China Prepares More Stimulus and Powell's on Deck

*China brings out a bigger stimulus gun

*Economic data on deck: August durable orders, 2Q 2024 GDP revisions

*A barrage of Fed speakers, but Powell will be the focus

*Coming up: Our takes on Micron, Meta and Jefferies

China Brings Out a Bigger Stimulus Gun

Exiting today’s Politburo meeting, President Xi and other leaders called for additional fiscal and monetary support to prop up China’s economy.

While details were slim, this suggests China is formulating a larger aid package to address the country’s economic challenges that include employment, an aging population and real estate. The backdrop for this has been further signs of slowing in China’s economy that raised questions over the 5% 2024 GDP target and led to several investment banks dialing back GDP expectations for this year.

What we can be relatively sure of is that there will be more stimulative policy coming in China, most likely in the form of lower interest rates and lower bank reserve requirements. Lingering questions exist over how big of a bazooka China will use to stimulate its economy, and whether or not it will be enough.

While we wait for those answers, we’ll look forward to next week’s September NBS PMI data as well as the September PMI data from Caixin. Parsing the two of those reports should give us a better indication of China’s economic footing.

Data on Deck: August Durable Orders, 2Q 2024 GDP Revisions

On the economic front, Thursday brings the August durable goods order figures, which are expected to fall 2.6% after jumping 9.9% in July. Let’s keep in mind the transportation component can be volatile month to month, which is why most will focus on the durable orders excluding transportation, which is expected to inch higher by 0.1% in August compared to the 0.2% decline in July.

Alongside that data set, the market will also get the final GDP figure for 2Q 2024, and it is expected to fall to 2.5% compared to the 3.1% figure for 1Q 2024. Because the market is caught between hard- and soft-landing narratives for the economy, a stronger or weaker-than-expected 2Q 2024 figure on Thursday morning could alter Fed rate cut cadence expectations.

However, our view is that the September data coming next week will be a far greater factor than this rearview GDP figure. Ahead of this durable orders report, the Atlanta Fed’s GDPNow model pegs current quarter GDP at 2.9%.

Barrage of Fed Speakers, but Powell Will Be the Focus

Following Thursday morning’s data, we have a wave of Fed speakers, seven in all including Fed Chair Powell, all before market trading is done for the day. While the various Fed speakers will probably share their expectations for Fed policy, the market will take its cue from Powell, who speaks at 9:20 a.m. ET.

Because we are still relatively close to the Fed’s policy decision last week with only a modicum of fresh data, we doubt Powell will be breaking any new ground today. Even so, the market will be trying to figure out if Powell sees another big 50 basis-point cut in the pipeline or if the Fed chair is open to smaller bite sizes going forward. We’ll be keeping our ears open as well.

Coming Up: Our Takes on Micron, Meta and Jefferies

Quarterly results and guidance last night from Micron MU topped expectations due to, you guessed it, AI demand. We’ll break down our reaction to that report and its implications for several of our holdings as well as Meta’s META "Connect" announcements from Wednesday.

Following quarterly results from Jefferies JEF on Wednesday night, we’ll share what stood out to us as it relates to our positions in Morgan Stanley MS and Bank of America BAC.

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At the time of publication, TheStreet Pro Portfolio was long META, MS and BAC.