Inflationary Rates in the First Three Months After the First Half-Federal Resummation Revisited
The Federal Reserve’s preferred measurement of inflation showed price increases continued to moderate in November, providing yet another welcome indication that the period of painfully high prices has peaked.
The Personal Consumption Expenditures price index, or PCE, rose 5.5% in November from a year earlier, the Commerce Department reported Friday. That’s lower than in October, when prices rose 6.1% annually.
Gas prices are declining, which is causing inflation to be moderated on an overall basis. After stripping out food and fuel, both of which jump up and down, inflation climbed 4.9 percent in the year through August. That compares to 4.7 percent the month before. On a monthly basis, the core index picked up by 0.6 percent, a rapid pace of increase that was the fastest since June.
”We expect Fed Chair Powell will insist on the need to hold policy at a restrictive level for some time to bring inflation down toward the 2% target,” wrote Gregory Daco, chief economist at EY-Parthenon, in a note to clients Monday. “This will serve to push back against current market pricing … Powell will stress that history cautions strongly against prematurely loosening policy.”
There is a real pain point with wages. People are paying more but not making more,” said Marta Norton, chief investment officer of the Americas with Morningstar Investment Management. With that in mind,Norton said there is a higher chance of stagflation.
Inflation is not just a function of the price of oil and other commodities and production costs like manufacturing and shipping. How much workers take home in their paychecks is also a big part of the inflation picture.
When people have more money in their wallets (virtual or good old-fashioned leather ones), they tend to be more willing to spend it. Companies have the option to raise prices.
The Fourth and Fifth Quarters of the Stock Market: Predictions from the Central Bank of the U.S. Dollar, Wall Street Rates, and Retail Sales
Tony Welch, chief investment officer at SignatureFD, a wealth management firm, said in the report that they think slower wage growth will occur as jobs available contract in the future.
What’s more, the Fed typically is looking for just a 2% growth rate in the headline PCE number as a sign of price stability. That’s not going to happen anytime soon. In fact, the Fed’s latest forecasts suggest that the central bank thinks PCE will rise 5.4% this year, up from projections of 5.2% in June.
Retail sales in October are predicted to dip by a small amount. That number is important to put in perspective. Retail sales surged 1.3% from September and 8.3% over the past 12 months.
The third quarter is mercifully over. It’s been a tough time for the market. September in particular was bleak. It was the worst month for the Dow since the start of the pandemic in March 2020.
Despite being in a bear market, there are some good signs for the next few months.
The fourth quarter usually has a festive atmosphere on Wall Street. The holiday season is when investors buy stock in anticipation of robust consumer shopping. Businesses spend more to get rid of their yearly budgets. And major companies also often give rosy guidance in October about earnings expectations for the coming year.
Jeff Hirsch, editor in chief of the Stock Trader’s Almanac, said in a recent posting that October has been a “bear killer” if you will.
Optimum Time to Buy a Few More Companies, or Are You Probing the Fed’s Decelerating Policies for the Labor Market?
Traders will definitely be keeping close tabs on Washington this fall to see if Republicans gain control of the House. That could lead to more gridlock in DC, which investors tend to like.
Concerns about inflation, interest rates and the global economy make it up for debate as to whether corporate America and investors are going to be bullish this October. In 1987 and 1929, October is also famous for huge crashes, the most recent of which was in 2008.
Christopher Wolfe is the chief investment officer of First Republic Private Wealth Management. “A lot of quality companies are on sale. It’s a time to be patient.
Tuesday: China official PMI; Europe GDP; US employment cost index; US consumer confidence; earnings from Exxon Mobil
(XOM), Samsung
(SSNLF), GM
(GM), Phillips 66
(PSX), Marathon Petroleum
(MPC), UPS
(UPS), Pfizer
(PFE), Sysco
(SYY), Caterpillar
(CAT), UBS
(UBS), McDonald’s
(MCD), Spotify
(SPOT), Mondelez
(MDLZ), Amgen
(AMGN), AMD
(AMD), Electronic Arts
(EA), Snap
(SNAP) and Match
(MTCH)
Economists predict that 185,000 jobs were added last month, a slowdown from the gain of 223,000 jobs in December and 263,000 in November. The Fed would like to see another deceleration in the labor market as it would show that the hikes last year have taken some air out of the economy.
February is expected to add 200,000 jobs, a smaller amount than in January, but still historically high. According to the consensus poll from Refinitiv, the unemployment rate is expected to stay the same at 3.4%.
He said recent data suggests that consumer spending is not slowing that much, that the labor market is hot and inflation is not coming down as fast as he thought.
“This would still be a bit too hot, but any sizeable drop would provide Fed officials with a proof of concept for the idea that gradual labor market rebalancing can dampen wage and eventually price pressures without a recession,” they write.
If it comes in under 250K, you might see some renewed optimism that the Fed’s policies are starting to have their intended effect and that they may not need to continue to hurt the economy.
The F-150 Lightning, an Electric Pickup from Ford Motors in a Time of Historical Fragility: A No-go Theorem
The situation is delicate so it’s hard to overstate it. In fact, just today the IMF’s managing director, Kristalina Georgieva, described the world as being in a period of “historic fragility” after a torrent of economic shocks over the last two-and-a-half years, from the pandemic to the war in Ukraine.
The banking chaos has made some economists argue that the Fed should hold off on rate hikes, because they could make the economy less strong and lead to more bank failures.
Ford is, once again, raising prices on its first electric pickup, the F-150 Lightning. The entry-level model will be priced at around $52,000, which is an increase of more than $70,000 from when the truck was first introduced.
According to the state media, Alexander Lukashenko banned price increases in the economy. There is no price increase from today. Prohibited! The president is making a statement.
Nightcap jobs report: Silicon Valley giant Peloton isn’t going to build a’self-sustaining’ army of scalar robots
(CNN Business) Lawyers for Elon Musk and Twitter have agreed to postpone Musk’s deposition in the court fight over their $44 billion acquisition agreement, a source familiar with the negotiations told CNN. The deposition was supposed to take place today, but Musk threw a wrench in the plan earlier in the week when he offered to buy the company under the deal’s terms in exchange for dropping the litigation. The two sides are still haggling.
(Axios) Boston Dynamics, the company behind those viral videos of its creepily agile four-legged robots, is pledging not to weaponize their products and encouraging others in the industry to do the same. According to the letter reviewed, the company is worried their customers won’t believe them if they say they’re not building an army that will destroy humanity. Thankfully though, they’ve now said they’re not doing that. Oh wow!
The number of employees will be less than half what it was at its peak. The company said Barry McCarthy had made major changes to restore the brand. And if it fails, McCarthy told The Wall Street Journal, Peloton likely isn’t viable as a stand-alone company. He will give it another six months.
Source: https://www.cnn.com/2022/10/06/business/nightcap-jobs-report/index.html
Amazon Firefights: The Staten Island facility shuttered after a unionized labor stoppage and implications for the global economic crisis of the early 2000s
(CNN Business) Amazon suspended roughly 50 workers at its only unionized warehouse Tuesday after they organized a work stoppage following a fire at the facility. A fire broke out Monday at the Staten Island facility, known as JFK8, and workers reported that parts of the building still smelled of smoke and that it was difficult to breathe. 100 workers left the job.
It is more expensive to obtain a car loan, house or credit card because of higher borrowing costs. That’s already curbing demand in some of the more sensitive parts of the economy, like the housing market.
How much pain today’s moves will ultimately cause remains unclear: So many countries are raising rates so quickly — and so in sync — that it is difficult to determine how intense any slowdown will be once it takes full effect. Monetary policy takes months or years to kick in completely.
Many economists and several international bodies warn that there’s a danger or overdoing it, including the UN agency who warned of the damage in poorer nations. Developing economies had already been dealing with a cost-of-living crisis because of soaring food and fuel prices, and now their American imports are growing steadily more expensive as the dollar marches higher.
CNN Business Insider’s Dig Dig: Wall Street Views of Wall Street and Wall Street Wall Street Efforts: The State of the Economy
CNN Business published a version of the story. It was before the Bell newsletter. Is that not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
The Summary of Economic Projections is due out Wednesday, which will be read closely by investors. They will be watching Powell’s press conferences for clues to what’s to come.
What’s happening: Four of the nation’s largest banks — JPMorgan Chase
(JPM), Wells Fargo
(WFC), Citigroup
(C) and Morgan Stanley
(MS) — report third-quarter earnings before the bell on Friday. Their CEOs will also answer questions from investors, analysts and reporters about their views on the wider economy.
Growth of Individual loans will likely decline, showing that Americans are beginning to feel the pinch of rising interest rates. Mortgage rates are now two times the level they were a year ago, and mortgage applications recently fell to a 25-year low.
Beyond disappointing headline figures, Wall Street analysts are focusing on three important factors: loan growth, capital adequacy, and the economic outlook.
Loan growth: The rate at which businesses borrow money from big banks doesn’t just tell us about the health of a financial institution itself. It also tells us a lot about whether businesses plan to expand over the next few months or if they’re preparing for a slowdown.
Analysts think that loan growth will stay strong in the third quarter. “Credit risk and loan loss exposure are beginning to creep into the picture, but will not be front and center for Q3 2022 results,” wrote CFRA Research Director Kenneth Leon in a note.
Banks will ask about how much money they have on hand. Concerns about a domino effect in the US have arisen because of recent upheaval in UK bond markets.
It’s unlikely the turmoil will lead to another Lehman Brothers-esque financial crisis: The 2010 Dodd-Frank Act forced banks to double their capital ratios and quadruple their liquidity. Large banks also participate in annual stress tests performed by the Federal Reserve to measure their capital adequacy.
The other issue, wrote UBS analysts in a note, “is that while banks have sufficient capital and deposit flows to support loan growth, it is less robust than it has been in recent years, and we expect banks to be less well positioned to return capital to shareholders through buybacks.” That will likely weigh on stock valuations.
Economic outlook: JPMorgan CEO Jamie Dimon has a knack for moving markets by predicting economic downturn. The US could potentially be in a recession within the next six months, he warned this week. Expect more commentary on future outlook, and warnings from CEOs attempting to prepare investors for weaker days ahead.
The Effect of Federal Rate Increases on Prices: An Empirical Study of the Labor Department’s Monitor of Inflationary Declining Markets
A key measure of inflation increased faster than expected in September, raising concerns that the Federal Reserve’s aggressive rate hikes are having limited impact in bringing prices under control, reports my colleague Chris Isidore.
The Labor Department said the producer price index rose 8.5% in September, down from a 8.7% increase in August. The report shows prices increasing 0.4% month over month.
The economists expected the 12-month rise in wholesale prices to slow to 8.4% and the month-to-month increase to come in at 2%.
The cost of taking too little action to bring down inflation outweighs the cost of taking too much action, according to the minutes. The participants wanted to maintain a restrictive stance for as long as necessary.
A bombshell investigation by the Wall Street Journal has found that thousands of government officials reportedly own or trade stocks that are directly impacted by the decisions their agencies make.
Public health and food safety, diplomatic relations and regulating trade are some of the things in which the federal agency officials hold enormous power, according to Don Fox, an ethics lawyer. He said the trades present a clear conflict of interest and violate spirit of the law.
The bottom line: This report highlights the need for greater disclosure and trading regulations throughout the government. The same issues are also to be found in the legislative branch: There’s currently no federal statute, regulation, or rule that absolutely prohibits a Member or House employee from holding assets that might conflict with or influence the performance of official duties.
The First Three Months of 2019: The Strength of the US Economy in the Light of Inflation, Trade Rates and the Second Half of the Millenium
Biden said in a statement that inflation in January was lower than during the summer, while the unemployment rate remained at or near a 50-year low. “As I’ve long said, there may be setbacks along the way, but we face global economic challenges from a position of strength.”
Until there is further evidence that the labor market is cooling off enough to lower inflation, the Fed may need to keep raising interest rates.
“Consumers clearly welcomed the recent easing of inflation,” Joanne Hsu, director of the Surveys of Consumers, said in a statement. Consumers were cautious about whether the trends would continue, even after sentiment appeared to have turned a corner from its all-time low.
Solid growth is what we see this quarter. Growth has obviously slowed following a very rapid recovery from high unemployment,” Yellen said when asked about whether the latest GDP data assuaged any recession concerns. We are at a full employment economy. Growth would slow, that is what it is. It has been ok over the first three quarters of this year. We have a very strong labor market. I don’t see signs of a recession in this economy at this point.”
During a one-on-one interview in Ohio that aired on CNN’s “Erin Burnett OutFront,” Yellen said the third quarter GDP data released Thursday underscored the strength of the US economy as policy makers urgently move to cool off pervasive and soaring inflation that has had a sharp effect on American views of the economy – and endangered the Democratic majorities on Capitol Hill less than two weeks from the midterm elections.
Gross domestic product rose by an annual rate of 2.5% during the third quarter according to initial estimates released by the Bureau of Economic Analysis. The first and second quarters were negative because of decline of 1.6% and 0.6%, respectively.
Biden and the Covid-19 era: What have we learned in the last few months? And what are we going to do about it?
President Joe Biden has sought to highlight a rapid economic recovery and major legislative victories while also promising to tackle soaring prices, as he tries to balance out both of these elements over the course of this year.
It’s a reality that has undercut efforts by the administrationto take advantage of what officials view as a robust record. Biden, asked about the economy last week, told reporters it’s “strong as hell,” drawing criticism from Republicans.
Yellen pledged that those efforts would be felt as they course through the economy in the months and years ahead. Asked if the administration’s general message to Americans was one of patience, Yellen said: “Yes.”
“There were several problems that we could have had, and difficulties many families American families could have faced,” Yellen said. “These are problems we don’t have, because of what the Biden administration has done. One often doesn’t get credit for problems that aren’t there.
As part of the effort to highlight the legislative wins, Yellen traveled to Cleveland, where she talked to business executives about how the policies have encouraged investment in manufacturing around the country.
It’s a critical piece of an economic strategy designed to address many of the vulnerabilities and failings laid bare as Covid-19 ravaged the world, with significant federal investments in infrastructure and shoring up – or creating from scratch – key pieces of critical supply chains.
While acknowledging they would take some time to effect, she pointed out a number of major private sector investments like the Intel plant opened a few hours drive outside of Columbus.
“But you’re beginning to see repaired bridges come online – not in every community, but pretty soon. Many communities are going to see roads improved, bridges repaired that have been falling apart. Money flow into research and development is an important source of long term strength to the American economy. And America’s strength is going to increase and we’re going to become a more competitive economy,” she said.
Source: https://www.cnn.com/2022/10/27/politics/janet-yellen-gdp-recession-cnntv/index.html
The Yellen-Biden Debt Limit, and the Fed’s Interest Rate Rises: A Belief to the Predictions of the House
The fight lines that have been drawn this week over raising the debt ceiling, and the Washington crisis of its own making that House Republicans have pledged to utilize for leverage should they take the majority, were addressed by Yellen.
But Yellen, who has long highlighted the “destructive” nature of the showdowns, has also backed doing away with the debt limit altogether through legislation. A group of House Democrats wrote a letter to Democratic leaders requesting that action be taken, but they were rejected by Biden this week.
As the administration moves toward a time period that traditionally leads top officials to leave an administration, she made clear she did not plan to be one of them. She said the reports that she told the White House she wanted to stay were an accurate read.
“I feel very excited by the program that we talked about,” Yellen said. I see how it strengthens economic growth and addresses climate change. I want to be a part of it.
The central bank has already raised its benchmark interest rate by 3 percentage points since March, and it’s expected to tack on another 3/4 of a point at this week’s meeting. That’s the most aggressive string of rate hikes in decades, but so far it’s done little to bring prices under control.
“Interest rates have risen at a whiplash-inducing speed, and we’re not done yet,” said Greg McBride, chief financial analyst at Bankrate. “It’s going to take some time for inflation to come down from these lofty levels, even once we start to see some improvement.”
“We see today that there is a bit of a savings buffer still sitting for households, that may allow them to continue to spend in a way that keeps demand strong,” said Esther George, president of the Federal Reserve Bank of Kansas City. “That suggests we may have to keep at this for a while.”
George has been in the camp of steadier and slower rate increases in order to be able to see how those effects will unfold. “My concern being that a succession of very super-sized rate hikes might cause you to oversteer and not be able to see those turning points.”
Powell was challenged about the potential jobs lost as a result of such rate hikes by Sen. Elizabeth Warren.
The Fed’s Warning against Inflation: A Kansas City Homebuilder, a Realtor’s Guide, and a Conservative Conservative Sensitivity to Job Security
Kansas City homebuilder Shawn Woods said his company has gone from selling a dozen houses a month before the Fed started raising rates to fewer than five.
“Never in my wildest dreams would I have thought we’d go from 3% [mortgage rates] to 7% within six months,” said Woods, president of Ashlar Homes and the Home Builders Association of Kansas City.
“I think we’re in for a rough six or eight months,” Woods said. “Typically, housing leads us into downturns and it leads us out of downturns. We’ve probably been in a housing recession since March or April.
The market is watching reports on private-sector job growth this week from payroll processor ADP and the Job Openings and Labor Turnover Survey from the Department of Labor. There were more jobs available than expected last month.
The warning, in testimony before the Senate Banking Committee, comes after a series of economic indicators that indicate the economy is running hotter than expected despite aggressive action from the Fed.
There are currently 1.9 jobs for every one person looking for work, a margin that the Fed worries is keeping inflation uncomfortably high. With plenty of options, workers are demanding higher wages; and managers are forking out higher pay, which helps to bolster demand for goods and services and drives up prices.
Even if interest rate hikes do ease off, they will remain high, and economists are largely expecting that the US economy will endure a recession next year. Powell said in November that there is still a chance the economy avoids recession but the odds are slim, noting: “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing.”
Unfortunately for Democrats trying to hold on to power next week, the pain of inflation appears to be outweighing any positive sentiment about job security. According to a new CNN poll, three-quarters of likely voters already feel like the country is in a recession.
More Bad News for First-Time Buyers: Baby Boomers vs. Governments: How the Affordable Real Estate Market Has Grown Over the Last 10 Years
More bad news for the younger people trying to buy their first home. The typical age of a first-time homebuyer is now a record 36 years old, up from 33 last year.
Baby Boomer parents with a large investment portfolios were happy to pass on gains from the stock surge to their children.
People who were lucky enough to close on a home during that housing boom should be very lucky in the event that the housing market goes bust.
The share of first-time buyers over the past 10 years has ranged from 30% to 40%. It was 45% in the middle of the Great Recession.
“They have to save while paying more for rent, as well as student debt, child care and other expenses,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. mortgage rates are also climbing while home prices are increasing.
In addition to the mortgage rate hikes, home prices went up, with the median peaking at $413,800 in June. (Imagine your starter home clocking in at 400 grand!)
The policies that regulate land use and housing production make it difficult to add homes in desirable locations, according to Jenny Schuetz.
Rather than rebuild within existing neighborhoods, housing supply has been expanded through subdivisions at the urban fringe. More people and homes are being put in areas that are vulnerable to fire.
As affordability reaches crisis levels, now is a good time for federal and local governments to rethink the way we frame the American Dream. But that will only happen if those who stand to benefit — Millennials and Gen Z — are better represented in elected office. Schuetz says that the upper-middle class Boomers in power are unwilling to change the system that helped them get where they are.
Fed Rate Increases and the Future of the Market: The Implications for Wall Street and Alternative Assets in the U.S. Economy
The policymakers hiked rates for the ninth time. They raised overnight lending rates to a range of 4.75% to 5%, their highest level since September 2007. That sends a clear message that restoring price stability remains a top priority.
Minneapolis Federal Reserve President Neel Kashkari said last Wednesday that he’s “open to the possibility” of a larger interest rate increase in the Fed’s March policy meeting, “whether it’s 25 or 50 basis points.” (That’s a quarter or half of a percent. The basis point is one hundredth of one percent.
Many older workers who retired in the last two years may not return to the job market. With the supply of workers constrained, the Fed is trying to restore balance by tamping down demand.
The stock market’s best day since 2020 occurred on Thursday when a key inflation indicator came in softer than expected. The report gave investors reason to believe that the peak inflation may be behind us. That means the Federal Reserve could be less aggressive with its rate hikes.
Rick Rieder, the chief investment officer of Global Fixed Income, said the Federal Reserve’s attempt to bring inflation down towards its 2% target requires some patience, but importantly, moving forward is even more important.
“I’ve been a bit surprised by some people’s willingness to leap on those January numbers and proclaim they mark some sort of evidence the economy isn’t responding to the Fed’s interest rate increases,” says Shepherdson, chief economist at Pantheon Macroeconomics. “I think the trends are, from the Fed’s perspective, quite favorable. Economic growth is slowing. The inflation rate is going down. But these things never happen in a straight line.”
If interest and inflation rates increased, investors would abandon the dollar and invest in alternative assets, like gold andcryptocurrencies. Paul R. La Monica said that they have been in for a rude awakening this year.
There’s no place to hide in the market where rates are high and there is a recession, because those assets have been hit just like stocks and bonds.
The Covid-era of Digital Currency: a Thaw, or What Comes With a Break in Inflation?
a thaw: The Covid-era was marked by near-zero interest rates, a big influx of investors, and the emergence of the new digital currency, criptocurrency. It reached a record high of nearly $70,000 in November.
The dollar strengthened and investors became more cautious after the central banks began raising rates to fight inflation. At the same time, the economy began to sour and those new investors who still viewed bitcoin as a risky asset exited in droves.
“Bitcoin and ethereum went straight up and down but they have still gained a lot from mid-2020. Over that longer time horizon, digital assets are still outperforming tech stocks,” said Jeff Dorman, chief investment officer at Arca, a firm that specializes in crypto.
“Mortgage application activity is at a quarter-century low this week, due to the continuing weakness of the housing market.” stated Sam Khater, Freddie Mac’s chief economist. The mortgage market activity has significantly shrunk over the last year, and should lead to lower mortgage rates in the years to come.
Investors are now pricing in about a 70% chance of just a quarter-point rate increase at the Fed’s next meeting on February 1, according to Fed funds futures on the Chicago Mercantile Exchange.
“The end of the rate hiking cycle is in sight,” said Jamie Cox, managing partner at Harris Financial Group. “The Fed is trying to navigate the very narrow path between defeating inflation and destroying the economy with blunt force rate hikes — even they now know the latter is a very real risk.”
The more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. The inflation rate through October increased 7.7% compared to a year ago.
The senior portfolio manager at Globalt Investments said that the idea of peak inflation, which people have been talking about for most of this year, is starting to look valid. “It’s just how quickly does that come down?”
“We think the markets are too sanguine on rates after the first quarter and we expect Powell to take a more hawkish tone and for the dots to indicate higher rates for a longer period of time than what is currently being priced in by the futures markets,” wrote Cliff Hodge, chief investment officer for Cornerstone Wealth in a recent note. Ahawkish step-down, so to speak.
Tuesday: Fed meeting, UK inflation, and earnings from trip.com and Lennar.
Truist Advisory Services’ co-chief investment officer says that a pivot is not a cure-all for the market. It’s possible that rate cuts may be too late. Recession risks are still relatively high.”
What Will Comgest Global Investors Learn From Inflation? A View from Wall Street Insider Looks at BP&L, Hermes, L’oreal and Catamaran
Gregory Daco, an economist with the company, told CNN Business that consumers were happy in January. “They spent more freely across the board, really on all items, despite inflation being higher.”
Everybody is talking about inflation this year. Comgest Global Investors CEO Arnaud Cosserat stated that it would be less about deflation in the years to come.
What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. He said that his firm owns two of them: luxury goods maker Hermes and cosmetics giant L’oreal.
Earnings from four restaurants will be reported on Friday: The Eurozone data, UK retail sales, and earnings from Catamaran and other companies.
There were hopes that the Fed might scale back on its rate hikes, which led to a rally in the stock market. They are still down sharply for the year, though, and stocks have been more volatile so far in December.
Long-term bond yields have eased as well, with the yield on the 10-year US Treasury edging back down to about 3.5% after moving above 4.3% in late October. That was the highest the 10-year has been since 2008.
The major concern is that the Fed and other central banks may not begin to pause, let alone consider lowering interest rates to try and stimulate the economy, until it’s too late.
Tom Essaye, editor of the Sevens Report newsletter, said on Monday that it would shift from the fears of Fed tightening to how badly growth slows and earnings fall before global central banks can hint at providing accommodation.
The Fed is Expecting to Increase Interest Rates by 2024, and the Wall Street Wall will Rise by 55% in the Next Three Months
Sam Bankman-Fried, founder of FTX, is scheduled to testify in front of the House Financial Services Committee on Tuesday. The Senate Banking Committee will hold its own FTX hearing Wednesday, but Bankman-Fried is not currently on the list of witnesses set to appear.
Maybe investors will be able to relax and take a deep breath before the Fed announcement and press conference later that day. There is no guarantee of that.
But the average period between peak interest rates and the first reductions by the Fed is 11 months, which could mean that even if the central bank stops actively hiking rates, they could remain elevated into 2024.
The European Central Bank, the Bank of England and the Swiss National Bank are expected to follow the United States with half-point moves of their own on Thursday. The borrowing costs of Norway, Mexico, Taiwan, Mexico, and the Philippines will likely increase this week.
There is a question of what the size of a jump will be. Back in December 2021, the Fed was only expecting rates to finish this year at about 0.9%.
In a note on Monday, Goldman Sachs analysts said they expect the median “dot” to rise to a new peak in Federal fund rates of 5%-5.25%, up from 4.5%-4.75% in September. That would mean Fed officials expect to raise rates by half a percent more than they did three months ago, when the plot was last released.
Why a Tesla Model Cannot Drive by Its Self-Driving Self-Sustainable System? The Correspondence to Tesla
The real GDP is expected to grow by 0.4% this year, compared to earlier predictions of 0.5%. In 2024, officials project that the economy will grow by 1.2%, a cut from the 1.6% they projected in December.
Around 100,000 Royal College of Nursing members in England, Wales and Northern Ireland will walk out on Thursday to protest their wages and working conditions. They plan to walk out again on December 20, reports my colleague Anna Cooban.
That is partly because, for most of its history, the RCN had a “no strike” policy. In 1995, the union changed its rules, allowing strikes as long as they did not compromise patient care.
It is the broadest wave of industrial unrest since the country’s infamous “winter of discontent” in the late 1970s, when huge numbers of workers, from truck drivers to gravediggers, went on strike.
Musk has said before that the cars of the company will be completely self-driving within the next two years. It has not happened years after he set self-imposed deadlines. Even when equipped with a $15,000 technology package that is literally called “Full Self Driving Capability,” a Tesla car can’t actually drive by itself, reports my colleague Peter Valdes-Dapena.
“Mere failure to realize a long-term, aspirational goal is not fraud,” Tesla’s lawyers wrote in a November 28 court filing, asking that the suit be dismissed.
The lawsuit was filed in California and claimed that there were many cases of crashes involving the use of driver assist technology.
The Rise and Fall of Inflation: Implications for Consumer Products and Consumer Behavior, and the Economic Impact of Lower Interest Rates, Decays in Housing, Food and Energy
The hike, smaller than the previous four increases, comes after the latest government reading showed inflation is running at its slowest annual rate in nearly a year.
“It’s clear there is more work to do,” Daly said in a speech at Princeton University. “In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”
Many Americans are feeling the effects of higher interest on credit cards, mortgages, and car loans due to price increases in virtually every part of their lives. Currently, used car buyers are charged an average interest rate of 9.34%, compared to 8.12% last year, and they’re making the largest monthly payments on record, according to credit reporting firm Experian.
“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the central bank said in a statement on Wednesday.
Stocks plunged earlier this month after the closely watched November jobs report showed a resilient labor market. The number of people who applied for unemployment benefits fell last week, according to the numbers released on Thursday.
Rents continue to climb, but Fed officials believe the worst of shelter inflation may be behind us. Rent increases have slowed since the spring.
The price of haircuts rose 6.8% in the last twelve months, while the price of dry cleaning jumped 7.9%. Services other than housing and energy account for nearly a quarter of all consumer spending.
Powell’s Economy During the First Three Months of the Inflationary Period: The State of the Economy in the Light of Recent Interest Rate Increases
“We see goods prices coming down,” Powell said. “We understand what will happen with housing services. There isn’t much progress there, and the rest of the story will be the big one. That is going to take some time.
Powell says the job market is out of balance because there is more job openings than workers who can fill them. While the U.S. economy has now replaced all of the jobs that were lost during the pandemic, the share of adults who are working or looking for work has not fully recovered.
The central bank has made it clear it will do whatever it takes to bring inflation back down, and on Wednesday it raised interest rates for the seventh time in nine months.
Gasoline prices have dropped sharply and are now lower than they were before Russia’s invasion of Ukraine. The prices of other goods like used cars and televisions have fallen, as pandemic kinks in the supply chain come untangled. The prices of things like plane tickets and rental cars have gone down as travelers become less price-conscious, and as demand for certain goods has faded due to lockdowns.
Still, Powell warned economy watchers that “the job is not fully done” and that the labor market remains too tight for his liking. He doesn’t expect to make any rate cuts this year unless the economic trajectory changes.
The central bank has lowered its growth forecast for the year. But Powell says there’s considerable uncertainty.
“I don’t think anyone knows whether we’re going to have a recession or not and if we do, whether it’s going to be a deep one or not,” he said on Wednesday.
What will the Fed tell us about the economy, the tech sector, and the prospects for the next few years: Wall Street and Silicon Valley are in a high unemployment recession
Changes in the weather or the war in Ukraine could cause big swings in prices at the gas station and the grocery store. Faster or slower economic growth around the world could also cause gyrations in the price of crude oil and other commodities.
The price of services is dependent on how much money workers make. Depending on how many jobs the country adds each month, how many workers are available to fill those jobs, and how productive the workers are when they’re employed.
What might happen: “Boy the Fed is really committed to this put us in a high unemployment recession thing,” Jon Stewart, former host of The Daily Show, tweeted after Wednesday’s meeting.
“I think it’s a really, really narrow path, and the Fed’s tone [during its December meeting] doesn’t give me a lot of optimism that they can navigate that without hitting a recession. … If a soft landing is avoiding a recession altogether, then I think that’s a pretty tough task. I believe that it is still possible that it is a milder recession than the past.
Jeremy Siegel of the Wharton School of the University of Pennsylvania said in a commentary last week that jobs data is likely to deteriorated meaningfully and quickly.
Wall Street is buying into the idea that there is more than one way to land. Despite a number of layoffs at top Silicon Valley companies in the last few months, tech stocks have done well this year.
Super-Satiny Shopping Week: A Report on Bankman-Fried, a Crypto-Bolt Capitalist, and the Premarket Stocks Market
The time Bankman-Fried will appear in court is not known. He would return to the US quickly if he didn’t take the chance of being extradited. Once in the states, he will appear before a US judge for an arraignment and bail hearing.
Last Tuesday, federal prosecutors from the Southern District of New York charged Bankman-Fried with eight counts of fraud and conspiracy. If he is found guilty of all of the charges, Bankman- Fried could face up to 115 years in prison.
On top of that, US market regulators filed civil lawsuits accusing Bankman-Fried of defrauding investors and customers, saying he “built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.”
Super Saturday is the busiest shopping day of the year leading up to Christmas. With Christmas Day falling on a Sunday, and Christmas Eve falling on the preceding Saturday, Super Saturday this year is on Dec. 17th. More than 158 million consumers are estimated to shop that day, according to the National Retail Federation.
Half of gift buying has been completed, according to the NRF. With less than a week to go until Christmas Day, and drop-dead shipping deadlines approaching, people have a lot more buying to do.
Source: https://www.cnn.com/2022/12/19/investing/premarket-stocks-trading/index.html
The Holiday Season in the Services Sector: The PCE Inflation Index Releases an Implication for Employment, Product Sales, and Inventory Management
It’s also costly for retailers to sit on an oversupply of merchandise for too long. Retailers who store merchandise in their own warehouse and distribution centers have a limited amount of available space to work with and some wiggle room to accommodate excess inventory. But costs add up if more space is needed for a protracted glut that they can’t quickly clear out.
Also, unsold products lose value over time. When it comes to fashion clothing, savvy shoppers will not buy last year’s style if the trend has passed. Stores have to heavily discount, which affects their profitability.
Well ahead of the final full weekend before Christmas, stores this year were already offering discounts of 50% to 60% off, and tacking on free shipping for online orders.
Ross Steinman, professor of consumer behavior at Widener University in Chester, PA, has been studying the holiday season for twenty years and hasn’t seen discounts like this before.
“Retailers are very nervous,” he said. They know they have to maximize every opportunity to get consumers to make purchases, because the clock is running.
The yearly increases for the PCE inflation index have been at their lowest levels since October 2021, following declines in other inflation measures.
Friday’s report also showed that spending continued to rise in November, but at a much slower pace than in previous months. Spending was up in November as compared to the previous month. Personal income went up in November, but not as much as in October.
As 2022 draws to a close, inflation metrics show some of that may have worked: Consumer prices are cooling, home sales have ground to a halt, and some of America’s best-known companies have made plans to slow their roll and pull back on capital investment.
Inflation has moderated in recent months, especially on items like goods as supply chain bottlenecks have eased and consumers focused more spending in areas like leisure and hospitality.
Inflation within the services sector has not abate as quickly as we would have liked. Friday’s PCE report showed the services index posted a monthly increase of 0.4% – unchanged from October’s rate – and a year-over-year increase of more than 11%, Faucher noted.
While much of the services inflation is due to housing costs, which are rapidly reversing, the Fed is concerned that strong wage growth could fuel persistent increases in services prices and overall inflation, he added.
Declining New Orders of Manufactured Goods and the Decline of the U.S. Manufacturing Activity During the December Pandemic
A separate Commerce Department report released Friday showed that new orders for manufactured goods tumbled 2.1% in November, the biggest monthly drop since the onset of the pandemic.
Transportation equipment, specifically new orders for non-defense aircraft and parts, drove the decline, according to the report. New orders are up 2% Excluding transportation.
“Core durable goods orders slowed but did not contract, reflecting growing unease about the economy,” Diane Swonk, chief economist for KPMG, tweeted Friday after the report’s release. The prelim reading for December suggests that manufacturing activity will contract further by year end. The manufacturing sector is going to experience a cold winter.
The index of consumer sentiment rose slightly to 59.7 in December from a preliminary reading of 59.1 and the final reading of 56.8 in November.
Earlier this week, the Conference Board’s consumer confidence index – another measure of how consumers are feeling about the economy – landed at its highest measurement since April 2022.
Powell explained in December that the labor shortage was due to a variety of issues, including a plunge in net immigration and early retirements.
Employers are reluctant to lay off people while other areas of the economy are strong and those who are unemployed can be rehired quickly.
“It’s been pretty impressive how well the consumer has held up over the past 18 months, and not pulling the rug out from under the consumer is pretty much how you get to the soft landing,” Mayfield said.
The First Two Years of the Federal Open Market Committee: A Breakdown in the Stock and Financial Markets and Implications for the Economy and the Economy
There are eight regularly scheduled meetings of the Federal Open Market Committee every year. The 12-member group looks through economic data, assesses financial conditions, and evaluates monetary policy actions on the second day of its meeting, along with a press conference led by Chair Powell.
It was a brutal period for the stock market, with roughly one-fifth of the value of the S&P 500 vanishing and the Nasdaq dropping by more than one-third. All three major US markets have had their worst years.
The number of first-time applications for Unemployment benefits went up last week. That is still a historically low number and in line with the same time a year ago.
The chief economist of Moody’s Analytics told CNN on Thursday that he was optimistic the economy could avoid a recession. “Without mass layoffs, it’s unlikely consumers will stop spending and the economy suffer a downturn.”
The price of gas went up above $5 a gallon for the first time in June. The national average for regular gasoline dropped to $3.10 a gallon, an 18-month low, and has crept higher in recent days at about $3.22 a gallon.
There is a fear that if the Fed doesn’t do something about it, the recession will be caused by hiking rates so high and keeping them there for so long.
The Premarket Stocks Trading (Premarket-Stocks-Trading): Jobless Claims, ADP, Amazon, and other tech firms have announced job cuts
Wednesday’s weaker than expected report on the health of the manufacturing sector, coupled with more signs of strength in the jobs market given the solid report about labor turnover, led to more market volatility.
That is why investors are interested in the weekly jobless claims numbers that are released on Thursday morning as well as a report on the private sector job market from payroll processing companyADP. Further strength could set off more alarm bells about inflation and Fed rate hikes.
Wages are under increased pressure due to the mismatch between labor supply and demand according to a New York Life Investments report.
In other words, the Fed will likely focus more on the number of jobs added than the amount of them. Maybe Wall Street will do the same.
As my colleague Catherine Thorbecke reported, Salesforce joins a growing list of major tech firms that have recently announced job cuts, including Amazon
(AMZN) and Facebook owner Meta Platforms. Amazon
(AMZN) confirmed late Wednesday that it was laying off more than 18,000 employees.
The hope was that consumers and businesses would continue to spend heavily on tech products and services, a notion that seemed valid as the economy quickly rebounded from a brief recession in 2020.
Now, though, recession alarm bells are sounding once more as inflation and rate hikes take their toll…and tech companies realize that they may have not factored that in to their budgeting plans.
“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing,” said Salesforce chair and co-CEO Marc Benioff in a recent note to employees.
“Companies that last a long time go through different phases. Andy Jassy said in a memo to employees that they are not in a mode of expansion where they hire a lot of people.
Source: https://www.cnn.com/2023/01/05/investing/premarket-stocks-trading/index.html
The global economy is not out of the woods: How do Europeans feel about the future? — An analysis by CNN’s Anna Cooban
The global economy is not out of the woods. Many, including the head of the International Monetary Fund, are still concerned about a looming downturn that could hit China and emerging markets particularly hard.
According to CNN’s Anna Cooban, investors in Europe appear to be more hopeful about the future of consumer price increases in France and Germany. A drop in energy prices is leading the pullback.
The British Retail Consortium said in a report Wednesday that food prices went up in December. Meanwhile, data analytics firm Kantar noted in another report that UK grocery sales hit a record during the four weeks ending on December 25, even though the number of items that consumers bought fell 1% during the same period.
In the salad days of the New Year, people feel rejuvenated and positive about the year to come. There is some clarity during this time of year.
The Consumer is Strained, and Will Wage Growth Continue in the U.S. Through the Season of Jobs: An Investment Report from Ally Invest
The theme this month is how traders reward firms for cutting jobs. With corporate layoffs making headlines each evening, you might think the consumer is strained. Maybe not so much. It turns out that demand is decent,” said Frank Newman, portfolio manager at Ally Invest, in a report.
The US economy is in no danger of a recession just yet according to several other job market indicators. The number of people filing for weekly jobless claims dipped last week to 186,000, a nine-month low. The latest weekly initial claims numbers will be handed out on Thursday.
In an interview with the Financial Times this week, Gita Gopinath, second in command at the International Monetary Fund, urged the Fed to continue with rate increases this year, citing the labor market’s resilience.
Will wages moderate this year? Goldman economists think that they will. Wage growth is expected to slow from 5% in 2020 to 4% by the end of this year, as they think unemployment will grow.
Bank of America CEO Brian Moynihan told CNN around the holidays that the continued strength of the US consumer is nearly single-handedly staving off recession.
The weaker-than-expected retail sales in November caused a big shift in market sentiment, and it raised the possibility that the Fed would hike rates to push the economy into recession.
This is the main question on every investor’s mind — and the answer will not only help determine what happens to markets this year, but also whether the economy will fall into recession.
Inflation, the Wall Stable, and the Bed Bath & Beyond Chain: Expectations for the Fed to Keep Up with the Curvature
They insisted that more evidence of progress was required and that inflation was still high even after softer inflation reports in recent months.
The 30-year fixed-rate mortgage went up in the week ending January 5 to 6.48%) from the week before. The 30-year fixed rate was higher a year ago.
The market is driving away would-be buyers due to the lack of inventory as Americans are willing to part ways with low mortgage rates.
There is “substantial doubt about the company’s ability to continue” because of its worsening financial situation, the home goods chain said in a regulatory filing.
But the Wall Street Journal reported that Bed Bath & Beyond is preparing to file for bankruptcy within weeks, citing sources familiar with the matter. Bed Bath & Beyond did not immediately respond to CNN’s request.
“Workers are going to be very reluctant to give up their bargaining power, since they have gained it over the course of the past year.” said the global strategist at Putnam in a report.
If you combine a strong labor market with a still substantial reserve of excess savings you have all the components in place to keep the Fed up at night, according to Vaillancourt.
Tech Layoffs, Consumer Spending and the Wall Street: What Do These News Reports Tell Us About the IMF and Banks of the USA?
There are some people who think that tech layoffs won’t be a problem. Investors seem to be (somewhat perversely) taking the view that companies cutting costs is a good thing for profits and that revenue likely won’t be impacted in a negative way because consumers are still spending.
The earnings reports of Amazon, Facebook, Meta Platform, Apple and Alphabet next week will be crucial in determining if the index continues its surge.
Daniel Berkowitz, senior investment officer at Prudent Management, said that a set of weaker-than-expected reports from these firms could hurt the market.
Last week, we learned of strong results from electric car maker,Tesla, which could be a sign of things to come from other dynamic tech companies.
On Monday, the International Monetary Fund releases world outlook, as well as earnings from Royal Dutch Shell and Franklin Resources.
Steven Kamin is a Senior fellow at the American Enterprise Institute, which studies international macroeconomic and financial issues. He served as director of the international finance division of the Federal Reserve from 2011 to 2020. The opinions expressed in this commentary are his own. View more opinion on CNN.
The Fed Open Market Committee Report on February 3rd Wage Ratios: Implications for the US Economy and the Core Services Sector
Wage gains have been less than they have been in the past. That helps to allay concerns that rapid wage gains might put more upward pressure on prices — as happened in the 1970s.
The decision was made by the Federal Open Market Committee at the conclusion of their first meeting of 2023 and comes after many large rate increases intended to cool the economy.
Powell said it was difficult to manage the risk and not get the job done in six to 12 months.
US markets jumped after the press conference when investors assumed a more dovish Fed. The S&P 500 closed the first day of February 1.1% higher after notching its best January in four years.
“We do not want to be head-faked like we were in 2021,” Fed governor Chris Waller said two weeks ago. Three months in a row of relatively low readings of core inflation exploded in the face of us.
Financial markets are skeptical of that forecast. Many investors are betting that the central bank will soon start cutting interest rates, despite repeated warnings to the contrary from Fed officials. One of the reasons the stock and bond markets have rallied is the expectation of lower borrowing costs.
“We didn’t expect it to be this strong,” Powell said of the January jobs report, which showed the US economy added 517,000 jobs. “It kind of shows you why we think that this will be a process that takes a significant period of time.”
Powell said that the disinflationary process has begun. The services sector’s price gains remain high.
Powell expects housing inflation to come down by the middle of this year but is keeping the closest watch on a metric within the Personal Consumption Expenditures report: Core services excluding housing.
The major US stock indexes rallied during Powell’s discussion but then fell in early afternoon trading, with the Dow down by around 200 points or 0.6%, the S&P lower by 0.3% and the tech-heavy Nasdaq down by 0.2%.
“We had a labor market with 3.5% unemployment in 2018 and ’19, and we had inflation just barely getting to 2%, and wages moving up for most of the people at the lower end of the spectrum,” he said. We would love to get back to that place.
If we continue to get strong labor market reports, it may be the case that we have to raise rates more.
If your heart goes pitter patter when central bankers discuss inflation (you know who you are on Twitter!), then this may be the best Valentine’s Day ever. Four members of the Federal Reserve (although not Fed Chair Jerome Powell) spoke on the economy today.
First up was Richmond Fed President Thomas Barkin, who is not a voting member on the interest-rate setting Federal Open Market Committee this year. According to Barkin in an interview with the television station, there is more persistence to inflation than maybe we would all want.
The prediction of economic data is a problem. “When inflation repeatedly comes in higher than the forecasts…or when the jobs report comes in with hundreds of thousands more jobs than anyone expected…it is hard to have confidence in any outlook,” she said.
The Philadelphia Fed and the PCE Index: A Hard-to-Fix Week for the S&P 500, Nasdaq, N$/$S$/Q2$
Philadelphia Fed President Patrick Harker sounded a little more dovish (i.e. less concerned about inflation) than Logan. He is also a member of the Federal Open Market Committee. Harker said in a speech Tuesday that “we are not done yet” with rate hikes but added that “we are likely close.” Harker noted that “at some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place.”
Last up was New York Fed President John Williams, another FOMC member and also someone whose name has been mentioned as a possible successor to Lael Brainard as Fed vice chair now that President Biden is expected to name Brainard as his new top economic adviser.
That’s a fair share hotter than what economists were expecting. The annual core index was projected to land at 4.3% by Refinitiv and give a three-month stretch of cooling.
President Joe Biden said that the higher-than- expected reading shows that the country has more work to be done, but that he was happy with the progress the economy had made during his administration.
The PCE index is included in the Personal Income and Outlays report. The latest estimates on how much consumers bring in and how much they spend are included in the report.
The PCE report supported recent data that showed inflation is not falling at a faster rate than investors had thought. It also adds pressure on the Fed to continue with its rate-hiking campaign for longer than markets anticipated just a few weeks ago.
The major indexes had a losing week. The S&P 500 was down for the week, its worst performance of the year. The blue chip index lost for the fourth week in a row. The tech-heavy Nasdaq ended the week 3.3% lower.
What the Fed and the Consumer Inflationary Environment Have in Common: Implications for the US Economy, Consumer Spending and the Supply Chain
For the past year, the Fed has undertaken a heavy-handed approach to try to cool down decades-high inflation by cranking up interest rates in order to stifle demand.
“We are likely to experience surprises in this disinflationary process, it’s not just going to be a smooth ride back down to the low levels,” Daco said. “And so we’ll have to see whether the Fed panics in light of this recent report.”
The impact of the global Pandemic on the US economy, labor market, supply chain and spending patterns are a few of the unusual factors economists and Fed officials say has played into this recent stretch of high inflation.
Additionally, while monetary policy does act on a lag, the rapid increase in interest rates have filtered down to some areas of the economy, notably housing and financing.
The spending increase was to be expected — the Commerce Department’s stronger-than-expected retail sales report for January gave an early indication that Americans’ loosened the purse strings after a reined-in holiday shopping season — but the pace in Friday’s report surprised on the upside as well and exceeded economists’ forecasts of a 1.3% gain.
Spending on durable goods (items like cars, appliances and TVs expected to last three or more years) increased 5.5% last month, buoyed by vehicle sales; non-durable goods (clothing, gas, groceries, etc.) increased 1.2%; and services gained 1.3%, according to the report.
Economists have suggested that the January spending surge may reflect a variety of factors including warm weather, a rebound of muted holiday spending, seasonal data adjustments, first-of-the-year boosts in Social Security income and state minimum wage increases, and a strong and tight labor market.
The consumer is more resilience than initially thought and households are still spending freely as of January, according to Daco.
However, given the high inflationary environment, rising interest rates, and the latest household debt data that showed some deterioration in Americans’ finances, the spending gains seen in January may not be lasting, he added.
According to the University of Michigan’s survey, consumers are more optimistic about the future direction of the economy than they have been in a long time.
The University of Michigan’s Surveys of Consumers show that the sentiment index is 17 points above the lowest point in June of 2022, now that it has risen for three consecutive months.
Year-ahead inflation expectations bounced back up, coming in at 4.1% this month. In January and December, that was an increase from 3.9% to 4.4%. Long-run inflation expectations held steady for the third month in a row.
All that spending threatens to cause more upward pressure on inflation when the Fed is raising rates because of the economy.
A drop in consumer spending would help to cool inflation, but it would also raise concerns about a recession. If spending grows at this pace, we could see the Fed raise interest rates aggressively to bring prices under control.
The Commerce Department said Friday that consumer spending increased in January as consumers spent more on both goods and services.
Thanks to strong job growth and rising wages, a lot of people have money in their pockets. Retirees also got a raise this year. The cost-of-living increase for Social Security was the largest in four decades in January.
According to Jonathan Silver, who tracks credit card use by 100 million people nationwide, additional income will help to support consumer spending in the months to come.
Many people put in extra savings during the first few months of the Pandemic when there were limited spending opportunities, and the government was distributing relief payments. While bank balances have come down, Americans are still sitting on a lot of additional cash.
“We estimate households to still have about ten months of spending power if they continue to deplete excess savings at the pace they have over the past six months,” Wells Fargo economists wrote in a research note Friday.
The Consumer’s Choice during the Covid Epidemic: How Retailers Have Been and What They’ve Learned in the Last Three Years
People who put off traveling during the worst of the pandemic are making up for lost time. Vacation visits to Las Vegas jumped more than 20% last year.
“People realized what they were missing during Covid,” says Steve Hill, CEO of the Las Vegas Convention and Visitors Authority. I think it has made people feel better about getting back to experiences. And we see, and I’m sure you do as well in the numbers, a shift from buying stuff to buying experiences.”
Of course, not everybody is flush with cash. People are struggling. And businesses are not confident that consumers’ free-spending habits will continue.
Walmart, the nation’s largest retailer, is projecting only modest sales growth this year. CEO Doug McMillon notes that shoppers are increasingly focused on basic necessities like groceries, while limiting spending on more discretionary items.
Customers are spending money, according to McMillon. “It’s obviously not as clear to us what the back half of the year looks like.”
But restaurant owner Cameron Mitchell remains cautiously optimistic. His food costs began to go down. Staffing shortages have abated. He is planning to open a number of new locations.
Mitchell says that is what his gut is telling him as an operator. A year ago people knew we had to raise prices. They were willing to see that it was obvious. But the consumer is starting to change. I think people want inflation to come down, they’re not as tolerant of price increases.
Ian Shepherdson thinks the Fed’s efforts are working. The strong spending last month was a random phenomenon, according to him.
The U.S. Economy is Turning Faster than It Needs: A Multi-Analytic Panel Report on 5 Years of Data
When the economic data has delivered mixed messages or flat out busted expectations, economists’ predictions for the year ahead are growing more opaque.
The results of the newest survey from the National Association for Business Economics show a divergence between where they think the US economy is heading in the next five years.
“Estimates of inflation-adjusted gross domestic product or real GDP, inflation, labor market indicators, and interest rates are all widely diffused, likely reflecting a variety of opinions on the fate of the economy — ranging from recession to soft landing to robust growth,” Julia Coronado, NABE’s president, said in a statement.
The opinions of Panelists are divided on how high the Federal Reserve can raise interest rates, how long rates need to stay at peak, and what the central bank will do about it. The impact on the US economy of China’s reopening on global inflation and the debt ceiling are just some of the consequences thatRespondents are concerned about.
The labor market remains strong and tight, and the median projection from the panel for monthly payroll growth this year was 102,000, a significant upward revision from the previous projections for 76,000 jobs per month.
On the housing front, they expect home prices and new home construction to continue to fall this year, projecting that housing starts could see their largest decline since 2009.
They don’t expect the downturn to end up being as bad as they think. A mere 2% of respondents said that a “housing market bust” was the greatest downside risk to the US economy in 2023.
Instead 51% of respondents said the biggest downside risk was too much monetary tightening. Trailing far behind in second was the broadening of war in Ukraine, with 12%.
Wall Street investors are gearing up for their version of Hell Week — a torrent of jobs data coming over the next few days could easily lead to volatile market swings.
The job openings, hires, and quits report for January and the private payroll report for February are expected on Wednesday. The Labor Department publishes the monthly employment report on Friday, and on Thursday, Challenger, Gray, and Christmas will release their February job cuts numbers.
Inflationary and Monetary Predictions: Hirt, Powell, the Wall Street Wall, the Mall, and the Dole
“We’re stuck in the messy middle.” said Josh Hirt, senior US economist at Vanguard. “Activity has weakened in the most interest rate-sensitive sectors of the economy, but core areas are still showing resilience. There is an in-between period where the impact of rates has not worked through the economy.
Hirt said he expects the unemployment rate will likely climb from its current 54-year low, albeit slowly and modestly, to around 4.5% to 5% by the end of this year.
Tuesday: Federal Reserve Chair Jerome Powell is expected to testify on economic outlook and monetary policy before the Joint Economic Committee; earnings from Dick’s Sporting Goods, Caseys General Stores, Squarespace, and Dole.
Congress uses the president’s budget to figure out spending priorities for the year ahead. Wall Street investors will likely pour over the document in order to understand what market-shifting debates may be coming down the pipeline.
Biden’s budget will help offset the rising costs of Medicare, Social Security and health care by increasing taxes on the rich. The president introduced a tax of some kind last year. Other Biden proposals, like increased tax on capital gains and on corporate stock buybacks, have roiled Wall Street.
The Fed’s action to bring inflation down has caused a panic on Main Street, as well as on Wall Street. “The responses range from fearing these actions will tip the economy into a recession to fearing they won’t be enough to get the job done,” she said.
High inflation levels in goods, housing and other sectors along and strong economic data, she said, has led her to question the momentum of disinflation.
The Fed needs a Fed That will fight for families, not for a Waller-like Whale E. Coyote moment
Atlanta Fed President Raphael Bostic also said Wednesday that he believes the Fed needs to raise its policy rate by half a percentage point at the next meeting.
On Thursday, Fed Governor Christopher Waller warned that painful interest rates could go higher than expected, citing a slew of recent stronger-than-expected economic data.
And for the US economy, it could likely mean a “Wile E. Coyote moment,” Summers said, referencing the cartoon canine’s relentless — yet futile — pursuit of the speedy Roadrunner off a cliff and into mid-air.
But in the weeks following that meeting, there was a barrage of surprisingly strong economic data, showing blockbuster job gains, hearty consumer spending and unyielding inflation.
Over the last year, the central bank has raised interest rates eight times in an effort to tamp down demand. Consumer spending and employment came roaring back in January, putting more upward pressure on prices.
She noted the Fed’s own December forecast showed the unemployment rate climbing to 4.6% by the end of this year. Warren thinks that would put 2 million people out of work.
“You are gambling with people’s lives,” she said. “You continue to believe that there is only one solution, laying off millions of workers.” We need a Fed that will fight for families.”
Inflation: How Do Finance and Financial Assets Lose Their Weight During the Recovery After Credit Suisse’s Bank Crisis? An Analysis from the House Select Committee
Republicans are demanding the government rein in spending as a condition to raise the debt ceiling. The Republicans are accused by the Democrats of risking a costly federal default if the debt ceiling is not raised.
The European central Bank followed through with its plans to raise rates after one of Europe’s biggest banks, Credit Suisse, was damaged by the market turmoil.
Is inflation bad? It depends on the circumstance. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
The poor can be affected by inflation. Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities like food, housing and gas.
Is inflation affecting the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
Fed Supervisors and the Silicon Valley Bank, Signature Bank, Collapse, and its Report on the U.S. Banks’ Risk Management Problems
David Mericle at Goldman has said that markets appear to be less than fully convinced about efforts to support small and mid-sized banks. Stress in the banking system is the most immediate concern at the moment, according to our view of Fed officials.
That’s partially because rate hikes have undermined the value of Treasuries and other securities, a critical source of capital for most US banks. Silicon Valley Bank had to sell bonds quickly due to a loss, and ran into a liquidity crisis.
Some observers had urged the central bank to pause its rate hikes, at least temporarily, in order to assess the fallout from the collapse of Silicon Valley Bank and Signature Bank earlier this month.
The Fed is also facing scrutiny for its oversight of the two failed banks. Fed supervisors reportedly identified problems with Silicon Valley Bank’s risk-management practices years ago, but the problems were not corrected and the California lender had to be taken over by the U.S. government after suffering a massive bank run.
“We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm,” said Michael Barr, the Fed’s vice chairman for supervision.
Others want an independent investigation into the role played by the Fed in the bank failures. Senators Elizabeth Warren, D-Mass., and Rick Scott, R-Fla., have also proposed replacing the Fed’s internal inspector general with an outside inspector, appointed by the president.
” Credit makes small businesses’ wheels run and makes the economy run, so it’s the important piece of the puzzle,” she said.
Nightcap: What Happened to the Banking Sector in the White House after the Second Fed Policy Meeting? Revisiting The Fun Nightcap
Still, Federal Reserve Chairman Jerome Powell and policymakers entered their second policymaking meeting of the year surrounded by an unusual level of uncertainty as the landscape surrounding the financial system continues to shift.
The Fed admitted that recent financial market turmoil is hurtinginflation and the economy, but they were confident in the overall system.
The risk here is that the banking crisis — or “recent events in the banking system,” per Powell, who studiously avoided the c-word — will wind up doing the Fed’s job for it.
“Powell is trying to have it both ways,” said Joe Gilbert, portfolio manager at Integrity Asset Management, per Bloomberg. Powell has to make the market believe that it isn’t because of the loosened financial conditions that the rate hike would cause.
Meanwhile, Wall Street also appeared to react negatively to Yellen, who was across town telling lawmakers that officials were not considering expanding bank deposit guarantees beyond the FDIC’s current $250,000 limit.
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