REUTERS
"Stocks close lower as Middle East tensions, Treasury yields weigh"
By Chuck Mikolajczak
April 15, 2024
Summary
* Goldman Sachs rises after Q1 profit beat
* Salesforce falls on report of likely Informatica deal
* Tesla falls on layoffs report
* Indexes down: Dow 0.65%, S&P 500 1.2%, Nasdaq 1.79%
NEW YORK, April 15 (Reuters) - U.S. stocks closed sharply lower on Monday, as an early lift from a strong retail sales report succumbed to a jump in Treasury yields and concerns about rising geopolitical tensions between Iran and Israel.
With the S&P 500 coming off its biggest one-day percentage drop since Jan. 31 in the prior session, stocks opened higher in part after data showed retail sales increased by more than expected in March.
Also providing early support were gains in some financial stocks after their quarterly results, as Goldman Sachs rose 2.92% after its first-quarter profit beat Wall Street estimates, fueled by a recovery in underwriting, deals and bond trading that lifted its earnings per share to the highest since late 2021.
M&T Bank jumped 4.74% after forecasting better-than-expected annual net interest income (NII), while brokerage Charles Schwab advanced 1.71% despite reporting a fall in quarterly profit.
The stocks were the three best performers in the S&P 500 financial sector.
But gains faded over concerns the hostilities between Israel and Iran could continue to flare, and Treasury yields jumped, with the benchmark 10-year U.S. Treasury note hitting its highest level since November.
"You saw a little bit of a bounce this morning because maybe people thought 'OK it sold off on Friday' in anticipation of something really bad happening in the Middle East," said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.
"All the geopolitical stuff is going to cause tension and anxiety in the market, the realization that rates are not going down anytime soon has got to be finally hitting home, that's what the bond market is telling you, that rates are going to go higher."
The Dow Jones Industrial Average fell 248.13 points, or 0.65%, to 37,735.11, the S&P 500 lost 61.59 points, or 1.20%, to 5,061.82 and the Nasdaq Composite lost 290.07 points, or 1.79%, to 15,885.02.
The S&P 500 is now down 2.64% over the past two sessions, it's biggest two-day drop since early March 2023.
The index also closed below its 50-day moving average, a technical support level, for the first time since Nov. 2.
Israel faced growing pressure from allies to show restraint and avoid an escalation of conflict in the Middle East as it considered how to respond to Iran's weekend missile and drone attack, launched after a suspected Israeli attack on its embassy.
Each of the 11 major S&P sectors were lower, with the rate-sensitive real estate and utilities sectors among the worst performers.
Stocks have struggled recently, with the S&P 500 suffering two straight weeks of declines and its biggest weekly percentage drop since October last week as investors have pushed back expectations for the timing and size of any rate cuts from the Federal Reserve.
Apple fell 2.19% as one of the biggest drags on the S&P 500 after data from research firm IDC showed the company's smartphone shipments dropped about 10% in the first quarter of 2024.
Tesla slumped 5.6% after the EV maker said it will lay off more than 10% of its global workforce, according to an internal memo seen by Reuters.
Salesforce stumbled 7.28% after Reuters reported, citing a source, that the customer relations software maker was in advanced talks to acquire Informatica.
On the NYSE, declining issues outnumbered advancing ones by a 5.1-to-1 ratio and on the Nasdaq, decliners outnumbers advancers by a 3.5-to-1 ratio.
There were 39 new highs and 138 new lows on the NYSE while on the Nasdaq, there were 37 new highs and 333 new lows.
Volume on U.S. exchanges was 11.53 billion shares, compared with the 11.03 billion average for the full session over the last 20 trading days.
Reporting by Chuck Mikolajczak in New York; Editing by Matthew Lewis And Aurora Ellis
https://www.reuters.com/markets/us/futu ... 024-04-15/
THE DAILY NEWS
Re: THE DAILY NEWS
REUTERS
"Strong US retail sales boost first-quarter growth estimates"
By Lucia Mutikani
April 15, 2024
Summary
* Retail sales increase 0.7% in March
* Core retail sales jump 1.1%; February sales revised up
* Business inventories rise 0.4% in February
WASHINGTON, April 15 (Reuters) - U.S. retail sales increased more than expected in March amid a surge in receipts at online retailers, further evidence that the economy ended the first quarter on solid ground.
The report from the Commerce Department on Monday, which followed news this month of robust employment gains in March and a pick-up in consumer inflation, bolstered expectations that the Federal Reserve could delay cutting interest rates until September.
Some economists see the window for lowering rates this year closing.
Strong retail sales prompted economists at Goldman Sachs to boost their gross domestic product (GDP) growth estimate for the first quarter to a 3.1% annualized rate from a 2.5% pace.
The economy grew at a 3.4% rate in the fourth quarter.
"The stronger economic activity remains, the slower inflation declines and the later the Fed responds with rate cuts," said Kathy Bostjancic, chief economist at Nationwide.
"The lack of moderation in consumer spending and inflation ... could push off rate reductions to next year."
Retail sales rose 0.7% last month, the Commerce Department's Census Bureau said.
Data for February was revised higher to show sales rebounding 0.9%, which was the largest gain in just over a year, instead of the previously reported 0.6%.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would rise 0.3%. Sales jumped 4.0% on a year-on-year basis in March.
Despite higher inflation and borrowing costs, spending is continuing to hold up, confounding predictions of distress among lower-income households, thanks to the resilient labor market.
The latest Bank of America credit card data showed lower-income spending continues to outpace higher-income spending.
"An important reason is that, although lower-income consumers have been disproportionately affected by inflation, they have also been the biggest beneficiaries of the robust labor market," economists at Bank of America Securities wrote in a note.
"Lower-income workers have seen the largest cumulative wage gains since the start of the pandemic."
Job gains averaged 276,000 per month in the first quarter, compared to 212,000 in the October-December period.
Wage growth remains above 4.0% on a year-on-year basis.
Financial markets and most economists have pushed back their expectations for the first rate cut to September from June, and anticipate two rate cuts instead of the three envisaged by policymakers.
A few economists believe the U.S. central bank could still initiate its easing cycle in either June or July.
The Fed has kept its policy rate in the 5.25%-5.50% range since July.
It has raised the benchmark overnight interest rate by 525 basis points since March 2022.
"A June cut is not out of the question, but the balance of risks is tilting toward the first rate cut coming later in the year," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
Stocks on Wall Street were trading largely higher, with investors keeping a wary eye on the Middle East.
The dollar rose against a basket of currencies.
Prices of U.S. Treasuries fell, with the yield on the benchmark 10-year note hitting a five-month high.
RESILIENT CONSUMERS
Sales last month were boosted by a 2.7% acceleration in online receipts, which followed a 0.2% gain in February.
Amazon held a spring sales promotion last month.
Sales at gasoline stations rose 2.1%, reflecting higher prices at the pump.
Building material and garden equipment store sales advanced 0.7%.
Sales at food services and drinking places, the only services component in the report, rose 0.4% after climbing 0.5% in February.
Economists view dining out as a key indicator of household finances.
But there were pockets of weakness.
Receipts at motor vehicles and parts dealers fell 0.7%.
Furniture store sales slipped 0.3%, likely as higher mortgage rates constrain home purchases.
A survey from the National Association of Home Builders on Monday showed confidence among single-family homebuilders was unchanged in April.
Sales at sporting goods, hobby, musical instrument and book stores dropped 1.8% last month.
That suggests households continue to focus on essentials and are cutting back on discretionary spending.
Receipts at electronics and appliance outlets decreased 1.2%, while those at clothing retailers fell 1.6%.
Retail sales excluding automobiles, gasoline, building materials and food services increased 1.1% in March - the biggest gain since January 2023.
Data for February was revised higher to show these so-called retail sales gaining 0.3% instead of the previously reported unchanged reading.
Core retail sales correspond most closely with the consumer spending component of GDP.
The jump in core retail sales in March and the upward revision in February erased the dip in January and led economists to expect that growth in consumer spending in the first quarter probably matched the fourth quarter's brisk pace of 3.3%.
That estimate does not take into account services, the biggest component of consumer spending, leaving an upside risk to both spending and GDP growth in the January-March quarter.
The growth picture was further brightened by other data from the Census Bureau showing business inventories rose 0.4% in February after being unchanged in January.
"Given the various stimulus programs have stopped and money from them has been spent, consumer spending now rests firmly on incomes from paychecks, which continue to expand along with the labor market," said Robert Frick, corporate economist at Navy Federal Credit Union.
"This means a solid expansion should continue."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-r ... 024-04-15/
"Strong US retail sales boost first-quarter growth estimates"
By Lucia Mutikani
April 15, 2024
Summary
* Retail sales increase 0.7% in March
* Core retail sales jump 1.1%; February sales revised up
* Business inventories rise 0.4% in February
WASHINGTON, April 15 (Reuters) - U.S. retail sales increased more than expected in March amid a surge in receipts at online retailers, further evidence that the economy ended the first quarter on solid ground.
The report from the Commerce Department on Monday, which followed news this month of robust employment gains in March and a pick-up in consumer inflation, bolstered expectations that the Federal Reserve could delay cutting interest rates until September.
Some economists see the window for lowering rates this year closing.
Strong retail sales prompted economists at Goldman Sachs to boost their gross domestic product (GDP) growth estimate for the first quarter to a 3.1% annualized rate from a 2.5% pace.
The economy grew at a 3.4% rate in the fourth quarter.
"The stronger economic activity remains, the slower inflation declines and the later the Fed responds with rate cuts," said Kathy Bostjancic, chief economist at Nationwide.
"The lack of moderation in consumer spending and inflation ... could push off rate reductions to next year."
Retail sales rose 0.7% last month, the Commerce Department's Census Bureau said.
Data for February was revised higher to show sales rebounding 0.9%, which was the largest gain in just over a year, instead of the previously reported 0.6%.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would rise 0.3%. Sales jumped 4.0% on a year-on-year basis in March.
Despite higher inflation and borrowing costs, spending is continuing to hold up, confounding predictions of distress among lower-income households, thanks to the resilient labor market.
The latest Bank of America credit card data showed lower-income spending continues to outpace higher-income spending.
"An important reason is that, although lower-income consumers have been disproportionately affected by inflation, they have also been the biggest beneficiaries of the robust labor market," economists at Bank of America Securities wrote in a note.
"Lower-income workers have seen the largest cumulative wage gains since the start of the pandemic."
Job gains averaged 276,000 per month in the first quarter, compared to 212,000 in the October-December period.
Wage growth remains above 4.0% on a year-on-year basis.
Financial markets and most economists have pushed back their expectations for the first rate cut to September from June, and anticipate two rate cuts instead of the three envisaged by policymakers.
A few economists believe the U.S. central bank could still initiate its easing cycle in either June or July.
The Fed has kept its policy rate in the 5.25%-5.50% range since July.
It has raised the benchmark overnight interest rate by 525 basis points since March 2022.
"A June cut is not out of the question, but the balance of risks is tilting toward the first rate cut coming later in the year," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
Stocks on Wall Street were trading largely higher, with investors keeping a wary eye on the Middle East.
The dollar rose against a basket of currencies.
Prices of U.S. Treasuries fell, with the yield on the benchmark 10-year note hitting a five-month high.
RESILIENT CONSUMERS
Sales last month were boosted by a 2.7% acceleration in online receipts, which followed a 0.2% gain in February.
Amazon held a spring sales promotion last month.
Sales at gasoline stations rose 2.1%, reflecting higher prices at the pump.
Building material and garden equipment store sales advanced 0.7%.
Sales at food services and drinking places, the only services component in the report, rose 0.4% after climbing 0.5% in February.
Economists view dining out as a key indicator of household finances.
But there were pockets of weakness.
Receipts at motor vehicles and parts dealers fell 0.7%.
Furniture store sales slipped 0.3%, likely as higher mortgage rates constrain home purchases.
A survey from the National Association of Home Builders on Monday showed confidence among single-family homebuilders was unchanged in April.
Sales at sporting goods, hobby, musical instrument and book stores dropped 1.8% last month.
That suggests households continue to focus on essentials and are cutting back on discretionary spending.
Receipts at electronics and appliance outlets decreased 1.2%, while those at clothing retailers fell 1.6%.
Retail sales excluding automobiles, gasoline, building materials and food services increased 1.1% in March - the biggest gain since January 2023.
Data for February was revised higher to show these so-called retail sales gaining 0.3% instead of the previously reported unchanged reading.
Core retail sales correspond most closely with the consumer spending component of GDP.
The jump in core retail sales in March and the upward revision in February erased the dip in January and led economists to expect that growth in consumer spending in the first quarter probably matched the fourth quarter's brisk pace of 3.3%.
That estimate does not take into account services, the biggest component of consumer spending, leaving an upside risk to both spending and GDP growth in the January-March quarter.
The growth picture was further brightened by other data from the Census Bureau showing business inventories rose 0.4% in February after being unchanged in January.
"Given the various stimulus programs have stopped and money from them has been spent, consumer spending now rests firmly on incomes from paychecks, which continue to expand along with the labor market," said Robert Frick, corporate economist at Navy Federal Credit Union.
"This means a solid expansion should continue."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-r ... 024-04-15/
Re: THE DAILY NEWS
REUTERS
"US lawmakers angry after Huawei unveils laptop with new Intel AI chip"
By Reuters
April 12, 2024
WASHINGTON, April 12 (Reuters) - Republican U.S. lawmakers on Friday criticized the Biden administration after sanctioned Chinese telecoms equipment giant Huawei unveiled a laptop this week powered by an Intel AI chip.
The United States placed Huawei on a trade restriction list in 2019 for violating Iran sanctions, part of a broader effort to hobble Beijing's technological advances.
Placement on the list means the company's suppliers have to seek a special, difficult-to-obtain license before shipping to it.
One such license, issued by the Trump administration, has allowed Intel to ship central processors to Huawei for use in laptops since 2020.
China hardliners had urged the Biden administration to revoke that license, but many grudgingly accepted that it would expire later this year and not be renewed.
Huawei's unveiling Thursday of its first AI-enabled laptop, the MateBook X Pro powered by Intel's new Core Ultra 9 processor, shocked and angered them, because it suggested to them that the Commerce Department had approved shipments of the new chip to Huawei.
“One of the greatest mysteries in Washington, DC is why the Department of Commerce continues to allow U.S. technology to be shipped to Huawei" Republican Congressman Michael Gallagher, who chairs the House of Representatives select committee on China, said in a statement to Reuters.
A source familiar with the matter said the chips were shipped under a preexisting license.
They are not covered by recent broad-cased restrictions on AI chip shipments to China, the source and another person said.
The Commerce Department and Intel declined to comment.
Huawei did not immediately respond to requests for comment.
The reaction is a sign of growing pressure on the Biden administration to do more to thwart Huawei's rise, nearly five years after it was added to a trade restriction list.
In August, it shocked the world with a new phone powered by a sophisticated chip manufactured by sanctioned Chinese chipmaker SMIC, becoming a symbol of China's technological resurgence despite Washington's ongoing efforts to cripple its capacity to produce advanced semiconductors.
At a Senate subcommittee hearing this week, Kevin Kurland, an export enforcement official, said Washington's restrictions on Huawei have had a "significant impact" on it access to U.S. technology.
He also stressed that the goal was not necessarily to stop Huawei from growing but to keep it from misusing U.S. technology for "malign activities."
But the remarks did little to stem frustration among Republican China hawks following the news about Huawei's new laptop.
"These approvals must stop," Republican congressman Michael McCaul said in a statement to Reuters.
"Two years ago, I was told licenses to Huawei would stop."
"Today, it doesn’t seem as though the policy has changed."
Reporting by Alexandra Alper and Karen Freifeld; Editing by Leslie Adler and Stephen Coates
https://www.reuters.com/technology/us-l ... 024-04-12/
"US lawmakers angry after Huawei unveils laptop with new Intel AI chip"
By Reuters
April 12, 2024
WASHINGTON, April 12 (Reuters) - Republican U.S. lawmakers on Friday criticized the Biden administration after sanctioned Chinese telecoms equipment giant Huawei unveiled a laptop this week powered by an Intel AI chip.
The United States placed Huawei on a trade restriction list in 2019 for violating Iran sanctions, part of a broader effort to hobble Beijing's technological advances.
Placement on the list means the company's suppliers have to seek a special, difficult-to-obtain license before shipping to it.
One such license, issued by the Trump administration, has allowed Intel to ship central processors to Huawei for use in laptops since 2020.
China hardliners had urged the Biden administration to revoke that license, but many grudgingly accepted that it would expire later this year and not be renewed.
Huawei's unveiling Thursday of its first AI-enabled laptop, the MateBook X Pro powered by Intel's new Core Ultra 9 processor, shocked and angered them, because it suggested to them that the Commerce Department had approved shipments of the new chip to Huawei.
“One of the greatest mysteries in Washington, DC is why the Department of Commerce continues to allow U.S. technology to be shipped to Huawei" Republican Congressman Michael Gallagher, who chairs the House of Representatives select committee on China, said in a statement to Reuters.
A source familiar with the matter said the chips were shipped under a preexisting license.
They are not covered by recent broad-cased restrictions on AI chip shipments to China, the source and another person said.
The Commerce Department and Intel declined to comment.
Huawei did not immediately respond to requests for comment.
The reaction is a sign of growing pressure on the Biden administration to do more to thwart Huawei's rise, nearly five years after it was added to a trade restriction list.
In August, it shocked the world with a new phone powered by a sophisticated chip manufactured by sanctioned Chinese chipmaker SMIC, becoming a symbol of China's technological resurgence despite Washington's ongoing efforts to cripple its capacity to produce advanced semiconductors.
At a Senate subcommittee hearing this week, Kevin Kurland, an export enforcement official, said Washington's restrictions on Huawei have had a "significant impact" on it access to U.S. technology.
He also stressed that the goal was not necessarily to stop Huawei from growing but to keep it from misusing U.S. technology for "malign activities."
But the remarks did little to stem frustration among Republican China hawks following the news about Huawei's new laptop.
"These approvals must stop," Republican congressman Michael McCaul said in a statement to Reuters.
"Two years ago, I was told licenses to Huawei would stop."
"Today, it doesn’t seem as though the policy has changed."
Reporting by Alexandra Alper and Karen Freifeld; Editing by Leslie Adler and Stephen Coates
https://www.reuters.com/technology/us-l ... 024-04-12/
Re: THE DAILY NEWS
RIGZONE
"Oil Shows Little Change Awaiting Israel Response"
by Bloomberg | Julia Fanzeres and Alex Longley
Tuesday, April 16, 2024
Oil fluctuated in a narrow range as risk-off sentiment prevailed in broader markets and traders monitored Israel’s response to an unprecedented attack by Iran.
West Texas Intermediate settled little changed above $85 a barrel as a stronger dollar pressured commodities priced in the currency.
Prices swung between gains and losses of less than 1% throughout the session.
Top Israeli military officials said their country has no choice but to respond to Tehran’s weekend strike, even as Western and Arab nations try to convince Prime Minister Benjamin Netanyahu that an aggressive reaction would harm Israel’s interests.
The Middle East accounts for about a third of global crude supply.
The Israeli officials’ comments about retaliation led to a fresh round of bidding in the oil options market late Monday.
Bullish calls on global benchmark Brent crude are trading at the biggest premium to bearish puts since October, and the volume of contracts that profit from higher prices set a fresh record.
Unless the attacks result in escalation or lead to the “destruction of oil-producing components, each attack will pull less on prices,” said Dennis Kissler, senior vice president at BOK Financial.
“Still, a geopolitical risk premium of approximately $7 to $10 in crude will most likely remain until there are signs of de-escalation.”
Federal Reserve Chair Jerome Powell threw additional choppiness into the market after signaling that the Fed may hold rates higher for longer to combat sticky inflation.
The S&P 500 spiked on Powell’s comments, but oil is moving more in line with news from the Middle East, said Rohan Reddy, director of research at Global X Management.
He noted that Powell’s newest statement hasn’t deviated from his existing message around rate cuts.
In another sign that crude may face challenges building on its 19% advance this year, one South Korean refiner will lower operating rates from this month as a result of recent gains in oil, people with knowledge of the matter said on Tuesday.
Prices:
WTI for May delivery declined 0.1% to settle at $85.36 a barrel in New York.
Brent for June settlement declined 0.1% to settle at $90.02.
https://www.rigzone.com/news/wire/oil_s ... 7-article/
"Oil Shows Little Change Awaiting Israel Response"
by Bloomberg | Julia Fanzeres and Alex Longley
Tuesday, April 16, 2024
Oil fluctuated in a narrow range as risk-off sentiment prevailed in broader markets and traders monitored Israel’s response to an unprecedented attack by Iran.
West Texas Intermediate settled little changed above $85 a barrel as a stronger dollar pressured commodities priced in the currency.
Prices swung between gains and losses of less than 1% throughout the session.
Top Israeli military officials said their country has no choice but to respond to Tehran’s weekend strike, even as Western and Arab nations try to convince Prime Minister Benjamin Netanyahu that an aggressive reaction would harm Israel’s interests.
The Middle East accounts for about a third of global crude supply.
The Israeli officials’ comments about retaliation led to a fresh round of bidding in the oil options market late Monday.
Bullish calls on global benchmark Brent crude are trading at the biggest premium to bearish puts since October, and the volume of contracts that profit from higher prices set a fresh record.
Unless the attacks result in escalation or lead to the “destruction of oil-producing components, each attack will pull less on prices,” said Dennis Kissler, senior vice president at BOK Financial.
“Still, a geopolitical risk premium of approximately $7 to $10 in crude will most likely remain until there are signs of de-escalation.”
Federal Reserve Chair Jerome Powell threw additional choppiness into the market after signaling that the Fed may hold rates higher for longer to combat sticky inflation.
The S&P 500 spiked on Powell’s comments, but oil is moving more in line with news from the Middle East, said Rohan Reddy, director of research at Global X Management.
He noted that Powell’s newest statement hasn’t deviated from his existing message around rate cuts.
In another sign that crude may face challenges building on its 19% advance this year, one South Korean refiner will lower operating rates from this month as a result of recent gains in oil, people with knowledge of the matter said on Tuesday.
Prices:
WTI for May delivery declined 0.1% to settle at $85.36 a barrel in New York.
Brent for June settlement declined 0.1% to settle at $90.02.
https://www.rigzone.com/news/wire/oil_s ... 7-article/
Re: THE DAILY NEWS
CNBC
"Fed Chair Powell says there has been a ‘lack of further progress’ this year on inflation"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED TUE, APR 16 2024
KEY POINTS
* Fed Chair Jerome Powell said the U.S. economy has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
* “The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said during a central banking forum.
Federal Reserve Chair Jerome Powell said Tuesday that the U.S. economy, while otherwise strong, has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
Speaking to a policy forum focused on U.S.-Canada economic relations, Powell said that while inflation continues to make its way lower, it hasn’t moved quickly enough, and the current state of policy should remain intact.
“More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal,” the Fed chief said during a panel talk.
Echoing recent statements by central bank officials, Powell indicated the current level of policy likely will stay in place until inflation gets closer to target.
Since July 2023, the Fed has kept its benchmark interest rate in a target range between 5.25%-5.5%, the highest in 23 years.
That was the result of 11 consecutive rate hikes that began in March 2022.
“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said.
“That said, we think policy is well positioned to handle the risks that we face.”
Powell added that until inflation shows more progress, “We can maintain the current level of restriction for as long as needed.”
The comments follow inflation data through the first three months of 2024 that has been higher than expected.
A consumer price index reading for March, released last week, showed inflation running at a 3.5% annual rate — well off the peak around 9% in mid-2022 but drifting higher since October 2023.
Treasury yields rose as Powell spoke.
The benchmark 2-year note, which is especially sensitive to Fed rate moves, briefly topped 5%, while the benchmark 10-year yield rose 3 basis points.
The S&P 500 wavered after Powell’s remarks, briefly turning negative on the day before recovering.
https://www.cnbc.com/2024/04/16/powell- ... -goal.html
"Fed Chair Powell says there has been a ‘lack of further progress’ this year on inflation"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED TUE, APR 16 2024
KEY POINTS
* Fed Chair Jerome Powell said the U.S. economy has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
* “The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said during a central banking forum.
Federal Reserve Chair Jerome Powell said Tuesday that the U.S. economy, while otherwise strong, has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
Speaking to a policy forum focused on U.S.-Canada economic relations, Powell said that while inflation continues to make its way lower, it hasn’t moved quickly enough, and the current state of policy should remain intact.
“More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal,” the Fed chief said during a panel talk.
Echoing recent statements by central bank officials, Powell indicated the current level of policy likely will stay in place until inflation gets closer to target.
Since July 2023, the Fed has kept its benchmark interest rate in a target range between 5.25%-5.5%, the highest in 23 years.
That was the result of 11 consecutive rate hikes that began in March 2022.
“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said.
“That said, we think policy is well positioned to handle the risks that we face.”
Powell added that until inflation shows more progress, “We can maintain the current level of restriction for as long as needed.”
The comments follow inflation data through the first three months of 2024 that has been higher than expected.
A consumer price index reading for March, released last week, showed inflation running at a 3.5% annual rate — well off the peak around 9% in mid-2022 but drifting higher since October 2023.
Treasury yields rose as Powell spoke.
The benchmark 2-year note, which is especially sensitive to Fed rate moves, briefly topped 5%, while the benchmark 10-year yield rose 3 basis points.
The S&P 500 wavered after Powell’s remarks, briefly turning negative on the day before recovering.
https://www.cnbc.com/2024/04/16/powell- ... -goal.html
Re: THE DAILY NEWS
CNBC
"2-year Treasury yield briefly tops 5% after Powell cites lack of progress on inflation"
Alex Harring @ALEX_HARRING Sarah Min @_SARAHMIN Sophie Kiderlin @IN/SOPHIE-KIDERLIN-B327B914A/ @SKIDERLIN
PUBLISHED TUE, APR 16 2024
U.S. Treasury yields rose Tuesday, with the 2-year’s at one point surpassing the 5% mark, after Federal Reserve Chair Jerome Powell said inflation has yet to ease back to the central bank’s target.
The 2-year Treasury yield briefly topped the 5% level, but was last trading at 4.981% after rising more than 4 basis points.
The yield on the 10-year Treasury rose more than 3 basis points to 4.659%.
Yields and prices move in opposite directions.
One basis point equals 0.01%.
Fed Chair Powell, speaking at the Washington Forum on the Canadian Economy, cited the lack of progress on inflation, adding to recent concerns the central bank may take longer to lower rates than investors had been anticipating.
“More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal,” Powell said.
Those comments echo recent statements from other central bank officials.
San Francisco Federal Reserve Bank President Mary Daly recently said there was “no urgency” for the Fed to cut interest rates.
Elsewhere, investors digested recent economic data such as the March retail sales figure that came in far higher than expected, suggesting resilience in consumer spending even as inflation remains persistent.
Heightened geopolitical tensions after Iran’s attack on Israel over the weekend also weighed on investors’ minds as observers awaited Israel’s response and world leaders called for calm and restraint.
https://www.cnbc.com/2024/04/16/us-trea ... tlook.html
"2-year Treasury yield briefly tops 5% after Powell cites lack of progress on inflation"
Alex Harring @ALEX_HARRING Sarah Min @_SARAHMIN Sophie Kiderlin @IN/SOPHIE-KIDERLIN-B327B914A/ @SKIDERLIN
PUBLISHED TUE, APR 16 2024
U.S. Treasury yields rose Tuesday, with the 2-year’s at one point surpassing the 5% mark, after Federal Reserve Chair Jerome Powell said inflation has yet to ease back to the central bank’s target.
The 2-year Treasury yield briefly topped the 5% level, but was last trading at 4.981% after rising more than 4 basis points.
The yield on the 10-year Treasury rose more than 3 basis points to 4.659%.
Yields and prices move in opposite directions.
One basis point equals 0.01%.
Fed Chair Powell, speaking at the Washington Forum on the Canadian Economy, cited the lack of progress on inflation, adding to recent concerns the central bank may take longer to lower rates than investors had been anticipating.
“More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal,” Powell said.
Those comments echo recent statements from other central bank officials.
San Francisco Federal Reserve Bank President Mary Daly recently said there was “no urgency” for the Fed to cut interest rates.
Elsewhere, investors digested recent economic data such as the March retail sales figure that came in far higher than expected, suggesting resilience in consumer spending even as inflation remains persistent.
Heightened geopolitical tensions after Iran’s attack on Israel over the weekend also weighed on investors’ minds as observers awaited Israel’s response and world leaders called for calm and restraint.
https://www.cnbc.com/2024/04/16/us-trea ... tlook.html
Re: THE DAILY NEWS
REUTERS
"Wall Street stocks close lower on higher Treasury yields, rate expectations"
By Chibuike Oguh
April 16, 2024
Summary
* UnitedHealth gains on Q1 profit beat
* Fed Chair Jerome Powell sees higher rates for longer
* Indexes: Dow up 0.17%, S&P down 0.21%, Nasdaq lost 0.12%
April 16 (Reuters) - Wall Street stocks ended lower in choppy trading on Tuesday as Treasury yields climbed, with investors weighing the likely path of interest rates in a resilient U.S. economy with persistent inflation.
Federal Reserve Chair Jerome Powell said on Tuesday recent inflation data has not given policymakers enough confidence to ease credit soon, noting that the U.S. central bank may need to keep rates higher for longer than previously thought.
The Dow Jones Industrial Average got a boost from UnitedHealth Group's better-than-expected quarterly results.
Real estate and utilities were the biggest drags on the S&P 500, while technology gave the largest boost.
"People are trying to balance this two-sided narrative: U.S. economic growth, which looks really good, and at the same time the inflation picture and interest rates, which will eventually be problematic for the equity market," said James St. Aubin, chief investment officer at Sierra Mutual Funds in California.
A report on Monday showed retail sales grew more than expected in March, a sign of U.S. economic resilience that helped push benchmark U.S. 10-year Treasury yields to five-month highs on Tuesday.
The Dow Jones Industrial Average rose 63.86 points, or 0.17%, to 37,798.97, the S&P 500 lost 10.41 points, or 0.21%, to 5,051.41 and the Nasdaq Composite lost 19.77 points, or 0.12%, to 15,865.25.
The S&P 500 and the Nasdaq are nearly 4% off from record high levels reached last month.
Shares of Morgan Stanley rose 2.5% after its first-quarter profit beat estimates on resurging income from investment banking.
Bank of America dropped 3.5% after the lender posted lower first-quarter profits as its loan loss provisions grew.
Johnson & Johnson slipped 2.1% as the drugmaker's revenue missed analysts' estimates after sales from its blockbuster psoriasis drug, Stelara, fell short of expectations.
Tesla slipped 2.7% a day after falling over 5% on news that the EV marker plans to lay off more than 10% of its global workforce.
Declining issues outnumbered advancers by a 2.25-to-1 ratio on the NYSE, which had 23 new highs and 175 new lows.
On the Nasdaq, 1,451 stocks rose and 2,764 fell as declining issues outnumbered advancers by a 1.9-to-1 ratio.
The S&P 500 posted one new 52-week high and eight new lows while the Nasdaq recorded 30 new highs and 362 new lows.
Volume on U.S. exchanges was 11.48 billion shares, compared with the 11.05 billion average for the last 20 days.
Reporting by Chibuike Oguh in New York; additional reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Richard Chang
https://www.reuters.com/markets/us/futu ... 024-04-16/
"Wall Street stocks close lower on higher Treasury yields, rate expectations"
By Chibuike Oguh
April 16, 2024
Summary
* UnitedHealth gains on Q1 profit beat
* Fed Chair Jerome Powell sees higher rates for longer
* Indexes: Dow up 0.17%, S&P down 0.21%, Nasdaq lost 0.12%
April 16 (Reuters) - Wall Street stocks ended lower in choppy trading on Tuesday as Treasury yields climbed, with investors weighing the likely path of interest rates in a resilient U.S. economy with persistent inflation.
Federal Reserve Chair Jerome Powell said on Tuesday recent inflation data has not given policymakers enough confidence to ease credit soon, noting that the U.S. central bank may need to keep rates higher for longer than previously thought.
The Dow Jones Industrial Average got a boost from UnitedHealth Group's better-than-expected quarterly results.
Real estate and utilities were the biggest drags on the S&P 500, while technology gave the largest boost.
"People are trying to balance this two-sided narrative: U.S. economic growth, which looks really good, and at the same time the inflation picture and interest rates, which will eventually be problematic for the equity market," said James St. Aubin, chief investment officer at Sierra Mutual Funds in California.
A report on Monday showed retail sales grew more than expected in March, a sign of U.S. economic resilience that helped push benchmark U.S. 10-year Treasury yields to five-month highs on Tuesday.
The Dow Jones Industrial Average rose 63.86 points, or 0.17%, to 37,798.97, the S&P 500 lost 10.41 points, or 0.21%, to 5,051.41 and the Nasdaq Composite lost 19.77 points, or 0.12%, to 15,865.25.
The S&P 500 and the Nasdaq are nearly 4% off from record high levels reached last month.
Shares of Morgan Stanley rose 2.5% after its first-quarter profit beat estimates on resurging income from investment banking.
Bank of America dropped 3.5% after the lender posted lower first-quarter profits as its loan loss provisions grew.
Johnson & Johnson slipped 2.1% as the drugmaker's revenue missed analysts' estimates after sales from its blockbuster psoriasis drug, Stelara, fell short of expectations.
Tesla slipped 2.7% a day after falling over 5% on news that the EV marker plans to lay off more than 10% of its global workforce.
Declining issues outnumbered advancers by a 2.25-to-1 ratio on the NYSE, which had 23 new highs and 175 new lows.
On the Nasdaq, 1,451 stocks rose and 2,764 fell as declining issues outnumbered advancers by a 1.9-to-1 ratio.
The S&P 500 posted one new 52-week high and eight new lows while the Nasdaq recorded 30 new highs and 362 new lows.
Volume on U.S. exchanges was 11.48 billion shares, compared with the 11.05 billion average for the last 20 days.
Reporting by Chibuike Oguh in New York; additional reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Richard Chang
https://www.reuters.com/markets/us/futu ... 024-04-16/
Re: THE DAILY NEWS
REUTERS
"US homebuilding retreats; manufacturing turning the corner"
By Lucia Mutikani
April 16, 2024
Summary
* Single-family housing starts drop 12.4% in March
* Single-family building permits decline 5.7%
* Overall housing starts fall 14.7%; permits down 4.3%
* Manufacturing output rises 0.5%; February data revised up
WASHINGTON, April 16 (Reuters) - U.S. single-family homebuilding tumbled in March, and while new construction remains underpinned by a severe shortage of previously owned houses for sale, a resurgence in mortgage rates is pushing potential buyers to the sidelines.
The report from the Commerce Department on Tuesday also showed permits for future construction of single-family houses fell to a five-month low.
Residential investment rebounded in the second half of 2023 after contracting for nine straight quarters, the longest such stretch since the housing market collapse in 2006.
But the recovery appears to be losing steam.
"The housing recovery has stalled for now as home builder expectations of sharply lower interest rates this year have faded," said Christopher Rupkey, chief economist at FWDBONDS.
"One thing is for certain, and that is home prices are going to be on an upward, more unaffordable trend without more supply."
Single-family housing starts, which account for the bulk of homebuilding, dropped 12.4% to a seasonally adjusted annual rate of 1.022 million units last month, the Commerce Department's Census Bureau said.
Data for February was revised higher to show single-family starts rebounding to a rate of 1.167 million units instead of the previously reported 1.129 million units.
Single-family home building increased 21.2% on a year-on-year basis in March.
Wet weather could have impacted groundbreaking activity last month.
Homebuilding fell in the Northeast, Midwest and the densely populated South, but rose in the West.
The latest government data showed there were 757,000 housing units on the market in the fourth quarter, well below the 1.145 million units before the COVID-19 pandemic.
A survey from the National Association of Home Builders (NAHB) on Monday showed confidence among single-family home builders was unchanged at an eight-month high in April.
The NAHB said "buyers are hesitating until they can better gauge where interest rates are headed."
The average rate on the popular 30-year fixed-rate mortgage has drifted up towards 7%, data from mortgage finance agency Freddie Mac showed, as strong reports on the labor market and inflation suggested the Federal Reserve could delay an anticipated rate cut this year.
A few economists doubt that the U.S. central bank will lower borrowing costs in 2024.
Fed Chair Jerome Powell said on Tuesday the central bank might need to keep rates higher for longer than previously thought as inflation remains elevated.
The Fed has kept its policy rate in the 5.25%-5.50% range since July.
It has raised the benchmark overnight interest rate by 525 basis points since March of 2022.
Stocks on Wall Street fell on Powell's comments.
The dollar gained versus a basket of currencies.
U.S. Treasury yields rose.
HOUSING COMPLETIONS DECLINE
Starts for housing projects with five units or more plunged 20.8% to a rate of 290,000 units, the lowest level since April 2020.
Overall housing starts plummeted 14.7%, the biggest drop since April 2020, to a rate of 1.321 million units in March.
Economists polled by Reuters had forecast starts would fall to a rate 1.487 million units.
Permits for future construction of single-family homes fell 5.7% to a rate of 973,000 units in March, the lowest level since last October.
That likely reflects the recent rise in mortgage rates and suggests slower homebuilding activity ahead.
Multi-family building permits were unchanged at a rate of 433,000 units.
Building permits as a whole dropped 4.3% to a rate of 1.458 million units, the lowest level since last July.
Economists expect housing made a small contribution to gross domestic product growth in the first quarter.
The fortunes of the housing market are seen tied to upcoming inflation data.
The number of houses approved for construction that were yet to be started rose 0.7% to 273,000 units in March.
The single-family homebuilding backlog was unchanged at 141,000 units.
The completion rate for that housing segment declined 10.5% to 947,000 units, suggesting that supply could remain low and keep prices elevated.
Overall housing completions decreased 13.5% to a rate of 1.469 million units.
Realtors estimate that housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month over time to bridge the inventory gap.
Multi-family starts and permits surged in the aftermath of the pandemic, with the building backlog hitting record highs.
"With a typical 1.5-2-year time from start to completion, most of these units are being completed," said Alice Zheng, an economist at Citigroup.
"We should see less incoming multi-family supply, which could put pressure on housing prices."
While housing took a step back last month, manufacturing appears to be turning the corner.
These two sectors were the most impacted by the Fed's tighter monetary policy stance.
A separate report from the Fed on Tuesday showed production at factories increased 0.5% in March after rebounding by 1.2% in February.
Factory output edged down at a 0.1% annualized rate in the first quarter after contracting at a 0.9% pace in the October-December period.
"Manufactured output exits the first quarter at a high level relative to the quarterly average, which potentially sets the stage for a solid advance in output in the second quarter," said John Ryding, chief economic advisor at Brean Capital.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-s ... 024-04-16/
"US homebuilding retreats; manufacturing turning the corner"
By Lucia Mutikani
April 16, 2024
Summary
* Single-family housing starts drop 12.4% in March
* Single-family building permits decline 5.7%
* Overall housing starts fall 14.7%; permits down 4.3%
* Manufacturing output rises 0.5%; February data revised up
WASHINGTON, April 16 (Reuters) - U.S. single-family homebuilding tumbled in March, and while new construction remains underpinned by a severe shortage of previously owned houses for sale, a resurgence in mortgage rates is pushing potential buyers to the sidelines.
The report from the Commerce Department on Tuesday also showed permits for future construction of single-family houses fell to a five-month low.
Residential investment rebounded in the second half of 2023 after contracting for nine straight quarters, the longest such stretch since the housing market collapse in 2006.
But the recovery appears to be losing steam.
"The housing recovery has stalled for now as home builder expectations of sharply lower interest rates this year have faded," said Christopher Rupkey, chief economist at FWDBONDS.
"One thing is for certain, and that is home prices are going to be on an upward, more unaffordable trend without more supply."
Single-family housing starts, which account for the bulk of homebuilding, dropped 12.4% to a seasonally adjusted annual rate of 1.022 million units last month, the Commerce Department's Census Bureau said.
Data for February was revised higher to show single-family starts rebounding to a rate of 1.167 million units instead of the previously reported 1.129 million units.
Single-family home building increased 21.2% on a year-on-year basis in March.
Wet weather could have impacted groundbreaking activity last month.
Homebuilding fell in the Northeast, Midwest and the densely populated South, but rose in the West.
The latest government data showed there were 757,000 housing units on the market in the fourth quarter, well below the 1.145 million units before the COVID-19 pandemic.
A survey from the National Association of Home Builders (NAHB) on Monday showed confidence among single-family home builders was unchanged at an eight-month high in April.
The NAHB said "buyers are hesitating until they can better gauge where interest rates are headed."
The average rate on the popular 30-year fixed-rate mortgage has drifted up towards 7%, data from mortgage finance agency Freddie Mac showed, as strong reports on the labor market and inflation suggested the Federal Reserve could delay an anticipated rate cut this year.
A few economists doubt that the U.S. central bank will lower borrowing costs in 2024.
Fed Chair Jerome Powell said on Tuesday the central bank might need to keep rates higher for longer than previously thought as inflation remains elevated.
The Fed has kept its policy rate in the 5.25%-5.50% range since July.
It has raised the benchmark overnight interest rate by 525 basis points since March of 2022.
Stocks on Wall Street fell on Powell's comments.
The dollar gained versus a basket of currencies.
U.S. Treasury yields rose.
HOUSING COMPLETIONS DECLINE
Starts for housing projects with five units or more plunged 20.8% to a rate of 290,000 units, the lowest level since April 2020.
Overall housing starts plummeted 14.7%, the biggest drop since April 2020, to a rate of 1.321 million units in March.
Economists polled by Reuters had forecast starts would fall to a rate 1.487 million units.
Permits for future construction of single-family homes fell 5.7% to a rate of 973,000 units in March, the lowest level since last October.
That likely reflects the recent rise in mortgage rates and suggests slower homebuilding activity ahead.
Multi-family building permits were unchanged at a rate of 433,000 units.
Building permits as a whole dropped 4.3% to a rate of 1.458 million units, the lowest level since last July.
Economists expect housing made a small contribution to gross domestic product growth in the first quarter.
The fortunes of the housing market are seen tied to upcoming inflation data.
The number of houses approved for construction that were yet to be started rose 0.7% to 273,000 units in March.
The single-family homebuilding backlog was unchanged at 141,000 units.
The completion rate for that housing segment declined 10.5% to 947,000 units, suggesting that supply could remain low and keep prices elevated.
Overall housing completions decreased 13.5% to a rate of 1.469 million units.
Realtors estimate that housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month over time to bridge the inventory gap.
Multi-family starts and permits surged in the aftermath of the pandemic, with the building backlog hitting record highs.
"With a typical 1.5-2-year time from start to completion, most of these units are being completed," said Alice Zheng, an economist at Citigroup.
"We should see less incoming multi-family supply, which could put pressure on housing prices."
While housing took a step back last month, manufacturing appears to be turning the corner.
These two sectors were the most impacted by the Fed's tighter monetary policy stance.
A separate report from the Fed on Tuesday showed production at factories increased 0.5% in March after rebounding by 1.2% in February.
Factory output edged down at a 0.1% annualized rate in the first quarter after contracting at a 0.9% pace in the October-December period.
"Manufactured output exits the first quarter at a high level relative to the quarterly average, which potentially sets the stage for a solid advance in output in the second quarter," said John Ryding, chief economic advisor at Brean Capital.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-s ... 024-04-16/
Re: THE DAILY NEWS
REUTERS
"Fed's Powell says restrictive rates policy needs more time to work"
By Howard Schneider and Ann Saphir
April 16, 2024
WASHINGTON, April 16 (Reuters) - Top U.S. central bank officials including Federal Reserve Chair Jerome Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer and further dashing investors' hopes for meaningful reductions in borrowing costs this year.
Fed policymakers have said since the start of the year that rate cuts are contingent on gaining "greater confidence" that inflation is moving towards the central bank's 2% goal, but readings over the past few months show price pressures may even be moving in the opposite direction.
"The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence," Powell told a forum in Washington, in what is likely to be his last public appearance before the April 30-May 1 policy meeting.
"Right now, given the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us," he said.
U.S. central bankers are universally expected to leave rates unchanged at their upcoming meeting, but until early this month analysts and investors thought rate cuts would likely start with an initial quarter-percentage-point reduction at the Fed's June 11-12 meeting, with two more cuts happening by the end of 2024.
Now the first cut is expected in September and the odds of a second cut are dwindling.
"If higher inflation does persist, we can maintain the current level of restriction for as long as needed," Powell said.
"At the same time, we have significant space to ease should the labor market unexpectedly weaken."
In separate remarks earlier on Tuesday, Fed Vice Chair Philip Jefferson omitted any mention of rate cuts, and said the U.S. central bank was ready to keep its tight monetary policy in place "for longer" if inflation fails to slow as expected.
Jefferson noted the central bank was facing a strong economy and had seen little recent progress in bringing down inflation, excluding what had been a staple reference in Fed speeches to gaining "confidence" in lower inflation and then cutting rates.
"My baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance," Jefferson said.
In his last public remarks, on Feb. 22, Jefferson included what had been a staple of recent Fed communications - that "if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year," a nod to the possibility of reducing the Fed's benchmark overnight interest rate from the current 5.25%-5.50% range to account for a slowing pace of price increases.
'MEASURED HAWKISH RESET'
Analysts and investors have been steadily marking down the likelihood and timing of Fed rate cuts as policymakers struggle to reconcile a gravity-defying economy with their assessment that monetary policy is "restrictive" and inflation likely on its way down.
Both of those ideas have been called into question by job growth, retail spending, inflation and other data that continue to challenge the Fed's sense that the economy was gliding towards lower demand, slower growth, and price increases nearing the 2% target.
Just over five weeks ago, Powell told a U.S. Senate panel that the Fed was "not far" from gaining the confidence in falling inflation needed to cut interest rates.
Powell not only omitted that characterization on Tuesday, but he also did not repeat his prior view, laid out after the Fed's March 19-20 meeting, that data in January and February had not changed the "overall story" of gradually slowing inflation.
Instead, he said the Fed's preferred measure of underlying inflation - the year-over-year change in the core personal consumption expenditures price index - likely rose 2.8% in March, unchanged from February, with three-month and six-month average measures "actually above that level."
"We view this as a measured hawkish reset of policy communication to a more neutral posture with less of an immediate bias to cut rates, though the basic idea of wanting to get more confidence inflation is moving lower before cutting rates remains intact," said Krishna Guha, vice chairman at Evercore ISI.
"But what has not changed is Powell's read of the underlying economics, and this prevents us from reading him too hawkish overall."
When inflation was in fast decline last year, Powell was reluctant to declare the fight against it won even as policymakers laid the groundwork for rate reductions beginning this year.
Officials at the Fed's March 19-20 meeting said they still expected to cut the policy rate by three-quarters of a percentage point by the end of 2024.
Powell at the time said disappointing inflation data in January and February "haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2%."
Yet the bumps continued through March, enough so that some officials at the last Fed meeting worried monetary policy was not having the sort of impact that would be typically expected from the highest interest rates in a quarter of a century.
Data since then have shown a massive 303,000 jobs were added in March, the pace of consumer price increases accelerated, and even low-income households continued to spend.
The strength of the economy, policymakers suggest, is one reason they could wait to cut rates and be sure inflation will resume its decline.
Reporting by Howard Schneider; Additional reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Dan Burns and Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-16/
"Fed's Powell says restrictive rates policy needs more time to work"
By Howard Schneider and Ann Saphir
April 16, 2024
WASHINGTON, April 16 (Reuters) - Top U.S. central bank officials including Federal Reserve Chair Jerome Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer and further dashing investors' hopes for meaningful reductions in borrowing costs this year.
Fed policymakers have said since the start of the year that rate cuts are contingent on gaining "greater confidence" that inflation is moving towards the central bank's 2% goal, but readings over the past few months show price pressures may even be moving in the opposite direction.
"The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence," Powell told a forum in Washington, in what is likely to be his last public appearance before the April 30-May 1 policy meeting.
"Right now, given the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us," he said.
U.S. central bankers are universally expected to leave rates unchanged at their upcoming meeting, but until early this month analysts and investors thought rate cuts would likely start with an initial quarter-percentage-point reduction at the Fed's June 11-12 meeting, with two more cuts happening by the end of 2024.
Now the first cut is expected in September and the odds of a second cut are dwindling.
"If higher inflation does persist, we can maintain the current level of restriction for as long as needed," Powell said.
"At the same time, we have significant space to ease should the labor market unexpectedly weaken."
In separate remarks earlier on Tuesday, Fed Vice Chair Philip Jefferson omitted any mention of rate cuts, and said the U.S. central bank was ready to keep its tight monetary policy in place "for longer" if inflation fails to slow as expected.
Jefferson noted the central bank was facing a strong economy and had seen little recent progress in bringing down inflation, excluding what had been a staple reference in Fed speeches to gaining "confidence" in lower inflation and then cutting rates.
"My baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance," Jefferson said.
In his last public remarks, on Feb. 22, Jefferson included what had been a staple of recent Fed communications - that "if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year," a nod to the possibility of reducing the Fed's benchmark overnight interest rate from the current 5.25%-5.50% range to account for a slowing pace of price increases.
'MEASURED HAWKISH RESET'
Analysts and investors have been steadily marking down the likelihood and timing of Fed rate cuts as policymakers struggle to reconcile a gravity-defying economy with their assessment that monetary policy is "restrictive" and inflation likely on its way down.
Both of those ideas have been called into question by job growth, retail spending, inflation and other data that continue to challenge the Fed's sense that the economy was gliding towards lower demand, slower growth, and price increases nearing the 2% target.
Just over five weeks ago, Powell told a U.S. Senate panel that the Fed was "not far" from gaining the confidence in falling inflation needed to cut interest rates.
Powell not only omitted that characterization on Tuesday, but he also did not repeat his prior view, laid out after the Fed's March 19-20 meeting, that data in January and February had not changed the "overall story" of gradually slowing inflation.
Instead, he said the Fed's preferred measure of underlying inflation - the year-over-year change in the core personal consumption expenditures price index - likely rose 2.8% in March, unchanged from February, with three-month and six-month average measures "actually above that level."
"We view this as a measured hawkish reset of policy communication to a more neutral posture with less of an immediate bias to cut rates, though the basic idea of wanting to get more confidence inflation is moving lower before cutting rates remains intact," said Krishna Guha, vice chairman at Evercore ISI.
"But what has not changed is Powell's read of the underlying economics, and this prevents us from reading him too hawkish overall."
When inflation was in fast decline last year, Powell was reluctant to declare the fight against it won even as policymakers laid the groundwork for rate reductions beginning this year.
Officials at the Fed's March 19-20 meeting said they still expected to cut the policy rate by three-quarters of a percentage point by the end of 2024.
Powell at the time said disappointing inflation data in January and February "haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2%."
Yet the bumps continued through March, enough so that some officials at the last Fed meeting worried monetary policy was not having the sort of impact that would be typically expected from the highest interest rates in a quarter of a century.
Data since then have shown a massive 303,000 jobs were added in March, the pace of consumer price increases accelerated, and even low-income households continued to spend.
The strength of the economy, policymakers suggest, is one reason they could wait to cut rates and be sure inflation will resume its decline.
Reporting by Howard Schneider; Additional reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Dan Burns and Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-16/
Re: THE DAILY NEWS
REUTERS
"Bank of America profit hurt by losses on credit cards, office loans"
By Saeed Azhar and Mehnaz Yasmin
April 16, 2024
NEW YORK, April 16 (Reuters) - Bank of America shares on Tuesday fell more than 3% after its first-quarter profits shrank and the bank set aside more money to cover souring loans from consumers whose finances are worsening.
U.S. lenders have cited resilient household finances as evidence that the economy remains on a solid footing, but cracks are starting to show for the lowest-income consumers.
While their spending remains robust despite rising borrowing costs, higher prices and shrinking savings, banks are preparing for more Americans to miss payments.
"The market has used Bank of America as the bellwether for consumer commentary," said David Wagner, a portfolio manager at Aptus Capital Advisors.
"The weakness in credit card delinquencies caught them offside."
BofA's net charge-offs, or debts that are unlikely to be recovered, rose to $1.5 billion in the first quarter from $807 million a year earlier, mainly from credit card losses.
The charge-offs are from delinquencies in the fourth quarter, but are beginning to stabilize, said Alastair Borthwick, chief financial officer.
"The main economic hangover for Bank of America as well as most other banks is that Federal Reserve interest rates may not decline as quickly as previously expected," said Michael Ashley Schulman, chief investment officer of California-based investment firm Running Point, which advises wealthy families.
"Therefore they may see an uptick in consumer and business delinquencies and defaults, especially from real estate."
"One good quarter from the bank is not going to allay these macro concerns."
Despite Tuesday's decline, BofA shares were up about 3% this year, lagging the S&P 500 bank index's 4.7% increase and a 6% gain for rival JPMorgan.
BofA's net interest income (NII) — the difference between what it earns on loans and pays for deposits — slid 3% to $14 billion as it paid more to customers to park their money while demand from borrowers stayed modest.
But it was turning more optimistic.
"We continue to expect that Q2 will be the low point for NII and we expect the back half of 2024 to grow," Borthwick told analysts on a conference call on Tuesday.
JPMorgan, the largest U.S. lender, slightly increased its estimate for NII, disappointing investors who hoped that the bank would reap even greater benefits from a prolonged period of higher interest rates.
BofA's CEO Brian Moynihan told analysts the bank had cut the workforce by more than 4,700 employees from the first quarter of 2023.
SHIFTING EXPECTATIONS
Excluding one-off items, Bank of America earned 83 cents a share in the first quarter, ahead of analysts' average estimate of 76 cents a share, according to LSEG data.
Still, shifting expectations for U.S. interest rate cuts and an uncertain economic outlook have made it more difficult to predict future profits, banking executives said last week.
If the Federal Reserve keeps rates higher for longer in the coming months, lenders that made bumper profits from rising interest rates in the last two years could build on their gains.
But their earnings could diminish if a potential economic slowdown deters borrowers from taking out loans.
"Generally speaking, higher for longer is probably better for banks," said Borthwick.
"Inflation is under control ... that appears to be the case."
"So that's obviously a good place."
A resilient U.S. economy, buoyant equities and a flurry of large deals have reignited hopes of a nascent recovery in dealmaking, although industry executives have expressed guarded optimism.
Investment banking fees jumped 35% to $1.6 billion from a year earlier, partially offsetting a decline in interest payments due to slow demand from borrowers.
Last month, Borthwick said he expected investment banking revenue to jump 10% to 15% in the first quarter.
Revenue from the segment also rose at rival JPMorgan and Citigroup in the first quarter, fueled by gains in debt and equity capital markets.
BofA's sales and trading revenue rose 2% to $5.2 billion with equities contributing a 15% jump and fixed income currencies and commodities posting a 4% decline.
COMMERCIAL REAL ESTATE
Bank of America set aside $1.3 billion in provisions for credit losses in the first quarter, up from $931 million a year earlier.
It also took more writedowns on office loans, which partly increased loan losses for its commercial division.
Still, its CFO said the lender had limited commercial real estate exposure and was reviewing ratings, property appraisals and sales.
Revenue from Bank of America's consumer unit sank 5% to $10 billion in the quarter, primarily due to lower deposit balances.
Bank of America also took a $700 million charge in the reported quarter to replenish a government deposit insurance fund, drained by $16 billion to cover depositors of two banks that collapsed in 2023.
Profit from BofA's Merrill wealth management division rose about 10% to $1 billion as rising equity values generated higher fees with record revenue and client balances.
The division grew assets under management to $1.4 trillion from $1.3 trillion in the fourth quarter.
Reporting by Saeed Azhar in New York and Mehnaz Yasmin in Bengaluru;additional reporting by Sinead Carew; Editing by Lananh Nguyen, Shinjini Ganguli and Nick Zieminski
https://www.reuters.com/business/financ ... 024-04-16/
"Bank of America profit hurt by losses on credit cards, office loans"
By Saeed Azhar and Mehnaz Yasmin
April 16, 2024
NEW YORK, April 16 (Reuters) - Bank of America shares on Tuesday fell more than 3% after its first-quarter profits shrank and the bank set aside more money to cover souring loans from consumers whose finances are worsening.
U.S. lenders have cited resilient household finances as evidence that the economy remains on a solid footing, but cracks are starting to show for the lowest-income consumers.
While their spending remains robust despite rising borrowing costs, higher prices and shrinking savings, banks are preparing for more Americans to miss payments.
"The market has used Bank of America as the bellwether for consumer commentary," said David Wagner, a portfolio manager at Aptus Capital Advisors.
"The weakness in credit card delinquencies caught them offside."
BofA's net charge-offs, or debts that are unlikely to be recovered, rose to $1.5 billion in the first quarter from $807 million a year earlier, mainly from credit card losses.
The charge-offs are from delinquencies in the fourth quarter, but are beginning to stabilize, said Alastair Borthwick, chief financial officer.
"The main economic hangover for Bank of America as well as most other banks is that Federal Reserve interest rates may not decline as quickly as previously expected," said Michael Ashley Schulman, chief investment officer of California-based investment firm Running Point, which advises wealthy families.
"Therefore they may see an uptick in consumer and business delinquencies and defaults, especially from real estate."
"One good quarter from the bank is not going to allay these macro concerns."
Despite Tuesday's decline, BofA shares were up about 3% this year, lagging the S&P 500 bank index's 4.7% increase and a 6% gain for rival JPMorgan.
BofA's net interest income (NII) — the difference between what it earns on loans and pays for deposits — slid 3% to $14 billion as it paid more to customers to park their money while demand from borrowers stayed modest.
But it was turning more optimistic.
"We continue to expect that Q2 will be the low point for NII and we expect the back half of 2024 to grow," Borthwick told analysts on a conference call on Tuesday.
JPMorgan, the largest U.S. lender, slightly increased its estimate for NII, disappointing investors who hoped that the bank would reap even greater benefits from a prolonged period of higher interest rates.
BofA's CEO Brian Moynihan told analysts the bank had cut the workforce by more than 4,700 employees from the first quarter of 2023.
SHIFTING EXPECTATIONS
Excluding one-off items, Bank of America earned 83 cents a share in the first quarter, ahead of analysts' average estimate of 76 cents a share, according to LSEG data.
Still, shifting expectations for U.S. interest rate cuts and an uncertain economic outlook have made it more difficult to predict future profits, banking executives said last week.
If the Federal Reserve keeps rates higher for longer in the coming months, lenders that made bumper profits from rising interest rates in the last two years could build on their gains.
But their earnings could diminish if a potential economic slowdown deters borrowers from taking out loans.
"Generally speaking, higher for longer is probably better for banks," said Borthwick.
"Inflation is under control ... that appears to be the case."
"So that's obviously a good place."
A resilient U.S. economy, buoyant equities and a flurry of large deals have reignited hopes of a nascent recovery in dealmaking, although industry executives have expressed guarded optimism.
Investment banking fees jumped 35% to $1.6 billion from a year earlier, partially offsetting a decline in interest payments due to slow demand from borrowers.
Last month, Borthwick said he expected investment banking revenue to jump 10% to 15% in the first quarter.
Revenue from the segment also rose at rival JPMorgan and Citigroup in the first quarter, fueled by gains in debt and equity capital markets.
BofA's sales and trading revenue rose 2% to $5.2 billion with equities contributing a 15% jump and fixed income currencies and commodities posting a 4% decline.
COMMERCIAL REAL ESTATE
Bank of America set aside $1.3 billion in provisions for credit losses in the first quarter, up from $931 million a year earlier.
It also took more writedowns on office loans, which partly increased loan losses for its commercial division.
Still, its CFO said the lender had limited commercial real estate exposure and was reviewing ratings, property appraisals and sales.
Revenue from Bank of America's consumer unit sank 5% to $10 billion in the quarter, primarily due to lower deposit balances.
Bank of America also took a $700 million charge in the reported quarter to replenish a government deposit insurance fund, drained by $16 billion to cover depositors of two banks that collapsed in 2023.
Profit from BofA's Merrill wealth management division rose about 10% to $1 billion as rising equity values generated higher fees with record revenue and client balances.
The division grew assets under management to $1.4 trillion from $1.3 trillion in the fourth quarter.
Reporting by Saeed Azhar in New York and Mehnaz Yasmin in Bengaluru;additional reporting by Sinead Carew; Editing by Lananh Nguyen, Shinjini Ganguli and Nick Zieminski
https://www.reuters.com/business/financ ... 024-04-16/