Markets Rally After a Divided Fed Cuts Interest Rates

SPEAKER_1 (0:00)

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Alex Ossola (0:18)

The Fed cuts interest rates for the third time in a row, but signals that it might be done for now.

SPEAKER_3 (0:23)

We are well positioned to wait to see how the economy evolves.

Alex Ossola (0:27)

Plus, investors are betting on a bidding war for Warner Brothers. And how the Venezuelan opposition leader secretly made it out of the country by boat to try to collect her Nobel Peace Prize. It's Wednesday, December 10th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today. Today, the Federal Reserve cut interest rates, the third straight meeting where they've made a cut, but suggested that might be it for now. Today's quarter point cut is focused on the jobs market as hiring has slowed down, even as progress on bringing down inflation has stalled. Officials have been unusually divided over whether inflation or the job market should be their bigger worry. The Fed voted nine to three for the rate cut, and it's the first time in six years that three officials cast dissents. Two thought the Fed should have left rates where they were better, while one wanted a bigger cut than the one that was made, which was to between three and a half and three and three quarters percent. The Fed's post-meeting statement signaled a higher bar to additional cuts. Here's what Fed Chair Jerome Powell said at a news conference when asked if the Fed is on hold for more rate cuts.

SPEAKER_3 (1:41)

We are well positioned to wait to see how the economy evolves.

Alex Ossola (1:45)

WSJ's Markets Bureau Chief Aaron Kuriloff said investors were expecting the Fed's move today.

SPEAKER_4 (1:50)

This really matched what Wall Street thought was going to happen. They thought that there would be an interest rate cut. They thought that Powell would come out and suggest that we don't know when the next one is coming. You do not want to get ahead of yourselves.

Alex Ossola (2:01)

Damian Paletta, WSJ's Washington Coverage Chief, suspected that the White House wouldn't be happy with the Fed's move.

SPEAKER_5 (2:08)

The White House is not going to be happy with this meeting because the White House wants a lot of cuts now. And Powell seems to be in no rush as he's on his way out to give the White House that.

Alex Ossola (2:18)

And he was right. At an event at the White House this afternoon, President Trump said that the Fed didn't cut rates enough. For more analysis on the Fed's decision, go to wsj.com. And to hear more from Erin and Damian, go to wsj.com. Powell's concerns about the health of the labor market cheered investors, who took it as a sign that future cuts are still likely. Treasury yields slipped while stocks climbed in afternoon trading. The three indexes closed higher, with the Dow adding 1.1%, the S&P 500 up 0.7%, and the NASDAQ gaining 0.3%.

Investors are betting that there's more drama ahead for the Hollywood megadeal. To recap, last week Netflix and Warner Bros Discovery agreed to a deal for $72 billion. On Monday, Paramount launched a hostile tender offer for nearly $78 billion. Ben Dummett, who covers dealmaking for the journal, is here to discuss why markets are signaling there's going to be a bidding war. Ben, what are the signs here?

Ben Dummett (3:20)

The offers of the bids are very close to where Warner Bros stock price is trading. So that's a sign that investors are betting there's going to be another bid, a higher bid from either Netflix and or Paramount. If they didn't think a deal was going to happen, the share price of Warner would trade at a huge discount to the offer prices.

Alex Ossola (3:39)

Paramount CEO David Ellison was in meetings with a number of Warner investors yesterday seeking their support for the Hostile Tender Offer. How is that factoring in here?

Ben Dummett (3:49)

Ellison is just trying to push his case that their bid is superior because it's an all cash offer, which is easier to understand than Netflix's cash and stock offer. And there's a view that the Paramount offer won't receive the regulatory and antitrust scrutiny that a Netflix offer would face because Netflix is the dominant streaming service in the market today. And then there's the relationship that Paramount has with Trump. The Ellisons are close to Trump, and the Ellisons' backers include Jared Kushner, the son-in-law of Trump. Now, Trump, for his part, he's sort of sent out mixed signals as to how he views this deal.