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Tag: Interest Rates

  • Fed raises interest rates half a point to highest level in 15 years

    Fed raises interest rates half a point to highest level in 15 years

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    The Federal Reserve on Wednesday raised its benchmark interest rate to the highest level in 15 years, indicating the fight against inflation is not over despite some promising signs lately.

    Keeping with expectations, the rate-setting Federal Open Market Committee voted to boost the overnight borrowing rate half a percentage point, taking it to a targeted range between 4.25% and 4.5%. The increase broke a string of four straight three-quarter point hikes, the most aggressive policy moves since the early 1980s.

    Along with the increase came an indication that officials expect to keep rates higher through next year, with no reductions until 2024. The expected “terminal rate,” or point where officials expect to end the rate hikes, was put at 5.1%, according to the FOMC’s “dot plot” of individual members’ expectations.

    The U.S. economy has slowed significantly from last year's rapid pace: Fed Chair Jerome Powell

    Investors initially reacted negatively to the expectation that rates may stay higher for longer, and stocks gave up earlier gains. During a news conference, Chairman Jerome Powell said it was important to keep up the fight against inflation so that the expectation of higher prices does not become entrenched.

    “Inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases,” the chair said at his post-meeting news conference. “But it will take substantially more evidence to have confidence that inflation is on a sustained downward” path.

    The new level marks the highest the fed funds rate has been since December 2007, just ahead of the global financial crisis and as the Fed was loosening policy aggressively to combat what would turn into the worst economic downturn since the Great Depression.

    This time around, the Fed is raising rates into what is expected to be a moribund economy in 2023.

    Members penciled in increases for the funds rate until it hits a median level of 5.1% next year, equivalent to a target range of 5%-5.25. At that point, officials are likely to pause to allow the impact of monetary policy tightening to make its way through the economy.

    The consensus then pointed to a full percentage point worth of rate cuts in 2024, taking the funds rate to 4.1% by the end of that year. That is followed by another percentage point of cuts in 2025 to a rate of 3.1%, before the benchmark settles into a longer-run neutral level of 2.5%.

    However, there was a fairly wide dispersion in the outlook for future years, indicating that members are uncertain about what is ahead for an economy dealing with the worst inflation it has seen since the early 1980s.

    The newest dot plot featured multiple members seeing rates heading considerably higher than the median point for 2023 and 2024. For 2023, seven of the 19 committee members – voters and nonvoters included – saw rates rising above 5.25%. Similarly, there were seven members who saw rates higher than the median 4.1% in 2024.

    The FOMC policy statement, approved unanimously, was virtually unchanged from November’s meeting. Some observers had expected the Fed to alter language that it sees “ongoing increases” ahead to something less committal, but that phrase remained in the statement.

    Fed officials believe raising rates helps take money out the economy, reducing demand and ultimately pulling prices lower after inflation spiked to its highest level in more than 40 years.

    The FOMC lowered its growth targets for 2023, putting expected GDP gains at just 0.5%, barely above what would be considered a recession. The GDP outlook for this year also was put at 0.5%. In the September projections, the committee expected 0.2% growth this year and 1.2% next.

    The committee also raised its median estimate for its favored core inflation measure to 4.8% for 2022, up 0.3 percentage point from the September outlook. Members slightly lowered their unemployment rate outlook for this year and bumped it a bit higher for the ensuing years.

    The rate hike follows consecutive reports showing progress in the inflation fight.

    The Labor Department reported Tuesday that the consumer price index rose just 0.1% in November, a smaller increase than expected as the 12-month rate dropped to 7.1%. Excluding food and energy, the core CPI rate was at 6%. Both measures were the lowest since December 2021. A level the Fed puts more weight on, the core personal consumption expenditures price index, fell to a 5% annual rate in October.

    However, all of those readings remain well above the Fed’s 2% target. Officials have stressed the need to see consistent declines in inflation and have warned against relying too much on trends over just a few months.

    Powell said the recent news was welcome but he still sees services inflation as too high.

    “There’s an expectation really that the services inflation will not move down so quickly, so we’ll have to stay at it,” he said. “We may have to raise rates higher to get where we want to go.”

    Central bankers still feel they have leeway to raise rates, as hiring remains strong and consumers, who drive about two-thirds of all U.S. economic activity, are continuing to spend.

    Nonfarm payrolls grew by a faster-than-expected 263,000 in November, while the Atlanta Fed is tracking GDP growth of 3.2% for the fourth quarter. Retail sales grew 1.3% in October and were up 8.3% on an annual basis, indicating that consumers so far are weathering the inflation storm.

    Inflation came about from a convergence of at least three factors: Outsized demand for goods during the pandemic that created severe supply chain issues, Russia’s invasion of Ukraine that coincided with a spike in energy prices, and trillions in monetary and fiscal stimulus that created a glut of dollars looking for a place to go.

    After spending much of 2021 dismissing the price increases as “transitory,” the Fed started raising interest rates in March of this year, first tentatively and then more aggressively, with the previous four increases in 0.75 percentage point increments. Prior to this year, the Fed had not raised rates more than a quarter point at a time in 22 years.

    The Fed also has been engaged in “quantitative tightening,” a process in which it is allowing proceeds from maturing bonds to roll off its balance sheet each month rather than reinvesting them.

    A capped total of $95 billion is being allowed to run off each month, resulting in a $332 billion decline in the balance sheet since early June. The balance sheet now stands at $8.63 trillion.

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  • The Fed lifts rates by half a point, acknowledging that inflation is easing | CNN Business

    The Fed lifts rates by half a point, acknowledging that inflation is easing | CNN Business

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    Washington, DC
    CNN
     — 

    The Federal Reserve approved a half-point interest rate hike on Wednesday, a smaller increase than in recent months and an acknowledgment that inflation is finally easing.

    The increase marks a shift for the central bank after an unprecedented year that includes seven-straight rate hikes as part of an aggressive campaign to try and bring down the highest inflation since the early 1980s.

    While lower than the four consecutive three-quarter-point hikes approved at the Fed’s previous meetings, Wednesday’s rate hike is still twice the size of the central bank’s customary quarter-point increase and will likely deepen the economic pain for millions of American businesses and households by pushing up the cost of borrowing even further.

    Fed officials will increase the rate that banks charge each other for overnight borrowing to a range of 4.25-4.5%, the highest since 2007.

    The Fed also released its highly anticipated Summary of Economic Projections, which includes what is colloquially known as the dot plot. Investors pay close attention to these forecasts, which show where each of its 19 leaders expect interest rates to go in the future, for clues about the path of rate hikes in the new year and beyond.

    The December projections showed a more aggressive monetary policy tightening path, with the median “dot” rising to a new peak in federal fund rates of 5-5.25% up from 4.5-4.75% in September. That would mean Fed officials expect to raise rates by half a percent more than they did three months ago, when the plot was last released.

    Policymakers also projected that PCE inflation, the Fed’s favored price gauge, would remain above its 2% target until at least 2025. Further projections showed souring expectations for the health of the US economy, with Fed officials now predicting that unemployment will rise to 4.6% by the end of 2023 and remain at that level through 2024. That’s 0.2 percentage points higher than the 4.4% rate they were expecting in September and significantly higher than the current 3.7% rate.

    GDP, a measure of economic output, is also projected to drop to 0.5% next year, down from 1.2% in September.

    The forecast will likely stoke investors’ and economists’ fear that the US economy will endure a recession next year. Federal Reserve Chair Jerome Powell said last month that there is still a chance the economy can avoid recession but said the odds are slim.

    “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing,” he said at an economic forum last month.

    Still, the economy has so far withstood the hikes. The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

    Fed Chair Powell is schedule to hold a post-meeting press conference at 2:30 p.m. Wednesday.

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  • Mortgage applications rose last week on lower rates

    Mortgage applications rose last week on lower rates

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    CNBC's Diana Olick reports on mortgage applications.

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  • Fed interest rate hike sends business loans to steepest cost since 2007, breaking 10% sticker shock level

    Fed interest rate hike sends business loans to steepest cost since 2007, breaking 10% sticker shock level

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    With the Federal Reserve’s latest rate hike adding half a percentage point to the cost of debt capital and reaching its highest level in 15 years, the majority of small business loans will hit the double-digit interest level for the first time since 2007.

    The cost of taking out loans, and making monthly interest payments on business debt already has been rising swiftly after successive mega 75 percentage point rate hikes from the Fed, but the 10% level is a psychological threshold that small business loan experts say will weigh on many entrepreneurs who have never experienced a loan market this elevated.

    Small Business Administration lenders are limited to a 3% maximum spread over the Prime Rate. With Wednesday’s rate hike raising Prime to 7.5%, the most common SBA loans will now surpass the 10% interest level. It’s the highest level for the Prime Rate since September 2007.

    To veteran small business lenders, it’s not a new experience.

    “Prime was 8.25% in May 1998 when I started in the SBA lending industry, 24 years ago,” said Chris Hurn, founder and CEO of small business lender Fountainhead. 

    Loans he made at that time were at the very common Prime+2.75% (then the maximum over Prime that any lender could charge on an SBA loan), or 11%. But that was the norm rather than a sea change in rates in a short period of time.

    “In less than a year, we will have gone from the 5-6% range to a doubling and it will have a tremendous psychological effect,” Hurn said.

    The monthly interest payment owners will be making isn’t very different from what’s already become one of the primary costs of Fed rate hikes on Main Street. Servicing debt at a time of input inflation and labor inflation is forcing business owners to make much tougher decisions and sacrifice margin. But there will be an added psychological effect among potential new applicants. “I think it’s started already,” Hurn said. “Business owners will be very careful taking out new debt next year,” he added.

    “Every 50 basis points costs more and there’s no denying it, psychologically, it is a big deal. Many business owners have never seen double-digits,” said Rohit Arora, co-founder and CEO of small business lending platform Biz2Credit. “Psychology matters as much as facts and it could be a tipping point. A few people over the past few weeks have said to me, ‘Wow, it will be double digits.’”

    A monthly NFIB survey of business owners released earlier this week found that the percentage of entrepreneurs who reported financing as their top business problem reached its highest reading since December 2018 — the last time the Fed was raising rates. Almost a quarter of small business owners said they are paying a higher rate on their most recent loan, and the highest since 2008. A majority (62%) of owners told NFIB they are not interested in applying for a loan.

    “The pain is already in, and there will be more,” Arora said.

    That’s because beyond the psychological threshold of the 10% interest level being breached, the expectation is that the Fed will keep rates elevated for an extended period of time. Even in slowing rate hikes and potentially stopping rate hikes as soon as early next year, there is no indication the Fed will move to cut rates, even if the economy enters a recession. The latest CNBC Fed Survey shows the market forecasting a peak Fed rate around 5% in March 2023 and the rate being held there for nine months. Survey respondents said a recession, which 61% of them expect next year, would not alter that “higher for longer” view.

    The latest Fed projection for the terminal rate released on Wednesday rose to 5.1%.

    This problem will be exacerbated by the fact that as the economy slows the need to borrow will increase for business owners facing declining sales, and unlikely to see additional support from the Fed or federal government.

    Getting inflation down from 9% to 7% was likely to be the quicker change than getting inflation from 7% to 4% or 3%, Arora said. “It will take a lot of time and create more pain for everyone,” he said. And if rates don’t come down until late 2023 or 2024, that means “a full year of high payments and low growth, and even if inflation is coming down, not coming down at a pace to offset other costs,” he added.

    As economist and former Treasury Secretary Larry Summers recently noted, the economy may be moving into the first recession in the past four decades to feature higher interest rates and inflation.

    “We are in for a long haul problem,” Arora said. “This recession won’t be as deep as 2008 but we also won’t see a V-shaped recovery. Coming out will be slow. The problem isn’t the rate increase anymore, the biggest challenge will be staying at these levels for quite some time.”

    Margins already have been hit as a result of the rising costs of monthly payments, and that means more business owners will cut back on investments back into the business and expansion plans.

    “Talking to small business owners looking for financing, it’s starting to slow things down,” Hurn said.

    There is now more focus on cutting costs amid changing expectations for revenue and profit growth.

    “It’s having the effect the Fed wants but at the expense of the economy and expenses of these smaller companies that are not as well capitalized,” he said. “This is how we have to tame inflation and if it hasn’t already been painful, it will be more painful.” 

    Margins have been hit as a result of the costs of monthly payments — even at a low interest rate, the yearlong SBA EIDL loan repayment waiver period has now ended for the majority of business owners eligible for that debt during the pandemic, adding to the monthly business debt costs — and investments back into business are slowing down, while expansion plans are being put on hold.

    Economic uncertainty will result in more business owners borrowing only for immediate working capital needs. Ultimately, even core capital expenditures will get hit — if they have not been already — from equipment to marketing and hiring. “Everyone is expecting 2023 will be a painful year,” Arora said.

    Even in bad economic times, there is always a need for debt capital, but it will curtail the interest in growth-oriented capital, whether it’s a new marketing plan, the new piece of equipment making things more efficient or designed to increase scale, or buying the company down the street. “There will continue to be demand for regular business loans,” Hurn said.  

    While debt coverage ratios — the cash flow level needed to make monthly interest payments — are flashing warning signs, the credit profile of business owners hasn’t weakened across the board, but banks will continue to tighten lending standards into next year. Small business loan approval percentages at big banks dropped in November to the second lowest total in 2022 (14.6%), according to the latest Biz2Credit Small Business Lending Index released this week; and also dropped at small banks (21.1%).

    One factor yet to fully play out in the commercial lending market is the slowdown already in the economy but not yet in the interim financial statements that bank lenders use to review loan applications. Business conditions were stronger in the first half of the year and as full year financial statements and tax returns from businesses reflect second half economic deterioration, and likely no year-over-year growth for many businesses, lenders will be denying more loans.

    This implies demand for SBA loans will remain strong relative to traditional bank loans. But by the time the Fed stops raising rates, business loans could be at 11.5% or 12%, based on current expectations for Q2 2023. “When I made my first SBA loan it was 12% and Prime was 9.75%, but not everyone has the history I have,” Hurn said.

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  • Here’s what the Federal Reserve’s half-point rate hike means for you

    Here’s what the Federal Reserve’s half-point rate hike means for you

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    The Federal Reserve raised its target federal funds rate by 0.5 percentage points at the end of its two-day meeting Wednesday in a continued effort to cool inflation.

    Although this marks a more typical hike compared to the super-size 0.75 percentage point moves at each of the last four meetings, the central bank is far from finished, according to Greg McBride, chief financial analyst at Bankrate.com.

    “The months ahead will see the Fed raising interest rates at a more customary pace,” McBride said.

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    The latest move is only one part of a rate-hiking cycle, which aims to bring down inflation without tipping the economy into a recession, as some feared would have happened already.

    “I thought we would be in the midst of a recession at this point, and we’re not,” said Laura Veldkamp, a professor of finance and economics at Columbia University Business School.

    “Every single time since World War II the Federal Reserve has acted to reduce inflation, unemployment has shot up, and we are not seeing that this time, and that’s what stands out,” she said. “I couldn’t really imagine a better scenario.”

    Still, the combination of higher rates and inflation has hit household budgets particularly hard.

    What the federal funds rate means for you

    The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Whether directly or indirectly, higher Fed rates influence borrowing costs for consumers and, to a lesser extent, the rates they earn on savings accounts.

    For now, this leaves many Americans in a bind as inflation and higher prices cause more people to lean on credit just when interest rates rise at the fastest pace in decades.

    With more economic uncertainty ahead, consumers should be taking specific steps to stabilize their finances — including paying down debt, especially costly credit card and other variable rate debt, and increasing savings, McBride advised.

    Pay down high-rate debt

    Since most credit cards have a variable interest rate, there’s a direct connection to the Fed’s benchmark, so short-term borrowing rates are already heading higher.

    Credit card annual percentage rates are now over 19%, on average, up from 16.3% at the beginning of the year, according to Bankrate.

    The cost of existing credit card debt has already increased by at least $22.9 billion due to the Fed’s rate hikes, and it will rise by an additional $3.2 billion with this latest increase, according to a recent analysis by WalletHub.

    If you’re carrying a balance, “grab one of the zero-percent or low-rate balance transfer offers,” McBride advised. Cards offering 15, 18 and even 21 months with no interest on transferred balances are still widely available, he said.

    “This gives you a tailwind to get the debt paid off and shields you from the effect of additional rate hikes still to come.”

    Otherwise, try consolidating and paying off high-interest credit cards with a lower interest home equity loan or personal loan.

    Consumers with an adjustable-rate mortgage or home equity lines of credit may also want to switch to a fixed rate. 

    How to know if we are in a recession

    Because longer-term 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the broader economy, those homeowners won’t be immediately impacted by a rate hike.

    However, the average interest rate for a 30-year fixed-rate mortgage is around 6.33% this week — up more than 3 full percentage points from 3.11% a year ago.

    “These relatively high rates, combined with persistently high home prices, mean that buying a home is still a challenge for many,” said Jacob Channel, senior economic analyst at LendingTree.

    The increase in mortgage rates since the start of 2022 has the same impact on affordability as a 32% increase in home prices, according to McBride’s analysis. “If you had been approved for a $300,000 mortgage in the beginning of the year, that’s the equivalent of less than $204,500 today.”

    Anyone planning to finance a new car will also shell out more in the months ahead. Even though auto loans are fixed, payments are similarly getting bigger because interest rates are rising.

    The average monthly payment jumped above $700 in November compared to $657 earlier in the year, despite the average amount financed and average loan term lengths staying more or less the same, according to data from Edmunds.

    “Just as the industry is starting to see inventory levels get to a better place so that shoppers can actually find the vehicles they’re looking for, interest rates have risen to the point where more consumers are facing monthly payments that they likely cannot afford,” said Ivan Drury, Edmunds’ director of insights. 

    Federal student loan rates are also fixed, so most borrowers won’t be impacted immediately by a rate hike. However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Libor, prime or T-bill rates — which means that as the Fed raises rates, borrowers will likely pay more in interest, although how much more will vary by the benchmark.

    That makes this a particularly good time to identify the loans you have outstanding and see if refinancing makes sense.

    Shop for higher savings rates

    While the Fed has no direct influence on deposit rates, they tend to be correlated to changes in the target federal funds rate, and the savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.24%, on average.

    Thanks, in part, to lower overhead expenses, the average online savings account rate is closer to 4%, much higher than the average rate from a traditional, brick-and-mortar bank.

    “The good news is savers are seeing the best returns in 14 years, if they are shopping around,” McBride said.

    Top-yielding certificates of deposit, which pay between 4% and 5%, are even better than a high-yield savings account.

    And yet, because the inflation rate is now higher than all of these rates, any money in savings loses purchasing power over time. 

    What’s coming next for interest rates

    Consumers should prepare for even higher interest rates in the coming months.

    Even though the Fed has already raised rates seven times this year, more hikes are on the horizon as the central bank slowly reins in inflation.

    Recent data show that these moves are starting to take affect, including a better-than-expected consumer prices report for November. However, inflation remains well above the Fed’s 2% target.

    “They will still be raising interest rates now and into 2023,” McBride said. “The ultimate stopping point is unknown, as is how long rates will stay at that eventual destination.”

    Subscribe to CNBC on YouTube.

    Correction: A previous version of this story misstated the extent of previous rate hikes.

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  • Best stock picks for 2023: Here are Wall Street analysts’ most heavily favored choices

    Best stock picks for 2023: Here are Wall Street analysts’ most heavily favored choices

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    Following a sharp and sustained rise in interest rates, U.S. stocks have taken a broad beating this year.

    But 2023 may bring very different circumstances.

    Below are lists of analysts’ favorite stocks among the benchmark S&P 500
    SPX,
    the S&P 400 Mid Cap Index
    MID
    and the S&P Small Cap 600 Index
    SML
    that are expected to rise the most over the next year. Those lists are followed by a summary of opinions of all 30 stocks in the Dow Jones Industrial Average
    DJIA.

    Stocks rallied on Dec. 13 when the November CPI report showed a much slower inflation pace than economists had expected. Investors were also anticipating the Federal Open Market Committee’s next monetary policy announcement on Dec. 14. The consensus among economists polled by FactSet is for the Federal Reserve to raise the federal funds rate by 0.50% to a target range of 4.50% to 4.75%.

    Read: 5 things to watch when the Fed makes its interest-rate decision

    A 0.50% increase would be a slowdown from the four previous increases of 0.75%. The rate began 2022 in a range of zero to 0.25%, where it had sat since March 2020.

    A pivot for the Fed Reserve and the possibility that the federal funds rate will reach its “terminal” rate (the highest for this cycle) in the near term could set the stage for a broad rally for stocks in 2023.

    Wall Street’s large-cap favorites

    Among the S&P 500, 92 stocks are rated “buy” or the equivalent by at least 75% of analysts working for brokerage firms. That number itself is interesting — at the end of 2021, 93 of the S&P 500 had this distinction. Meanwhile, the S&P 500 has declined 16% in 2022, with all sectors down except for energy, which has risen 53%, and the utilities sector, which his risen 1% (both excluding dividends).

    Here are the 20 stocks in the S&P 500 with at least 75% “buy” or equivalent ratings that analysts expect to rise the most over the next year, based on consensus price targets:

    Company

    		 Ticker

    		 Industry

    		 Closing price – Dec. 12

    		 Consensus price target

    		 Implied 12-month upside potential

    		 Share “buy” ratings

    		 Price change – 2022 through Dec. 12
    EQT Corp.

    		 EQT Oil and Gas Production

    		 $36.91

    		 $59.70

    		 62%

    		 78%

    		 69%
    Catalent Inc.

    		 CTLT Pharmaceuticals

    		 $45.50

    		 $72.42

    		 59%

    		 75%

    		 -64%
    Amazon.com Inc.

    		 AMZN Internet Retail

    		 $90.55

    		 $136.02

    		 50%

    		 91%

    		 -46%
    Global Payments Inc.

    		 GPN Misc. Commercial Services

    		 $99.64

    		 $147.43

    		 48%

    		 75%

    		 -26%
    Signature Bank

    		 SBNY Regional Banks

    		 $122.73

    		 $180.44

    		 47%

    		 78%

    		 -62%
    Salesforce Inc.

    		 CRM Software

    		 $133.11

    		 $195.59

    		 47%

    		 80%

    		 -48%
    Bio-Rad Laboratories Inc. Class A

    		 BIO Medical Specialties

    		 $418.28

    		 $591.00

    		 41%

    		 100%

    		 -45%
    Zoetis Inc. Class A

    		 ZTS Pharmaceuticals

    		 $152.86

    		 $212.80

    		 39%

    		 87%

    		 -37%
    Delta Air Lines Inc.

    		 DAL Airlines

    		 $34.77

    		 $48.31

    		 39%

    		 90%

    		 -11%
    Diamondback Energy Inc.

    		 FANG Oil and Gas Production

    		 $134.21

    		 $182.33

    		 36%

    		 84%

    		 24%
    Caesars Entertainment Inc

    		 CZR Casinos/ Gaming

    		 $50.27

    		 $67.79

    		 35%

    		 81%

    		 -46%
    Alphabet Inc. Class A

    		 GOOGL Internet Software/ Services

    		 $93.31

    		 $125.70

    		 35%

    		 92%

    		 -36%
    Halliburton Co.

    		 HAL Oilfield Services/ Equipment

    		 $34.30

    		 $45.95

    		 34%

    		 86%

    		 50%
    Alaska Air Group Inc.

    		 ALK Airlines

    		 $45.75

    		 $61.08

    		 34%

    		 93%

    		 -12%
    Targa Resources Corp.

    		 TRGP Gas Distributors

    		 $70.42

    		 $93.95

    		 33%

    		 95%

    		 35%
    Charles River Laboratories International Inc.

    		 CRL Misc. Commercial Services

    		 $201.94

    		 $269.25

    		 33%

    		 88%

    		 -46%
    ServiceNow Inc.

    		 NOW Information Technology Services

    		 $401.64

    		 $529.83

    		 32%

    		 92%

    		 -38%
    Take-Two Interactive Software Inc.

    		 TTWO Software

    		 $102.61

    		 $135.04

    		 32%

    		 79%

    		 -42%
    EOG Resources Inc.

    		 EOG Oil and Gas Production

    		 $124.06

    		 $158.24

    		 28%

    		 82%

    		 40%
    Southwest Airlines Co.

    		 LUV Airlines

    		 $38.94

    		 $49.56

    		 27%

    		 76%

    		 -9%
    Source: FactSet

    Most of the companies on the S&P 500 list expected to soar in 2023 have seen large declines in 2022. But the company at the top of the list, EQT Corp.
    EQT,
    is an exception. The stock has risen 69% in 2022 and is expected to add another 62% over the next 12 months. Analysts expect the company’s earnings per share to double during 2023 (in part from its expected acquisition of THQ), after nearly a four-fold EPS increase in 2022.

    Shares of Amazon.com Inc.
    AMZN
    are expected to soar 50% over the next year, following a decline of 46% so far in 2022. If the shares were to rise 50% from here to the price target of $136.02, they would still be 18% below their closing price of 166.72 at the end of 2021.

    Read: Here’s why Amazon is Citi’s top internet stock idea

    You can see the earnings estimates and more for any stock in this article by clicking on its ticker.

    Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

    Mid-cap stocks expected to rise the most

    The lists of favored stocks are limited to those covered by at least five analysts polled by FactSet.

    Among components of the S&P 400 Mid Cap Index, there are 84 stocks with at least 75% “buy” ratings. Here at the 20 expected to rise the most over the next year:

    Company

    		 Ticker

    		 Industry

    		 Closing price – Dec. 12

    		 Consensus price target

    		 Implied 12-month upside potential

    		 Share “buy” ratings

    		 Price change – 2022 through Dec. 12
    Arrowhead Pharmaceuticals Inc.

    		 ARWR Biotechnology

    		 $31.85

    		 $69.69

    		 119%

    		 83%

    		 -52%
    Lantheus Holdings Inc.

    		 LNTH Medical Specialties

    		 $54.92

    		 $102.00

    		 86%

    		 100%

    		 90%
    Progyny Inc.

    		 PGNY Misc. Commercial Services

    		 $31.21

    		 $55.57

    		 78%

    		 100%

    		 -38%
    Coherent Corp.

    		 COHR Electronic Equipment/ Instruments

    		 $35.41

    		 $60.56

    		 71%

    		 84%

    		 -48%
    Exelixis Inc.

    		 EXEL Biotechnology

    		 $16.08

    		 $26.07

    		 62%

    		 81%

    		 -12%
    Darling Ingredients Inc.

    		 DAR Food: Specialty/ Candy

    		 $61.17

    		 $97.36

    		 59%

    		 93%

    		 -12%
    Perrigo Co. PLC

    		 PRGO Pharmaceuticals

    		 $31.83

    		 $49.25

    		 55%

    		 100%

    		 -18%
    Mattel Inc.

    		 MAT Recreational Products

    		 $17.39

    		 $26.58

    		 53%

    		 87%

    		 -19%
    ACI Worldwide Inc.

    		 ACIW Software

    		 $20.75

    		 $31.40

    		 51%

    		 83%

    		 -40%
    Topgolf Callaway Brands Corp.

    		 MODG Recreational Products

    		 $21.99

    		 $32.91

    		 50%

    		 83%

    		 -20%
    Dycom Industries Inc.

    		 DY Engineering and Construction

    		 $86.03

    		 $128.13

    		 49%

    		 100%

    		 -8%
    Travel + Leisure Co.

    		 TNL Hotels/ Resorts/ Cruiselines

    		 $37.98

    		 $56.00

    		 47%

    		 75%

    		 -31%
    Frontier Communications Parent Inc.

    		 FYBR Telecommunications

    		 $25.21

    		 $36.18

    		 44%

    		 82%

    		 -15%
    Manhattan Associates Inc.

    		 MANH Software

    		 $120.06

    		 $171.80

    		 43%

    		 88%

    		 -23%
    MP Materials Corp Class A

    		 MP Other Metals/ Minerals

    		 $31.39

    		 $44.79

    		 43%

    		 92%

    		 -31%
    Lumentum Holdings Inc.

    		 LITE Electrical Products

    		 $54.45

    		 $76.44

    		 40%

    		 76%

    		 -49%
    Tenet Healthcare Corp.

    		 THC Hospital/ Nursing Management

    		 $44.22

    		 $62.00

    		 40%

    		 80%

    		 -46%
    Repligen Corp.

    		 RGEN Pharmaceuticals

    		 $166.88

    		 $233.10

    		 40%

    		 82%

    		 -37%
    STAAR Surgical Co.

    		 STAA Medical Specialties

    		 $59.57

    		 $82.67

    		 39%

    		 82%

    		 -35%
    Carlisle Cos. Inc.

    		 CSL Building Products

    		 $251.99

    		 $348.33

    		 38%

    		 75%

    		 2%
    Source: FactSet
    Wall Street’s favorite small-cap names

    Among companies in the S&P Small Cap 600 Index, 91 are rated “buy” or the equivalent by at least 75% of analysts. Here are the 20 with the highest 12-month upside potential indicated by consensus price targets:

    Company

    		 Ticker

    		 Industry

    		 Closing price – Dec. 12

    		 Consensus price target

    		 Implied 12-month upside potential

    		 Share “buy” ratings

    		 Price change – 2022 through Dec. 12
    UniQure NV

    		 QURE Biotechnology

    		 $22.99

    		 $51.29

    		 123%

    		 95%

    		 11%
    Cara Therapeutics Inc.

    		 CARA Biotechnology

    		 $11.34

    		 $23.63

    		 108%

    		 88%

    		 -7%
    Vir Biotechnology Inc.

    		 VIR Biotechnology

    		 $25.50

    		 $53.00

    		 108%

    		 75%

    		 -39%
    Dynavax Technologies Corp.

    		 DVAX Biotechnology

    		 $11.22

    		 $23.20

    		 107%

    		 100%

    		 -20%
    Thryv Holdings Inc.

    		 THRY Advertising/ Marketing Services

    		 $18.40

    		 $36.75

    		 100%

    		 100%

    		 -55%
    Artivion Inc.

    		 AORT Medical Specialties

    		 $12.93

    		 $23.13

    		 79%

    		 83%

    		 -36%
    Cytokinetics Inc.

    		 CYTK Pharmaceuticals

    		 $38.33

    		 $67.43

    		 76%

    		 100%

    		 -16%
    Harsco Corp.

    		 HSC Environmental Services

    		 $7.17

    		 $12.30

    		 72%

    		 80%

    		 -57%
    Ligand Pharmaceuticals Inc.

    		 LGND Pharmaceuticals

    		 $64.80

    		 $110.83

    		 71%

    		 100%

    		 -35%
    Corcept Therapeutics Inc.

    		 CORT Pharmaceuticals

    		 $20.84

    		 $34.20

    		 64%

    		 80%

    		 5%
    Payoneer Global Inc.

    		 PAYO Misc. Commercial Services

    		 $5.70

    		 $9.33

    		 64%

    		 100%

    		 -22%
    Xencor Inc.

    		 XNCR Biotechnology

    		 $28.69

    		 $46.71

    		 63%

    		 93%

    		 -28%
    Pacira Biosciences Inc.

    		 PCRX Pharmaceuticals

    		 $45.50

    		 $72.90

    		 60%

    		 80%

    		 -24%
    BioLife Solutions Inc.

    		 BLFS Chemicals

    		 $19.72

    		 $31.38

    		 59%

    		 89%

    		 -47%
    Customers Bancorp Inc.

    		 CUBI Regional Banks

    		 $30.00

    		 $47.63

    		 59%

    		 75%

    		 -54%
    ModivCare Inc.

    		 MODV Other Transportation

    		 $92.22

    		 $145.83

    		 58%

    		 100%

    		 -38%
    Stride Inc.

    		 LRN Consumer Services

    		 $32.56

    		 $51.25

    		 57%

    		 100%

    		 -2%
    Ranger Oil Corp. Class A

    		 ROCC Oil and Gas Production

    		 $36.98

    		 $58.00

    		 57%

    		 100%

    		 37%
    Outfront Media Inc.

    		 OUT Real Estate Investment Trusts

    		 $17.59

    		 $27.00

    		 53%

    		 83%

    		 -34%
    Walker & Dunlop Inc.

    		 WD Finance/ Rental/ Leasing

    		 $82.22

    		 $125.20

    		 52%

    		 100%

    		 -46%
    Source: FactSet
    The Dow

    Here are all 30 components of the Dow Jones Industrial Average ranked by how much analysts expect their prices to rise over the next year:

    Company

    		 Ticker

    		 Industry

    		 Closing price – Dec. 12

    		 Consensus price target

    		 Implied 12-month upside potential

    		 Share “buy” ratings

    		 Price change – 2022 through Dec. 12
    Salesforce Inc.

    		 CRM Software

    		 $133.11

    		 $195.59

    		 47%

    		 80%

    		 -48%
    Walt Disney Co.

    		 DIS Movies/ Entertainment

    		 $94.66

    		 $119.60

    		 26%

    		 82%

    		 -39%
    Apple Inc.

    		 AAPL Telecommunications Equipment

    		 $144.49

    		 $173.70

    		 20%

    		 74%

    		 -19%
    Verizon Communications Inc.

    		 VZ Telecommunications

    		 $37.95

    		 $44.60

    		 18%

    		 21%

    		 -27%
    Visa Inc. Class A

    		 V Misc.s Commercial Services

    		 $214.59

    		 $249.33

    		 16%

    		 86%

    		 -1%
    Microsoft Corp.

    		 MSFT Software

    		 $252.51

    		 $293.06

    		 16%

    		 91%

    		 -25%
    Chevron Corp.

    		 CVX Integrated Oil

    		 $169.75

    		 $191.20

    		 13%

    		 54%

    		 45%
    Cisco Systems Inc.

    		 CSCO Information Technology Services

    		 $49.30

    		 $53.76

    		 9%

    		 44%

    		 -22%
    UnitedHealth Group Inc.

    		 UNH Managed Health Care

    		 $545.86

    		 $593.30

    		 9%

    		 85%

    		 9%
    Goldman Sachs Group Inc.

    		 GS Investment Banks/ Brokers

    		 $363.18

    		 $392.63

    		 8%

    		 59%

    		 -5%
    Walmart Inc.

    		 WMT Specialty Stores

    		 $148.02

    		 $159.86

    		 8%

    		 72%

    		 2%
    JPMorgan Chase & Co.

    		 JPM Banks

    		 $134.21

    		 $143.84

    		 7%

    		 59%

    		 -15%
    Home Depot Inc.

    		 HD Home Improvement Chains

    		 $327.98

    		 $346.61

    		 6%

    		 61%

    		 -21%
    American Express Co.

    		 AXP Finance/ Rental/ Leasing

    		 $157.31

    		 $164.57

    		 5%

    		 43%

    		 -4%
    McDonald’s Corp.

    		 MCD Restaurants

    		 $276.62

    		 $288.67

    		 4%

    		 72%

    		 3%
    Johnson & Johnson

    		 JNJ Pharmaceuticals

    		 $177.84

    		 $185.35

    		 4%

    		 36%

    		 4%
    Coca-Cola Co.

    		 KO Beverages: Non-Alcoholic

    		 $63.97

    		 $66.62

    		 4%

    		 73%

    		 8%
    Boeing Co.

    		 BA Aerospace and Defense

    		 $186.27

    		 $192.69

    		 3%

    		 77%

    		 -7%
    Intel Corp.

    		 INTC Semiconductors

    		 $28.69

    		 $29.54

    		 3%

    		 13%

    		 -44%
    Walgreens Boots Alliance Inc.

    		 WBA Drugstore Chains

    		 $41.06

    		 $42.24

    		 3%

    		 17%

    		 -21%
    Merck & Co. Inc.

    		 MRK Pharmaceuticals

    		 $108.97

    		 $110.62

    		 2%

    		 65%

    		 42%
    Caterpillar Inc.

    		 CAT Trucks/ Construction/ Farm Machinery

    		 $233.06

    		 $236.23

    		 1%

    		 41%

    		 13%
    Honeywell International Inc.

    		 HON Aerospace and Defense

    		 $214.50

    		 $217.35

    		 1%

    		 54%

    		 3%
    Nike Inc. Class B

    		 NKE Apparel/ Footwear

    		 $112.07

    		 $112.58

    		 0%

    		 64%

    		 -33%
    3M Co.

    		 MMM Industrial Conglomerates

    		 $126.85

    		 $127.30

    		 0%

    		 5%

    		 -29%
    Procter & Gamble Co.

    		 PG Household/ Personal Care

    		 $152.47

    		 $150.22

    		 -1%

    		 59%

    		 -7%
    Travelers Companies Inc.

    		 TRV Multi-Line Insurance

    		 $187.11

    		 $184.24

    		 -2%

    		 18%

    		 20%
    Amgen Inc.

    		 AMGN Biotechnology

    		 $276.78

    		 $264.79

    		 -4%

    		 24%

    		 23%
    Dow Inc.

    		 DOW Chemicals

    		 $51.11

    		 $48.73

    		 -5%

    		 15%

    		 -10%
    International Business Machines Corp.

    		 IBM Information Technology Services

    		 $149.21

    		 $140.29

    		 -6%

    		 33%

    		 12%
    Source: FactSet

    Don’t miss: 10 Dividend Aristocrat stocks expected by analysts to rise up to 54% in 2023

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  • What to expect from this week’s Fed meeting | CNN Business

    What to expect from this week’s Fed meeting | CNN Business

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    New York
    CNN
     — 

    The Federal Reserve is expected to raise interest rates by half a point at the conclusion of its two-day policy meeting on Wednesday, an indication that the central bank is pulling back on its aggressive stance as signs begin to emerge that inflation may be easing.

    Although that increase would be smaller than the three-quarter-point hikes announced at the past four Fed meetings, it’s nothing to scoff at.

    It’s still double the Fed’s customary quarter-point hike, and a sizable increase that will likely cause economic pain for millions of American businesses and households by pushing up the cost of borrowing for homes, cars and other loans.

    The Fed’s anticipated action would increase the rate that banks charge each other for overnight borrowing to a range of between 4.25% and 4.5%, the highest since 2007.

    Federal Reserve Chairman Jerome Powell confirmed last month that smaller rate hikes could be expected, saying: “The time for moderating the pace of rate increases may come as soon as the December meeting.”

    But while inflation is unlikely to slow dramatically any time soon, partly due to continued pressure on wages amid a shortage of workers, Wall Street appears to believe the Fed will eventually be forced to pivot away from, or even reverse its regimen of rate hikes. Traders are largely pricing in rate cuts in the second half of 2023.

    The Fed will conclude its rate hike regimen by the second quarter of next year, predicted JPMorgan analysts in a recent note. “With inflation continuing to fade and fiscal policy likely on hold, the Fed is likely to end its tightening cycle early in the new year and inflation could begin to ease before the end of 2023,” they wrote. The analysts expect two quarter-point hikes in the first half of 2023.

    But the average period between peak interest rates and the first reductions by the Fed is 11 months, which could mean that even if the central bank stops actively hiking rates, they could remain elevated into 2024.

    Investors will closely read the Fed’s economic outlook, the Summary of Economic Projections, which is also due out Wednesday. And they will watch Powell’s press conferences for clues about what’s to come — though they may end up sorely disappointed.

    ​”We expect Fed Chair Powell will insist on the need to hold policy at a restrictive level for some time to bring inflation down toward the 2% target,” wrote Gregory Daco, chief economist at EY-Parthenon, in a note to clients Monday. “This will serve to push back against current market pricing … Powell will stress that history cautions strongly against prematurely loosening policy.”

    The Fed has increased its benchmark lending rate six times this year in an attempt to discourage borrowing, cool the economy and bring down historically high inflation that peaked at 9.1% over the summer.

    Even if interest rate hikes do ease off, they will remain high, and economists are largely expecting that the US economy will endure a recession next year. Powell said in November that there is still a chance the economy avoids recession but the odds are slim, noting: “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing.”

    In an interview that aired on CBS on Sunday, Treasury Secretary Janet Yellen — Powell’s predecessor at the Fed — said there is “a risk of a recession. But it certainly isn’t, in my view, something that is necessary to bring inflation down.”

    And the economy has so far withstood the Fed’s aggressive rate hikes. The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

    The Fed isn’t acting alone, it’s just one of nine central banks expected to make a rate announcement this week. Landing softly on the ever-narrowing path between high inflation and recession is a global concern as central banks across the world contend with similar economic problems.

    The European Central Bank, the Bank of England and the Swiss National Bank are expected to follow the United States with half-point moves of their own on Thursday. Norway, Mexico, Taiwan, Colombia and the Philippines will also likely increase their borrowing costs this week.

    The Federal Reserve announces its rate hike decision Wednesday at 2 p.m., followed by a press conference with Chair Powell at 2:30 p.m.

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  • The Federal Reserve is about to hike interest rates one last time this year. Here’s how it may affect you

    The Federal Reserve is about to hike interest rates one last time this year. Here’s how it may affect you

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    The Federal Reserve is expected on Wednesday to raise interest rates for the seventh time this year to combat stubborn inflation. 

    The U.S. central bank will likely approve a 0.5 percentage point hike, a more typical pace compared with the super-size 75 basis point moves at each of the last four meetings.

    This would push benchmark borrowing rates to a target range of 4.25% to 4.5%. Although that’s not the rate consumers pay, the Fed’s moves still affect the rates consumers see every day.

    Why a smaller rate hike may be ‘pretty good news’

    By raising rates, the Fed makes it costlier to take out a loan, causing people to borrow and spend less, effectively pumping the brakes on the economy and slowing down the pace of price increases. 

    “For most people this is pretty good news because prices are starting to stabilize,” said Laura Veldkamp, a professor of finance and economics at Columbia University Business School. “That’s going to bring a lot of reassurance to households.”

    However, “there are some households that will be hurt by this,” she added — particularly those with variable rate debt.

    For example, most credit cards come with a variable rate, which means there’s a direct connection to the Fed’s benchmark rate.

    But it doesn’t stop there.

    More from Personal Finance:
    Just 12% of adults, and 29% of millionaires, feel ‘wealthy‘
    35% of millionaires say they won’t have enough to retire
    Inflation boosts U.S. household spending by $433 a month

    What the Fed’s rate hike means for you

    Another increase in the prime rate will send financing costs even higher for many other forms of consumer debt. On the flip side, higher interest rates also mean savers will earn more money on their deposits.

    “Credit card rates are at a record high and still increasing,” said Greg McBride, chief financial analyst at Bankrate.com. “Auto loan rates are at an 11-year high, home equity lines of credit are at a 15-year high, and online savings account and CD [certificate of deposit] yields haven’t been this high since 2008.”

    Here’s a breakdown of how increases in the benchmark interest rate have impacted everything from mortgages and credit cards to car loans, student debt and savings:

    1. Mortgages

    Although 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.

    “Though they are falling, mortgage rates are still at a more than 10-year high,” said Jacob Channel, senior economic analyst at LendingTree.

    The average rate for a 30-year, fixed-rate mortgage currently sits at 6.33%, down from mid-November, when it peaked at 7.08%.

    For would-be buyers, a 30-year, fixed-rate mortgage on a $300,000 loan would cost about $1,283 a month at last year’s 3.11% rate. If you paid today’s 6.33% instead, that would cost an extra $580 a month or $6,960 more a year and another $208,800 over the lifetime of the loan, Channel calculated.

    Adjustable-rate mortgages, or ARMs, and home equity lines of credit, or HELOCs, are pegged to the prime rate. As the federal funds rate rises, the prime rate does, as well, and these rates follow suit. Most ARMs adjust once a year, but a HELOC adjusts right away. Already, the average rate for a HELOC is up to 7.3% from 4.24% earlier in the year.

    2. Credit cards

    Credit card annual percentage rates are now more than 19%, on average, up from 16.3% at the beginning of the year, according to Bankrate.

    “Even those with the best credit card can expect to be offered APRs of 18% and higher,” said Matt Schulz, LendingTree’s chief credit analyst.

    But “rates aren’t just going up on new cards,” he added. “The rate you’re paying on your current credit card is likely going up, too.”

    Further, households are increasingly leaning on credit cards to afford basic necessities since incomes have not kept pace with inflation, making it even harder for those carrying a balance from month to month.

    If the Fed announces a 50 basis point hike as expected, the cost of existing credit card debt will increase by an additional $3.2 billion in the next year alone, according to a new analysis by WalletHub.

    3. Auto loans

    Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans. So if you are planning to buy a car, you’ll shell out more in the months ahead.

    The average interest rate on a five-year new car loan is currently 6.05%, up from 3.86% at the beginning of the year, although consumers with higher credit scores may be able to secure better loan terms.

    Paying an annual percentage rate of 6.05% instead of 3.86% could cost consumers roughly $5,731 more in interest over the course of a $40,000, 72-month car loan, according to data from Edmunds.

    Still, it’s not the interest rate but the sticker price of the vehicle that’s primarily causing an affordability crunch, McBride said.

    4. Student loans

    The interest rate on federal student loans taken out for the 2022-23 academic year already rose to 4.99%, up from 3.73% last year and 2.75% in 2020-21. It won’t budge until next summer: Congress sets the rate for federal student loans each May for the upcoming academic year based on the 10-year Treasury rate. That new rate goes into effect in July.

    Private student loans tend to have a variable rate tied to the Libor, prime or Treasury bill rates — and that means that, as the Fed raises rates, those borrowers are also paying more in interest. How much more, however, will vary with the benchmark.

    Currently, average private student loan fixed rates can range from 2.99% to 14.96%, and 2.99% to 14.86% for variable rates, according to Bankrate. As with auto loans, they vary widely based on your credit score.

    5. Savings accounts

    On the upside, the interest rates on some savings accounts are also higher after consecutive rate hikes.

    While the Fed has no direct influence on deposit rates, the rates tend to be correlated to changes in the target federal funds rate. The savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.24%, on average.

    Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are as high as 4%, much higher than the average rate from a traditional, brick-and-mortar bank, according to Bankrate.

    “Interest rates can vary substantially, especially in today’s interest rate environment in which the Fed has raised its benchmark rate to its highest level in more than a decade,” said Ken Tumin, founder of DepositAccounts.com.

    “Banks make money off of customers who don’t monitor their interest rates,” Tumin said.

    With balances of $1,000 to $25,000, the difference between the lowest and highest annual percentage yield can result in an additional $51 to $965 in a year and $646 to $11,685 in 10 years, according to an analysis by DepositAccounts.

    Still, any money earning less than the rate of inflation loses purchasing power over time. 

    Subscribe to CNBC on YouTube.

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  • Inflation has peaked — but it’s not returning to pre-Covid levels in 2023, Mastercard says

    Inflation has peaked — but it’s not returning to pre-Covid levels in 2023, Mastercard says

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    Inflation has already peaked, but it will remain above pre-Covid levels in 2023, said David Mann, chief economist for Asia-Pacific, Middle East and Africa at the Mastercard Economics Institute.

    “Inflation has seen its peak this year, but it will still be above what we had been used to pre-pandemic next year,” Mann told CNBC’s “Squawk Box Asia” on Friday. 

    It’ll take a few years to return to 2019 levels, he said. 

    “We do expect that we go back down in the direction of where we were back in 2019 where we were still debating how many countries needed negative interest rates.”

    Central banks around the world have been hiking interest rates as recently as November in response to high inflation.

    They include central banks from the Group of 10 countries — such as the U.S. Federal Reserve, the Bank of England and the Reserve Bank of Australia — as well those of emerging markets, such as Indonesia, Thailand, Malaysia and the Philippines, Reuters reported.

    The Fed will hold its December policy meeting this week, where it is expected to hike interest rates by 50 basis points. The central bank has raised rates by 375 basis points so far this year. 

    “Inflation has become that big challenge. It’s been spiking and staying very high,” Mann said. But he warned that it would be risky if central banks end up hiking rates more than they need to. 

    “The challenge is if you’ve lost orientation of where the sky and the ground is, you’re not quite sure where you need to end up,” Mann said. 

    It would be a “serious scenario” if central banks “end up going slightly too far and then need to reverse relatively quickly,” he added. 

    Consumer spending

    Despite high inflation, Mann said, U.S. consumers are still willing to engage in discretionary spending in areas such as travel. 

    Travel recovery in the U.S. is strong and people are still choosing to spend on experiences rather than material goods, Mann said.

    And they are being frugal about their spending on necessities in order to be able to afford non-essentials, he added.

    “There is something in the back of people’s minds that worries them that even though it’s not very likely, it’s still possible that those [Covid] restrictions [will] come back,” he said. 

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  • 12/11/2022: The Treasury Secretary, Suing Social Media, College of Magic

    12/11/2022: The Treasury Secretary, Suing Social Media, College of Magic

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    12/11/2022: The Treasury Secretary, Suing Social Media, College of Magic – CBS News


    Watch CBS News



    Janet Yellen on recession fears, inflation and the war in Ukraine; Families suing social media companies; Cape Town’s College of Magic

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  • The Fed will raise rates again. But it’s playing with fire | CNN Business

    The Fed will raise rates again. But it’s playing with fire | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN
     — 

    The Federal Reserve is all but guaranteed to announce Wednesday that it will once again raise interest rates. But investors are hopeful it will be a smaller increase than the last four hikes.

    Traders are betting on just a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.

    The Fed bumped up rates by three-quarters of a percentage point in the past four meetings (June, July, September and November). That followed two smaller rate hikes earlier this year. The central bank’s key short-term interest rate, which sat at zero at the beginning of the year, is now at a range of 3.75% to 4%.

    The hope is that inflation pressures are finally starting to abate enough that the Fed can pivot — Fed-speak for a series of smaller rate hikes -— to avoid crashing the economy into a recession.

    But it may not be that simple. The government reported Friday that a key measure of wholesale prices, the Producer Price Index, rose 7.4% over the past 12 months through November. That was a bit higher than the expected rate of 7.2% but a marked slowdown from the 8% increase through October.

    The more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.

    As long as inflation remains a problem, the Fed is going to have to tread cautiously.

    “Inflation has probably peaked but it may not come down as quickly as people want it to,” said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.

    Jones still thinks the Fed will raise rates by only half a point this week and may look to hike them just a quarter point in early 2023. But she conceded that the Fed is now sort of “making it up as they go along.”

    The other problem: The Fed’s rate hikes this year have had limited impact on the economy so far. Yes, mortgage rates have spiked and that has severely hurt demand for housing, but the job market remains strong. Wages are growing, and consumers are still spending. That can’t last indefinitely.

    “The cumulative impact of higher rates are just beginning. Hence, the Fed has to step down its pace a bit,” Jones said.

    So investors are going to need to pay attention not to just what the Fed says in its policy statement about rates and what Powell talks about in his press conference. The Fed also will release its latest projections for gross domestic product growth, the job market and consumer prices Wednesday.

    In September, the Fed’s consensus forecasts called for GDP growth of 1.2% in 2023, an unemployment rate of 4.4% and an increase in personal consumption expenditures, the Fed’s preferred measure or inflation, of 2.8%. It seems likely that the Fed will cut its GDP target and raise its expectations for the jobless rate and consumer prices.

    The likelihood of an economic downturn is increasing, and the Fed’s projections may reflect that. But the Fed is not expected to start cutting interest rates until 2024 at the earliest, so it may be too late for the central bank to prevent a recession.

    “A pivot or pause is not a cure-all for this market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “Rate cuts may be too late. Recession risks are still relatively high.”

    The US economy isn’t in a recession yet. But are American shoppers tapped out? We’ll get a better sense of that Thursday after the government reports retail sales figures for November.

    Economists are actually forecasting a small dip of 0.1% in retail sales from October. But it’s important to put that number in context. Retail sales surged 1.3% from September and 8.3% over the past 12 months.

    So it’s possible consumers were simply getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.

    One market strategist also pointed out that as long as price increases continue to slow, consumers will feel more confident as well.

    “Everybody has been talking about inflation this year. Going forward, it will be more about disinflation in 2023 or 2024,” said Arnaud Cosserat, CEO of Comgest Global Investors.

    What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes

    (HESAF)     and cosmetics giant L’Oreal

    (LRLCF)    .

    Monday: UK monthly GDP; earnings from Oracle

    (ORCL)

    Tuesday: US Consumer Price Index; Germany economic sentiment

    Wednesday: Fed meeting; EU industrial production; UK inflation; earnings from Lennar

    (LEN)     and Trip.com

    (TCOM)

    Thursday: US retail sales; US weekly jobless claims; ECB and Bank of England rate decisions; earnings from Jabil

    (JBL)

    Friday: Eurozone PMI; UK retail sales; earnings from Accenture

    (ACN)    , Darden Restaurants

    (DRI)     and Winnebago

    (WGO)

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  • Elon Musk Sounds a Dire Warning About the Economy

    Elon Musk Sounds a Dire Warning About the Economy

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    Elon Musk is worried about the economy. 

    For several months now, the richest man in the world has continued to sound the alarm, warning that the economy risks a deep recession if the central bank’s monetary policy stays on course. 

    While the Federal Reserve is holding its last monetary meeting of the year in the coming days, the serial entrepreneur has just made a new prediction. And like his past predictions, this one is very alarming.

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  • These are the best 10 metro areas for first-time home buyers — and how to make it more affordable no matter where you’re buying

    These are the best 10 metro areas for first-time home buyers — and how to make it more affordable no matter where you’re buying

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    The Central Business District of Pittsburgh

    J. Altdorfer Photography | Getty Images

    After bidding wars during the pandemic, demand for home purchases has fallen amid higher mortgage interest rates. That dynamic has made some markets are more attractive for first-time home buyers for 2023, according to a Zillow report released this week.

    The real estate site found the “best opportunity” for first-time buyers in metros areas with more affordable rent, less competition and a higher inventory of homes for sale.  

    “The affordability hurdle is very tough,” said Matt Hackett, manager of operations at Equity Now, a mortgage lender in Mamaroneck, New York, that operates in five states. 

    More from Personal Finance:
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    One of the biggest challenges has been a sharp increase in interest rates within a short amount of time, explained Erica Davis, producing branch manager at Guild Mortgage in Myrtle Beach, South Carolina.

    Mortgage interest rates have more than doubled from early January after a series of hikes from the Federal Reserve to curb inflation in 2022. These rates have recently softened, reaching 6.41% last week.  

    Meanwhile, median home sales prices are higher year-over-year, reaching $454,900 during the third quarter of 2022, according to the Federal Reserve Bank of St. Louis.

    Still, some markets may be more affordable for buyers on a budget, Zillow’s report shows.

    10 best markets for first-time home buyers in 2023

    These are the best metros for first-time home buyers in 2023 based on mortgage and rent affordability, housing supply and the share of listings with a price cut, according to Zillow.

    1. Wichita, Kansas
    2. Toledo, Ohio
    3. Syracuse, New York
    4. Akron, Ohio
    5. Cleveland
    6. Tulsa, Oklahoma
    7. Detroit
    8. Pittsburgh
    9. St. Louis
    10. Little Rock, Arkansas

    First-time buyers may have mortgage ‘knowledge gap’

    While affordability may be a concern, experts say first-time home buyers may have more options than they expect.

    “First-time homebuyers almost always have that knowledge gap,” said Hackett. “They’re not really sure how much they can afford, and they’re not really sure how much they need for a down payment.”

    For example, many first-time home buyers don’t know about mortgages for veterans, which don’t require a down payment, or Federal Housing Administration loans with 3.5% down, he said. 

    You may also qualify for so-called conventional mortgages, backed by Fannie Mae or Freddie Mac, with down payments as low as 3%.

    However, loans with a smaller down payment come with mortgage insurance and higher interest rates, which may be reduced later, experts say. You’ll also have a bigger monthly payment with a larger mortgage.

    First-time homebuyers almost always have that knowledge gap.

    Matt Hackett

    manager of operations at Equity Now

    Davis said lower down payment mortgages may also preserve savings for future home expenses. “There’s less stress if they’re able to close and still have some money in their pocket,” she said.  

    Depending on your income and location, you may also qualify for first-time home buyer grants or programs run by state and local governments to help cover your down payment and closing costs. “It’s definitely a good option,” Hackett said, urging buyers to speak with a local mortgage expert familiar with programs in their area.  

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  • Key inflation measure shows price pressures cooled off in November, but remain high | CNN Business

    Key inflation measure shows price pressures cooled off in November, but remain high | CNN Business

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    New York
    CNN
     — 

    Another key inflation measure shows price pressures cooled off but remained stubbornly high in November, despite the Federal Reserve’s monthslong efforts to fight inflation through higher interest rates.

    The Producer Price Index, which measures prices paid for goods and services by businesses before they reach consumers, rose 7.4% in November compared to a year earlier, the Bureau of Labor Statistics reported Friday. That’s down from the revised 8.1% gain reported for October.

    US stocks fell immediately after the report, as economists surveyed by Refinitiv had expected wholesales prices to have risen just 7.2%, annually. The higher-than-expected inflation readings raised concerns about whether the Fed will be able to slow the pace of rate hikes.

    But futures for the Fed funds rate still show a strong likelihood of a half-point increase at the central bank’s policymaking meeting next week, rather than the three-quarter point hike instituted at the last four meetings.

    “Overall inflation is moving in the right direction, though at a slow pace,” said Kurt Rankin, senior economist at PNC. “The Federal Reserve’s tightening plans will remain aggressive until clear, consistent signs of inflation’s demise have been demonstrated.”

    The PPI report generally gets less attention that the corresponding Consumer Price Index, which measures prices paid by US consumers for goods and services. But this is a rare month in which the PPI report came out before the CPI report, which is due out Tuesday.

    That and the Fed meeting scheduled for Tuesday and Wednesday next week is making this inflation report of particular importance to investors.

    “Next Tuesday’s CPI release will be more important than today’s data, but with traders on edge, any indication that prices remain elevated and that inflation is more sticky than currently believed is a negative for markets,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

    Overall prices rose a seasonally adjusted 0.3% compared to October — the same monthly increase as was reported in both September and October — but were slightly higher than the 0.2% rise forecast by economists.

    Stripping out volatile food and energy prices, core PPI rose 6.2% for the year ending in November, down from the revised 6.8% increase the previous month. Economists had forecast only a 5.9% increase.

    Core PPI posted a 0.4% increase from October, a far bigger rise than the revised 0.1% month-over-month rise in that previous month, and twice as big as the 0.2% rise forecast by economists.

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  • CBS Evening News, December 8, 2022

    CBS Evening News, December 8, 2022

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    CBS Evening News, December 8, 2022 – CBS News


    Watch CBS News



    Brittney Griner freed in prisoner swap with Russia; Female skydivers set world record in midair

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  • U.S. gas prices now lower than 1 year ago, even as inflation remains high

    U.S. gas prices now lower than 1 year ago, even as inflation remains high

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    U.S. gas prices now lower than 1 year ago, even as inflation remains high – CBS News


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    Gas prices continue to fall and are now lower than they were one year ago. While plunging gas prices have provided some relief, Americans are still facing stubbornly high inflation. Kris Van Cleave takes a look.

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  • Why we think we’re in a recession when the data says otherwise | CNN Business

    Why we think we’re in a recession when the data says otherwise | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN Business
     — 

    It seems like you can’t go anywhere these days without colliding headfirst into another ominous prediction of imminent recession. CEOs, portfolio managers, politicians, news pundits, second cousins and even Cardi B are sounding the alarm: Hear ye! Hear ye! Economic downturn awaits all who dare enter 2023!

    But those predictions contradict the slew of positive economic data we’ve seen: The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

    The Federal Reserve’s regimen of painful interest rate hikes meant to tame persistent inflation could certainly cool the economy — as could events in Eastern Europe and China — but the economy has been able to successfully endure nearly a year of hikes and war in Ukraine with barely a dent.

    It’s possible that recession chatter is just that. Chatter.

    What’s happening: No one would ever accuse investors of shying away from their emotions: Passions run high on trading floors where feelings are often as valid as facts and fear and greed can sometimes run the show. Economists, on the other hand, are a data-dependent, stoic bunch. The US economy is not Wall Street, and market downturns are not recessions — but sometimes they get jumbled together in the public eye and their borders become hazy.

    That appears to be the case: The Fed’s attempts to tamp down sky-high inflation are having an outsized impact on markets — the S&P 500 is down about 18% so far this year — but there has so far been little impact on the US economy as a whole.

    This week, a number of top executives warned of an economic slowdown in 2023. CEOs from Goldman Sachs, JPMorgan, General Motors, Walmart, United and Union Pacific all said they were making plans for less-profitable times ahead. But hidden behind those “CEO PREDICTS RECESSION” headlines lies a lot of uncertainty.

    Rising interest rates and geopolitical chaos are pointing towards storm clouds on the horizon, JPMorgan CEO Jamie Dimon told CNBC on Tuesday: “When you look out forward, those things may well derail the economy and cause this mild-to-hard recession that people are worried about.” When pressed to predict what was coming, he deflected. “It could be a hurricane. We simply don’t know,” he said. What was left unsaid was that sunny days are also a possibility.

    Feedback loop: United Airlines CEO Scott Kirby also told CNBC on Tuesday that “we’re probably going to have a mild recession induced by the Fed.” He then went on to say that demand in his industry is higher than ever and United entered the fourth quarter with profit margins near all-time highs. He doesn’t see any indication of a slowdown on the horizon, either.

    So why does he think a recession is coming? “If I didn’t watch CNBC in the morning, the word ‘recession’ wouldn’t be in my vocabulary,” he said. “You just can’t see it in our data.”

    It’s almost as though Kirby predicted recession was imminent because other prominent voices predicted that recession was imminent. And it’s possible that we’re all stuck in a feedback loop that amplifies unjustified fear.

    Prophecies are often self-fulfilling. If CEOs believe recession is coming, they preemptively batten down the hatches — and that means less spending and more layoffs, which in turn can trigger an economic downturn.

    Goldman CEO David Solomon said Tuesday that the bank may soon terminate staff and exercise caution with its financial resources due to the mounting economic uncertainty. Morgan Stanley will reportedly slash its workforce by about 1,600 people, roughly 2% of the total.

    The upside: Some parts of Wall Street seem to be avoiding the recession fervor. ​​A recent study by Goldman Sachs found that smart money is betting on a soft landing. Money managers have been favoring industrial and commodity stocks that are sensitive to economic downturns. Stocks that act as a buffer during economic downturns like consumer staples and utilities have fallen out of favor at investment funds with assets totaling almost $5 trillion, Goldman strategists found.

    “Current sector tilts are consistent with positioning for a soft landing,” they wrote.

    Oil prices have tumbled to their lowest level since Christmas as worries about the health of the economy weigh on crude, overshadowing concerns about new restrictions imposed on Russian energy, reports my colleague Matt Egan.

    Brent crude, the world benchmark, lost nearly 3% on Thursday to around $77.45 a barrel.

    The oil selloff comes after the West hit Russia with new restrictions that, so far at least, do not appear to be derailing global energy markets.

    The European Union on Monday imposed a ban on seaborne oil imports from Russia, while the West placed a $60 cap on Russian oil. Both moves are designed to hurt Russia’s ability to finance its war in Ukraine, without hurting consumers by causing Moscow to slash oil production.

    “Russia oil is still on the market. As of now, it appears Russia is willing to play ball,” said Robert Yawger, vice president of oil futures at Mizuho Securities.

    The tame reaction from energy markets is a welcome gift for Americans heading on long drives this holiday season, as prices at the gas pump are expected to continue their recent plunge.

    US oil this week hit its lowest level since December 23, 2021, before recovering a little on Thursday to trade up 2% at $73.60 a barrel. That leaves oil down by 43% since briefly topping $130 a barrel in March amid fears about Russia’s invasion of Ukraine.

    The national average price for regular gasoline dipped by three cents to $3.33 a gallon on Thursday, according to AAA. Gas prices have dropped 14 cents in the past week and 47 cents in a month. The national average is a cent lower than a year ago when they averaged $3.34 a gallon.

    Britain is bracing for further disruption from strikes heading into the Christmas period, as ambulance drivers and nurses join rail operators and postal workers in the worst wave of walkouts the country has endured for at least a decade, reports my colleague Hanna Ziady.

    More than 20,000 ambulance workers, including paramedics and call handlers, are expected to strike on December 21 in a dispute over pay, according to statements from labor unions GMB, Unison and Unite.

    The strike will involve just under half of all ambulance drivers in England, Wales and Northern Ireland, although unions have said they will cover life-threatening emergencies during the walkouts. More than 10,000 ambulance workers represented by the GMB Union will strike again on December 28.

    Strikes have swept the United Kingdom this year, as workers grapple with a cost-of-living crisis and stagnating wages. Consumer prices rose by 11.1% in the year to October, a 41-year high. Once inflation is taken into account, average wages fell by the biggest drop on record earlier this year, and were still declining in the June-September period.

    According to The Times newspaper, one million UK workers are set to strike in December and January. Data from the Office for National Statistics shows Britain has already lost at least 741,000 days to strike action this year, putting it on track for its worst year of labor disputes in at least a decade.

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  • Philippines’ inflation soars to 14-year high, fueling expectations of more rate hikes

    Philippines’ inflation soars to 14-year high, fueling expectations of more rate hikes

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    A boat ferries passengers on the Pasig River in Makati City, Metro Manila, the Philippines, on Monday, Aug. 15, 2022.

    Veejay Villafranca | Bloomberg | Getty Images

    Philippines’ annual inflation data for November soared 8% year-on-year, marking the country’s highest inflation in 14 years as food prices soar, according to data from the Philippines Statistics Authority.

    Its surge was driven primarily by costlier food prices.

    Recent typhoons have hammered the production of crops like vegetables, rice and fruits, driving food prices higher.

    Core inflation, which excludes volatile energy and food prices, rose by 6.5%.

    “The government is continuously implementing targeted subsidies and discounts to allay the impact of the higher prices of essential goods, especially for the vulnerable sectors and low-income earners of our society,” in a separate statement, the Philippines’ National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan.

    He said the Philippines will be ramping up food production in a bid to ease price pressures. 

    The inflation issue is sticky but “not unique” to the Philippines, JPMorgan’s global strategist Kerry Craig told CNBC. He said the rise in prices is driven by supply side pressures rather than an increase in demand.

    “Given the pace of inflation it’s likely that a further rate hike will come later this month,” he added.

    ING economist Nicholas Mapa forecasts that the Philippine central bank may raise rates by 50 basis points at its mid-December meeting, bringing the policy rate to 5.5%.

    The central bank raised interest rates six times this year, according to data from Refinitiv.

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  • Nifty and Sensex posted second consecutive weekly gains after hitting all time highs amid signals of cooling off global inflation

    Nifty and Sensex posted second consecutive weekly gains after hitting all time highs amid signals of cooling off global inflation

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    The Federal Open Market Committee (FOMC) minutes which hinted towards a less hawkish approach in the coming policies are expected to start a rally in global equities. While in the domestic market, India’s forex reserves have grown by $2.537 billion to $547.252 billion for the week ended November 18. Some optimism also came as Fitch Ratings said India’s bank credit will see strong growth in the current financial year despite effects of higher interest rates.

    Added to that Foreign portfolio investors have infused funds worth Rs 32,344 crore in Indian stock markets so far in November and became net buyers again along with this market participants also turned bullish with S&P Global Ratings’ latest report that the global slowdown will have less impact on domestic demand-led economies such as India, Indonesia and the Philippines. These positive signals helped the BSE Sensex to gain 574.86 points, or 0.92 per cent, at 62,868.5 during the week ended December 02, while the Nifty inclined 183.35 points, or 0.99 per cent, to 18,696.1.

    Market veteran Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities, said: “Nifty and Sensex gained around 0.8% in the past week creating all-time highs. The BSE Midcap Index gained 1.63% while the BSE SmallCap Index gained 1.94%. A steady softening of global bond yields on expectations of ‘peak’ inflation and a decline in crude prices, helped equity markets continue the momentum and helped the Nifty-50 Index log its new all-time high on a closing basis.”

    “FPIs were net buyers in the past five trading sessions, while DIIs were net sellers in the same period. Going forward, D-street will focus on macro trends. Going ahead, markets may be dominated by global news flows and steps taken by different governments to tackle their economies. On the economy front, Q2FY23 real GDP grew by 6.3%, while GST collections for October (collected in November) stood at Rs1.469 lakh cr (September: Rs1.517 lakh cr)” Chouhan added.

    As many as 41 stocks in the Nifty 50 index delivered a positive return to investors in the passing week. With a gain of (5.8 per cent), Britannia Industries emerged as the top gainer in the index. It was followed by Tata Steel (up 5.5 per cent), Ultratech Cement (up 5.3 per cent), Bharat Petroleum Corporation (up 5.1 per cent), and Grasim Industries (up 5.0 per cent).

    SBI Life Insurance Company, Hindalco Industries, Hero MotoCorp and Reliance Industries also advanced by over 4 per cent. On the other hand, Eicher Motors, Maruti Suzuki India and Coal India declined 2.4 per cent, 2.2 per cent and 2.1 per cent, respectively.

    Sector-wise, the BSE Realty index gained 4.2 per cent during the week gone by. BSE Metal has also given a 3.4 per cent return. While, BSE Fast Moving Consumer Goods, BSE Information Technology, BSE Oil & Gas, BSE Carbonex, BSE Teck and BSE Healthcare indices also surged more than 1 per cent during the week.

    Market strategist Vinod Nair, Head of Research at Geojit Financial Services, said: “The rally in the domestic market was halted by negative cues from global counterparts and broad-based profit booking in large caps. The correction in the market was led by auto stocks as the sales data came in lower than expected due to weaker exports and sequential de-stocking. Declining manufacturing activity in the US is proof that the central bank’s policy tightening has started to show results, which in turn will encourage the Fed to keep rate hikes at bay.”

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  • The Fed’s path to a ‘Goldilocks’ economy just got a little more complicated

    The Fed’s path to a ‘Goldilocks’ economy just got a little more complicated

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    A ‘help wanted’ sign is displayed in a window of a store in Manhattan on December 02, 2022 in New York City. 

    Spencer Platt | Getty Images

    As far as jobs reports go, November’s wasn’t exactly what the Federal Reserve was looking for.

    A higher-than-expected payrolls number and a hot wage reading that was twice what Wall Street had forecast only add to the delicate tightrope walk the Fed has to navigate.

    In normal times, a strong jobs market and surging worker paychecks would be considered high-class problems. But as the central bank seeks to stem persistent and troublesome inflation, this is too much of a good thing.

    “The Fed can ill afford to take its foot off the gas at this point for fear that inflation expectations will rebound higher,” wrote Jefferies chief financial economist Aneta Markowska in a post-nonfarm payrolls analysis in line with most of Wall Street Friday. “Wage growth remains consistent with inflation near 4%, and it shows how much more work the Fed still needs to do.”

    Payrolls grew by 263,000 in November, well ahead of the 200,000 Dow Jones estimate. Wages rose 0.6% on the month, double the estimate, while 12-month average hourly earnings accelerated 5.1%, above the 4.6% forecast.

    All of those things together add up to a prescription of more of the same for the Fed — continued interest rate hikes, even if they’re a bit smaller than the three-quarter percentage point per meeting run the central bank has been on since June.

    Little effect from policy moves

    The numbers would indicate that 3.75 percentage points worth of rate increases have so far had little impact on labor market conditions.

    “We really aren’t seeing the impact of the Fed’s policy on the labor market yet, and that’s concerning if the Fed is viewing job growth as a key indicator for their efforts,” said Elizabeth Crofoot, senior economist at Lightcast, a labor market analytics firm.

    Much of the Street analysis after the report was viewed through the prism of comments Fed Chairman Jerome Powell made Wednesday. The central bank chief outlined a set of criteria he was watching for clues about when inflation will come down.

    Among them were supply chain issues, housing growth, and labor cost, particularly wages. He also went about setting caveats on a few issues, such as his focus on services inflation minus housing, which he thinks will pull back on its own next year.

    “The labor market, which is especially important for inflation in core services ex housing, shows only tentative signs of rebalancing, and wage growth remains well above levels that would be consistent with 2 percent inflation over time,” Powell said. “Despite some promising developments, we have a long way to go in restoring price stability.”

    In a speech at the Brookings Institution, he said he expected the Fed could cut the size of its rate hikes — the part that markets seemed to hear as grounds for a post-Powell rally. He added that the Fed likely would have to take rates up higher than previously thought and leave them there for an extended period, which was the part the market seemed to ignore.

    “The November employment report … is precisely what Chair Powell told us earlier this week he was most worried about,” said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities. “Wages are rising more than productivity, as labor supply continues to shrink. To restore labor demand and supply, monetary policy must become more restrictive and remain there for an extended period.”

    The path to ‘Goldilocks’

    To be sure, all is not lost.

    Powell said he still sees a path to a “soft landing” for the economy. That outcome probably looks something like either no recession or just a shallow one, nevertheless accompanied by an extended period of below-trend growth and at least some upward pressure on unemployment.

    Getting there, however, likely will require almost a perfect storm of circumstances: A reduction in labor demand without mass layoffs, continued easing in supply chain bottlenecks, a cessation of hostilities in Ukraine and a reversal in the upward trend of housing costs, particularly rents.

    From a pure labor market perspective, that would mean an eventual downshifting to maybe 175,000 new jobs a month — the 2022 average is 392,000 — with annual wage gains in the 3.5% range.

    There is some indication the labor market is cooling. The Labor Department’s household survey, which is used to calculate the unemployment rate, showed a decline of 138,000 in those saying they are working. Some economists think the household survey and the establishment survey, which counts jobs rather than workers, could converge soon and show a more muted employment picture.

    “The biggest disappointment was the strong wage growth number,” Mark Zandi, chief economist at Moody’s Analytics, said in an interview. “We’ve been at 5% since the beginning of the year. We’re not going anywhere fast, and that needs to come down. That’s the thing we need to most worry about.”

    Still, Zandi said he doubts Powell was too upset over Friday’s numbers.

    “The inflation outlook, while very uncertain at best, has a path forward that is consistent with a Goldilocks scenario,” Zandi said. “263,000 vs 200,000 — that’s not a meaningful difference.”

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