Fed Kicks Off New Hiking Cycle, SEC Greenlights Tokenized Stocks

Zaid Admani (0:00)

Public.com presents The Rundown. Your daily market update in 10 minutes. My name is Zaid Admani, and today is Thursday, September 17th. In today's episode, we'll break down the Fed's rate hike decision and why more rate hikes are likely coming. We'll also tell you about a new SEC exemption that is bringing tokenized stocks to the US. Then stick around to the end of this show to find out why people were lining up at two o'clock in the morning to buy a Starbucks cup. We got a great show for you today.

Let's go.

Well, stocks continued to sell off yesterday after the Fed meeting with the S&P 500 falling about half a percent, while the NASDAQ was pretty much flat, but still technically in the red. Now, obviously the Fed was the main story yesterday. The Federal Reserve announced that they were raising interest rates by 25 basis points, which is a fancy way of saying 0.25%, which brings the Fed funds rate up to 3.75% to 4%. This was the first rate hike in three years for the Fed, but the hike itself wasn't really the surprise. Wall Street was already expecting that. What stood out to me was just how united the Fed suddenly was in the rate hike decision. The vote for this rate hike was unanimous, 12 to zero. Remember, back at the July meeting, there was only three Fed officials that voted for a rate hike, and now two months later, everybody is on board. And not only that, 16 of the 18 Fed officials who submitted projections expect at least one more rate hike before the end of the year. And there's rate hikes expected for next year as well. You know, on yesterday's show, I said the big thing to watch at this Fed meeting was whether this was gonna be a one-and-done hike or a beginning of a hiking cycle. And I think we got a pretty clear answer. Fed Chair Kevin Warsh was pretty hawkish during his press conference. He said that inflation is still too high, it has been for too long, and he described this rate hike as removing just a dose of accommodation, which is Fed talk for interest rates aren't high enough to be restrictive yet. And I think that was why the stocks sold off after the Fed meeting. Wall Street had already priced in yesterday's quarter point hike. What investors hadn't fully priced in was the start of a potentially aggressive hiking cycle. Now, before you panic, sell your portfolio, what's interesting is that rate hikes aren't necessarily bad for stocks. If you look at the previous six Fed hiking cycles going back to 1994, historically the first few months after the first hike has been pretty rocky. On average, the S&P 500 has been negative through the first four months, but by month five and six, stocks have historically started to recover. And if you look at 12 months after the first hike, the S&P 500 has gained 6.7% on average with the median gain of 10.7%. So a hiking cycle isn't immediately bad for stocks. And looking at the pre-market today, I'm seeing the S&P 500 and NASDAQ futures up over 1% at the time of this recording. So today could be a big bounce back day. But I do want to point out, if you step back and look at the macro picture right now, something doesn't add up for me. Now you still have oil hovering over $100 a barrel. The 10-year treasury yield is around 5%. The Fed is openly telling us they're gonna keep hiking rates, and yet the stock market is still sitting near all time highs. I guess it could be a sign that investors are basically betting that corporate earnings and the AI boom remains strong enough to absorb the higher rates. And it could be a sign that investors think the Iran war will be cooling down soon, causing oil prices to fall and inflation to come down, which would mean the Fed wouldn't have to hike too aggressively. But yeah, it's a really weird market, and I'm not sure how much longer it can stay this way until something breaks. It does make it very interesting for someone like me who watches the markets pretty closely. So we're gonna be staying on top of all this for you guys, so make sure you are subscribed to the podcast and tuning in every day to stay in the loop.

Let's run through some headlines. Starting with a big shakeup coming for Wall Street. The SEC just cleared a path for tokenized stocks to trade legally in the US, bringing us one step closer to 24-7 stock trading. Now a quick explainer on the whole situation. A tokenized stock is a digital token on a blockchain that represents a share of a publicly traded company, like say Apple or NVIDIA. You can trade these tokens like crypto. It's 24-7 with instant settlement. And you know, many apps like Coinbase and others, which will not be name dropped on this podcast, already offered tokenized stock trading for users overseas. But until now, tokenized trading has not been allowed in the US. Well, the SEC is rolling out what the agency is calling a five-year innovation exemption, which will allow tokenized stocks to trade here in the US for the first time. So this is a pretty big deal. Now, importantly, these tokens aren't supposed to be like a fake synthetic version of the stock. Under the SEC exemption, token holders will have to receive the same shareholder rights as traditional investors, including dividends and voting rights. And I think the key part of the SEC ruling here is that companies also get a say. If a platform wants to offer a tokenized version of the company stock, it has to notify the company. It gives them 30 days to object. If the company does end up objecting, then their token stock can't be traded. Personally, I don't really know how to feel about all of this. Now, on one hand, I do think that it's silly that the stock market isn't already 24 seven, even though as a mid thirties dad with two kids, I actually don't mind the stock market closing every day. But I realized that it is silly and some people want to trade all night. But I'm curious like how all of this is going to work and how volatile these tokens will be in after hours trading when the stock market is closed. The good thing is the SEC has addressed one of the biggest criticisms of token stocks overseas, where some platforms have been offering products that simply track a US stock without actually giving investors the rights that come with owning the stock. I always thought that was really shady and the SEC has addressed it. So we'll see how the rollout goes here in the US. The SEC exemptions take effect immediately. And I'm sure the crypto companies will be rushing to roll this out along with both the New York Stock Exchange and NASDAQ, which have said they're building their own tokenized platforms. Let me know in the comments what you guys think about all of this. Do you want to be trading stocks 24-7? Do you think that it's a good thing that these stocks are becoming tokenized assets? Drop your thoughts on Spotify and YouTube. Let's talk about some stocks making moves today. Shares of Generac are soaring this morning after the generator maker signed a $2.4 billion deal to supply backup generators for Amazon data centers. As part of this agreement, Amazon also receives warrants to purchase up to $340 million worth of Generac stock. Deliveries for these generators are expected to begin in 2027 and continue through 2028 That averages to about $1.2 billion a year in revenue, which is huge for a company like Generac, considering the entire company generated $4.2 billion in revenue in 2025 So, you know, Generac has become one of the big winners of the AI boom. Data centers have been the main driver of their business. Back in July, management said that data center backlog had reached $1.6 billion, with $1 billion of those orders added in the previous three months, and that did not include this Amazon deal. So investors are taking notice. Shares of Generac jumped as much as 40% in the pre-market before paring back some of those gains. The stock is up around 20% at the time of this recording. Now, on the flip side, shares of Lennar are falling after the homebuilder reported disappointed earnings as high mortgage rates and affordability concerns continue to pressure the housing market. The company reported revenues of $8 billion. That missed the $8.3 billion estimate, and earnings came in at $1.19 per share. That's below the $1.28 that Wall Street was expecting. I think the more important number here is deliveries. Lennar delivered about 20,800 homes last quarter. That's down 3% from a year ago. The company also cut their full year delivery forecast again, now expecting to sell between 80,000 to 81,000 homes. That's down from the 82,000 to 83,000 deliveries they projected earlier. Now management is blaming affordability pressures here and elevated mortgage rates, which is causing buyers to delay buying a home. Now one of the ripple effects of bond yields going up is the impact it's having on mortgage rates. The average 30 year fixed mortgage rate is over 7.2%, which is causing demand to completely collapse. And you know, with the Fed raising interest rates yesterday and signaling more hikes in the future, the pressure on the housing market is not going to ease up anytime soon. As a result, shares of Lennar are down around 3% this morning in reaction to the report. Let's wrap the show with a fun fact. Starbucks has a new hit product, but it's not a drink, it's a coffee cup. The company released a limited edition Snoopy glass this week for $40, and people are going nuts to get one. This cup was limited to two per customer, and stores were selling out almost immediately. Bloomberg even found one person who lined up outside Starbucks at 2.15 in the morning to buy a Snoopy cup. And Starbucks Snoopy even became one of the top Google searches in the US for 24 hours. People want these cups so bad that they're being resold online for like $200. So you know what, clearly interest rates aren't high enough. All jokes aside though, this is a pretty smart business strategy by Starbucks. Starbucks has been leaning harder into limited edition merchandise under CEO Brian Nicol. The idea is to copy the sneaker drop playbook. Starbucks will release something for a limited time, which creates FOMO, and suddenly people have a reason to physically go into a Starbucks and buy some coffee. McDonald's has done something similar as well with their Grinch socks. So it's been a pretty effective strategy by these companies. Now we'll have to see how long this marketing trick is effective. Is it a long term thing, or will people get over it pretty quickly? We'll have to see how long it lasts. For now though, I think Starbucks and others are going to lean into the merch drop model while it's still hot. And by the way, Starbucks stock is up around 15% this year, so slightly outperforming the S&P.