Pre-Markets Up on Rate-Cut Excitement
Wednesday, August 13, 2025
Pre-market futures are up again this morning, following fresh all-time closing highs from the S&P 500 and Nasdaq on Tuesday. The rate-cut narrative continues to feed market optimism, as overnight the U.S. Treasury Secretary Scott Bessent suggested the Federal Open Market Committee (FOMC), which next meets September 16-17, should cut the Fed funds rate by 50 basis points (bps) instead of the earlier considered 25 bps.
This would bring interest rates down to 3.75-4.00%, which last was at this level back in December of 2022, when the Fed was still raising rates aggressively to sop-up runaway inflation — back when the Inflation Rate was still +6.5%. We saw Tuesday morning that the July Inflation Rate was an in-line +2.7%, assuaging fears that tariffs have re-ignited inflation in the present economy.
So we’re no longer approaching +2.0% inflation, but that was a nominal figure pushed by Fed Chair Jerome Powell, who at best will be in his current position for the next 3/4 of a year. And, sub-3.0% inflation (if we don’t count core CPI, which came in at +3.1% yesterday) does not sandbag economic activity. It keeps prices elevated somewhat, but if folded into an economy over time, has a better chance of being absorbed without much disturbance.
The question we’ll need to face — which clearly market participants aren’t interested in considering currently — is what happens if interest rates come down while tariffs begin to heat up inflation from now through the end of the year? Right now we’re looking at 2-3 rate cuts for the remainder of 2025; this roughly would equate a 3.50-3.75% Fed funds rate at a time inflation might also be climbing to the mid-3%s. Would this be a set-up for a fresh unprotected rise in inflation for 2026 and beyond?
In yesterday’s CPI report, Food prices remained steady and Gasoline fell -9.5%. New Vehicles rose slightly, to +0.4% from +0.2%, while Used Cars and Trucks ramped up to +4.8% from +2.8% in June. These numbers help illustrate a core CPI at a 5-month high in July. And this is before new tariff policy has manifest itself in goods prices at higher rates than we’ve seen thus far.
Tomorrow’s Producer Price Index (PPI) report for July — the wholesale print on prices, as opposed to the CPI’s retail print — is projected to warm up to +0.2% on headline and +0.3% on core (minus food and energy costs) from 0.0% a month ago. Year over year, June’s +2.3% was the low for 2025 so far this year. Theoretically, this PPI data may give us a look at tariff effects prior to retailers setting public-facing price tags.
Quarterly Earnings for This Hump Day
Brinker International EAT, the parent company of restaurant chains such as Chili’s and Maggiano’s, outperformed expectations in its fiscal Q4 report this morning, with earnings of $2.49 per share surpassing the Zacks consensus $2.43 (and way above the $1.61 per share reported in the year-ago quarter). Revenues of $1.46 billion beat estimates by +2%.
Its Maggiano’s Little Italy franchise actually slipped -0.4% in the quarter, but this was more than made up for with its Chili’s exceptional +24% growth year over year. Overall, the company experience a +16% growth in restaurtant traffic. Shares are up +6.5% in today’s pre-market, adding to the +17% the stock has made year to date. For more on EAT’s earnings, click here.
What to Expect from the Stock Market Today
We’re quiet on the economic report front, but we’ll look for Cisco Systems CSCO earnings after the closing bell. Shares are up +20% year to date for the tech conglomerate, and the Zacks Rank #2 (Buy) company is expected to bring +11.5% earnings growth year over year, +7% in revenues. Cisco is one of those companies that dsimply does not miss earnings projections.
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