Wall Street picks hope over reality after inflation report

The Fed Shouldn’t Close the Window: Jobs and Productivity in a Tighter Labor Market: How Does the US Economy Grow?

There are signs that the labor market is becoming softer, including: a decline in quits and hires; layoffs moving higher; and a rise in continuing claims.

Last week’s unemployment number may have been too low for investors’ liking, he said, but it’s important to remember how much growth has slowed since the Fed began tightening earlier this year. The US economy added 263,000 jobs in September, but that’s a lot lower than the 431,000 jobs added in March 2022.

Measures of inflation expectations, both those derived from financial markets and those based on household surveys, remain above pre-pandemic levels, but have moved down since earlier last year. Wages have barely kept up with rising prices since the beginning of the pandemic, and labor productivity has risen about 4%.

Wages pose a dilemma for the Fed. It wants us to shop just a little less – but not a lot less. Unfortunately, there’s no magic formula for how much wages need to go down to make a dent.

It is problematic for the inflation rate to stay near 4% for an extended period. People will expect inflation to stay high because of the cut into buying power. They will ask for higher wages, and companies will increase their prices to make up for it. Unemployment is close to its lowest level in over 50 years, and this tight job market adds to these risks. The economy still seems to be going hotter than it is sustainable.

If it is less than 250K, you can see a renewed confidence in the Fed’s policies and they may need to stop hurting the economy.

The Fed’s Decisions: Why Not Every Economy is Going Through A Recession, Unless The Fed Becomes More Decelerent

It is hard to overstate the delicate situation. The world is in a state of economic fragility after a lot of shocks over the last two and a half years, according to Kristalina Georgieva, the managing director of the International Monetary Fund.

The Fed’s decisions are closely scrutinized because of that. When the Fed raises rates as aggressively as it has in the past several months, it creates painful ripple effects around the globe, pushing the US dollar’s value up and forcing other central banks to raise their own rates as well. All of which could cause the world’s largest economies to go into a recession.

Ford is raising prices on the F-150 Lightning, its first electric pickup. The cost of the entry-level model will be much higher than it was when it was first launched, due to ongoing supply chain constraints and rising material costs.

The president of the country banned price increases for consumers, according to state media. “From today, any price increase is prohibited. Prohibited! the president is quoted as saying.

Nightcap: Why Peloton is Not Facing a Stand-alone Company after Trump’s Acquisition Agreement? (CNN Business)

(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. After throwing a curve ball earlier in the week, Musk is going to give a deposition today, but he wants to buy the company in exchange for dropping the litigation. The two sides are still haggling over various conditions.

Boston Dynamics, creators of the wildly popular four-legged robot, pledges not to weaponize their products and encourages others in the industry to do the same. According to a letter Axios reviewed, the company suggests it’s worried that customers don’t, like, believe them when they say they’re not building an army that’ll destroy humanity. Thankfully though, they’ve now said they’re not doing that. Oh yes, phew!

After letting go of another 500 people, Peloton will be left with around 3,800 employees — less than half the number of employees it had at its 2021 peak. The company said the latest cut was the last of CEO Barry McCarthy’s 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’s giving it six more months.

Source: https://www.cnn.com/2022/10/06/business/nightcap-jobs-report/index.html

The Effect of Inflation on the Economy: Why Do Fed Rate Increases Should Be Increased in the Aftermath Of Hurricane Ian?

CNN Business is owned by CNN. Amazon suspended roughly 50 workers at its only unionized warehouse Tuesday after they organized a work stoppage following a fire at the facility. Workers at the Staten Island facility reported that parts of the building still smelled of smoke, even after the fire had been put out. An estimated 100 workers walked off the job.

Global warming has created new problems for forecasters, according to meteorologists. It is difficult to issue early warnings for communities that are in the path of hurricanes due to the fact that they are getting stronger. Notably, officials in Florida’s Lee County waited for definitive evidence that they would be hit hard by Hurricane Ian before ordering evacuations — and by then it was too late for many people.

After making three large rate increases, officials suggested that they debate slowing down in November. The fresh inflation data makes it very hard for the Fed to slow down at the end of the year, according to economists.

A second reason the Fed should be slowing its rate hikes is that the actual level of the interest rates needed to slow inflation is unknown. The Fed has economic models that can provide some guidance on how high to raise rates, but these models proved unable to predict the inflationary surge that materialized in 2021, and their implications for the optimal level of interest rates must be taken with more than a grain of salt.

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.

But many economists and several international bodies have warned that there’s a pronounced danger or overdoing it, including a United Nations agency that warned the damage could be particularly acute 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.

Investors winced on Friday, as fresh data about the health of the labor market paved the way for the Federal Reserve to deliver another bumper increase to interest rates next month, raising costs for companies and weighing on stock prices.

The S&P 500 dropped by almost 3% on Friday due to interest rate-sensitive sectors. The dollar strengthened as the yields on government bonds indicated the future path of interest rates.

Wall Street Downs, Wall Walls, and Wall Street Elliptism: The Fed’s Wrong Predictions for Stock Prices

Typically a sign of economic strength, at the moment a resilient labor market is bad news for investors, as it points to the need for the Fed to raise interest rates even more than it already has. Higher rates, in turn, raise costs for companies, weighing on stock prices.

Some of the predictions about the recession are more serious than others. According to the survey, almost two-thirds of corporate economists think the U.S. will experience a recession within the next 12 months.

One of the 30 stocks in the Dow was down nearly 1%, and that wasJPMorgan Chase. JPMorgan Chase

            (JPM) is one of several big banks that will report earnings on Friday.

Stocks have tumbled this year due to worries about inflation and how the Federal Reserve’s aggressive interest rate hikes to fight surging prices may eventually lead to a recession. Stocks soared early last week, leading to hopes that the market had bottomed.

The sellers came back with gusto in the past few days. Friday’s mostly solid jobs report did little to dispel fears about more big rate hikes from the Fed.

Thursday’s retail sales report was worse-than-expected and sent stocks plunging, compounding fears from those dour Fed forecasts. The Dow lost 765 points Thursday, or 2.3%, the index’s worst day in three months. The S&P 500 lost 2.5% and the Nasdaq tumbled 3.2%, their worst days in a month.

Fed-Deflation and the Rise of the 10-Year Treasury Yield: Lael Brainard in a QCD Talk at the LHC

The yield on the 10-year US treasury fell to about 3.5%, retreating after moving above 4.3% in late October. That was the highest the 10-year has been since 2008.

Lael Brainard was the Fed’s vice chair and gave a speech Monday. Brainard noted that “the moderation in demand due to monetary policy tightening is only partly realized so far” and that “the transmission of tighter policy is most evident in highly interest-sensitive sectors like housing.”

Economy experts say the US is likely headed for a slowdown this year as the Fed continues waging war against inflation – even as the battle will result in “real costs” like rising unemployment rates. The banking turmoil will be important for markets and the economy, but it is only one part of a complex equation.

CNN Business published a version of the story. Before the Bell newsletter. Don’t be a subscriber? You can sign up right here. Clicking on the same link gives you an audio version of the newsletter.

What is going on? What are markets saying, and what do they want to change? Comment on Wall Street and Wall Street in the wake of the Wall Street Wall

Markets overreact to inflation data by a factor of three to 10 times what they should, according to Blinder. He said it was what was going on now.

Expect the swings to continue until the Fed declares “mission accomplished” in its fight to lower inflation and pivots away from its current regime, likely some time in 2023, he told me.

Still, Powell warned economy watchers that “the job is not fully done” and that the labor market remains too tight for his liking. it would be “very premature” to think “we really got this,” he said, adding that unless the economic trajectory changes drastically, he doesn’t expect to cut rates this year.

“Inflation has probably peaked but it may not come down as quickly as people want it to,” said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.

Last week, Goldman Sachs said it still believes the US economy will avoid a recession and instead move towards a “soft landing” where inflation moderates but growth continues.

The central bank announced Monday that it was increasing its efforts to ensure financial stability in the UK. The bank said that it was ready to buy up to £10 billion ($11 billion) of government bonds each day this week, double the daily limit it set when it announced its emergency intervention on Sept. 28.

The program would end Friday but extra support will be extended beyond the week’s end to banks affected by the pension funds crisis.

How Banks Can Prevent Another Financial Crisis: Results from a Nobel Committee on Banks’ Resilience to Market Upheaval

See here: The UK government sold index-linked gilts due in 2051 at a yield of 1.55%. That is the highest yield since October 2008.

The yields on long-dated government bonds, which are different from prices, fell after the Bank of England took action, but have since gone up again.

The central bank said it was compelled to act because of the historic selling in the market caused by the budget plans revealed by Finance Minister Kwarteng.

The Bank of England stated on Monday that funds have made progress over the past week but that it needed to continue to work with them to make the industry resilient in the future.

Ben Bernanke, a former Federal Reserve Chairman, won the Economic Sciences prize for changing the way the world thinks about the relationship between banks and financial crises.

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.

Major US banks were tested for resilience in the face of a severe recession and upheaval in their financial markets under the Fed’s policy. The tests are used to determine whether banks can increase dividends or repurchase shares.

The research is especially relevant today as rapid interest rate hikes to combat inflation have sent markets into turmoil, drawing comparisons to 2008.

The research papers, said the Nobel Committee, “offer important insights into the beneficial role that banks play in the economy, but also into how their vulnerabilities can lead to devastating financial crises.”

What’s happening: All four of the nation’s biggest banks are scheduled to report third-quarter earnings on Friday. Their CEOs will also answer questions from investors, analysts and reporters about their views on the wider economy.

Still, traders have been glued to economic reports even more than usual as of late, and stocks have been incredibly choppy based on what the latest figures indicate about inflation.

Wall Street Perspectives on Bank Loan Growth, Capital Adequacy, and the Economic Outlook in the United States and Beyond: A Brief Review of Wall Street Analysis

When banks have a poor financial state, they tend to take on less risk. That means fewer loans to regular people and businesses, which in turn slows economic growth, and — ta-da! — brings down inflation.

Beyond disappointing headline figures, Wall Street analysts are focusing on three important factors: loan growth, capital adequacy, and the economic outlook.

Loan growth shows us about the health of the financial institution itself, as well as the rate at which businesses borrow money from big banks. It tells us about whether businesses plan to expand in the next few months or if they’re ready for a downturn.

Analysts think 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.

Capital adequacy: Expect banks to take questions about how much money they have on hand. Concerns about a “contagion” effect in the United States have been caused by the recent upheaval in UK bond markets.

The other issue is that banks have enough capital and deposit flows to support loan growth, but not as robust as they have been in the last few years, and we expect banks to stop returning capital to shareholders through Buy backs. That will likely weigh on stock valuations.

The Rise and Fall of the US Producer Price Index: Concerns about the Need for More Trade Regulations in the Government, a Human Rights Lawyer’s Report

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 US Producer Price Index, which tracks what America’s producers get paid for their goods and services, rose at an annual pace of 8.5% in September, down slightly from the 8.7% rise in August, the Labor Department reported Wednesday. But the report showed prices rose 0.4% month-over-month.

Economists surveyed by Refinitiv had been expecting the 12-month rise in wholesale prices to slow to an 8.4% increase, and the month-to-month increase to come in at 0.2%, compared to the 0.1% decline in August.

“Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action,” the minutes read. “Several participants underlined the need to maintain a restrictive stance for as long as necessary.”

A recent investigation by the Wall Street Journal has found that thousands of government officials own ortrade stocks that are directly impacted by their agencies’ decisions.

Federal agency officials hold “immense power and influence over things that impact the day-to-day lives of everyday Americans, such as public health and food safety, diplomatic relations and regulating trade,” said Don Fox, an ethics lawyer and former general counsel at the U.S. agency that oversees conflict-of-interest rules. These trades violate the spirit of the law because of a conflict of interest, he told the Journal.

This report shows the need for more trading regulations in the government. There is no federal statute, regulation or rule that prohibits a Member or House employee from holding assets that could conflict with or influence the performance of official duties.

How the Fed Made the Real Economy Work: The Case of Consumer Prices and Mortgage Rates Increases in the U.S. and Export Markets

Mr. Biden said the report showed “some progress” in combating the increases, noting that costs have climbed by less over the past three months than they had in the prior three months. He admitted that inflation continued to be high.

The reason for the Fed to raise their benchmark interest rate was due to this situation, which slowed the economy by increasing the cost of houses, cars and other things people buy with debt. A quarter-point increase was favored by some Fed Officials, which would be the same amount of increase as the one last month. The recent inflation data made some people like a half-point increase.

So what does that mean? A decade of free-flowing money from the Federal Reserve to banks has created two economies, argues Nomi Prins, a former managing director at Goldman Sachs and author of “Permanent Distortion: How the Financial Markets Abandoned the Real Economy Forever.” Wealthy Americans and corporations benefited directly from years of low rates, which kept money flowing into businesses and stocks high while Main Street suffered from decelerating wages and little support. There is now a permanent distortion where economic prosperity and market behavior have nothing to do with each other.

The Fed is mandated to keep prices stable and unemployment down, but it is also mandated to boost markets. Over the past 14 years we have seen that, she said. Beginning in 2008, interest rates for overnight bank borrowing in the United States were set low, near zero, and Fed officials pursued an aggressive monetary easing policy, where they infused money into the financial system by purchasing Treasury securities from the US Government. She said that there was a belief that the stock market would go up no matter what.

The Fed created a world where investors became dependent on them, while the larger economy was hurt, because the bulk of thisStimulus flowed into markets and not out into the economy.

A “trilemma” of re-establishing price stability, reducing unemployment, and reestablishing financial stability is being faced by the Fed. And the probability is low that the Fed will be able to bring down inflation without causing a recession, preventing further consolidation in the banking sector or increasing unemployment, he said.

She says Main Street is feeling the impact of the higher interest rate hikes through higher borrowing and mortgage rates and a slowing jobs market.

Consumer prices were up by 7.1% in November. It would be high at almost any point in the last 40 years. But this marked the fifth-straight month of improvement and a significant cooldown from 9.1% in June. It’s also the lowest annual inflation rate in nearly a year.

The Flipping of Britain’s Third Prime Minister to the Battle of a Crashes: The Stories of Rishi Sunak and the End of the Great Depression

Shortages of raw materials and labor continue to hinder businesses’ operations, according to the survey. The share of respondents reporting shortages remained near record levels.

Rishi Sunak, Britain’s third prime minister in seven weeks, will face the huge challenge of projecting stability after a period of historic political and financial market chaos. But his other task — shepherding the country through a recession — is poised to be just as daunting, reports my colleague Julia Horowitz.

Sunak campaigned for the job over the summer with promises to help households tackle the rising cost of living, which is causing many to pull back spending. He said he would cut taxes, but only once price pressures eased.

Yet the economic outlook has deteriorated sharply since then — not least because of the market turmoil unleashed by Truss’ now-abandoned plan to slash taxes as soon as possible and boost government borrowing.

Plus: The Conference Board is expected to release October Consumer Confidence which measures the level of confidence consumers have in the economy at 10 a.m. ET.

The narrative was flipped on it’s head in 2020. They simply couldn’t afford homes in the suburbs, which is why they didn’t want them. The furor of the era was driven by people in their 30’s, who were finally free from the jobs they had been stuck with for years because of the Great Recession.

(It also didn’t hurt that dizzying stock surges meant Baby Boomer parents with large investment portfolios were happy to pass on some of those gains to their darling Millennial kids.)

The Real Housews: Why the Boom is Coming, Why the Fed is Growing, and Why the United States is Doing What It Needs

Even though the 2020 housing boom is likely to go bust, those who closed on a home in the midst of competition should still count themselves lucky.

Here’s the deal: On Thursday, a new report showed that first-time buyers made up just 26% of all homebuyers in the year ending in June — an all-time low over the four decades that the National Association of Realtors has been conducting its survey.

“They have to save while paying more for rent, student debt, child care and other expenses.” said Jessica Lautz, vice president of demographics and behavioral insights. There was increasing home prices this year while mortgage rates were climbing.

Mortgage rates have gone up since the Federal Reserve implemented its interest rate hikes. The Fed increased interest rates for the sixth time this year last week, increasing their rate by another 75 basis points.

The housing is broken. I don’t purport to have a silver bullet, but it’s clear that inventory constraints and outdated zoning restrictions are a big part of the problem.

Rather than rebuilding within the neighborhoods, housing supply has expanded through subdivisions at the urban fringe. That’s putting more people and homes in environmentally vulnerable areas, such as wildfire-prone regions of the West.

Now is a great time for the federal and local governments to rethink how they describe the American Dream. It will only happen if the people who are going to benefit are better represented in office. As Schuetz argues, the upper-middle class Boomers in power now are, understandably, reluctant to change the system that got them where they are.

Defying the Fed: Inflation, Markets, and the Prospect for Growth in the U.S. and the First Mile in a Marathon

While the vote to raise interest rates on Wednesday was unanimous, members of the Fed’s rate-setting committee showed less agreement about where borrowing costs will go in the future. Some believe that the Fed will need to increase its benchmark rate from 5.2% to 5.5% next year in order to restore price stability.

(Side note: “Basis points” are how central bankers talk about rate moves, which usually happen in tiny increments. One-tenth of a percentage point is the basis point.

It’s not all bad news that the first mile in a marathon matters. The latest report bodes well for the economy and could mean that a soft or soft-ish landing, where inflation eases without recession, is still achievable. That’s also good for markets.

One of the biggest unknowns since the Federal Reserve started its historic rate-hiking campaign has been how many jobs could be lost from the central bank’s deliberate effort to slow down the US economy.

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.

While investors and leaders of the economy warn of a recession, Wall Street’s most powerful investment bank remains cautious.

A four step path from a high-inflation economy to a low-inflation economy is still possible according to a report by Goldman’s chief economist.

By contrast, a Bloomberg Economics model released in late October determined the risk of a recession over the next 12 months stands at a staggering 100%. A probability model run by Ned Davis Research similarly found a 98.1% chance of a global recession.

The transition to more sustainable economic growth looks durable and positive, according to GoldmanSachs. The bank believes that the domestic economy will grow by 1% over the next year.

Goldman Sachs concedes that there has been “much less progress” on the price side. The Inflation metrics have mostly stopped getting worse but they still aren’t any better.

It was the best day for stocks since 2020 when a key inflation indicator came in softer than expected. A report suggesting that peak inflation may be behind us was interpreted by investors as a sign of things to come. The Federal Reserve could be less aggressive with rate hikes if that’s the case.

Members of the Fed’s rate-setting committee said additional rate hikes may be necessary to restore price stability. policymakers expect rates to climb by another quarter-percentage point by the end of the year

Bitcoin Price and Inflation Since the Covid-era: Why do we care about it? What do we really want to see in 2020?

In November, prices of the virtual currency fell more than 15%. FTX, a broker and exchange company that was once worth as much as $32 billion, collapsed in the middle of the year, causing investors in digital Currency to wonder what the future holds.

Unfortunately, those assets have gotten hit just like stocks and bonds, proving there really is no place to hide in a market where worries about rate hikes and recession reign supreme.

A thaw. The Covid-era was a time of near-zero interest rates and lots of investors from large-scale institutions. It reached a record high of nearly $70,000 in November.

The dollar strengthened significantly when the central banks started 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.

Just look at bitcoin prices since the summer of 2020. Even though it has been rough, they are still up more than 80%. The difference between July 2020 and July 2020 is about 1%.

The change in the cost of financing a home has caused sales to fall for eight months. The lowest number of people think it’s a good time to buy a home was shown in the survey.

If this trend continues, it could significantly lower the risk of a recession. But if inflation remains well above the Federal Reserve’s 2% target, that would be problematic.

The more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. The year-over- year increase in the inflation rate is 7.7%.

There is a central bank meeting. The Federal Reserve has a policy committee meeting on Wednesday.

Truist’s co-chief investment officer said that a pivot or pause was not a cure-all for the market. “Rate cuts may be too late. A high proportion of recession risks still exist.

The US economy isn’t in a recession yet. Are American shoppers tapped out? We will have a better idea of this Thursday when the government reports retail sales for November.

So it’s possible consumers were simply getting a head start on holiday shopping. Inflation and retail sales have been impacted by the fact that people spend more money on stuff.

Everyone has been talking about inflation this year. Going forward, it will be more about disinflation in 2023 or 2024,” said Arnaud Cosserat, CEO of Comgest Global Investors.

What Does Cosserat Say About the Fed and Central Banks: A Study of Emerging Markets, Retail, and L’Oreal

What does that mean for investors? quality consumer companies with pricing power can maintain their profit margins, so people should look for them, according to Cosserat. He said that the two stocks that he owned were luxury goods maker Hermes and makeup giant L’Oreal.

The Eurozone’s Purchasing Managers’ Inventory; UK retail sales; and earnings from Accenture, DRI, and Winnebago will be reported on Friday.

In the December Fed meeting, central bank officials said that they did not expect to cut rates in 3 years. The minutes warned that “an unwarranted easing in financial conditions … would complicate the Committee’s effort to restore price stability.”

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 investing newsletter said that the macroeconomic focus would be shifted to how badly growth slows and earnings fall before the central banks can hint at providing accommodation.

This week, investors may get some answers when Sam Bankman- Fried testifies in front of the House Financial Services Committee. 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.

The Fed announcement and press conference later on that day might give investors enough time to relax and take a deep breath. Although there is no guarantee of that.

Fed Board Of Governor Timing Measurements: The Rate of Inflation is Running at Its Slowest Annual Rate in Almost a Year

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 good to see progress, but let’s just understand we have a long ways to go to get back to price stability,” Fed Chairman Jerome Powell said at a press conference after the board announced its latest, smaller rate increase.

Many Americans already have to contend with price increases in almost every part of their lives, now they have to pay more in interest on credit cards, mortgages and car loans. 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.

The central bank said in a statement on Wednesday that inflation is elevated due to supply and demand imbalances related to the swine Flu.

Rents continue to climb, but Fed officials believe the worst of shelter inflation may be behind us. Increases in market rents have slowed since spring.

The price of haircuts has gone up in the last year, while the price of dry cleaning has gone up. Most of the consumer spending is done by services other than housing and energy.

The U.S. Economy Has Come Into Disagreement: Commodity Energy, Real Estate, and Energy Co-Energy

Powell said that they saw goods prices coming down. We know what will happen in housing services. But the big story will really be the the rest of it, and there’s not much progress there. And that’s going to take some time.”

Powell has described the job market as out of balance, with more openings than workers are available to 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 sell-off has been broad, only 12 companies in the S&P 500 are trading in the green. Real estate and energy sectors have been hit the hardest the hardest, down more than 3.3% and 2.1%, respectively.

The real GDP is expected to grow by 4% this year, down from a previous estimate of 5.0%. In 2024, officials project that the economy will grow by 1.2%, a cut from the 1.6% they projected in December.

Adobe and Facebook parent company Meta are the markets largest gainers today, up 3.6% and 3.4%, respectively. Adobe shares soared after their better-than-expected quarterly earnings and guidance. Meta, which is still down nearly 65% for the year, saw a tick after JPMorgan upgraded shares of the company to neutral from overweight.

Sam Bankman-Fried: Building a house of cards on a foundation of deception, and why we need a strong job market

Fed Chair Jerome Powell did not mince words last week when he said that the strong job market is exceedingly responsible for inflation and will have to weaken before rate hikes end. “There’s an imbalance in the labor market between supply and demand,” he said, adding that it will take a “substantial period” to fix that imbalance.

Jon Stewart, a former host of The Daily Show, said after Wednesday’s meeting that the Fed was committed to putting us in a high unemployment recession.

Some economists think that if employment starts to fall in the first half of next year then a Fed pivot could come quickly and with it, recovery.

“Employment has yet to soften notably, but I think the jobs data is likely to deteriorate meaningfully and quickly,” said finance professor Jeremy Siegel of The Wharton School of the University of Pennsylvania in his weekly commentary for WisdomTree last week.

Powell expressed optimism on Wednesday that a soft landing was still possible and that the labor market was tight enough to withstand an increase in unemployment without snowballing into a recession. Investors, meanwhile, will be watching jobs numbers very closely.

CNN is aware of the situation and has learned that Sam Bankman-Fried is scheduled to appear in a Bahamas court on Monday.

The federal prosecutors in New York charged Bankman-Fried with eight counts of fraud. Bankman-Fried could face up to 115 years in prison if he is convicted of all the charges against him.

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: How retailers are dealing with the Christmas shopping season compared to the last 30 days of December 17th, 2001, and November 17th

Super Saturday is the busiest shopping day of the November-December gift-buying period. Christmas Day is on a Sunday and Christmas Eve is on a Saturday which means that Super Saturday is on December 17th. The National Retail Federation says more than 158 million consumers will shop that day.

Half of the gift buying has been completed, estimates 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.

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 finite amount of space to work with, with some wiggle room to accommodate excess inventory. If more space is needed, it adds up since they can’t quickly clear out.

Also, unsold products lose value over time. That’s especially true with fashion clothing as savvy shoppers won’t buy last year’s style if the trend has passed. Stores have to heavily discount which has a negative impact on 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.

“I’ve studied the holiday season for 20 years and haven’t seen discounting so dramatic,” said Ross Steinman, professor of consumer behavior at Widener University in Chester, Pennsylvania.

“Retailers are very nervous,” he said. “The clock is ticking and they know they have to maximize every opportunity now to get consumers to make purchases.”

What Has the Musk of Twitter Learned in the Building and Real Estate Development of the Second Largest Economy in the U.S. Ever Tweeted?

Morgan Stanley was one of the investment banks that helped finance the acquisition of Twitter. The banks made the promise before technology sector shares crashed, the billionaire tried to walk away from the acquisition, and the market for leveraged loans seized up. The banks have loans that will make it difficult for them to finance more deals in the new year.

Mr. Musk’s management of Twitter has been erratic: He’s fired workers, refused to pay invoices, changed content moderation policies, allowed banned users back on to the platform, temporarily suspended some journalists’ accounts, been accused of neglecting his other companies and said he would resign as C.E.O. (eventually). But his style has won admiration among many tech executives, founders and investors.

The number of vacant properties in China as of late summer. The world’s second-largest economy has been hammered this year and a sharp slowdown in the crucial property sector has been one big reason. The real estate development industry in China has suffered in recent years due to a squeeze, causing social unrest among unhappy property owners. The lingering challenges facing the debt-fueled housing industry point to structural questions that still hang over the economy.

Inflation metrics show that consumer prices are cooling, home sales are down, and some of America’s best-known companies are pulling back on capital investments as the year ends.

The Fed has a new script that calls for the federal funds rate to move higher but at a slower pace than in the past.

Policymakers also projected that PCE inflation, the Fed’s favored price gauge, would remain far above its 2% target until at least 2025. Further projections showed souring expectations for the health of the US economy, with Fed officials now predicting that unemployment will rise to 4.6% by the end of 2023 and remain at that level through 2024. It is higher than the 4% rate they had in mind in September and it is also higher than the current 3.7% rate.

However, a “structural labor shortage” remains a major headwind, Powell noted in December, attributing the lack of workers to early retirements, caregiving needs, Covid illnesses and deaths, and a plunge in net immigration.

Employers are hesitant to lay off workers, and other parts of the economy are showing such strength that those who are out of work are able to return to work quickly.

Over the past eighteen months, the consumer has held up well, and not pulling the rug out from under them is pretty much how you get to the soft landing.

The Fed Open Market Committee: Summary of Economic Projections, First-time Job Applications, and Gas Price Drops for the First Month in 2023

The Federal Open Market Committee, the central bank’s policymaking arm, holds eight regularly scheduled meetings per year. A group of 12 people look through data, analyze financial conditions and evaluate monetary policy actions that are announced to the public on the second day after their meeting, which is led by Chair Powell.

Below are the meetings tentatively scheduled for 2023. The meeting with a Summary of Economic Projections is an indication of the meeting and shows where each Fed member expects interest rates to go in the future.

New numbers show first-time applications for unemployment benefits went up. That is close to where it was a year ago, before recession fears emerged.

Mark Zandi told CNN that this is a reason the economy could skirt a recession. “Without mass layoffs, it’s unlikely consumers will stop spending and the economy suffer a downturn.”

After spiking above $5 a gallon for the first time ever in June, gas prices have plunged. The national average for regular gasoline recently dropped to $3.10 a gallon, an 18-month low, though it has crept higher in recent days to about $3.22 a gallon.

The Role of Job Creation in the Recovery from a Slow-Century: The Case of the US Economy as a Model for Growth and Jobs

Moody’s said in a slowcession — a phrase coined by Zandi’s colleague Cristian deRitis — economic growth “comes to a near standstill but never slips into reverse.” Unemployment wouldn’t spike but would rise.

There is a risk of a self-fulfilling prophecy where business owners and consumers are scared of a recession and just want to stay in business.

Shoppers are the vital link between an economy in a recession and an economy that is not. The firewall is likely to come under pressure, but should continue to hold.

Zandi also pointed to relatively strong fundamentals in the US economy, including profitable businesses, healthy consumer balance sheets and a banking system that is “on about as strong financial ground as it has ever been.”

The Moody’s economist noted the economy is not plagued by troubling imbalances that were glaring before prior recessions, such as overbuilt real estate markets or massive asset bubbles.

Traders are betting on a further deceleration in jobs growth because that could lead to a reduction in the size of interest rate hikes by the Federal Reserve.

Wednesday’s weak manufacturing sector report coupled with signs of a stronger jobs market gave the market a scare and caused more volatility.

That’s why investors will also be poring over the weekly jobless claims numbers that come out Thursday morning as well as a report from payroll processing company ADP

            (ADP) about the private sector job market. More alarm bells may be set off if further strength occurs.

The level of wage growth will also be under scrutiny. A hike in worker compensation tends to lead to inflation. Consumers can pay better prices for their products and services if they have more disposable income.

“The persistent mismatch between labor supply and demand continues to put upward pressure on wages,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments, in a report.

In other words, the Fed is likely to focus more on worker paychecks in Friday’s jobs report than the number of jobs added. Wall Street may follow suit.

Are US Consumer Prices in Trouble? Amazon, Meta Platforms and CNN are Coping with a Downturn in the Global Economy: A Heady Warning from the IMF

It was reported by Catherine that a number of major tech firms have recently announced job cuts, including Amazon and Meta Platforms. Amazon stated 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.

Tech companies are aware that inflation and rate hikes can affect budgeting plans and that they may not have taken those into account.

As revenue increased, we created too many employees and are now faced with an economic downturn, warned a recent note to employees from its chairs and co- CEOs.

There are different phases of companies that last a long time. They’re not in heavy people expansion mode every year,” Amazon CEO Andy Jassy said in a memo shared with employees.

The global economy is clearly 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.

CNN correspondent Anna Cooban reports that European investors seem to be growing more hopeful that the pace of consumer price increases is slowing down in France and Germany. A drop in energy prices is leading the pullback.

Still, consumers continue to bear the brunt of higher prices. CNN’s Hanna Ziady reports that European supermarket giant Aldi just had its best December ever in the United Kingdom as British shoppers, feeling the pinch of inflation, flocked to the German discount grocer. Aldi said Brits bought more than 48 million mince pies, for example.

The Fed is Getting Closer to the New Year: The Labor Market Is Respelling the Recession, and Will Wage Growth Continue?

In the salad days of New Year, people feel refreshed and motivated, and maybe even optimistic about the next year. There’s a certain clarity that comes during this time in January.

The word Jobs was the word of the week as investors looked at a lot of data highlighting a strong labor market that is still resisting the Feds efforts to cool the economy.

Assuming no change in the labor force, going from the current unemployment rate of 3.6% to 4.5% would mean 1.5 million more people would be unemployed by the end of the year, according to the Fed’s projections.

The Fed should continue to raise rates because of the labor market’s resilience, says Gita Gopinath, the second in command at the International Monetary Fund.

So will wages moderate this year? The analysts at Goldman believe they will do that. Wage growth will slow to around 4% by the end of this year, as they believe unemployment will grow and the rate will rise.

Brian Moynihan, the CEO of Bank of America, told CNN that the continued strength of the US consumer is helping to staving off the recession.

Market sentiment was hurt by weak retail sales in November and the odds that the Fed would push the economy into recession grew last month.

The disposable income fell from the spring of 2020 to the summer of 2021, as inflation outrammed wage growth. Consumers are taking on more debt, despite the fact that American banks are still strong. In the third quarter of 2022, credit card balances jumped 15% year over year. The New York Fed has been keeping track of the data since 2004.

The answer to this question will have an effect on the markets and the economy this year.

More on the State of the Economy and the Future of the Bed Bath & Beyond Home Goods Chain — A Comment on CNN’s Steven Kamin

They stressed that more proof of progress was needed and that inflation was still unacceptable.

The 30-year fixed-rate mortgage averaged 6.48% in the week ending January 5, up from 6.42% the week before, according to Freddie Mac. The 30-year fixed rate was around 3% a year ago.

The home goods chain said in a regulatory filing that there is a doubt about the company’s ability to continue.

“Bed Bath & Beyond is too far gone to be saved in its present form,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients Thursday. All of this indicates that bankruptcy is the most likely outcome.

Editor’s Note: Steven Kamin is a senior fellow at the American Enterprise Institute (AEI), where he studies international macroeconomic and financial issues. He served as the director of the international finance division of the Federal Reserve. The opinions are of his own. There is more opinion on CNN.

Core Inflation: The First Fed Appropriate Cuts and the First Open Market Committee Meeting in 2023, a Reflection on Powell’s Predictions

To be sure, much of this decline reflects falling energy prices. In December the so-called core inflation rate, which excludes volatile energy and food prices as well as provides a more reliable reading on price trends, has moved down a little in recent months to 5.7%.

Price pressures are likely to continue to ease as remaining supply-side bottlenecks are resolved, the economy slows in response to the rise in interest rates, and labor markets tighten as a result.

The Fed said that recent developments are likely to cause tighter credit conditions for households and businesses. The extent of the effects is not known.

The Fed’s concern about wage growth being above levels compatible with its 2% inflation target and the risk of a wage-price spiral where rising wages leads to rising prices, seems low because of the tight labor markets.

The Federal Reserve unanimously approved a quarter-point interest rate hike Wednesday, slowing the pace of its increases in a clear sign that the central bank is seeing progress in its fierce battle with inflation.

The decision, at the conclusion of the Federal Open Market Committee’s first meeting of 2023, comes after months of jumbo-sized rate increases intended to cool the economy, and marks the return to a more traditional interest-rate policy.

Powell echoed that sentiment Wednesday, saying: “I continue to think that it is very difficult to manage the risk of doing too little, and finding out in six or 12 months that we actually were close but didn’t get the job done.”

The investors expect the Fed to be more dovish going forward, after the press conference. The S&P 500 closed the first day of February 1.1% higher after notching its best January in four years.

Where do we see the US economy going forward? The NABE survey revealed that 2023 is not the best time for epochs of growth or inflation

The year ahead predictions of economists are getting more opaque in a time when economic data has been mixed and expectations are less than ideal.

The National Association for Business Economics’ latest survey, released Monday, shows a “significant divergence” among respondents about where they think the US economy is heading in 2023, the organization’s president said.

“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 views ofPanelists are divided regarding how high the Fed will raise rates, how long they will stay at the peak, and how to signal the central bank’s actions. “Respondents are also highly concerned but divided in their opinions regarding the consequences of other matters that might affect the US economy, including the impact of China’s reopening on global inflation and the looming debt ceiling.”

A significant upward revision from projections in December was that the labor market will increase monthly payrolls by 102,000.

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.

But they don’t expect the downturn to end in a bust. A small percentage of respondents think that the housing market bust is the greatest downside risk to the US economy in the next five years.

The majority of respondents said the biggest downside risk was monetary tightening. Trailing far behind in second was the broadening of war in Ukraine, with 12%.

Fed Supervision after the Silicon Valley Bank and Signature Bank Collapse: Why Do Banks Close? The Case of the Fate of the Speedy Roadrunner

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.

In the months following that meeting, there was a flurry of strong economic data, with blockbuster job gains and robust consumer spending.

The banking troubles of the past two weeks scrambled these plans. Why? In addition to slowing the economy, higher interest rates depress the value of many financial assets (as these charts explain). Bank executives did a poor job of planning for the asset declines and their balance sheets suffered. A classic bank run occurred when customers were worried about the banks not having enough money to return their deposits. Silicon Valley Bank and Signature Bank both went out of business as a result.

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.

They wrote in their policy statement that the US banking system is sound and resilient. “Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation. There are uncertain effects on the extent.

The Fed is also facing scrutiny for its oversight of the two failed banks. The California lender Silicon Valley Bank was taken over by the U.S. government after experiencing a huge bank run because the Fed spotted problems with the bank’s risk-management practices years ago.

Michael Barr, the Fed’s vice chairman for supervision, said they need humility, and conducted a careful review of how they supervised and regulated the firm.

The Fed’s role in the bank failures has been called for to be investigated by others. The internal inspector general of the Fed should be replaced by an outside inspector that was appointed by the president, it was proposed by two senators.

Lattice Wall Street Sensitivities to Fed Policymakers in the Presence of Financial Market Turbulence and Uncertainty

Kathy Bostjancic, chief economist at Nationwide, said that credit is the grease that makes small businesses’ wheels run.

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.

In a statement released at the conclusion of the meeting, Fed officials acknowledged that recent financial market turmoil is weighing on inflation and the economy, though they expressed confidence in the overall system.

Fed policymakers also forecast that unemployment would drop lower than previously expected by the end of the year, to 4.5%, from the projected 4.6% in December.

There is a risk that the banking crisis will wind up happening the Fed’s job in it’s current form.

The Fed raised its rate by a quarter-point. Wall Street turned sour after the comments by Powell and comments by Janet Yellen while they were testifying before Congress at the same time.

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.

Nightcap: What Happens When the Fed Lifts the Jobless Rate and Its Implications for Wall Street, Wall Street Investors and the Fed

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The quick escalation of a jobless rate to that level or even the Fed’s 4.5% has sparked concern and criticism, most notably from Senator Elizabeth Warren. Earlier this month, the Democratic congresswoman from Massachusetts (and frequent Powell critic) pressed Powell about American jobs sacrificed for the Fed’s goals.

The actions taken by the Fed, the Federal Deposit Insurance Corporation and Treasury appear to have contained the crisis, said Eugenio Alemán, chief economist with Raymond James.

A day later, Yellen said in something of a reversal that the federal government is ready to take more action to stop bank contagion if necessary to curb systemic risk.

Prior to this recent episode, about half of banks tightened credit standards for commercial and industrial loans, and he expects that to increase to 75% to 80%.

The markets were volatile this week after two of the most prominent leaders in the US economy gave differing statements about the health of the banking sector. Expect more turbulence ahead.

The Fed Chairman said at the press conference that all of the savings of the people are safe, a few hours after the Fed raised rates.

The apparent disconnect baffled Wall Street investors, who for weeks have been searching for clues about the state of the banking sector and what the crisis means for the Fed in its fight against inflation.

“It kind of reeks of a lack of leadership from the people we need leadership from,” says Matthew Tuttle, CEO and CIO of Tuttle Capital Management. They have to get their story straight.

The Ups and Downs of the Stock Market, Gold and Bonds: A Critique of the First Three Weeks in the Big Picture

By week’s end, the stock market emerged relatively resilient, with all three major indexes posting gains. The S&P 500 fell on Wednesday. On Thursday, the index gained as much as 1.8% before paring back its gains to 0.3%. The broad-based index rose about 0.6% on Friday and finished the week up 1.4%.

Already, investors have sought alternative spaces for their cash as the market churns. The virtual currency has appreciated in recent weeks. Money market indexes are thought to be one of the safest and lowest-risk investment options and have seen a large influx of cash. Gold, another perceived haven, has climbed – and will likely continue to see upside.

Some of the banks that had poor risk management strategies are going to go under, because the Fed has an important mandate to control inflation at the moment.

Investment experts said markets probably aren’t going for a crash. Until either the Fed or traders wave a white flag, stocks will likely be stuck in a range. in other words, either the central bank says it made a mistake and needs to pivot, or traders believe the economy will tank and start selling, says Tuttle. “I don’t think we’re at either one of those things yet.”

The banking industry is unclear as a slide in shares ofDeutsche Bank on Friday adds to global concerns. The Wall Street will be watching.