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Inflation is moving lower, the economy is cooling and the Federal Reserve has begun cutting interest rates. But can the central bank stick the landing?

Economists have said the Fed is on the verge of achieving an elusive “soft landing” in which the central bank is able to bring down inflation without sending the economy into a recession. It’s rarely been done, but some say the Fed is almost there.

“The U.S. economy is clearly not in a recession, nor is it likely to head into a recession in the home stretch of 2024,” said Jack Kleinhenz, National Retail Federation chief economist. “Instead, it appears that the economy is on the cusp of nailing a long-awaited soft landing with a simultaneous cooling of growth and inflation.”

Recent reports showed inflation was down to 2.2% over the year ending August, well off the highs from the summer of 2022 and closer to the Federal Reserve’s annual target.

After holding interest rates at decades-high levels to relieve price pressures, the Fed is now responding to slowing inflation by cutting interest rates. Central bankers voted to cut the influential fed funds rate by half a percentage point in its September meeting and forecast more cuts are on the way.

Those next steps in the cutting cycle could be crucial in determining whether the economy levels off sustainably or veers into a recession, economists said. 

“Current economic conditions can be best described as ‘goldilocks.’ Not too hot, and not too cold," wrote Torsten Slok, chief economist at Apollo. "The risk with cutting interest rates too much too quickly is that the economy becomes too hot again."

Goldman Sachs estimates there is only a 20% chance of recession in the next year. The investment bank noted that the recent weakening in the labor market wasn’t likely to slow economic growth significantly.

Employers created fewer jobs than analysts expected in August, but the unemployment rate also dipped back down to 4.2%. Economists expect those numbers will be similar when September's unemployment numbers are released on Friday. According to the Federal Reserve Bank of Atlanta's GDP Now model, the economy is expected to have grown 3.1% despite elevated unemployment.

“The increase in U.S. unemployment since April 2023 mostly reflects strong labor supply and continued expansion, not weak labor demand and a high risk of recession,” wrote Jan Hatzius, chief economist at Goldman.

Wells Fargo wrote that the Federal Reserve is dealing with a tricky situation. While weakness in the jobs market calls for an interest rate cut, strength in retail sales and other economic indicators call for moving more slowly when lowering borrowing costs.

“That divergence perfectly describes why this easing cycle is different and so hard to predict. Historically, when the Fed starts to cut rates, the economy is already in serious trouble,” wrote Wells Fargo economists Tim Quinlan and Shannon Seery Grein.

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Dollar Tree (DLTR) shares tumbled 34% in the third quarter, making it the S&P 500’s fifth worst performing stock over the period, as a challenging macro environment has caused financially constrained consumers to rein in spending on discretionary products. 

The discount retailer, whose stock has lost around half its value since the start of the year, announced earlier this year it was exploring strategic alternatives, including selling or spinning off the Family Dollar brand. It also announced plans to close 1,000 stores in an effort to improve profitability.

Below, we take a closer look at the technicals on Dollar Tree’s monthly chart and point out important historical price levels to watch out for in the quarter ahead.

Dollar Tree shares broke down below a multi-year descending channel in August, with declines accelerating into September.

Importantly, the sharp downward move has occurred on the highest monthly trading volume since March 2009, potentially flagging capitulation selling in the stock.

Although the shares trade around 16% above their September low, the price remains below the closely watched 200-month moving average, indicating the bears remain in control of the action.

Looking ahead, investors should monitor several well-respected support and resistance levels on Dollar Tree’s chart that other market participants will likely be watching.

The first lower level to watch sits around $70, a location on the chart just below Monday’s close where the shares may find support near the prominent June 2017 and March 2020 swing lows.

A breakdown below this level could instigate a drop to the $54 level, where the stock would likely attract buying interest from bargain hunters near a trendline connecting the June 2012 peak and prices positioned around the February 2014 trough.

An initial upswing in the stock’s price could see a rise to the $96 area, where the shares find a confluence of resistance from the descending channel’s lower trendline and a horizontal line joining a range of similar trading levels from June 2016 to October 2021.

Finally, reclaiming the above area may see the shares climb to $115, a region where investors could seek selling opportunities near three prior record highs on the chart that formed between January 2018 and April 2021.

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Apple Inc. (AAPL), one the world’s largest companies, had a market value of $3.4 trillion as of September 2024 and posted net sales of $383.3 billion in fiscal year 2023. Since its founding in 1976, the technology giant has grown into a diversified technology giant that sells devices such as iPhones, iPads, and Mac computers, as well as software and streaming services such as video games and Apple TV+. When it comes to acquisitions, Apple’s strategy has been to purchase small tech companies that it can easily integrate into its expanding line of products.

In 2020, Apple made a higher-than-usual number of acquisitions later in the year, including the popular weather app Dark Sky. In May 2020, the company also spent an estimated $100 million to purchase virtual reality streaming service NextVR.

The year 2021 has been marked by legal trouble that threatens the company’s apps ecosystem. Apple’s apps help drive the company’s services business, which generates $60 billion a year in revenue. Epic Games, maker of the popular video game Fortnite, sued Apple for alleged anticompetitive behavior related to its App Store. There has been no ruling on the case as of July 2021.

Below, we look in more detail at six of Apple’s most important acquisitions. The company does not provide a breakdown of how much profit or revenue each acquisition currently contributes.

Apple’s largest acquisition as of April 2024 is the $3 billion purchase in cash and stock of audio products maker Beats Electronics and its streaming service, Beats Music. Beats Electronics was founded in 2006 by music producer and rapper Dr. Dre and record executive Jimmy Iovine and released its first headphones in 2008. The acquisition has allowed Apple to sell the Beats line of headphones in its retail stores and with resellers. At the time of the acquisition, Beats was an independent company with minority stakeholders including Dr. Dre, Iovine, and private equity firm Carlyle Group.

Apple used several elements of Beats Music to help build its Apple Music streaming service. Beats Music was shut in 2015, and its subscribers were transferred to Apple. Apple has been aggressive about making Beats Electronics products a key part of the company’s offerings, including its Beats-branded headphones, earphones, and speakers.

SRI International Artificial Intelligence Center originally developed Siri in conjunction with Nuance Communications, a company focused on speech technology. SRI International spun off Siri as an independent company in 2008. Early on, Siri was developed as an individual app to be used for everyday tasks like booking reservations at restaurants, getting weather reports, or buying tickets to a sports event. Apple integrated the voice-activated technology into its early iPhone models. Siri technology is now used on many Apple products, including the iPhone, Apple Watch, Mac PCs, and Apple TV. Siri reflects Apple’s strategy of acquiring a tech company for a specific technology, then integrating that technology into its existing products.

Founded as Shazam Entertainment Limited in 1999, Shazam is the company behind the namesake music identifier app. Apple completed its purchase of Shazam in 2018 for an estimated $400 million, with the goal of integrating the technology into iPhones and other smart devices.

Although Apple already had a music identifying system built into Siri, Shazam’s was regarded as more robust. The company announced that it would remove advertisements from all tiers of Shazam service, relying instead on revenue generated from song purchases made through the app.

Founded in 1985 by Apple co-founder Steve Jobs during a period in which he had been forced out of Apple, NeXT developed hardware and software platforms. The company was perhaps best known for its NeXT computer, built for higher education and business use.

Apple announced the agreement to acquire NeXT in December 1996, which was followed by Jobs’ return to the company as CEO. For roughly two decades, NeXT remained the most expensive acquisition for Apple, but its technology played a key role in the development of Apple products.

AuthenTec Inc. was founded in 1998 as a spin-off of Harris Corp. (then known as Harris Semiconductor). At the time of its acquisition by Apple in 2012, AuthenTec held roughly 200 patents in a multitude of computer and technology security applications and products.One of those turned out to be the most useful to Apple, and the one that the tech giant would integrate into a huge array of its devices: its biometric security tool.

That tool would later become Apple’s Touch ID. This technology now enables users to unlock iPhones and other devices with the touch of a finger. As with many other Apple acquisitions, AuthenTec’s products have been integrated in Apple’s existing offerings as added features.

Mobeewave was founded in 2011 in Montreal. The software company developed a system utilizing near-field communication (NFC) technology to allow users to tap either a smartphone or a credit card to another smartphone to process a payment.

Apple’s acquisition price of about $100 million is relatively small compared with some of its major acquisitions. But Mobeewave’s technology could play an outsize role in future Apple financial products. In 2019, Apple already launched its own credit card, the Apple Card. And Mobeewave could place Apple more in direct competition with payment services companies like Square Inc. (SQ).

As part of our effort to improve the awareness of the importance of diversity in companies, we have highlighted the transparency of Apple’s commitment to diversity, inclusiveness, and social responsibility. The below chart illustrates how Apple reports the diversity of its management and workforce. This shows if Apple discloses data about the diversity of its board of directors, C-Suite, general management, and employees overall across a variety of markers. We have indicated that transparency with a ✔.

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From the point of view of the Federal Reserve, the economy is running smoothly. Now, the central bank’s goal is to keep it that way.In public remarks Monday, Federal Reserve Chair Jerome Powell framed the central bank’s decision to cut rates earlier this month as a move to keep a strong economy on sure footing rather than to rescue one that is faltering. Powell’s comments, delivered at a meeting of the National Association for Business Economics in Nashville, were his first on monetary policy since the Fed’s landmark decision to sharply cut its benchmark interest rate on Sept. 18.Financial market participants took Powell’s comments as throwing cold water on expectations for another sharp rate cut when the Fed’s policy committee next meets in November. Following Powell’s remarks, markets were pricing in a 36% chance the Federal Open Market Committee would cut its benchmark fed funds rate by 50 basis points at that meeting, as opposed to a smaller 25-point cut, according to the CME Group’s FedWatch Tool, which forecasts rate movements based on fed funds futures trading data. The previous business day, the tool put the odds of a larger cut at 53%.“This is not a committee that feels like it’s in a hurry to cut rates quickly,” Powell said. “It’s a committee that wants to be guided…by the incoming data.”

Since the Fed’s Sept. 18 meeting, economic data has reinforced the case that the U.S. economy is recovering smoothly from the burst of high inflation that took hold in 2021, prompting the Fed to rapidly raise its benchmark interest rate to discourage borrowing and spending. Inflation has cooled nearly to the Fed’s goal of a 2% annual rate, while the economy has stayed humming along—a scenario that economists call a “soft landing” as opposed to an economic crash.Powell pointed to a report on consumer spending released last week that included revisions to the previous year’s data. The revisions showed U.S. consumers have been making, spending and saving more money than previously thought. The data suggests that consumer spending—the main engine of the U.S. economy—is holding up well, he said.At the same time, the Fed is keeping a close eye on incoming economic data when planning its next interest rate moves. The central bank is trying to balance two priorities: keeping inflation under control and keeping unemployment from rising severely. Since 2022, the Fed has kept interest rates high, making all kinds of loans costlier, to cool the economy and quash inflation. With inflation having fallen significantly and employers having cut back on job openings, the Fed is now cutting interest rates.Powell said upcoming economic reports, including data on the labor market, would guide the committee’s decision making.“If the economy slows more than we expect, then we can cut faster,” he said. “If it slows less than we expect, we can cut slower. And that's really what's going to decide it.”

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Shares of package delivery giant FedEx (FDX) advanced to start the trading week amid predictions that demand for air freight could increase if dockworkers at ports on the U.S. East Coast and Gulf Coast begin a labor stoppage.

Following months of stalled negotiations over a new labor contract, members of the International Longshoremen’s Association are reportedly planning a walkout beginning Tuesday. The expected labor action by the 47,000-member union would disrupt activities at some of the country's biggest ports and cause rippling impacts throughout the economy.

According to reports, analysts at investment banking firm Stifel said companies with air freight capacity—including FedEx and logistics rival United Parcel Service (UPS)—are positioned to benefit from a potential dockworker strike as shippers turn to the skies to sidestep the affected port facilities.

FedEx shares rose 2.3% on Monday, marking one the S&P 500's top daily performances, while UPS shares advanced 1.6%.

The potential boost in the air freight business should come as welcome news to FedEx, whose shares plunged earlier this month when the company missed quarterly sales and profit estimates and slashed its full-year guidance.

Stifel analysts also mentioned a few other potential beneficiaries of the looming port strike, including freight forwarders like Expeditors International (EXPD) and C.H. Robinson (CHRW). Shares of both companies added 1.9% on the day.

Meanwhile, Baird focused on the possible consequences for other sectors. Baird analysts believe that any impact of the dock strike on shares of railroad operators is likely to be short-lived but cautioned of more extended impacts for companies like carmakers and retailers that depend on the ports to receive key parts and merchandise.

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Nike (NKE) will report fiscal first-quarter earnings after the bell Tuesday, and analysts are projecting sales and profits to decline year-over-year—but calling for little upside to the stock.

The consensus price target for the sports apparel company is $89.65, according to Visible Alpha, less than 2% above Monday's close.

Of the 20 firms surveyed with current ratings, nine have Nike as a "buy" rating, according to Visible Alpha. Another nine have it as a "hold," and two have posted a "sell" rating.

Net income is projected to fall by nearly half year-over-year to about $775 million, down from $1.45 billion a year ago. The company is expected to report higher expenses due to increased advertising during the Olympics, which took place during the quarter, and a focus on developing new products.

The case for the upside, according to Deutsche Bank analysts, is that this quarter should be the bottom for Nike's sales decline before a recovery, particularly as it transitions to a new CEO in October. Here’s what you need to know ahead of Nike’s earnings report.

Nike's shares are down roughly 20% this year.

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