Here’s what Wall Street thinks ahead of critical Fed meeting

Published

2 years ago

March 17, 2023

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close video Should the Federal Reserve capitulate?

OptionsPlay Director of Education and Product Jessica Inskip gives her take on how Fed Chair Powell should respond to high inflation on ‘Making Money.’

The Federal Reserve launched its war against inflation exactly one year ago to the day, kicking off the most aggressive interest rate hike campaign since the 1980s as it rushed to cool the economy.

In the time since March, 16, 2022, the U.S. central bank has lifted the federal funds rate eight times, underscoring just how serious policymakers are about tackling the inflation crisis. The increases put the key benchmark federal funds rate at a range of 4.75% to 5%, the highest since before the 2008 financial crisis.

The ninth increase is just around the corner, with Chairman Jerome Powell suggesting last week the Fed may need to raise rates higher than previously anticipated and pick up the pace of increases amid signs of broadening inflationary pressures within the economy.

INFLATION ROSE 0.4% IN FEBRUARY AS PRICES REMAIN STUBBORNLY HIGH

Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing, and Urban Affairs Committee hearing in the Hart Building March 7, 2023. (Tom Williams/CQ-Roll Call, Inc via Getty Images / Getty Images)

The hawkish commentary prompted investors to reevaluate their expectations for the meeting, with many ramping up the odds that the Fed approves a half percentage point hike during its March 21-22 meeting.

But Wall Street no longer sees that as a possibility after the stunning implosion of Silicon Valley Bank on Friday roiled global markets and triggered fears of a broader financial meltdown.

Silicon Valley Bank collapsed after a liquidity crunch, forcing a government takeover and raising questions over the fate of nearly $175 billion in customer deposits.

It marked the largest U.S. bank failure since the global financial crisis in 2008, and rising interest rates played a pivotal role in SVB's collapse, according to Treasury Secretary Janet Yellen.

"The problems with the tech sector aren’t at the heart of the problems at this bank," Yellen said Sunday in an interview with CBS’ "Face the Nation."

SVB COLLAPSE THROWS FED RATE-HIKE DECISION NEXT WEEK INTO UNCERTAINTY

That's because SVB, which largely catered to tech companies, venture capital firms and high net worth individuals, saw a huge boom in deposits during the pandemic, with its assets surging from $56 billion in June 2018 to $212 billion in March 2023. The bank responded by investing a large chunk of that cash into long-term U.S. Treasury bonds and other mortgage-backed securities.

That strategy backfired when the Fed started rapidly raising interest rates and the value of those securities tumbled.

A sign of a branch of the Silicon Valley Bank in Frankfurt, Germany, Monday, March 13, 2023. (AP Photo/Michael Probst / AP Newsroom)

That coincided with a decline in available funding for startups, which started drawing down more of their money to cover their expenses, forcing the lender to sell part of its bond holds at a steep $1.8 billion loss. When depositors realized that SVB was in a precarious financial situation, a bank run ensued.

The bank's collapse, coupled with another failure at Signature Bank and turmoil at Swiss lender Credit Suisse, drastically altered rate hike bets on Wall Street.

MORTGAGE RATES POST BIG DECLINE AMID SVB FALLOUT

While problems at the European lender appear to be unrelated to SVB, the back-to-back issues sparked fresh fears over the vulnerability of the banking sector in the era of high interest rates. Swiss regulators stepped in on Wednesday afternoon to announce they would provide liquidity to Credit Suisse if necessary.

Investors remain evenly divided over whether the Fed will pause its rate hike cycle next week or approve a 25 basis point increase, according to data from the CME Group's FedWatch tool, which tracks trading. But they are in wide agreement that policymakers will cut rates later this year amid the bank sector fiasco.

Pricing in futures markets suggests the central bank will trim rates throughout the year, shaving a full percentage point from a peak of 4.75% to 5% by the end of 2023.

The logo of Swiss bank Credit Suisse at its headquarters in Zurich, Switzerland, March 24, 2021. (Reuters/Arnd Wiegmann / Reuters Photos)

"The easing of recent inflationary pressures, combined with concerns about the banking industry, finally give the Fed reason to discuss a possible end to their tightening cycle at next week’s meeting," said John Lynch, chief investment officer for Comerica Wealth Management.

Still, new data released Tuesday morning revealed that inflation remains uncomfortably high. The Labor Department said the consumer price index, a broad measure of the price for everyday goods, including gasoline, groceries and rents, rose 0.4% in February from the previous month. Prices climbed 6% on an annual basis.

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Although it marked the slowest annual inflation rate since September 2021, the gauge remains about three times higher than the pre-pandemic average, underscoring the persistent financial burden placed on millions of U.S. households by high prices.

"The Federal Reserve is going to have to pick its poison: tolerate some inflation for a bit to see if its current series of rate hikes takes hold and pause or keep hiking and deal with the financial instability caused by their own policy decisions," said Jamie Cox, a managing partner for Harris Financial Group.

Entertainment

YouTuber Jake Paul strikes defeat against former boxing champ Mike Tyson in Texas

Published

1 hour ago

November 16, 2024

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YouTuber Jake Paul strikes defeat against former boxing champ Mike Tyson in Texas

YouTuber-turned-boxer Jake Paul has defeated one of the greatest-ever fighters, former heavyweight world champion Mike Tyson, who’s more than twice his age.

The bout was won on a unanimous points decision at the AT&T Stadium in Arlington, Texas – home of the Dallas Cowboys and the biggest NFL stadium in the US.

The fight was already controversial but then arguably failed to live up to the hype. Boos were heard from the crowd in the final two rounds, after a perceived lack of action.

Boxing careers compared

This was not Paul’s first professional fight. The 27-year-old American YouTube star made his debut in 2020 with his most high-profile clash against Tyson Fury’s brother Tommy Fury last year, which he lost by a split decision.

The so-called “Problem Child” has since defeated former UFC contender Nate Diaz, professional boxer Andre August, former Gold Gloves champion Ryan Bourland and most recently MMA fighter Mike Perry.

In contrast, “Iron Mike” Tyson, 58, was ranked among the best heavyweight boxers of all time.

During his career, he knocked out 44 opponents – retiring from professional boxing in 2005 after defeat against Kevin McBride.

He returned to the ring in 2020 for a bout against fellow boxing icon Roy Jones, which ended in an unofficial draw.

‘Someone’s getting put to sleep’

Earlier this week, Paul said he believed the bout would not go the distance. “No, someone’s getting put to sleep,” he said. “It’s going to be a war, and we’re both heavy hitters. It’s not going the full 16 minutes.”

Tyson was more reflective: “I’ve been through so many ups and downs since my last fight with Kevin McBride,” he said.

“I’ve been in rehab. I’ve been in prison, been locked up. Never in a million years did I believe I’d be doing this.”

Several states would not allow the bout to go ahead, and the Texas Athletic Commission only agreed to the fight if there were changes, due to Tyson’s age.

It limited the contest to eight rounds lasting a maximum of two minutes instead of three. Both boxers were also required to wear heavier gloves, designed to lessen the force of punches.

The fight was initially scheduled for 20 July, but was postponed when Tyson suffered an ulcer flareup.

Taylor defends title

Meanwhile, among the undercard fights, Irish boxer Katie Taylor successfully defended her super lightweight world title against Puerto Rico’s Amanda Serrano.

But it was tight. Taylor claimed the rematch 95-94 for all three judges in an epic battle.

The bout came two and a half years after the pair fought at Madison Square Garden, which Taylor won on a split decision.

Bout suffered from buffering

Earlier in the evening thousands of Netflix users in the US reported problems seeing the coverage, with some posting on social media about buffering.

At one point, more than 98,000 people had reported issues according to Downdetector, which tracks outages.

This breaking news story is being updated and more details will be published shortly.

Please refresh the page for the fullest version.

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US

YouTuber Jake Paul strikes defeat against former boxing champ Mike Tyson in Texas

Published

1 hour ago

November 16, 2024

admin

YouTuber-turned-boxer Jake Paul has defeated one of the greatest-ever fighters, former heavyweight world champion Mike Tyson, who’s more than twice his age.

The bout was won on a unanimous points decision at the AT&T Stadium in Arlington, Texas – home of the Dallas Cowboys and the biggest NFL stadium in the US.

The fight was already controversial but then arguably failed to live up to the hype. Boos were heard from the crowd in the final two rounds, after a perceived lack of action.

Boxing careers compared

In contrast, “Iron Mike” Tyson, 58, was ranked among the best heavyweight boxers of all time.

During his career, he knocked out 44 opponents – retiring from professional boxing in 2005 after defeat against Kevin McBride.

He returned to the ring in 2020 for a bout against fellow boxing icon Roy Jones, which ended in an unofficial draw.

‘Someone’s getting put to sleep’

Tyson was more reflective: “I’ve been through so many ups and downs since my last fight with Kevin McBride,” he said.

“I’ve been in rehab. I’ve been in prison, been locked up. Never in a million years did I believe I’d be doing this.”

Several states would not allow the bout to go ahead, and the Texas Athletic Commission only agreed to the fight if there were changes, due to Tyson’s age.

It limited the contest to eight rounds lasting a maximum of two minutes instead of three. Both boxers were also required to wear heavier gloves, designed to lessen the force of punches.

The fight was initially scheduled for 20 July, but was postponed when Tyson suffered an ulcer flareup.

Taylor defends title

Meanwhile, among the undercard fights, Irish boxer Katie Taylor successfully defended her super lightweight world title against Puerto Rico’s Amanda Serrano.

But it was tight. Taylor claimed the rematch 95-94 for all three judges in an epic battle.

The bout came two and a half years after the pair fought at Madison Square Garden, which Taylor won on a split decision.

Bout suffered from buffering

Earlier in the evening thousands of Netflix users in the US reported problems seeing the coverage, with some posting on social media about buffering.

At one point, more than 98,000 people had reported issues according to Downdetector, which tracks outages.

This breaking news story is being updated and more details will be published shortly.

Please refresh the page for the fullest version.

Politics

Elon Musk ‘shot down’ OpenAI’s ICO plan in 2018 over credibility concerns

Published

3 hours ago

November 16, 2024

admin

<div>Elon Musk 'shot down' OpenAI's ICO plan in 2018 over credibility concerns</div>

According to a court filing, Elon Musk said that the proposed initial coin offering (ICO) “would simply result in a massive loss of credibility for OpenAI.”