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Federal Reserve Bank of Atlanta President Raphael Bostic said Friday he had inadvertently broken the central bank’s trading rules.
New documents highlighted multiple violations. Bostic, who has led the Atlanta Fed for five years, made personal trades during blackout periods, when officials are prohibited from making financial transactions. The disclosures also show that Bostic previously filed incomplete information and that he held more than $50,000 in US Treasury funds last year, which exceeds the permissible limit.
Bostic is the latest in a slew of top officials to come under scrutiny for trading activity outside of the scope of the Fed’s strict rules. The ongoing scandal has already led to multiple resignations.
The revelations come at a crucial time for the Federal Reserve’s credibility. The central bank characterized inflation as “transitory” last year and since then has been forced to ramp up rate hikes this year to cool down the economy.
On Friday, Bostic said that the errors were due to a misinterpretation of central bank rules. He said he sought to correct his mistakes “as soon as I became aware that my financial reporting did not meet the expressed or implicit expectations necessary to maintain the public’s trust.”
The Fed president added that he did not make any trades based on insider knowledge.
“I recognize it is my responsibility to understand and abide by every obligation of this office,” Bostic said. “I want to be clear: at no time did I knowingly authorize or complete a financial transaction based on nonpublic information or with any intent to conceal or sidestep my obligations of transparent and accountable reporting.”
Two Fed presidents resigned last year after disclosures showed they had traded individual stocks in 2020, a period during which the Fed intervened in markets due to the pandemic-induced recession.
Powell responded by instituting widespread personal-investing restrictions on senior officials. It was during the implementation of these restrictions that Bostic’s violations came to light.
The Fed said Friday that Chairman Jerome Powell had asked its inspector general to conduct a review of Bostic’s transactions and that the central bank would take action based on the results of the investigation.
US stocks fell Friday, giving up a big chunk of Thursday’s massive gains. Weak retail sales and rising bond yields overshadowed solid earnings from Dow components JPMorgan Chase (JPM) and UnitedHealth (UNH).
A big week of earnings lies ahead, with Goldman Sachs (GS), Netflix (NFLX), Tesla (TSLA) and IBM (IBM) among the many blue chips on tap to report results.
The Dow ended the day down more than 400 points, or 1.3%.
The S&P 500 lost 2.4%.
The Nasdaq Composite fell 3.1%.
The Dow still wound up eking out a gain for the week, rising more than 1% over the past five days. But the S&P 500 fell more than 1% and the Nasdaq tumbled more than 3%.
It’s not exactly a happy Friday on Wall Street. The major indexes are all down, and only a handful of stocks in the Dow are higher. But the few winners have something in common: strong earnings.
JPMorgan Chase (JPM), which posted results that were better than expected, was the biggest gainer in the Dow. The second-best performer? UnitedHealth (UNH), which also reported earnings that exceeded Wall Street’s forecasts.
The same was true over in the S&P 500. Big banks US Bancorp (USB) and Wells Fargo (WFC) led the way in that blue chip index. Citigroup (C) was also a leader. All three banks had impressive earnings Friday.
Delta (DAL) was also a big winner, extending its gains from Thursday, when…you guessed it…the airline reported solid profits.
Stocks were giving back a chunk of Thursday’s massive gains in midday trading Friday. The market was hovering at its lowest levels of the day just around noon.
Investors seemed more worried about sagging retail sales and continued inflation worries than excited by decent earnings from financial giants JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C).
The supermarket mega merger of Kroger (KR) and Albertsons (ACI) failed to entice stock shoppers either.
The Dow fell more than 300 points, or 1.1%.
The S&P 500 was down 1.9%.
The Nasdaq Composite slipped 2.5%.
US markets gave up their early-morning gains after a new consumer survey from the University of Michigan showed that expectations for elevated inflation were increasing.
Investors worried that the survey, closely watched by the Federal Reserve, could mean more painful rate hikes are on the horizon.
The Dow fell below 30,000 on the news, and the S&P 500 and Nasdaq also dropped to session lows.
The Dow lost 140 points, or 0.5%, on Friday morning.
The S&P 500 was down 1.1%.
The Nasdaq Composite was 1.4% lower.
Citigroup reported a 25% drop in year-over-year net income on Friday as the bank increased its loan loss reserves and activity in investment banking slumped.
“Banking was the business most adversely impacted by the macro environment with reduced deal flows and a lower appetite for M&A,” said Citigroup CEO Jane Fraser in the company’s statement, adding that “the backdrop for wealth management was difficult.”
Big banks have been slammed this year as the US faces a potential recession, which would lead to major loan losses and an accelerated slowdown in mergers and acquisitions.
Out of all the big bank stocks, Citi’s shares have tumbled the most – down 32% year-to-date.
There were some bright spots in the company’s third quarter report. The bank reported stronger-than-expected revenue, bringing in $18.51 billion in revenue versus the $18.25 billion expected by analysts, according to Refinitiv, a 6% increase since last year.
Personal banking revenue soared 10% year over year to $4.33 billion.
But the bank reported just $631 million in investment banking revenue for the third quarter, a steep decline of more than 60% year over year.
Citigroup’s Fraser will speak about earnings live at 11 a.m. ET.
Anyone who’s watched “Sesame Street” probably knows the classic song about how one object in a group differs from the rest. “One of these things is not like the others. One of these things just doesn’t belong.”
Well, Morgan Stanley (MS) was the one that didn’t belong Friday.
Shares of the investment bank fell 3% in early trading after the bank reported earnings and revenue that missed analysts’ forecasts. Meanwhile, shares of JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC) and US Bancorp (USB) were all higher after they each reported reasonably solid results.
So to quote another “Sesame Street” song, “it’s not easy being green” if you’re Morgan Stanley’s stock.
US stocks opened higher in the wake of a massive comeback Thursday that saw the Dow Jones Industrial Average surge 1,500 points from peak to trough and the S&P 500 post its widest trading range since March 2020.
Investors also considered mixed third-quarter earnings results from big banks. JPMorgan Chase and Wells Fargo stock soared after they beat revenue expectations. Morgan Stanley and Citigroup, meanwhile, both announced profit misses.
The Dow gained 249 points, or 0.8%, on Friday morning.
The S&P 500 was up 0.9%.
The Nasdaq Composite was 1% higher.
Americans were feeling more confident about the economy in early October — though that optimism may prove short lived, according to the latest University of Michigan consumer sentiment survey.
The preliminary consumer sentiment index for this month rose to 59.8 from 58.6 in September, having fallen to a record low of 50 in June when gas prices hit historic highs.
The decline in fuel costs since then has allowed consumers to feel a little more optimistic, but the recent decision by OPEC+ to cut oil production, along with the potential for further fallout from Russia’s war in Ukraine, threatens to push up the price at the pump again.
“Continued uncertainty over the future trajectory of prices, economies, and financial markets around the world indicate a bumpy road ahead for consumers,” said Joanne Hsu, Surveys of Consumers director, in a statement Friday.
Sentiment has perked up in recent months; however, it remains at levels similar to those seen during the Great Recession.
The preliminary October survey also showed that consumers are expecting inflation to hit 5.1% during the next 12 months and 2.9% within the next five years, up from September’s reading.
“I think you’re starting to see what looks like a turning point here with consumers becoming more pessimistic again, pulling back on spending going into the holiday season, which is a very important time of year for the consumer,” said Scott Brave, head of economic analytics at Morning Consult.
“That’s setting a tone that maybe this year is going to be a little bit different, maybe not quite as strong of a holiday shopping season as we’ve seen the last couple of years.”
Federal Reserve officials have grown anxious about inflation becoming entrenched in the United States, and consumers’ expectations factor heavily into that equation.
Wells Fargo CFO Mike Santomassimo said Friday that the bank is seeing “historically low delinquencies and high payment rates” from both consumers and business customers. But it doesn’t expect that to last.
“We are closely monitoring risks related to the continued impact of high inflation and increasing interest rates, as well as the broader geopolitical risks,” said Wells Fargo CEO Charlie Scharf in the company’s earnings statement. “While we do expect to see continued increases in delinquencies and ultimately credit losses, the timing remains unclear.”
Santomassimo elaborated on the company’s outlook on a call with journalists Friday, as reported by Reuters. He said that the bank will continue to “right size” its mortgage lending business due to lower volumes, although he gave no indication of how many jobs might be at risk in that unit.
Wells Fargo set aside $784 million for loan losses in the quarter, which reduced its net income to $3.5 billion from $5.1 billion a year earlier. The company also took $2 billion in accruals primarily related to a variety of historical matters, including litigation, customer remediation, and regulatory issues. The fact that its income would have risen without the accruals helped lift its shares 3% in premarket trading.
Monthly retail sales data released Friday were unchanged from the previous month, after rising by a revised 0.4% in August. The report reflects how American consumers, who are battling decades-high inflation, have pulled back on their purchasing amid aggressive rate hikes from the Federal Reserve.
Economists had predicted a 0.2% monthly increase, according to estimates from Refinitiv.
On an annual basis, sales were up 8.2% from September 2021, the Census Bureau reported.
The report showed that consumers pulled back their spending last month on cars, furniture, electronics, building materials, sporting goods and gas stations.
The retail sales data is not adjusted for inflation, which in September not only continued to remain at high levels but also lodged itself into more areas of the economy. The Consumer Price Index released Thursday showed that prices increased 0.4% from August and were up 8.2% for the 12 months ended in September, outpacing wage gains and leaving many US shoppers to rely on credit cards even for essentials.
The typical American household spent $445 more a month in September to buy the same goods and services they purchased a year ago, according to Moody’s Analytics.
“Inflation is costly,” said Ryan Sweet, senior director at Moody’s.
JPMorgan Chase CEO Jamie Dimon made waves in a CNBC interview earlier this week when he made gloomy comments about the global economy and potential recession for the United States. But the bank’s chief financial officer isn’t too worried about the possibility of a major housing meltdown leading to another downturn.
During a conference call with reporters Friday morning following the bank’s earnings release, JPMorgan Chase CFO Jeremy Barnum said in response to a question from CNN Business that he is “not expecting a big crash” in housing along the lines of what happened during the Great Recession of the late 2000s.
The bank’s home lending revenue plunged 34% from a year ago, due primarily to the super spike in interest rates leading to a slowdown in demand for mortgages.
“This is not surprising given the dramatic change in mortgage rates,” he said, adding that in the “very recent past, we were celebrating fantastic results.”
In other words, the housing market is cyclical and the bank isn’t too concerned about the ebbs and flows. Barnum also noted that, unlike in 2008, lending standards have tightened. And the fact that real estate prices have surged so much in recent years means that existing homeowners have a healthy financial cushion.
Dimon alluded to this as well in response to another question about his recession worries.
“It’s clear that the US consumer is very strong and spending money,” he said. “Even if we go into a recession, we’re going in with a healthy consumer.”
Investment banking powerhouse Morgan Stanley was hurt by the massive market volatility in the third quarter. The E-Trade owner reported steep declines in earnings and revenue for the past three months, missing Wall Street’s forecasts.
Shares of Morgan Stanley (MS) fell nearly 3% on the news. CEO James Gorman said in the earnings release that the bank was impacted by the “uncertain and difficult environment” and “challenging markets.”
Morgan Stanley, unlike rivals such as JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC), which also reported earnings Friday morning, has far less of a presence in consumer banking to fall back on during tumultuous times for the stock market.
But Morgan Stanley did get a boost from bond trading, thanks to surging Treasury yields following the Federal Reserve’s series of massive interest rate hikes.
A day after soaring stock futures are rising, buoyed by strong earnings from JPMorgan.
Dow futures were up 125 points or 0.5%.
S&P 500 futures rose 0.2%.
Nasdaq futures was 0.1% higher.
JPMorgan Chase reported a net profit of $9.7 billion, or $3.12 a share, in the third quarter. That was down 17% from a year ago. But profits (and revenue) topped forecasts, sending shares of JPMorgan Chase (JPM) up 2% in early trading.
The bank’s earnings were dragged down by a boost in reserves for potential default and a collapse in investment banking revenue as global deal activity dried up during the quarter due to market volatility.
But JPMorgan Chase CEO Jamie Dimon was upbeat.
“We continue to make all the investments that we need to grow our businesses and serve our customers,” Dimon said in a press release, adding that “in the U.S., consumers continue to spend with solid balance sheets, job openings are plentiful and businesses remain healthy.”
Still, Dimon conceded that “there are significant headwinds immediately in front of us – stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine, which is increasing all geopolitical risks, and the fragile state of oil supply and prices.”
Kroger announced it’s merging with Albertsons in a $24.6 billion deal, creating one of the largest grocery store chains in the United States with nearly 5,000 stores when combined.
“The combination creates a premier seamless ecosystem across 48 states and the District of Columbia, providing customers with a best-in-class shopping experience across both stores and digital channels,” Kroger said in a press release.
The merged company will give it greater scale to compete against Amazon, Walmart and smaller grocery store rivals.
Kroger said it would buy Albertsons for $34.10 a share — a roughly 30% premium above the grocery chain’s average share price over the course of the past month. Shares of Kroger (KR) slid 2% in premarket trading, while Albertsons soared more than 11%.
UK Prime Minister Liz Truss will hold a news conference Friday amid widespread speculation that she’s getting ready to ditch a big part of her economic strategy unveiled just three weeks ago.
Her “mini budget,” unveiled by finance minister Kwasi Kwarteng on Sept. 23, promised huge tax cuts and increased borrowing, sending the pound and government bonds crashing on fears that it would further juice inflation at a time when prices are already rising at their fastest rate in about 40 years.
That prompted the Bank of England to warn of a serious risk to UK financial stability and announce three separate interventions to avert a total meltdown that put some UK pension funds on the brink of default.
A day after soaring somewhat mysteriously, stock futures are in a holding pattern ahead of the start of third-quarter earnings season and a pair of economic reports.
JPMorgan, Wells Fargo, Citigroup, and Morgan Stanley are set to report their quarterly finances Friday.
Investors will also keep a close eye on a retail sales report at 8:30 am ET and a consumer sentiment report at 10 am ET. They will give investors insight into whether inflation and the Federal Reserve’s interest rate hikes are keeping Americans from spending.
Stocks:
Dow futures were up 30 points, or 0.1%.
S&P 500 futures fell 0.1%.
Nasdaq futures were 0.3% lower.
Fear & Greed Index: 23 = Extreme Fear
Oil & gas: US oil was down 0.7% to $88 a barrel. Average US gas prices fell to $3.90 a gallon.
Federal authorities are investigating Elon Musk in connection with his $44 billion acquisition of Twitter, the social media platform said in a court filing Thursday.
It is not clear which agencies may be carrying out the probe, and Twitter did not identify what specific actions by Musk US officials may be investigating. Twitter’s filing merely said authorities are looking into Musk’s “conduct” linked to the deal.
The company’s court filing elsewhere accused Musk’s legal team of failing to produce draft communications with the Securities and Exchange Commission and a slide presentation to the Federal Trade Commission as part of the two sides’ ongoing litigation over whether Musk can walk away from the deal.
