US stocks closed in the red Wednesday, following a rather quiet trading session.
The Federal Reserve left its monetary policy unchanged with interest rates near zero and reiterated that rising inflation was only temporary.
On the earnings front, Apple (AAPL) and Facebook (FB) earnings are due after the closing bell.
On the way to his office at the Federal Reserve in Washington, Chairman Jerome Powell drives by a homeless encampment. He said he’s going to visit the people living there soon.
“Frankly I have not had a chance to do it yet,” Powell said. “I don’t want to visit at a time of a lot of media attention. I don’t want that to be a part of the story. I will go visit when it’s no longer a news story.”
Powell noted he has met with homeless people a number of times and has learned from the experience.
“It’s always good to talk to people and hear what’s going on in their lives,” Powell said. “What you find out is, they’re you. They’re just us. These are people who in many cases had jobs and they have lives and they’ve just found themselves in this place.”
He said he finds a personal connection when he meets with the unhoused.
“What you find is they’re like you. That could be you. That could be your sister. That could be your kid. You always feel that way in that sort of an encounter. It’s an important thing to engage in, I think.”
The US job market is recovering nicely, albeit more slowly than everyone would like. Yet with 8.4 million fewer people working now than were working in February 2020, you’d think companies looking to hire would be able to fill all their positions quickly.
Except that’s not happening.
That’s stumped Federal Reserve Chairman Jerome Powell:
Federal Reserve Chairman Jerome Powell stated the obvious Wednesday: The US housing market is booming. But he also acknowledged a hidden weakness in the housing boom: Prices have soared so much that it’s forcing many Americans out of the housing market.
The US economy is in the middle of a substantial rebound from one of the worst recessions on record, yet Federal Reserve Chairman Jerome Powell said what emerges from the ashes will be a very different economy from the one before the pandemic.
Powell noted Wednesday the economy has a long way to go before it has fully rebounded, noting US employment remains 8.4 million people lower than in February of 2020. Some of those jobs are never coming back.
Wall Street had a minor freakout about inflation earlier this year, and concern that prices are rising has remained in the back of investors’ minds even as stocks recovered.
Yet Federal Reserve Chairman Jerome Powell thinks inflation concerns are much ado about nothing. Yes, prices are rising because the US government just sent out hundreds of billions of dollars in stimulus checks and plans to inject nearly $2 trillion into the economy. That sent prices higher as consumers shopped ‘til they dropped — but that’s a temporary sugar rush and not indicative of consistent rising prices, Powell said Wednesday.
Think the economy has recovered from the pandemic? Federal Reserve Chairman Jerome Powell has some news for you: It’s not going to be back for quite some time — not until the pandemic is over.
Federal Reserve Chairman Jerome Powell isn’t known for his directness, often dancing around reporters’ questions during his monthly press conferences. But Wednesday, he couldn’t have been clearer when he was asked if it was “time to talk about talking about tapering” its Treasury bond and other asset purchases designed to prop up the economy.
The Federal Reserve said Wednesday the US economy is growing stronger, but it left interest rates unchanged near zero.
Interest rates will stay the range of zero to a quarter of a percent until the Fed’s goal of maximum employment and inflation of about 2% over the longer term.
To ensure the economy stays on track, the central bank will continue with its monthly asset purchases, consisting of at least $80 billion in Treasury securities and $40 billion mortgage-backed securities.
Even though investors are growing nervous that the reopening of the economy could lead to a sudden spike in inflation that could force the Fed to raise rates sooner, the central bank has been steady in its view that rate increases wouldn’t happen anytime soon.
The Fed said it is “prepared to adjust the stance of monetary policy as appropriate if risks emerge.”
A press conference with Fed Chairman Jerome Powell is scheduled for 2:30 pm ET.
We’re less than an hour away from the Federal Reserve’s monetary policy update. The central bank isn’t expected to make many changes, but Mohamed El-Erian, Allianz Chief Economic Adviser, thinks that’s a mistake.
“The Fed will simply revise up its outlook and then do nothing at all in terms of policies,” he told Christine Romans during CNN Business’ digital live show Markets Now.
Instead, the Fed should start to slowly tap on the brakes, in terms of its bond purchases as well as low interest rates, so that it doesn’t have to slam onto them when the economy is overheating, El-Erian said.
“We already have evidence that the inflation in the pipeline will be more than transitory,” he added.
Investors have grown worried about a sudden spike in inflation as the economy reopens that could force the Fed to raise interest rates sooner than hoped.
The economy is now surging out of the pandemic, El-Erian said. “We’re going to have a very strong year.” And the Fed will need to be careful to avoid being caught on the wrong side of it.
But financial markets don’t like hawkish words from Washington, and that’s holding the central bank back, El-Erian said.
The pandemic has transformed the healthcare industry, be it digital doctor’s visits or remote testing kits or still other changes.
“It’s pretty dramatic how it’s changed,” said Anne Wojcicki, CEO and co-founder of gene testing company 23andMe. “Digital healthcare is going to take off from now.”
“Without the pandemic you would have not had the push of people trying something new,” she said on the CNN Business’ digital live show Markets Now. “Digital healthcare is going to take off from now,” she said.
23andMe, which provides at home gene testing kits, has been direct-to-consumer from the start. Getting people access to their genetic information will bring about the advent of effective personalized care and better drug discovery, Wojcicki said.
Now the company is planning to go public through Richard Branson’s Special Purpose Acquisition Company – a publicly traded blank check business.
“We weren’t rushing to ever be a public company,” Wojcicki said. “But Richard Branson knows how to think big and he knows about healthcare.” Now is the right time, 23andMe is a mature enough business and Branson is the right partner, she said.
It’s lunchtime and the stock market looks about as inspiring as my fridge: Stocks are broadly in the red, and the S&P 500, which started the day slightly higher, has given back its modest gains. The index is now flat.
The Dow is 0.4%, or 120 points, lower, while the Nasdaq Composite is down 0.2%.
It’s less than two hours until the Federal Reserve’s monetary policy decision. We likely won’t see major policy changes, but investors will look for clarity on the central bank’s economic outlook. The Fed decision at 2pm ET will be followed by a press conference at 2:30.
A month after he laid out a roughly $2 trillion infrastructure plan aimed at helping the nation recover from the coronavirus pandemic, President Joe Biden is set to unveil an additional $1.8 trillion federal investment in education, child care and paid family leave during his first address to Congress on Wednesday.
The massive package – which Biden is calling the American Families Plan – is the second half of his effort to revitalize the nation and ensure a more equitable recovery. The proposal would also extend or make permanent enhancements to several key tax credits that were contained in the Democrats’ $1.9 trillion rescue bill, which Biden signed into law last month.
The President intends to finance the latest package by hiking taxes on the rich, saying he wants to reward work, not wealth. His new proposed measures would raise about $1.5 trillion over a decade.
US stocks were mixed at Wednesday’s opening bell. Only the S&P 500 opened higher, which could signal another record high today for Wall Street’s broadest index.
There’s quite a bit keeping investors on their toes on Wednesday: company earnings, including Apple (AAPL) and Facebook (FB), are due after the close, and the Federal Reserve’s latest policy decision will be announced at 2pm ET followed by a press conference at 2:30pm ET.
Here comes $80 oil. At least that’s what Goldman Sachs says.
The Wall Street investment bank predicted Wednesday the easing pandemic will cause the biggest jump in oil demand on record. Goldman Sachs expects demand will rise by 5.2 million barrels per day over the next six months.
For context, that would be 50% bigger than the next largest demand spike since the bank began tracking in 2000, the bank said. That’s why Goldman Sachs said commodity investors “have looked through” the spike in Covid-19 cases in India.
That in turn is boosting demand for gasoline and jet fuel — both of which cratered last spring as the pandemic erupted. The unprecedented collapse in oil demand, along with excess supply, briefly sent US oil prices below zero for the first time ever.
Oil prices have since rebounded with Brent crude, the world benchmark, climbing above $67 a barrel Wednesday.
The rally may still have legs. Goldman Sachs expects Brent crude will reach $80 a barrel over the next six months before cooling off.
America is emerging from the worst of the pandemic, and that will mean some eye-popping figures when the government releases economic growth data Thursday.
But the big jump — fueled by resurgent consumer spending after a year in lockdown — will still be starting from a deep hole.
Economists predict that the US economy grew at an annualized rate of 6.1% in the first three months of the year — faster the than the 4.3% recorded at the end of 2020, but far slower than the enormous 33.4% jump in the second quarter of 2020 when the economy started to reopen.
An “annualized” rate is not the same as measuring one quarter to the next; annualizing assumes a quarterly rate would continue for a full year. Economists typically use the annualized rate for US GDP because it makes it easier to compare numbers over different periods of time.
US stock futures were mostly flat once again as investors await more corporate earnings and signs that the global economic recovery is taking hold. Wall Street will be watching Federal Reserve Chairman Jerome Powell’s press conference carefully this afternoon for signs of how the recovery is proceeding.
Here’s where things stand as of 6:15 am ET:
After a difficult year, Starbucks (SBUX) sales are finally bouncing back.
Sales at US stores open at least 13 months jumped 9% in the three months ending March 28 compared with the same period last year. The results pointed to a “full sales recovery” in the United States, CEO Kevin Johnson said in a statement Tuesday.
Globally, same-store sales increased 15%, missing Wall Street’s expectations of 16.8% growth. Shares of the company fell about 2% after the bell.
While some restaurants, like pizzerias, have seen sales soar during the pandemic, cafes like Starbucks have struggled. Stay-at-home orders disrupted people’s regular commute to work, and many started drinking their morning coffee at home instead of buying it to-go.
In the last three months of 2020, Starbucks’ US same-store sales fell 5%. In fiscal year 2020, the year leading up to late September 2020, US same-store sales fell 12%.
Alphabet (GOOG) kicked off a big week for tech earnings as the industry starts to look ahead to a post-pandemic economy by reporting a characteristically strong start to 2021.
Google’s parent company reported revenues of $55.3 billion for the first three months of the year — a 34% jump from the same period last year — and made close to $18 billion in profit, comfortably blowing past analyst estimates. It also announced a $50 billion stock buyback.
The company’s stock jumped 5% in premarket trading Wednesday.
