Fed cuts for the first time this year

The Federal Reserve this week authorized its first interest rate cut of 2025, lowering the federal funds rate by 25 basis points to the range of 4.00%–4.25%, citing a softening labor market and moderating economic activity. Policymakers signaled that this isn’t a one-and-done move, the “dot plot” projects two more rate cuts later this year, likely in October and December. There was one dissenter, newly confirmed governor Stephen Miran, who argued for a more aggressive half-point cut. The Fed specifically described the decision as a “risk management cut,” balancing elevated inflation with rising risks to employment.

• Lower rates mean mortgages, credit cards, and business loans could ease a bit.
• The Fed is cutting because growth is cooling, not because inflation is “fixed.”
• Stocks like rate cuts, but that doesn’t mean there won’t be bumps.
• A weaker dollar could help U.S. companies that sell overseas.
• Long-term rates (10- and 30-year Treasuries) actually moved higher after the cut, markets were expecting a more dovish tone.
• The Fed is walking a tightrope: cut too little and growth slows, cut too much and inflation could flare back up.

Nvidia invests in Intel

Nvidia is investing about $5 billion in Intel common stock (at $23.28 / share), which will give Nvidia roughly a 4% stake in Intel, making it one of Intel’s largest shareholders. As part of the arrangement, the two firms will co-develop multiple generations of custom products: Intel will build x86 CPUs tailored for Nvidia’s AI infrastructure in data centers, and for PCs it will make system-on-chips (SoCs) combining Intel CPUs with Nvidia RTX GPU chiplets. The collaboration makes use of Nvidia’s NVLink technology to facilitate high-speed integration between Intel’s CPU stack and Nvidia’s graphics/AI hardware. The share price reaction was dramatic; Intel’s stock jumped ~23% in one day following the announcement.

• Intel gets a lifeline to stay relevant in the AI world.
• Nvidia locks in more supply to keep up with huge demand.
• The partnership shows how central AI chips are becoming to everything from PCs to data centers.
• Investors see this as a big deal; Intel’s stock soared on the news.
• Nvidia remains the leader in AI, but this deal helps Intel prove it still has a role to play.
• It also highlights how dependent the U.S. wants to be on its own chipmakers rather than foreign foundries.

Retail sales seem strong

Retail and food services sales rose 0.6% month-over-month in August, above the ~0.2% that economists had expected. On a year-over-year basis, sales were up about 5.0%, showing that consumer spending remains broadly resilient despite headwinds. Core retail sales (excluding autos, gas, building materials, and food services) gained around 0.7% MoM, showing strength in discretionary categories like clothing, sporting goods, and online retailers. Some segments underperformed, however: furniture sales declined, while inflation-adjusted gains (real terms) were more modest. Overall, the data suggest consumers are still willing to spend, though rising prices and a softening labor market may begin to weigh more heavily.

• Consumers are still spending, especially online and on everyday items.
• Big-ticket purchases like furniture are slowing as budgets tighten.
• After inflation, the spending boost isn’t quite as strong as it looks.
• Shoppers are resilient, but cracks are forming in the picture.
• The holiday season will be the real test; retailers may need to discount to keep sales strong.
• Strong sales support the “soft landing” narrative, but weakening job growth could change the story quickly.

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