James Bullard, President and Chief Executive Officer of the Federal Reserve Bank of St. Louis, delivers a speech in London, UK, Tuesday, October 15, 2019.
Luke McGregor | Bloomberg | Getty Images
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US stocks fear a relentlessly overheating economy — and flamboyant rhetoric from the Fed.
what you need to know today
- US stock thursday fell, suppressed by major declines in Microsoft, Disney and Tesla. Asia-Pacific markets followed, trading down on friday, Australia’s S&P/ASX 200 fell 0.81% after the country’s central bank signaled more rate hikes.
- The US producer price index, which measures inflation at the wholesale level, rose 0.7% in January, It was the biggest increase since June, and 0.3 percentage points higher than economists had expected.
- China Renaissance, an investment bank that has advised mergers between major Chinese tech firms Unable to contact its CEO Bao Fan, Chinese financial news outlet Caixin reported that Kang Lin, the former president of the bank’s subsidiary, is under investigation.
- Tesla is 362,758 vehicles recalled Equipped with its experimental driver-assistant software. The company warned that the software, known as Full Self Driving Beta, could cause the vehicles to crash.
- Supporter is crypto coming back in 2023, according to Bernstein analyst Gautam Chugani. Investors may be taking the recent regulatory actions in the US less seriously than expected.
Bottom-line
The US economy is firing on all cylinders if we look at the figures for January. A quick recap: Lowest unemployment rate in 53 years. Improvement in consumer spending despite higher prices. And overnight, we learned that the producer price index rose by the most in eight months. This almost bizarrely strong economy implies that inflation – while still falling – remains uncomfortably high and sticky.
For a while, it looked like markets could live with it – and even embrace it as a new normal, in which economic growth with inflation above 2% could exist comfortably. Could With the hot inflation report exceeding everyone’s expectations, markets soared.
till tomorrow. The markets eventually fell. The Dow Jones Industrial Average fell 1.26%, the S&P 500 fell 1.38% and the Nasdaq Composite fell 1.78%. “It shouldn’t be surprising to see markets breathing a sigh of relief as dovish Fed expectations fade in the coming months,” said Mike Lowengart, head of model portfolio construction at Morgan Stanley.
Actually, it’s not like the Federal Reserve’s pigeons are flying. is that the hawkers are swooning. Markets had widely anticipated, and priced in, a 25 basis-point interest rate hike for the Fed’s next two meetings. Yesterday, that forecast was badly shaken.
James Bullard, president of the St. Louis Federal, said Thursday that he was “an advocate for a 50-basis-point increase and … argued that we should move to the level of rates that have been adequately restricted by the committee as soon as possible.” ” Cleveland Fed President Loretta Mester echoed Bullard’s sentiment, saying she wanted higher rate hikes. Neither Meester nor Bullard vote on the Federal Open Market Committee this year, but their sentiments could signal the Fed is increasingly strangling inflation.
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