WSJ What’s News - U.S. Markets Rally after Fed’s Powell Says ‘Time Has Come’ for Rate Cuts

Episode Date: August 23, 2024

P.M. Edition for Aug. 23. U.S. stocks rally after Powell’s speech at the first day of the Federal Reserve’s annual meeting in Jackson Hole, Wyoming. And Vice-President Kamala Harris’s crusade against price gouging is galvanizing the Democratic base. WSJ economics reporter Jeanne Whalen explains what Harris could do if she wins the White House in November. Plus, the U.S. Justice Department and eight states are suing a real-estate software firm for allegedly helping landlords illegally coordinate rent prices. Danny Lewis hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

So what's it like to buy your first cryptocurrency on Kraken? Well, let's say I'm at a food truck I've never tried before. Am I gonna go all in on the loaded taco? No, sir. I'm keeping it simple. Starting small. That's trading on Kraken. Pick from over 190 assets and start with the 10 bucks in your pocket.

Easy. Go to kraken.com and see what crypto can be. Not investment advice. Crypto trading involves risk of loss. See kraken.com slash legal slash ca dash pru dash disclaimer for info on Kraken'scom and see what crypto can be. Not investment advice. Crypto trading involves risk of loss. See kraken.com slash legal slash ca dash pru dash disclaimer for info on Kraken's undertaking to register in Canada. U.S. stocks rally after Fed Chair Jerome Powell sends the strongest signal yet of an upcoming

rate cut. And Vice President Kamala Harris's crusade against price gouging is resonating with the Democratic Party's base. They like the idea of fighting price gouging is resonating with the Democratic Party's base. They like the idea of fighting corporate gougers. They aren't always sure how to define gouging and they aren't always sure who's to blame, but they like the idea of the administration going after someone and trying to do something to curb a lot of these price hikes. Plus, the U.S. Justice Department and eight states are accusing a real estate software

company of illegally coordinating rent increases. It's Friday, August 23rd. I'm Danny Lewis for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that moved the world today. It's looking even likelier that the Federal Reserve will cut interest rates soon. During his speech at the Central Bank's annual gathering in Jackson Hole, Wyoming, Fed Chair Jerome Powell gave his strongest signal yet that cuts are on the way.

Powell said the Fed intends to act to stave off a further weakening of the U.S. labor market. The time has come for policy to adjust. The direction of travel is clear and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks. We will do everything we can to support a strong labor market as we make further progress toward price stability. WSJ economics reporter, Paul Kiernan is covering the meeting in Jackson Hole.

He joins us now. Paul Powell says the time has come. Do we know how much interest rates could come down and when? The Fed's next policy meeting is mid September, September 17th to 18th. And it is widely anticipated that they will start the easing cycle then as for how much that right now the market is kind of split between a quarter of a point decline in rates and a half point cut.

The Fed's key interest rate right now stands at around 5.3%. After this upcoming cut, you know, it's gonna be closer to 5% probably, or potentially a bit less. And what data are the Fed going to be considering when making this decision? One of the things that Pal said today is that while a rate cut is very likely, the magnitude and the timing will depend on how the economic data come in.

So the first big piece of data is the August jobs report that will be released on September 6th. and showed a further increase in the unemployment rate. And that certainly worried people in the markets and led to a bunch of speculation about could the economy be headed for a recession after all? Barring an unexpected surge in inflation in August, which again no one expects, a rate cuts likely on the way. And I think if the unemployment rate holds steady

or continues to rise a little bit, the case will be stronger for a bigger move. Paul Kiernan covers economics for The Wall Street Journal. Thanks for joining us. Thanks so much for having me. All three major US indexes rose after Powell's remarks. The tech-heavy Nasdaq led today's rally with a gain of 1.5%. The S&P 500 climbed about 1.1%.

And the Dow Jones Industrial Average also grew about 1.1%, or 462 points. While interest rate cuts may be coming, many Americans are still feeling the impact of inflation on everyday prices. And one of the big themes at the Democratic National Convention this week was Vice President Kamala Harris' crusade against price gouging. The policy proposal has galvanized the party's base. But how would it work? WSJ economics reporter Jean Whalen is here to explain.

Jean, if she wins the White House, what can Kamala Harris do about high prices for things like food, cars, or housing, to name a few hot topics? So Harris, the vice president, has not laid out a ton of detail yet. So a lot of the details are still TBD. But a couple of broad brush things that she has said is one, she would try to incentivize construction of three million new homes by offering tax breaks and other perks to home builders. Hopefully that would create more supply to kind of ease the the price shocks today among housing because it's a lack of housing supply right now is helping cause really high prices. She's also pledged to offer

first-time homebuyers a $25,000 benefit to help meet their down payment costs. And on the food front, she said that if elected, she would push in her first 100 days for a federal ban on corporate price gouging on groceries. And she would direct her administration to scrutinize food industry mergers that could raise prices. Those are the broad brush things that she has laid out. But beyond that, the details are still a little unclear. How is the Democratic Party's base responding to that?

So the base is actually very fired up by this idea of fighting gouging. Delegates to the convention, many of whom are just regular people, said that they are really angry about high prices. That's no surprise to all of us. We hear that a lot from voters. But they like the idea of fighting corporate gougers. They aren't always sure how to define gouging, and they aren't always sure who's to blame, but they like the idea of the administration going after someone and trying to do something to curb a lot of these price hikes. Many of them do also understand that a lot of this is regular market dynamics, inflation,

supply and demand. They get that, but they also feel that there's a level of corporate greed here of companies taking advantage and they want the government to fight back. How are the companies and industries that are in the spotlight on this reacting? Well, the food companies have pushed back hard against the idea that they are gouging. They have said that, look, our own costs have gone up dramatically during the same period of inflation. We, the food makers, have to buy ingredients like cocoa

and we have to pay workers. And all of those costs have soared for us during the pandemic and after. And we need to maintain our profit margins so we have no choice but to raise prices. Now, you know, that is true, their costs have grown, many of their costs. But at the same time, many food companies

are enjoying higher margins than normal. And they've had a lot of complaints from advocacy groups who say that they are taking advantage. And some supermarket retailers even are pushing back at the food companies price hikes saying, okay, enough, the retailers, the supermarkets are worried about consumer backlash. WSJ economics reporter, Jean Whalen. Coming up, the U.S. Justice Department at eight states are accusing RealPage of illegally coordinating rent prices. That's after the break. Introducing TD Insurance for Business with customized coverage options for your business.

Because at TD Insurance, we understand that your business is unique, so your business insurance should be too. Whether you're a shop owner, a pet groomer, a contractor, or a consultant, you can get customized coverage for your business. Contact a licensed TD insurance advisor to learn more. The U.S. Justice Department and eight states are suing real estate software firm, RealPage, for allegedly allowing landlords to illegally coordinate rent increases.

The civil suit accuses RealPage of stifling competition through a rent-setting algorithm. It also alleges the company maintains an illegal monopoly over rent-setting software. The Justice Department says RealPage commands an 80% market share in commercial revenue management software and two of its pricing systems are used by landlords overseeing about three million units. WSJ housing reporter Will Parker says the lawsuit is part of the DOJ's broader strategy. The Biden administration has gotten a lot more active on antitrust more broadly and they've been looking at the effects on consumers from pricing systems or pricing companies that assist with pricing. Another industry is the poultry industry is one

where there's been a pretty large amount of activity but there's also this broader interest in housing costs in the administration and trying to limit the ability of large companies to raise prices at rates that exceed what used to be more of a normal rate of increase. And this case is a combination of those two inclinations on those two issues from the current administration. RealPage denies the allegations. A spokeswoman for the company says its customers aren't required to use its price recommendations, and its software can recommend lowering rents.

The President's Departure from the Race In other news, independent presidential candidate Robert F. Kennedy Jr. says he is suspending his campaign and endorsing former President Donald Trump. His departure from the race could potentially boost the Republican former president, just after Democrats left their convention with renewed hope for a win. Delta Air Lines' chief operating officer is leaving to take a role at another company after just over a year on the job. Mike Spanos' departure, effective at the end of August, comes about a month after a botched CrowdStrike software update sparked an operational meltdown for Delta. Delta said it doesn't plan to replace Spanos.

Instead, two executives who had worked under him will now report directly to the CEO. And we exclusively report that hedge fund billionaire Paul Marshall is nearing a deal to acquire Britain's Spectator magazine for more than $131 million. People familiar with the matter say if completed, the deal could be announced by Tuesday. And that's What's News for this week. Tomorrow you can look out for our weekly markets wrap up, What's News in Markets. Then on Sunday, we'll be answering your questions about how the extreme weather events we've seen are impacting Americans and what businesses are doing about the effects

of our changing climate. That's in What's News Sunday. Today's show was produced by Ariana Asparu. I'm Danny Lewis in New York. Our AM host this week was Kate Bulevent and Luke Vargas reported from the Democratic National Convention in Chicago. Additional support this week from Anthony Bansi, Pierre Bienneme, Jess Fenton, Trina Menino, Jessica Mendoza, and Enrique Perez. Our supervising producers are Tali Arbel, Michael Kosmides, and Christina Roca. Aisha Al-Muslim is our development producer, Scott Salloway and Chris Zinsley are our deputy editors, and Philana Patterson is The Wall Street Journal's head of news audio.

We'll be back with our regular show on Monday morning. Thanks for listening.