Markets are digesting this morning's economic data, and we are looking at the major US stock averages in positive territory.
The Dow Jones Industrial Average up by 0.5%.
The Nasdaq and S&P 500 up by a little over 0.25% point.
Now earlier this week, we did see a slide in US equities and at the same time in terms of economic data, second quarter GDP growth coming in stronger than expected at 3.
8% now weekly jobless claims declined, showing fewer Americans filed for unemployment and monthly durable goods orders rebounded thanks to sharp increase in aircraft orders.
Well, joining me to weigh in on the latest round of tariffs, as well as economic data and what's happening in markets is Chris Versace, CEO of Tomatica Research.
Chris, happy, happy Friday to you actually.
Thank you so much for joining me.
So we have a slew of economic data to digest.
So what's the verdict on the economy now?
Well, I think if we take a look at not only the revisions that we got for 2nd quarter GDP, but we look at the rolling GDP models whether it's the Atlanta Fed's GDP now, the New York Fed's now casting model, and it tells us that, you know, by and large the domestic economy is continuing to hold up.
Honestly, Remy, far better than people were thinking a few months ago.
Yes, you know, the employment picture kind of remains a little bit of cloudy, but I think that overall when we look at whether it's consumer spending, businesses looking to spend, you know, by and large the economy is on firm footing.
Well, Fed speakers clamoring for airtime this week and we heard from several, including Powell as well as Myron, but given that Fed fund futures are pointing to two more rate cuts before year end, what do you think this means for markets?
Well, I think that the market is wrapping its head around the fact that we could get two more rate cuts, which, if you remember, that's really 1 more than the Fed was telegraphing with its June set of economic projections.
So that's a positive thing for the market.
But now we need to see confirmation that conditions are lining up.
And I think what we saw with today's August core PCE price index, which was Flat sequentially compared to what we saw in July, says that inflation, it's not continuing to surprise to the upside.
I think the market is getting a little more comfortable that as a result, perhaps the worst of the tariff inflation is behind us.
Meanwhile, the economy, like we said, continues to perform better than expected.
That indicates perhaps an arguable soft landing.
And Chris, after hitting record highs, the major US stock averages hit the brakes, but this morning we are looking at the Dow industrials back above 46,000.
The S&P 500 currently holding above 6630.
But we did see big tech stocks taking a bit of a bruising this week.
So giving all the developments and all the headlines we're hearing out from big tech.
What does this mean moving forward?
Well, I think there's a lot of concern about a potential, you know, shell game between big tech companies over who is investing in whom, who is supporting whom, but I think at the end of the day we kind of have to step back and look at the multi-year forecast for AI and data center demand, as at least as it relates to a tailwind for big tech, and all indications are that remains positive.
But I also think if we step Back a little bit.
There's been a lot of concern about the market's valuation.
I too have kind of singled out the PE ratio for the S&P 500 relative to where we are in the past.
But one of the things we're starting to see over the last few weeks is second half earnings expectations for 2025 and even 2026 are starting to nudge higher again, the The Economy is, you know, on firmer footing than we previously thought.
The Fed has telegraphed perhaps, you know, a little more leaning into dovish monetary policy.
These are good things for the market over the next, you know, several months, next few quarters.
We could have to navigate a little bit of a pullback near term depending on what happens with the government shutdown, maybe a lack of data in the short term, but by and large, if we follow the money, Remy, things continue to look good.
Yeah, and Chris, speaking of following the money, American consumers out there continue to spend, and overnight we got earnings out from Costco, so the wholesale giant navigating a challenging consumer environment, right, with tariff pressures as well as tough competition.
And apparently Costco is attracting more shoppers by focusing on its popular private label and by keeping prices low on some key items out there.
Now we know that US grocers like Kroger and Walmart also reported sales gains, and this was driven by strong demand for value products across all income levels.
So do you think this is sustainable?
Well, I think Costco's a little different, you know, I think what we need to understand with Costco is its membership business model, right?
So it's fascinating in that as it continues to grow its warehouse warehouse footprint, it continues to attract more members.
And if we parse the data over the last few quarters, there's little question that that growing membership is spending more at Costco.
So to me, all the metrics very much are confirming.
Um, but the other thing too is we are seeing the positive impact of Costco's membership price increase from last year.
That's resulting in a step function higher in its operating income.
And you know, I think you're correct, Remy, that Costco is extremely well positioned, especially as we go into the holiday shopping season where consumers want to stretch their spending dollars.
Costco is the place to be both from a shopping perspective and a stock perspective.
Well Chris, we will have to leave it there, but you and I will be back on air on Monday, so I look forward to continuing the conversation then.
Have a great weekend.
You too, Remy.
Thank you.
