Today, Federal Reserve Chair Jerome Powell had the last word against those questioning his ability to bring down the persistent inflation that’s been a thorn in the side of the US economy for the past two years.

And he didn’t need to actually speak—today’s Consumer Price Index numbers said it all:

• Prices increased 2.5% in August, lower than the 2.6% expected.
• Month over month, prices jumped 0.2%, in line with forecasts.
• Overall, inflation is back at 2021 levels.
• But core inflation, which excludes gas and food costs, and which many economists see as a better gauge, jumped 0.3%—slightly higher than the 0.2% expected.
• Sticky housing prices were the main contributor to the rise in core inflation. In August, housing prices rose their fastest over the entire year.

The higher-than-expected core inflation reading and rising shelter prices point to the Fed implementing a smaller 25 basis point rate cut in September, as opposed to the bigger 50 basis point cut some traders were betting on. The Federal Reserve will be announcing how much it is cutting rates by next week on Sept. 18.

“Overall, the combination of softer demand for goods and services due to increased pricing sensitivity, reduced markups, moderating wage growth, and moderating rent inflation will continue to provide a healthy disinflationary impulse heading into 2025,” explained EY Senior Economist Lydia Boussour.

What is the Fed looking for? Powell has emphasized that the decision to cut rates will be based on economic data, including the August unemployment numbers, which showed the labor market has weakened.

Beyond how large September’s rate cut will be, the next question investors will be asking is how many rate cuts we’ll get throughout the year, and what the new normal for interest rates will eventually look like.

How should you prepare your portfolio?

Now is the time to lock in longer-term yields, analysts say. And as always, stay invested.

“With consensus fully embracing the direction of travel, we’re encouraging investors to focus on what can be done to limit reinvestment risk in portfolios as cash yields head lower,” wrote Head of Investment Strategy at JP Morgan Wealth Management Elyse Ausenbaugh in a recent note. “From here, our energy might be better spent debating what the neutral or terminal rate might be in a soft landing scenario rather than the pace at which we get there.”—LB

Need a refresher on electronic exchanges? They’re trading platforms where the complicated ins and outs of buying and selling are automated by advanced tech—easy enough.

But here’s some big news: MIAX is upping the electronic exchange game.

MIAX Sapphire, their fourth US options exchange, follows a taker-maker model and features a state-of-the-art trading floor (coming in 2025) that enhances liquidity and promotes improved price discovery.

MIAX is the real deal. Their four fully automated electronic options exchanges in the US have distinct allocations and pricing models designed to meet specific client demands.

Get the scoop on the future of trading.

🟢 What’s up

• Dave & Busters Entertainment popped 4.66% after announcing strong sales and earnings growth last quarter, along with opening 13 new locations (more tokens for everyone!).
• Petco Health and Wellness roared 32.90% despite mixed earnings last quarter, though shareholders wagged their tails at new CEO Joel Anderson’s plans to improve profitability.
• Viking Therapeutics rose 11.31% thanks to JP Morgan initiating coverage of the company with a bullish overweight rating.

What’s down

• Bank of America slipped 0.71% after a new filing revealed that Warren Buffett sold more shares of the company last quarter.
• Rentokil Initial plummeted 21.07% once the pest control company made it clear that slow sales and currency exchange rates will take a $105 million toll on full-year profits.

Last night was the first, and probably last, presidential debate between former President Donald Trump and Vice President Kamala Harris. Judging by the reaction from betting markets, which now point to a Harris victory in the November election, the Democratic nominee performed better than her rival.

The fallout for certain stocks was quick, and in some cases, brutal. Harris’ perceived win last night helped send solar stocks higher, with the idea that a Democrat in the White House means President Biden’s economic policies supporting clean energy will remain in place. Homebuilder stocks also rose thanks to Harris’ plan to support first-time homebuyers with up to $25,000 in down payment assistance.

Meanwhile, a perceived Trump loss in the debate sent shares of Trump Media & Technology Group tumbling to a new all-time low. Bitcoin also sank shortly after the debate concluded, while healthcare stocks fell as well.

Last night’s debate may be moving the needle a bit today, but analysts far and wide have made it clear that investors shouldn’t trade based on a single evening of political insults. Stay diversified, and stay above the fray—at least until the mudslinging reaches a fever pitch in two months.—MR

GameStop has lost some of its clout as a meme stock favorite—and now it’s proving it can’t really carry itself on the same metrics regular old stocks are evaluated by, either.

The gaming retailer plummeted 12.05% today after it reported a mixed bag of earnings. Despite the fact that it (surprisingly) turned a profit, it didn’t instill investors with confidence that it is successfully transforming a meme into a sustainable business model.

• GameStop reported earnings of $0.04 per share in the second quarter, beating analyst expectations of a loss of $0.09 per share.
• But sales for the quarter came in at $798 million, below expectations of $896 million, and 30% lower than last year’s sales of $1.16 billion.
• Back in June, GameStop raised over $2 billion in a stock sale, but it’s unclear what the firm is doing with that cash.
• In an SEC filing on Tuesday, Gamestop disclosed it could sell an additional 20 million shares of Class A common stock, also stoking investor doubts about its financial health.

GameStop executives have had a complicated relationship with the stock’s frantic r/WallStreetBets investor base, which shocked and horrified Wall Street when it propelled GameStop to meme god tier back in 2021.

This summer, Keith Gill, known to his fans as Roaring Kitty, boosted GME shares after a bizarre and rambling social media appearance in early June. The stock is still up over 23% year to date in spite of today’s decline.

It looks like GameStop bulls are going to have to convince Roaring Kitty to return to social media to resuscitate shares from here. But if there’s any lesson to be learned, it’s that memes are better saved for group chats than for your portfolio.—LB

Not your average trading platform. Yep, there’s a new electronic options exchange in town, and it’s called MIAX Sapphire. MIAX operates four fully automated electronic options exchanges in the US, each with a distinct allocation and pricing model designed to meet specific client demands. Choose the trading tech of the future.

• A civil war is brewing, and it’s not produced by A24. The world of crypto seems poised to tear itself apart over the 2024 elections.
• Annuities and pensions may sound stodgy, but there’s billions of dollars wrapped up in these retirement investment vehicles. Long the domain of life insurance companies, now private equity wants in on the action.
• Wall Street is too optimistic, and analyst earnings estimates are 30% too high compared to actual earnings.
• The private companies that could make a splashy public debut in the next few years may end up being your next profitable investment, so getting to know the major players now could pay off down the line.
• Morgan Stanley has revealed its new top AI stock pick.

We’ve already seen the Consumer Price Index, now it’s time for the Producer Price Index. While CPI is all about changes in the prices paid by consumers, PPI focuses on the change in prices that producers receive for their goods. In other words, CPI measures inflation at the retail level, while PPI measures it from a wholesale perspective.

PPI increased 0.1% last month, less than the 0.2% economists expected, and dropped down to 2.2% annually, well below June’s 2.7%. Core PPI excluding food and energy was flat, and forecasters are hoping to see another flat reading this month.

We’ll also get the weekly initial jobless claims report, which, given the Fed’s renewed focus on the labor market, is suddenly in the spotlight as a key barometer of both the labor market, and the likelihood of a higher interest rate cut.

Before the open

• Kroger (KR) is continuing its quest to merge with frenemy Albertsons for $25 billion, and until it does the stock is in a bit of limbo. Shareholders want to see what a combined company can do, but until the deal goes through they’ll have to evaluate Kroger on its own, and they might like what they see: Revenue is growing, profits are growing, and even without Albertsons, Kroger remains a powerhouse in the grocery industry. Consensus: $0.91 EPS, $34.07 billion in revenue.

After the close

• Adobe (ADBE) has gone nowhere fast this year, in spite of its position as the leader in content creation software. That should put it in prime position to profit from the AI boom, but at the same time it means Adobe is going up against every new AI competitor that appears. Its industry dominance also puts a regulatory crosshair on the company’s back, and its already high valuation means it may not have any wiggle room to rise from flat. Consensus: $4.10 EPS, $4.85 billion in revenue.

Do you think you’re a good investor? Well, it’s time to put your (imaginary) money where your mouth is.

Our first-ever Brew Markets Fantasy Investing League kicks off tomorrow, and with it comes the chance to win honor, glory, and bragging rights. But if you’re more materialistic, the investor with the most profitable portfolio will win a backpack full of Morning Brew merch (a T-shirt, a sweatshirt, a water bottle, a deskpad, and more) worth $150. Second place gets a Morning Brew sweatshirt, and third place gets a T-shirt.

The rules are as follows:

• Let’s keep it simple: Your portfolio can be long-only, meaning no short selling or margin trading.
• Everyone starts with $100,000, and you can buy any stock on the Nasdaq, NYSE, NYSE American, and OTC markets that has a share price of at least $1.
• Commissions are only $1, but keep in mind that every trade you make saps your buying power a tiny bit.
• Speaking of trades, there’s no limit to how much buying and selling you do in the next three months.
• The winner will be measured by best total return as of December 31, 2024.

As for investing strategies, we leave that up to you. You could spend the next three months day trading, you could pick a portfolio tomorrow and stick with the same batch of stocks all quarter, you could pour all your money into one company and bet the house on it, or you could stay in cash and wager that everyone else will lose money. The choice is yours!

Also, we’re aware that three months isn't enough time to let a long-term investment strategy play out—and to be clear, long-term investment strategies have proven time and time again to be how successful investors make their money.

But, this is a game! So have fun, talk smack in the chat, and see if you can out-invest the Brew Markets gang.