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Fading Fed enthusiasm.
Markets are giving back some ground after the rip-roaring rally on Friday that ensued after Fed Chair Jerome Powell’s Jackson Hole speech. Powell acknowledged the Fed was in a challenging position ahead of its mid-September meeting as the job market has slowed while tariff-driven inflation lurks.
Still, Powell opened the door to a rate cut by showing more concern about a labor market slowdown.
“I worry that it’s now been years since we really had a sustained period of 2% inflation and that we probably haven’t seen all the consequences of tariffs. And we’re seeing probably more pressure on politicization of the Fed than any time in generations,” Larry Summers said on Opening Bid (video above).
“So I think it’s a moment actually to tilt towards concern about maintaining confidence in the long-term commitment to price stability.”
Intel (INTC) stock is up slightly today on the late-Friday news that the US government is taking a 10% stake in the chip giant.
The deal is getting mostly favorable reviews on the Street, in part because the government isn’t getting a board seat and the terms aren’t super restrictive.
Needless to say, this is not an ideal situation for Intel. Now, CEO Lip-Bu Tan will have the Trump administration breathing down his neck at every turn while he attempts to save the company.
And make no mistake, this government investment signals that Intel needs saving. And to save the company, Intel would likely have to sell its money-losing chip-building outfit. But that foundry business is what the government is likely betting on.
Catch-22!
“We see positive implications associated with this transaction, as we were previously concerned that the US government’s equity stake would likely have other Intel obligations with a potentially activist ownership role,” said KeyBanc analyst John Vinh.
“Additionally, with the removal of the clawback on the previous CHIPS Act grant and announced equity transaction, uncertainty associated with whether INTC’s CHIPS Act funding would be reneged is off the table.”
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Nvidia (NVDA) on the clock. The Street is bullish on Nvidia heading into earnings on Wednesday. Price targets have gone up, and most analysts are banking on robust guidance. Analysts say Nvidia will show a rebound in China sales and benefit from AI spending in the US.
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“We continue to believe that Nvidia’s leadership positioning in AI infrastructure remains unchallenged, and we expect GB300 specifications to remain best-in-class as inference/reasoning complexity continues to increase. We continue to view shares as attractively valued within the context of continued AI leadership positioning,” Stifel analyst Ruben Roy said. Given the high expectations, Nvidia has to deliver big-time — or the broader market could get drilled. The stock makes up an outsized 8% of the S&P 500 (^GSPC).
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Don’t sleep on Walmart. Walmart’s (WMT) less-than-perfect second quarter got the bears out of hibernation. But Evercore ISI analyst Greg Melich said the pullback is an ideal buying opportunity. Melich sees Walmart’s fair value at $110 a share, about 13% higher than current levels.
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“Walmart remains a Fab Five core holding with the pullback presenting opportunity to own the low cost/low price leader in a tariff impacted backdrop,” Melich said. “Walmart is winning share and driving topline volume while also investing for the long term via price, in store service levels, and omnichannel prowess.”
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