Good morning!

The Fed chose to go big last week with a surprise half-point rate cut, energizing the markets and sparking more conversations among investors about a "soft landing" to the economy. Here's what's happening this week ...

• There are a handful of important earnings reports this week, starting this morning with numbers from AutoZone and KB Home, followed Wednesday by Micron Technologies, Cintas, BlackBerry, and Paychex. On Thursday, retail giant Costco will post quarterly earnings after the close of trading, just weeks after it announced its first membership fee increase in more than 7 years. Costco's outlook is an important bellwether for gauging consumer spending as we head into the holiday season. Also reporting Thursday are CarMax and S&P 500 companies Accenture and Jabil. *

• This week, investors are focused on whether a new set of data will back Fed Chair Jerome Powell’s claim that the US economy is still robust. A second quarter GDP reading, set to be released on Thursday, will be crucial in evaluating this assertion. Powell has been cautious about declaring victory over inflation, noting that while pricing pressures are easing, challenges remain. The upcoming release of the PCE (Personal Consumption Expenditures) index on Friday, which is the Fed’s preferred measure of inflation, will provide further insights into the current economic landscape. Analysts expect Friday's reading to come in at 2.3% year over year, down from the prior month's 2.5% annual increase. Such a favorable metric would continue a downward climb and affirm the Fed's decision making. **

• Now that the Fed has cut interest rates for the first time in four years, what does that mean for the markets, and more importantly, you as an investor? Historically, rate cuts have led to mixed outcomes for the stock market, depending on the economic conditions at the time. Large rate cuts typically reflect an economy the Fed is trying to dig out of a recession. Not this time. The U.S. economy shows signs of strength, with low unemployment and expected corporate earnings growth, although some experts warn of weaknesses in sectors like housing. In addition to lowering its key interest rate by a half point last week, it also forecast a total 2.25 percentage points in cuts by the end of next year and 2.75 points by the end of 2026. Markets love rate cuts, which reduce borrowing costs for business as well as consumers, while spurring economic activity that bolsters corporate earnings. On Thursday, the market reached a record high following a report indicating that initial jobless claims—a dependable indicator of layoffs—dropped to a four-month low, suggesting that the economy is on stable ground. However, some of those gains were reduced on Friday, and stocks may experience volatility during the traditionally weaker months of September and October, particularly with the upcoming presidential election on the horizon. ***

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