Today in the Market (9/20/2023)

Good Evening! On Wednesday, stocks fell as market participants processed the Fed’s announcement to maintain the current interest rates. However, the Fed also indicated the possibility of one more rate hike during the last two meetings of 2023 which may remain elevated for an extended period.

With the news from the Fed, all three indexes ended the day in the red with the NASDAQ Composite falling the most by 1.53%, the S&P 500 decreasing by 0.94%, and the Dow Jones sliding by 0.22% in the last 30 minutes of trading. 

SPENDING LESS ON PETS

General Mills (GIS), a prominent food corporation that includes pet brand Blue Buffalo in its portfolio of cereal and snack brands, saw a noteworthy decline in the demand for pet food during its most recent quarter.

  • Revenue: $4.90 Billion vs. $4.88 Billion Expected
    • Pet Segment Revenue: $579.9 Million vs. $592.2 Million Expected
  • Earnings Per Share: $1.09 vs. $1.08 Expected

What else? The net sales for Blue Buffalo were constant when comparing the current year to the previous year, whereas the operational earnings of the division saw a decline of 10%. The firm reported a decrease in sales for pet treats, specifically noting a reduction in double-digit percentages. This loss was caused by the fact that pet treats are often considered to be a discretionary purchase for pet owners. Also, the sales of wet pet food, which is often priced more than dry food, remained stagnant

Other companies have already seen declines! The conservative observation of the demand for pet food was reiterated during a late August conference call by Chewy (CHWY). During the earnings call, Chewy CEO Sumit Singh said that in July, there was a noticeable transition from wet food to dry food. This consumer behavior often indicates a tendency towards seeking more value

WILL WE SEE A SOFT LANDING?

Federal Reserve Chair Jerome Powell reiterated the central bank’s pursuit of achieving a soft landing, a goal that has proven to be challenging. He admitted that implementing a tightening campaign without causing a broad economic collapse is not the most likely scenario, but rather a possible one.

So what is a soft landing? A soft landing is often defined as a successful monetary policy adjustment when the Fed incrementally increases interest rates to moderate economic growth and mitigate inflationary pressures while avoiding excessive tightening that may potentially trigger a recession. Thus far, the Federal Reserve has effectively navigated the delicate balance. However, the market exhibited a negative response when Powell indicated that he did not see the occurrence of a soft landing as the most likely scenario.

How likely is it? The achievement of a soft landing has major implications for market observers and the general population, as it will determine whether there will be a recession or sustained economic growth. However, successfully accomplishing such a feat is a difficult task.

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