Wall Street Wobbles as Fed Officials Dampen Rate Cut Hopes; Reddit Soars on AI Partnership
U.S. stock index futures barely budged during Thursday’s twilight trading, mirroring Wall Street’s lethargic close after a chorus of Federal Reserve officials struck a cautious note, suggesting that dreams of imminent rate cuts might be premature.
Earlier in the week, Wall Street had soared to record highs, buoyed by softer-than-expected consumer inflation data. However, these highs proved fleeting as the Fed’s warnings dampened spirits and nudged traders to reconsider their September rate cut bets.
As of 19:36 ET (23:36 GMT), S&P 500 Futures clung to 5,320.50 points, Nasdaq 100 Futures hovered at 18,653.0 points, and Dow Jones Futures sat flat at 40,017.0 points. A resurgence in Treasury yields also cast a shadow over the market.
Fed officials chant caution A brigade of Fed officials chimed in on Wednesday and Thursday, emphasizing that more evidence was needed before any rate cuts could be considered. Atlanta Fed President Raphael Bostic cheered the milder inflation numbers but cautioned that one data point doesn’t make a trend, and the central bank had not locked in any rate cut decisions.
New York Fed President John Williams echoed this sentiment, acknowledging the positive inflation development but deeming it insufficient for an immediate rate cut. Meanwhile, Cleveland Fed President Loretta Mester argued for holding rates higher for longer to tame inflation, underscoring the necessity for more proof of cooling price pressures.
Their collective caution prompted investors to rethink rate cut expectations, with traders slightly reducing their bets on a 25 basis point cut in September, as tracked by the CME Fedwatch tool.
Wall Street runs out of steam The persistent skepticism over rate cuts saw Wall Street lose its earlier momentum. The tech sector, in particular, didn’t appreciate the prospect of prolonged high interest rates. The S&P 500 dipped 0.2% to 5,297.10 points, the NASDAQ Composite slid 0.3% to 16,698.32 points, and the Dow Jones Industrial Average edged down 0.1% to 39,869.38 points.
After-hours highlights: Reddit rockets on AI alliance In the after-hours arena, Reddit Inc (NYSE:RDDT) soared over 11% after announcing a partnership with AI heavyweight OpenAI to integrate its content into AI products.
Conversely, Take-Two Interactive Software Inc (NASDAQ:TTWO) dropped 2.6% following a gloomy annual earnings forecast, with the much-anticipated GTA VI now slated for a 2025 release.
DXC Technology Co (NYSE:DXC) plummeted 20% after it also offered disappointing annual guidance.
In meme stock news, GameStop Corp (NYSE:GME) and AMC Entertainment Holdings Inc (NYSE:AMC) experienced a slight recovery, rising 3.4% and 5.9%, respectively, after nosediving between 15% and 30% earlier in the day.
AppTech Payments Corp. (Nasdaq: APCX), a pioneering Fintech company powering frictionless commerce, announces today the successful completion of the pilot program for its Banking-as-a-Service (BaaS) platform. The Company will use this BaaS solution to commercially launch InstaCash, which utilizes the BaaS for virtual accounts, debit and credit cards, and high interest-yielding financial products.
AppTech CEO Luke D’Angelo stated, “The success of our BaaS pilot program signifies a significant milestone as we continue our mission to democratize banking by providing small and medium-sized enterprises access to products traditionally reserved for Fortune 1000 companies. The availability of treasury products, including T-bills and other high yielding financial products are differentiators that we believe will help drive user growth as over 200 new Independent Sales Organizations are expected to utilize our BaaS platform in the near-term. We look forward to continuing to scale the use of our frictionless commerce products as we remain committed to building long-term shareholder value.”
During the BaaS pilot program, clients were issued a virtual account, a commercial purchase debit card, and connected external accounts for funding of the new bank account. Traditional features such as check issuance, wire and ACH set up for bill pay were enhanced to include SMS invoicing for Business-to-Business transactions. Pilot partners were encouraged to invite other merchants who are in the supply chain to open bank accounts to reduce friction in payments and create a Real Time Payment network. In this account-to-account environment, each pilot client received a unique handle to be put in invoices enabling money transfers to be instant rather than involving multiple financial institutions ultimately saving time and fees.
Roark Capital Eyes $2 Billion Sale of Primrose Schools in High-Stakes Education Deal
Roark Capital, the private equity maestro, is considering selling its star pupil, Primrose Schools, aiming for a dazzling $2 billion valuation, debt included, according to sources with insider knowledge.
Roark has enlisted the help of boutique investment bank R. W. Baird to orchestrate the sale of Primrose, an Atlanta-based early childhood education giant. These tipsters, preferring to remain incognito due to the hush-hush nature of the deal, spilled the beans.
Acquired by Roark back in 2008, Primrose Schools boasts a vast network of over 500 schools across 35 states, nurturing young minds and families alike. The franchise’s journey began in 1982 in Georgia, and each school is independently owned and operated by local franchisees.
Looking ahead to 2024, Primrose is projected to rake in about $85 million in EBITDA and $120 million in revenue. Roark’s ambitious goal? A valuation exceeding 20 times EBITDA, a hefty price tag in the world of private equity.
When asked for comments, Baird played it cool and declined, while Primrose and Roark kept their lips sealed.
Private equity loves franchise-operated businesses for their steady royalty fees, and they’re willing to pay a pretty penny. Case in point: Blackstone recently snapped up Tropical Smoothie Cafe for a cool $1.7 billion.
The early education franchise market is hot, with Sycamore Partners acquiring Goddard Systems in 2022 and Golden Gate Capital buying the Learning Experience in 2018.
Roark, based in Atlanta and managing a hefty $38 billion in assets, has a diverse portfolio including Subway, Orange Theory, and Arby’s. Now, with Primrose possibly graduating from its lineup, Roark is ready to test the market’s appetite for quality education franchises.
Investing on a Friday is like ordering a fancy cocktail at last call: it’s a bold move that might lead to a spectacular wind-down or a regretful hangover come Monday. The markets, much like the weekend revelers, can be unpredictable and a bit wild. While seasoned traders might see it as the perfect time to make a strategic play, the rest of us are left hoping that the financial gods are feeling generous as we head into the weekend. So, here’s to taking that leap of faith on a Friday—may your portfolio party hard but responsibly!