors later this morning. Central bank independence and proposed restructuring plans will likely be the main themes of the conversation as the Fed faces its next crucial decision.

• Miran is nominated to the seat vacated by Adriana Kugler. But President Donald Trump’s attempt to oust sitting Fed Gov. Lisa Cook could open another seat, and Trump has repeatedly pressured the Fed to cut interest rates. In prepared testimony, Miran said monetary policy independence is critical to its success.
• Fed officials will face their next rate decision later this month. Fed Gov. Christopher Waller, a contender to succeed Chair Jerome Powell, is pushing for lower rates, seeing a weakening labor market as a primary reason. And he sees multiple cuts on the table over the next three to six months.
• Others are more cautious. St. Louis Fed President Alberto Musalem didn’t outline a specific rate policy prescription on Wednesday, but said that available data indicate a labor market that’s close to full employment, though employment risks are rising.
• Atlanta Fed President Raphael Bostic says employment is cooling, not collapsing. He sees one cut this year—though he didn’t put a timeline on when that cut would happen. He did acknowledge that if Friday’s jobs report is really weak, that would put a September rate reduction in play for him.

What’s Next: Two Republicans on the Senate Banking Committee suggested on Wednesday they wouldn’t consider a successor to Gov. Cook at the Fed until a legal battle over her firing is resolved. Sen. Mike Rounds (S.C.) told CNBC Cook hadn’t had her due process and her status at the board hadn’t changed.

— Megan Leonhardt and Liz Moyer

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‘Tariffs’ Cited In Hundreds of S&P 500 Companies’ Earnings

Company executives have been mentioning the word “tariff” a lot on their earnings conference calls since President Donald Trump took office. Trump has repeatedly called it his favorite word and a solution to closing the federal debt deficit. Public company executives are evoking it for another reason.

• For the earnings season just passed, the word “tariff” or “tariffs” has come up at least once on 355 calls by S&P 500 companies through Sept. 2, according to John Butters, senior earnings analyst at FactSet. That’s less than 455 calls in the first quarter, but more than seven times a year ago.
• Condensed-soup maker Campbell’s said Wednesday that it expects its fiscal 2026 earnings to decline 18% to 21%, largely because 50% steel tariffs have raised its soup can costs. Campbell’s said about two-thirds of its projected 9% to 13% drop in full-year adjusted EPS is attributable to tariffs.
• Last week, J.M. Smucker Co., maker of Folgers, Café Bustelo, and Dunkin’ coffee sold in stores, said tariffs forced it to raise prices for the second time this year in August, and that those increases are starting to show up on grocery store shelves.
• The Fed said in its Beige Book that contacts in its 12 regional districts frequently cited economic uncertainty and tariffs as “negative factors.” Tariffs hurt consumer spending in Boston, household budgets in Philadelphia, prices in St. Louis, and the economic outlook in Dallas, the survey said.

What’s Next: While some firms told the Fed they are passing along all their tariff costs, others said they were hesitant to raise prices because of price-sensitive customers. Most Fed districts expect price hikes to continue in coming months, and three districts expect the pace of price increases to accelerate.

— Janet H. Cho and Nate Wolf

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ConocoPhillips Will Slash Up to 25% of Global Workforce

Crude oil exploration and production company ConocoPhillips will slash up to a quarter of its global workforce, including employees and contractors, by the end of 2025. The move comes as major oil producing nations consider whether to raise production.

• ConocoPhillips had about 11,800 employees as of Dec. 31, 2024. A spokesman told Barron’s that it is always looking for ways to be more efficient. But the move mirrors industry practice. Marathon Oil laid off 500 employees last year before ConocoPhillips completed its $22.4 billion acquisition.
• President Trump has promised a renaissance for fossil fuel producers, though Chevron also announced it would cut up to 20% of its workers. Uncertainty over trade policies has weighed on oil prices. West Texas Intermediate is currently around $64 a barrel, down from the mid-$70s in January.
• The Organization of the Petroleum Exporting Countries and its allies are considering boosting production, according to Reuters, which said the cartel is considering unwinding its output cuts of about 1.65 million barrels a day more than a year ahead of schedule.
• At the start of August, eight members of the group including Saudi Arabia and Russia agreed to accelerate scheduled production increases following earlier adjustments in April and November 2023.

What’s Next: OPEC+ will meet Sunday to discuss production policy amid a surge in supply that is currently outpacing demand. A product cut of 2.2 million barrels per day that was scheduled to be lifted by September 2026 will now be fully unwound this month.

— Nate Wolf, Mackenzie Tatananni, and Janet H. Cho

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Figma Was an IPO Darling. Its Earnings Disappointed.

It was a darling of the booming market for initial public offerings, but Figma, the design software developer that went public in late July and has more than doubled from its IPO price since, stumbled badly late Wednesday after reporting disappointing results.

• Figma posted sales of $249.6 million for the second quarter, up 41% from a year ago but slightly below expectations. The break-even quarter came in below expectations for a profit of 9 cents a share. Shares of Figma tumbled 10%.
• The company’s outlook also appeared to underwhelm investors. It expects third-quarter revenue to be between $263 million and $265 million and full-year sales between $1.021 billion and $1.025 billion. The stock’s reaction reflects that hopes were high for an even stronger quarter.
• Figma’s stock has an exorbitant valuation —shares trade for nearly 200 times earnings estimates for this year, which puts it at a significant premium to the large-cap software group, says BofA Securities analyst Brad Sills. Rival Adobe is valued at just 17 times earnings forecasts.
• Figma’s results will be a test of investors’ appetite for pricey new stocks. Shares of Stablecoin company Circle Internet Group, which soared on its first day of trading in June, have cooled off lately, despite the company posting healthy earnings in August.

What’s Next: Figma arguably benefited from too much hype surrounding its IPO, just like Circle, crypto trading platform Bullish, and medical imaging software maker Heartflow. Next up: buy now pay later platform Klarna, which just kicked off an IPO process expected to raise $1.46 billion.

— Paul R. La Monica

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—Newsletter edited by Liz Moyer, Rupert Steiner