Wall Street Lunch: Cup Of Coffee To Get Costlier (undefined:KC1:COM)

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A cup of Joe could see big price hikes with futures surging. (0:15) August retail sales top expectations. (1:34) Meta to unveil Prada smart glasses? (4:53)

This is an abridged transcript of the podcast:

Our top story so far, coffee futures prices (KC1:COM) continue to surge in 2025, with both arabica and robusta reaching multi-year highs. The impact is being felt in the U.S. as retail coffee prices at grocery stores have also spiked.

KPMG Chief Economist Diane Swonk recently warned that coffee prices could easily exceed the all-time record as the full effects of the 50% tariffs levied on Brazil continue to work their way onto store shelves.

The Bureau of Labor Statistics reported a 20.9% year-over-year increase in coffee prices in the U.S. during August, with both roasted coffee and instant coffee prices soaring during the month.

Major factors include a lingering drought in Brazil, poor crop conditions in Vietnam, persistent global supply deficits, strong demand and currency fluctuations. Weather uncertainties for Brazil’s 2025–26 harvest have also impacted trading.

The U.S. also faces extra pressure from new tariffs on Brazilian coffee, further raising import costs and shifting supply chains in a costly way. Brazil, the largest supplier to the U.S., has seen American buyers reducing new contract volumes and seeking alternatives, although sourcing options at notably lower prices are limited.

“Since the Trump tariffs took effect on Brazilian coffees, green coffee buyers have had to either eat the higher costs, pass them down towards consumers, and/or attempt to find comparable inventory from other producing countries such as Colombia, Peru, or Mexico,” Daily Coffee News said.

On the economic front, August Retail Sales rose +0.6% M/M, outpacing the +0.3% consensus and even with the revised 0.6% increase in July. That translates into an August annual rise of +5%. Total sales for the June 2025 through August 2025 period increased 4.5% from the same period a year ago.

Core retail sales (excluding motor vehicles and parts) rose +0.7% M/M, also topping the +0.4% consensus and accelerating from the +0.4% growth in July (revised from +0.3%). Excluding autos and gas, retail sales climbed +0.7%.

David Russell, global head of Market Strategy for TradeStation, says: “Even if the job market is weak, it’s not hurting the consumer yet. While these numbers won’t prevent the Fed from cutting rates tomorrow, they reduce some of the longer-term dovish hopes. There’s also risk that higher inflation, rather than real organic growth, boosted retail sales.”

Odds of the Fed cutting by 50 basis points on Wednesday fell even further after the report hit, now down to 4%.

But the meeting will still be a test of Fed Chairman Jay Powell’s ability to build a consensus in the face of a president who doesn’t think he’s up to the job. And a deadlock isn’t out of the realm of possibility.

Pantheon Macro economist Samuel Tombs said there could be up to five dissenting votes tomorrow — three for a bigger cut and “one or two” for no change,

Stephen Miran will be the strongest advocate for very easy monetary policy as he steps into a voting role following his Senate confirmation and could lobby for a mega-cut of 75 bps. Meanwhile, the last meeting’s dissenters — Fed Governor Christopher Waller and Fed Governor Michelle Bowman — are also likely half-point voters

The no-change votes would likely come from the hawkish Kansas City Fed President Jeffrey Schmid and St. Louis Fed President Alberto Musalem.

The last time there were five dissenting votes was on Oct. 2, 1973 — an extraordinary conference call (likely on an AT&T conference bridge) focused on bank reserves and was held without Fed Chair Arthur Burns. Five of the members wanted more for an easing bias in reserves.

At this meeting, if either the 50-bps crowd or the no-change crowd can swing another vote, the result would be a 6-6 deadlock. Powell would no doubt push as hard as possible to avoid that, but he has no official tie-breaking authority. So, if there’s a tie, the motion simply does not carry and rates stay as they are.

If the Trump-aligned voters can swing a fourth vote for a half-point cut, they may well be able to get Powell on side for a bigger cut rather than no cut at all, given his concern about weakness in the labor market.

Among active stocks, Hims & Hers Health (HIMS) is sliding after the FDA issued a warning letter over its marketing of compounded semaglutide, the weight loss drug marketed under the brand name Wegovy by Novo Nordisk (NVO).

“Compounded drug products are not FDA-approved,” the letter said. “Your claims imply that your products are the same as an FDA-approved product when they are not. As a result, these claims are false or misleading and your products are therefore misbranded.”

Warner Bros. Discover (WBD) is down after CNBC’s David Faber said a potential Paramount Skydance (PSKY) bid for the company “could be a little while.”

TD Cowen earlier cut WBD to Hold from Buy, citing deal uncertainty.

And Dave & Buster’s (PLAY) is plunging after the restaurant chain reported worse-than-expected second quarter results that included a 3% decline in comparable store sales and 64% profit erosion.

Newly-appointed CEO Tarun Lal set a goal to reinforce Dave & Buster’s guest-first culture and drive “meaningful” growth in sales.

And in other news of note, Meta Platforms (META) is expected to unveil new smart glasses with a built-in display at its annual Connect event on Wednesday, according to published reports. Reuters says a retail price tag of $800 is expected.

The new costlier glasses, codenamed “Hypernova,” are expected to be launched as “Celeste.” They will feature a small digital display in the right lens for basic functions such as notifications.

The new product will likely be much less advanced than the “Orion” prototype glasses that Meta showcased at last year’s event.

An earlier report from CNBC suggested that the “Hypernova” glasses could be developed in collaboration with Prada (OTCPK:PRDSY). The Italian label is known for thick frames and arms that could house many of the necessary components for smart glasses.

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.