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Here’s Everything the Federal Reserve Is Expected to Do Today

Rebekah Fuller

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Construction workers outside the Marriner S. Eccles Federal Reserve Building, photographed on Wednesday, July 27, 2022 in Washington, DC.
Kent Nishimura | Los Angeles Times | Getty Images

There’s not a lot of mystery surrounding Wednesday’s Federal Reserve meeting, with markets widely expecting the central bank to approve its third consecutive three-quarter point interest rate hike.

That doesn’t mean there isn’t considerable intrigue, though.

While the Fed almost certainly will deliver what the market has ordered, it has plenty of other items on its docket that will catch Wall Street’s attention.

Here’s a quick rundown of what to expect from the rate-setting Federal Open Market Committee meeting:

Rates: In its continuing quest to tackle runaway inflation, the Fed almost certainly will approve a 0.75 percentage point hike that will take its benchmark rate up to a target range of 3%-3.25%. That’s the highest the fed funds rate has been since early 2008. Markets are pricing in a slight chance for a full 1 percentage point hike, something the Fed has never done since it started using the fed funds rate as its primary policy tool in 1990.

Economic outlook: Part of this week’s meeting will see Fed officials issue their quarterly update of their interest rate and economic outlook. While the Summary of Economic Projections is not an official forecast, it does provide insight into where policymakers see various metrics and interest rates heading. The SEP includes estimates for GDP, unemployment and inflation as gauged by the personal consumption expenditures price index.

The “dot plot” and the “terminal rate”: Investors will be most closely watching the so-called dot-plot of individual members’ rate projections for the rest of 2022 and subsequent years, with this meeting’s version extending for the first time into 2025. Included in that will be the projection for the “terminal rate,” or the point where officials think they can stop raising rates, which could be the most market-moving event of the meeting. In June, the committee put the terminal rate at 3.8%; it’s likely to be at least half a percentage point higher following this week’s meeting.

Powell presser: Fed Chairman Jerome Powell will hold his usual news conference following the conclusion of the two-day meeting. In his most notable remarks since the last meeting in July, Powell delivered a short, sharp address at the Fed’s annual Jackson Hole symposium in late August emphasizing his commitment to bringing down inflation and in particular his willingness to inflict “some pain” on the economy to make that happen.

New kids on the block: One slight wrinkle at this meeting is the input of three relatively new members: Governor Michael S. Barr and regional presidents Lorie Logan of Dallas and Susan Collins of Boston. Collins and Barr attended the previous meeting in July, but this will be their first SEP and dot plot. While individual names are not attached to projections, it will be interesting to see whether the new members are on board with the direction of Fed policy.

The big picture

Put it all together, and what investors will be watching most closely will be the meeting’s tone – specifically how far the Fed is willing to go to tackle inflation and whether it is concerned about doing too much and taking the economy into a steeper recession.

Judging by recent market action and commentary, the expectation is for a hawkish hardline.

“Fighting inflation is job-one,” said Eric Winograd, senior economist at AllianceBernstein. “The consequences of not fighting inflation are greater than the consequences of fighting it. If that means recession, then that’s what it means.”

Winograd expects Powell and the Fed to stick to the Jackson Hole script that financial and economic stability are wholly dependent on price stability.

In recent days, markets have begun to relinquish the belief that the Fed will only hike through this year then start cutting possibly by early or mid-2023.

“If inflation is really stubborn and stays high, they may just have to grit their teeth and have a recession that lasts for a while,” said Bill English, a professor at the Yale School of Management and former senior Fed economist. “It’s a very tough time to be a central banker right now, and they’ll do their best. But it’s hard.”

The Fed has accomplished some of its goals toward tightening financial conditions, with stocks in retreat, the housing market slumping to the point of a recession and Treasury yields surging to highs not seen since the early days of the financial crisis. Household net worth fell more than 4% in the second quarter to $143.8 trillion, due largely to a decline in the valuation of stock market holdings, according to Fed data released earlier in September.

However, the labor market has stayed strong and worker pay continues to rise, creating worries over a wage-price spiral even with gasoline costs at the pump in retreat. In recent days, both Morgan Stanley and Goldman Sachs conceded that the Fed may have to raise rates into 2023 to bring down prices.

“The kind of door that the Fed is trying to get through, where they slow things down enough to get inflation down but not so much that they case a recession is a very narrow door and I think it has gotten narrower,” English said. There’s a corresponding scenario where inflation stays stubbornly high and the Fed has to keep raising, which he said is “a very bad alternative down the road.”

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Original Post: cnbc.com

Business

Disgraced Rep. Santos Defiant After Local GOP Officials Call for ‘immediate’ Resignation Over Campaign Lies

Rebekah Fuller

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(The press conference is scheduled to start at 11:30 a.m. ET. Please refresh the page if the above video doesn’t start at that time.)

The Nassau County Republican Committee and dozens of local elected GOP officials from New York are making a “major announcement” on Wednesday about freshman Rep. George Santos, R-N.Y. who is under scrutiny by federal and local lawmakers for embellishing key elements of his resume.

The Republican county political committee, which is chaired by Joseph Cairo, said in press release announcing the event that Santos is a “disgraced” member of Congress, but he did not provide details on the upcoming remarks. Santos has been caught embellishing and, at times, outright lying, about his past, including his claims that he worked on Wall Street.

Santos has apologized to anyone “disappointed by resume embellishments,” but he vehemently denies committing any crimes.

Cairo has previously said that Santos has “broken the public trust by making serious misstatements regarding his background, experience and education, among other issues.” As a member of Congress, Santos represents parts of Queens and Nassau County, a region of Long Island in New York. House Republican leadership have been quiet regarding Santos since he’s been sworn into Congress.

“Obviously, he’s addressed some of the concerns that we’ve had. In New York, they’re having a lot of internal conversations too. But at the end of the day, you know, he was seated, nobody objected to him being seated,” House Republican Majority Leader Steve Scalise, R-La., told CNBC on Wednesday after being asked whether Santos will serve his full two-year term.

Santos has said that all he’s guilty of is embellishing his resume and has committed no crimes.

The lies and embellishments he told during the election have also led to scrutiny from prosecutors in the Eastern District of New York who are examining Santos’ finances, including potential irregularities involving financial disclosures and an over $700,000 loan Santos made to his campaign while he was running for Congress during the 2022 midterms, according to NBC News.

The Campaign Legal Center, a nonpartisan campaign finance watchdog, filed an ethics complaint with the Federal Election Commission against Santos on Monday for allegedly violating campaign finance laws. Santos told reporters that he’s done nothing unethical.

Santos’ fundraising efforts during his successful 2022 run was also based, in part, on some of the false claims he’s made about his past. He would suggest to donors that he was Jewish when he was not and falsely told people he worked at Wall Street banks that don’t have any record of his employment. A Santos campaign staffer impersonated as Kevin McCarthy’s chief of staff in order to raise money for the campaign, CNBC and The Washington Times reported.

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Article: cnbc.com

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Bed Bath & Beyond Jumps 50% to Lead ‘nonsense’ Rally in Meme Stocks; AMC Gains 16%

Rebekah Fuller

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In this article

BBBYAMCGME

A “Store Closing” banner on a Bed Bath & Beyond store in Farmingdale, New York, on Friday, Jan. 6, 2023.
Johnny Milano | Bloomberg | Getty Images

A group of highly speculative stocks rallied double digits on Wednesday as retail investors pushed meme names up again in the new year following a dismal 2022.

Bed Bath & BeyondGameStopAMC Entertainment

Meme stocks rallying one more time

Stock Short interest % float Wed. Gain % off 52W high Bed Bath & Beyond (BBBY)48.9%60%-89%AMC (AMC)21%15%-78%GameStop (GME)21%8%-62%
Source: FactSet

The rally in Bed Bath & Beyond was initially triggered by news that it would lay off more employees in an attempt to reduce costs and stay in business.

The home goods retailer told employees that it is eliminating the chief transformation officer role, which is held by Anu Gupta, on the same day it reported disappointing fiscal third-quarter results. Bed Bath & Beyond is approaching a potential bankruptcy, as its sales decline and losses grow.

“We don’t love the strength in nonsense stocks like AMC, CVNA, GME, BBBY, PRTY, etc.,” said Adam Crisafulli, founder of Vital Knowledge. “This just means people are blindly chasing.”

During early 2021, a band of retail traders joined forces on social media to bid up a slew of heavily shorted stocks, creating massive short squeezes that inflicted high pain on short sellers. These meme stocks experienced big pullbacks last year when risk sentiment shifted amid aggressive rate hikes. GameStop fell 50% in 2022, while AMC tumbled 75% and Bed Bath & Beyond plunged 82%.

While the short interest in these names has come down from its peak after the jaw-dropping episode, it still remains much higher than average.

About 48% of Bed Bath & Beyond’s float shares are sold short, compared with an average of 5% short interest in a typical U.S. stock, according to S3 Partners. For GameStop, the short interest stands at 21%, down from more than 100% at the height of the meme stock mania in 2021, according to FactSet. AMC has also 21% of shares sold short.

A short squeeze happens when a stock jumps sharply higher, it forces short sellers to buy back shares in order to limit their losses. The short covering tends to fuel the stock’s rally further.

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Article: cnbc.com

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Crypto Exchange Binance Plans 15%-30% Hiring Spree in 2023 Even As Rivals Slash Jobs

Rebekah Fuller

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Zhao Changpeng, founder and chief executive officer of Binance, attends a conference at Porte de Versailles exhibition center in Paris, France June 16, 2022.
Benoit Tessier | Reuters

Binance is planning a hiring spree in 2023, CEO Changpeng Zhao said Wednesday, taking a somewhat contrarian view as crypto firms lay off huge swathes of staff amid continued pressure on coin prices.

Zhao said Binance, the world’s largest cryptocurrency exchange, said the company increased head count in 2022 from 3,000 people to “almost” 8,000.

In 2023, Binance plans to increase the number of staff by between 15% and 30%, Zhao said at the Crypto Finance Conference in St. Moritz, Switzerland.

Rival exchanges have been forced to cut large parts of their workforces after nearly $1.4 trillion was wiped off the crypto market in 2022 and major digital currencies including bitcoinether

In November, Kraken announced it was laying off 30% of staff, and this year Huobi and Coinbasesecond round of job cuts for Coinbase in the last year.

Zhao said Binance needs to get the company “well-organized” ahead of the next crypto bull run and admitted the exchange is “not super efficient.”

“We will continue to build and hopefully we will ramp up again before the next bull market,” Zhao said.

The industry was plagued last year by collapses of major projects, liquidity issues, bankruptcies and the high-profile failure of crypto exchange FTX. Sam Bankman-Fried who founded FTX has been charged with eight criminal counts by U.S. prosecutors, including fraud. He has pleaded not guilty.

Binance had a big role to play in FTX’s collapse. In November, Binance offered to buy FTX’s non-U.S. businesses which were facing liquidity issues but then later backed out of the deal. Zhao said publicly his company was selling its holdings in FTX’s native token, FTT, which exacerbated the collapse of that digital coin, adding to FTX’s downward spiral.

Zhao has said he “did not master plan” the collapse of FTX.

In response to a CNBC question on the sidelines of the CFC St Moritz conference, the Binance CEO said the “actual damage is not that high” on the crypto industry from the FTX collapse. He said FTX “is not a big player, they just make a lot of noise.”

“There’s definitely damage [but] the industry will be fine,” Zhao said.

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Original Post: cnbc.com

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