Good morning! It’s Fed day today.

Tech earnings are critical too, but the policy decision this afternoon holds more sway over the stock market and your portfolio than the results of any single company.

I spoke to a handful of Wall Street veterans to put together everything you need to know.

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Brace for…no move

Wall Street is not looking for the Federal Reserve to announce an interest rate cut today. 

Everyone instead expects Jerome Powell & Co. to signal that a cut is coming in September.

The only question is how clearly they convey their messaging to markets. 

The central bank has now kept its benchmark rate in the 5.25-5.5% range since last July. Inflation has gradually cooled over recent months and the labor market continues to soften. 

Traders forecast no rate adjustments until September, according to CME’s FedWatch Tool. Betting markets like Polymarket and Kalshi anticipate the same.

“For the Fed to alter their stance at this meeting materially would be a bit shocking,” said Byron Anderson, head of fixed income at Laffer Tengler Investments. 

Most Fed officials have signaled that they aren’t ready to lower rates just yet. Rarely does the central bank make any surprise decisions. 

“With markets already pricing in slightly more than 25 basis points worth of cuts in September, the Fed may find it hard to push back against these expectations,” said Julien Lafargue, chief market strategist at Barclays Private Bank.

Meanwhile, at the September 18 meeting, CME data as of Tuesday shows odds spiking to about 85% for a quarter-point move lower.

Bond markets have seen a sharp rally over the last three months, in line with the cooling economic data. That’s making the Fed’s job easier — and it’s raised concerns that the Fed should start cutting rates sooner than later. 

Proponents of an early cut point to the rise in corporate bankruptcies, stress in commercial real estate, and pain among consumers. 

The Fed will announce its policy decision at 2 p.m. ET today, and Powell will speak at 2:30 p.m. ET. Odds are, he will talk around and about a September cut without committing to one explicitly.

“We will be listening for changes in his language, particularly any emphasis on inflation versus a slowing economy,” said Paul Karger, the co-founder of wealth management firm TwinFocus.

“More language on a slowing economy is bullish for bonds as it's more certain that the economy slows than that inflation stabilizes.”

Comments or feedback? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

Elsewhere:

📉 Microsoft fell short. Shares of the tech giant fell over 7% after reporting weaker-than-expected earnings late Tuesday. The company missed on cloud revenue expectations, even as it came out strong on its top and bottom lines for the quarter. (Yahoo Finance)

💼 The labor market looks frozen. Companies have slowed down hiring and fewer workers are leaving their jobs willingly, according to the June job openings report out Tuesday. The data showed there were 5.3 million hires in the month, 314,000 fewer than in May. The rate of hiring fell to 3.4% of total employment, the lowest since March 2020. (Axios)

👀 Nvidia stock plunged and it hasn’t even reported earnings. The chip-maker continues to slide, and it’s dragged other semiconductor stocks with it. In Tuesday’s session, Nvidia declined roughly 7%. The move lower has fueled concerns that the AI hype train may finally be losing momentum (Barron’s)

Rapid-fire:

Last thing:

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