Wall Street Lunch: Intel Grabs Wall Street Attention

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The chipmaker embarks on a significant restructuring plan. (0:16) Retail sales unexpectedly climb . (1:38) Microsoft boosts its dividend, OKs $60 billion buyback . (3:43)

This is an abridged transcript of the podcast.

Our top story so far. Wall Street weighed in on big developments for Intel ( NASDAQ: INTC ), including an update on its foundry plans.

KeyBanc Capital Markets analyst John Vinh said the announcements—including the decision to pause construction on plants in Germany and Poland—were mostly about cost-cutting, rather than returning to growth. Nonetheless, he was "very encouraged" by the updates, as he believes it shows Intel's management is being proactive about the inputs it can control, largely cost.

While Intel said it would manufacture chips for Amazon ( AMZN ) Web Services, Bank of America analyst Vivek Arya said the announcement may not be as impressive as it sounds initially.

"AWS win sounds impressive but [Intel] has already been supplying AWS with CPU for a long time, so customization isn’t exactly something new, while the AI fabric (networking) win on 18A will probably matter only from CY26 while competing against tough Ethernet switch incumbency from [Broadcom] ( AVGO ) and others," he said.

The bull case for Intel is that it will be able to close the manufacturing gap between it and Taiwan Semiconductor ( TSM ) and deliver a customer experience that enables companies like Apple ( AAPL ), AMD ( AMD ), and Nvidia ( NVDA ) to easily choose it over the competition.

But that is likely to "take a long time to realize," Evercore's Mark Lipacis said.

"We view the developments as incremental positives, but remain In-Line rated until there is increased visibility into [the] success of its foundry business."

On the economic front, retail sales unexpectedly nudged up 0.1% in August , defying the expectation for a 0.3% dip. July’s increase was revised up slightly to 1%.

Compared with a year ago, the month's retail sales grew 2.1%. Total sales for June through August 2024 grew 2.3% Y/Y. Core retail sales, which excludes motor vehicles and parts, crept up 0.1% M/M vs. consensus of +0.3%.

Pockets of strength include health & personal care stores, miscellaneous store retailers, which includes Best Buy ( BBY ), and the non store retailers category, which includes Amazon ( AMZN ), Wayfair ( W ), and Etsy ( ETSY ).

With the stronger headline print just a day ahead of the Fed decision, the odds of a half-point cut moved back below 60%.

Wells Fargo economists said: “The deterioration in the labor market argues for Fed easing, yet many measures of growth demonstrate the economy is continuing to expand, including retail.”

"Historically, when the Fed starts to cut rates, the economy is already in serious trouble. There are only a few historic references in which a Fed achieves the type of'soft landing’many anticipate today. The consumer may technically be unstoppable, but in recent months spending has undeniably slowed sharply,”they added.

We took the pulse of Seeking Alpha subscribers on the big Fed decision, and they aren’t betting with the market: 79.4% expect a cut of 25 basis points, while 20.6% predict 50.

You can check out a great chart of the Fed's policy moves since 2019 and corresponding mortgage rates and retail inflation readings. I’ll put that link in Show Notes.

Among active stocks, Teladoc Health ( TDOC ) rose after Jefferies cited a short-term opportunity in the telehealth provider following an analysis of web traffic data related to the company's mental health business, BetterHelp.

Jefferies analyst Glen Santangelo, who has a Hold on the stock, pointed out that after 12 consecutive months of year-over-year declines, BetterHelp web traffic returned to growth in July/August.

In addition, online mental health care provider Talkspace ( TALK ) rose on news that it will be available through Amazon Health Services ( AMZN ).

Microsoft ( MSFT ) boosted its quarterly dividend to $0.83 a share from prior $0.75. That’s a forward yield of 0.77%. The board also approved a new $60 billion share repurchase program.

And Mizuho Securities initiated coverage on Dell ( DELL ) with an Outperform rating and $135 price target, as well as Super Micro ( SMCI ) with a Neutral rating and $450 price target.

Analyst Vijay Rakesh said that while “SMCI has led the market (~70-80% share) with a head start from tight GPU supply, it is losing share with DELL quickly gaining share by leveraging relationships as the overall server market leader."

In other news of note, U.S. home prices posted their largest monthly increase since April , growing 0.5% in August, according to Redfin ( RDFN ). Still, home prices rose just 6.7% from a year earlier, marking the lowest annual increase since January.

Mortgage rates have been retreating in recent months, with the Federal Reserve's easing cycle on the horizon. But that does not appear to be helping pull down home prices, as there still are not enough homes for sale.

While the supply of homes climbed 16.7% from a year ago, it is still off nearly 30% from pre-pandemic levels.

And in the Wall Street Research Corner, today’s retail sales strength may be good news for small-cap stocks . RBC Capital Markets have been trading closely (on a year-over-year basis) with consumer sentiment trends in the post-Covid era.

We used our Quan Rating system to screen for the top 25 small-cap stocks.

Power Solutions International ( OTCPK:PSIX ), Inseego ( INSG ), Heritage Insurance Holdings ( HRTG ), Jaguar Mining ( OTCQX:JAGGF ), Personalis ( PSNL ), Clover Health Investments ( CLOV ), and CareDx ( CDNA ) all get near-perfect scores of 4.99 out of 5. Rounding out the top 10 are CuriosityStream ( CURI ), GeneDx ( WGS ), and Bioventus ( BVS ).

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.