• Rate hike: Stocks tumbled after the Federal Reserve decided to raise interest rates (more on that in a moment). Yields on short-term rates, which closely follow the central bank’s interest rates, surged higher, while 10-year Treasury yields climbed back above 5%.
• Commodities: Crude prices sank after US officials said a Saudi Arabian pipeline will be fixed in a few days. But it might be too little, too late: Several oil execs believe that the global fuel crisis has finally arrived.
• Crypto: Bitcoin clawed back some losses a day after the Senate failed to advance the Clarity Act, though crypto-related stocks kept falling—which presents an opportunity to buy them for cheap, according to Morgan Stanley.

Interest rates

Illustration: Morning Brew Inc., Photos: Brendan Smialowski/Getty Images, Adobe Stock

Like the least outdoorsy person in your friend group, the Federal Reserve just hiked for the first time since 2023.

In a widely expected and unanimous decision, the central bank raised rates by a quarter percentage point today. Despite fears of an economic slowdown, new chair Kevin Warsh emphasized that inflation is still the Fed’s number one enemy, and noted that GDP growth and the labor market have been resilient, which means a single rate hike won’t derail the entire economy.

Inflating expectations: The Fed’s latest projections indicate that policymakers don’t think inflation will return to its 2% target until 2029. The Fed’s statement specifically pointed to geopolitical risk as a source of uncertainty; spiking oil prices have already nudged inflation higher since the beginning of the Iran war.

As for the near term, 16 out of 18 FOMC officials project at least one more quarter-point rate hike coming this year. Traders are currently pricing in a 50% chance of that hike arriving when the Fed meets in October.

“If the economy keeps up like it has, the Fed is telling us that we may not see a cut until 2028,” LPL Financial Chief Economist Jeffrey Roach explained. “Instead, another hike may be on its way.”

A new era of rate hikes

President Trump, who installed Warsh with the implicit directive to slash rates, is unlikely to relish the thought of more hikes. But at the same time, today’s decision could instill markets with the confidence that Warsh is not going to be a presidential pawn, nor will he underestimate the risk of inflation meaningfully accelerating.

“Our initial view is that the Fed has largely validated the credibility narrative that had developed since Jackson Hole,” Janus Henderson Head of Global Short Duration & Liquidity Daniel Siluk noted. “Chair Warsh faced increasing pressure to align policy action with increasingly hawkish rhetoric, and today’s decision reduces the risk that investors question the Fed’s inflation-fighting resolve.”

What this means for markets

Investors sold off stocks after today’s decision, anticipating that another hike could be on the horizon. Higher interest rates generally stymie equities, especially growth stocks, because they make borrowing costs higher for businesses and pour cold water on economic growth.

But history shows that over the last 21 tightening cycles, the S&P 500 has climbed during the 12 months after the first hike 81% of the time, with an average gain of 6.7%. In other words, don’t panic-sell just yet.—LB

      

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Stocks

🟢 What’s up

• SpaceX gained 5.15% after setting Sept. 22 as its next Starship test flight.
• Honeywell climbed 2.07% as management pointed to strong orders and solid third-quarter momentum heading into year-end.
• Alvotech rallied 1.59% following a Barclays upgrade that pointed to potential regulatory approvals for three of its drugs later this year.
• Twist Bioscience surged 3.6% on a deal to provide antibody data to Eli Lilly’s AI-powered drug discovery platform.
• Worthington Enterprises rose 8.22% ahead of its first investor day in nearly three years, when the company plans to provide more detail on its businesses.

🔴 What’s down

• Zillow fell 3.72% after losing a legal bid to gain access to home listings from the largest real estate listing service in Illinois.
• Robinhood dropped 5.46% after federal prosecutors charged two employees with allegedly using confidential information to make crypto trades.
• J.B. Hunt Transport Services tumbled 13.3% after warning that earnings could fall 5% to 10% amid unusually volatile fuel prices.
• Salesforce slipped 2.04% following a widespread service outage during the second day of its annual Dreamforce conference.

Stock of the day

Intel makes some new memories

Illustration: Morning Brew Inc., Photos: Adobe Stock

After years of trying to catch up to Nvidia in the AI-chip race, Intel may have found a new strategy: Work smarter, not harder.

The company is reportedly in talks with South Korea’s SK Hynix, one of the world’s largest memory-chip makers, about manufacturing its chips in the US for the first time. Intel has traditionally focused on compute chips like CPUs, and this deal would give it exposure to memory, another key part of the AI stack.

But Intel can’t start braiding friendship bracelets just yet. “No specific plans or arrangements have been finalized,” SK Hynix said in a statement today. There’s also the potential that any deal involving SK Hynix’s advanced technologies could face scrutiny from the South Korean government. And it’s worth noting that production at Intel’s $28 billion Ohio factories, once expected to begin in 2025, has been pushed back to around 2030 or 2031. Bringing in SK Hynix could help Intel put the expensive complex to work, but it will be a while before investors get to reap the rewards of this deal.

Still, Intel jumped 4.03% this afternoon.

Why it matters: Intel left the memory business behind in 2020, when it sold its NAND unit for $9 billion—to none other than SK Hynix. Now AI has turned memory into one of the industry’s hottest commodities. And SK Hynix CEO Kwak Noh-jung has touted that unprecedented demand could outstrip supply for years to come.

Instead of spending years following rival Nvidia, Intel may have found a better path to chip production: Go with an old friend.—SY

Retail

Illustration: Shannon May, Photos: Adobe Stock

Remember when adding cheap store-brand toilet paper to your cart felt like a small defeat?

That era is over: Private-label products (think Costco’s Kirkland, Whole Foods’ 365, and Amazon Basics) have morphed from consolation prizes into must-haves, pulling in $245 billion in sales last year, up from $184 billion in 2020, according to global market research firm Circana. One in five products on US retail shelves is now private-label, edging out household staples that have dominated for decades in categories ranging from soda to salty snacks.

In recent years, consumers trying store brands have realized: Hey, these knockoff Cheerios taste the same as the real thing for half the cost. And with inflation pushing up prices on every grocery aisle, sticking to store brands gives shoppers more power of the purse.

Meanwhile, retailers have stopped treating in-house products as an afterthought—and started spiffing them up with better materials and snazzier packaging. Kirkland, which launched in 1995 with just two products, now offers around 550 items. Amazon Basics started even smaller in 2009, with a handful of generic batteries and cables, and has since exploded to over 1,800 wares. Morgan Stanley analyst Simeon Gutman expects private-label sales to jump 40% by 2030, hitting $462 billion, as store brands get more ambitious, branching beyond off-brand cereal to more exotic fare like lobster ravioli.

The name-brand damage

Not surprisingly, this shift has stirred up an existential crisis for household heavyweights like PepsiCo and Procter & Gamble, which are now scrambling to compete against the very stores selling their products.

The damage has been real. Del Monte, a company with 140 years of canned goods behind it, cited private-label competition as a factor in its bankruptcy filing last year. Energy drink maker Celsius watched its stock drop in March after Costco rolled out a Kirkland-brand rival.

Beat ’em—or join ’em

Corporations are fighting back the best way they know how—by appealing to shoppers’ bottom line. PepsiCo slashed prices on Doritos, Tostitos, and Cheetos by up to 15% this year—though sluggish sales suggest these efforts arrived too little, too late. Investors noticed; the stock slid.

Other companies have taken a less diplomatic approach: Mondelēz sued Aldi, accusing it of copying Oreo and Chips Ahoy packaging, while J.M. Smucker went after Trader Joe’s for allegedly ripping off its Uncrustables. Turns out imitation isn’t always the sincerest form of flattery; sometimes it’s a lawsuit.

Some companies have stopped fighting the trend altogether, and started quietly manufacturing store brands themselves. Edgewell, for instance, not only makes shaving products under Schick, but for Walmart’s private-label brand Equate and Target’s up&up line. Niagara makes bottled water for grocery chain Kroger; Crystal Geyser does the same for Wegmans.

Although these companies risk cannibalizing their own brands, maybe that’s a risk worth taking to keep the factories running. And let’s face it—at the end of the day, does it really matter if everyone’s toilet paper comes from the same place?—JD

      

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News

• US imports boomed this summer—the exact opposite effect that tariffs were supposed to have.
• Sign of the times: Over half of US workers say they’d take a pay cut for job security.
• OpenAI investors have approached the company proposing a new funding round that they think could value the startup at $1.2 trillion.
• IBM finalized a $1 billion government deal to build the US’s first quantum foundry.
• Mark Zuckerberg says he’s more likely to side with Nvidia’s Jensen Huang over Anthropic’s Dario Amodei in the AI doomsday debate.
• Speaking of, meet Zuck’s right-hand woman and the driving force behind Meta’s expanding AI empire.

Calendar

The housing market gets its turn, with August housing starts coming into focus, as well as pending home sales. We’ll also get a look at the labor market with weekly initial jobless claims.

recs

🍯 No honeypots here. The “CIA framework” can help portfolio managers pick mispriced stocks.

📚 Back to school spending may be behind us, but these six retail stock picks will profit from plenty more shopping sessions.

✈️ One of the most unpredictable careers for becoming a millionaire? Piloting the skies.

💴 With the Japanese yen gaining strength, carry traders are eyeing two new currencies to fund future trades.

🪹 Guard the nest egg: Here are the five things that could threaten your high-worth retirement savings, and how to avoid them.

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