| Good morning. US stocks hold on to gains. Dubai reinforces its reputation as a leading financial hub. The US Justice Department sues Visa. Here's what's moving markets. —Isabelle Lee US stocks held on to gains buoyed by a jump in Nvidia's shares as traders largely shrugged off a grim consumer confidence reading. The S&P 500 edged up 0.3% — ending the day with its 41st record close this year — while the Nasdaq 100 rose 0.5%. A sweeping stimulus package from China helped shore up stocks with economic ties to the country. The benchmarks had initially declined after a Tuesday reading on the Conference Board's gauge of consumer sentiment posted the biggest drop since August 2021 — only to reverse course after a report that Nvidia's CEO was done selling shares. Investors are awaiting data on the Federal Reserve's preferred price metric and US personal spending later this week for further clues. An influx of some of the world's biggest hedge funds from Millennium to Balyasny has pushed the industry's headcount in Dubai to over 1,000. While that's still a fraction of the numbers employed in big financial centers — hedge funds in North America and Europe have close to 100,000 — the headcount has been ticking up in Dubai, according to data from the city's financial freezone. Beyond hedge funds, the Dubai International Financial Centre has seen employee numbers surge by two-thirds since 2019. The hub expects a record number of firms to set up this year too. Separately, Nigerian billionaire Aliko Dangote is setting up a family office in Dubai, joining other high-net worth individuals who have flocked there. The US Justice Department sued Visa, alleging the payments giant illegally monopolized the debit card market, in the Biden administration's first major antitrust case in the financial services industry. Enforcers alleged Visa, which handles more than 60% of US debit transactions, entered into agreements penalizing merchants who sought to use alternatives and paid potential rivals to stay out of the market. Visa is the largest of the payment networks in the US. Visa also entered into agreements with firms like PayPal and Apple, which were developing products that would have challenged its stranglehold over payment networks, the agency said. Investors added to bets on a recovery in Chinese shares, snapping up bullish options on US-traded securities after the country's central bank announced a massive stimulus package. Shares surged in Asia trading after the People's Bank of China announced measures to bolster the real estate sector and the broader economy. Those gains carried over to the US with ETFs tracking large-cap and internet stocks both up more than 8%, while PDD Holdings' ADR gained as much as 11% and Alibaba rallied more than 7%. Copper and other industrial metals also rallied strongly. Traders can look to Australia's August CPI data, which are likely to show inflation falling to 2.7% year on year from 3.5% in July. This would put the headline gauge back inside the Reserve Bank of Australia's 2%-3% target band for the first time since April 2021. The People's Bank of China is also expected to hold its one-year medium-term facility rate steady at 2.30%, pausing for a second month after a 20 basis point cut in July. Here's what caught our eye over the past 24 hours: The signal the Federal Reserve's 50 basis point interest-rate cut last week sends is that, irrespective of how the upcoming earnings season shakes out, there is more upside to come. We should expect the equity market to climb -- with one caveat. It was just a week ago that the Federal Open Market Committee began deliberations that culminated in that cut. What stands out in retrospect is the fact that this was the first time the Fed delivered a large reduction outside of recession or crisis since the 1980s. We were in crisis or recession when the Fed cut in the early 1990s, after the dot.com bubble popped in 2001, as the Global Financial Crisis threatened in 2008 and during the pandemic shutdowns in 2020. In essence, then, the Fed is telling you it wants to eliminate the left tail risk and preclude recession as an outcome as much as it can. For stocks, that should be bullish. That's the key takeaway if you look for large corrections that persist through time. I used the rolling 12-month return for the S&P 500 and a 15% drop, a level halfway between a so-called correction of 10% and a bear market 20% loss. In the post-war era there were about 10 such episodes. Six are associated with recessions and one was an outgrowth of the 1987 crash. Of the remaining three episodes, we can exclude 2022 because we are now seeing rate cuts instead of the hikes that caused that decline. That leaves 1947 and 1962. 1947 saw GDP declines in both the second and third quarter, meeting the unofficial definition of a recession. But the unemployment rate fell in an economy distorted by post-war demobilization. So this wasn't ruled a recession by the NBER. 1962 is more interesting. The so-called "Kennedy Slide of 1962," which also saw a flash crash in May of that year, has never been explained. The unemployment rate was declining and GDP growth was above 4%. But the takeaway has to be that by ensuring no recession, the Fed is telling the stock market, "we've got your back." Reasonably, only 1962 presents a different outcome, with stocks down 17% year-over-year by the end of October 1962, the nadir for rolling 12-month losses. But even in that instance, a year later, in October 1963 stocks had vaulted 30% higher. The Fed's removing of any left tail risk is a clear risk-on signal that should propel the market to yet more record highs. Ed Harrison writes the Everything Risk newsletter. Follow him on X at @edwardnh. | 
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