Federal Reserve Chairman Jerome Powell vowed on Wednesday to prevent inflation from getting out of hand.
“If we do see that inflation expectations are moving up or inflation is on a path to remain well above our goals and risks setting us off on a period of high inflation,” Powell told lawmakers, “then we’ll use our tools to guide inflation back to 2%.”
In other words, the Fed would stop its emergency asset purchases and rapidly raise interest rates – moves that should ease inflation but may also roil markets and slow the economy.
“In the end, it will be transitory,” Powell said. “And people need to have faith in the central bank that we will do it.”
The Fed chief was responding to concerns from multiple lawmakers about high inflation readings.
“I’m nervous about this,” Republican Rep. Frank Lucas of Oklahoma told Powell.
Lucas recalled that he was a farmer and college student during the super inflation spike of the late 1970s and early 1980s. The Fed eventually defeated inflation by dramatically hiking interest rates.
“It was really hard on me and a lot of people across this great country,” Lucas said, referring to the Fed’s rate hikes.
Still, Powell stressed that the Fed doesn’t want to overreact to what it believes will be temporary inflation.
“It would be a mistake to act prematurely,” Powell said.
Federal Reserve Chairman Jerome Powell expressed confidence Wednesday that skyrocketing prices for used cars will eventually come back to earth.
“It’s just a perfect storm of high demand and low supply. And it should pass,” Powell told lawmakers during a hearing.
Used car prices have surged by 45% over the past 12 months, a staggering increase that has contributed to the hottest consumer inflation since 2008.
“Unless we think there’s going to be a multi-year shortage of used cars in the United States, we should look at [high inflation] as temporary,” Powell said.
A pair of Congressional Republicans praised Federal Reserve Chairman Jerome Powell on Wednesday and called for him to remain in charge of the US central bank.
“There is a great deal of uncertainty right now. What I am certain of is this: You have earned and deserve another term as chair of the Federal Reserve,” said Rep. Patrick McHenry, the ranking member of the House Financial Services Committee.
Powell, a Republican and former investment banker, was nominated to lead the Fed by President Trump — who later blasted his handpicked Fed chief.
Trump, worried about roiling financial markets, repeatedly slammed Powell for raising interest rates. At one point in 2019, Trump questioned whether Powell is a “bigger enemy” than Chinese President Xi Jinping.
Powell’s four-year term as chairman expires in February and it’s unclear whether President Joe Biden will renominate him or seek to make his own mark on the Fed.
“You have proven to be a steady hand through the pandemic and our ongoing recovery, you have defended the independence of the Fed,” McHenry said.
Rep. Andy Barr, a Republican from Kentucky, said he joined McHenry’s view that Powell has “earned another term” as Fed chief.
The endorsements came despite concerns from Republicans about surging inflation. Barr said the latest consumer price figures painted a “grim picture.”
Doctors and nurses aren’t necessarily known for their fashionable work attire. But FIGS, the scrubs maker that went public in May and has nearly doubled in value since then, is trying to change that.
“We view ourselves as a lifestyle brand for on shift and off shift,” said Trina Spear, co-founder and co-CEO of the company, adding that FIGS is just getting started.
Spear told CNN’s Alison Kosik on “Markets Now” that FIGS still has a lot more room to grow, especially overseas. She added that a key factor about the company’s business is that there are very high replenishment rates, as people in the medical profession always need new uniforms.
FIGS currently only sells its medical garb in the US, Canada, Australia and the UK. Spear said the global healthcare apparel market is a $79 billion opportunity and that FIGS has just a 2% share of the US market.
“Many healthcare professionals around the world are excited for FIGS,” Spear said.
Still, the company has faced some growing pains — including a pretty big public relations miscue. FIGS was widely criticized last year after a video ad made fun of doctors of osteopathic medicine (or DOs) and women health care professionals in particular.
The now deleted ad showed a model pretending to be a DO who was reading a book called “Medical Terminology for Dummies”… upside down.
Spear said the ad was a “marketing misstep” and that the company immediately apologized for it and wants to ensure that nothing like that ever happens again.
“We are all about celebrating our healthcare professionals,” Spear said. “Healthcare professionals are the new icons.”
The job market has improved rapidly over the past year, but there are still many challenges for both employers and workers.
“Businesses do have choices,” said Nela Richardson, chief economist at ADP (ADP), on the CNN Business Markets Now live show on Wednesday.
Richardson told CNN’s Alison Kosik companies are pressured to fill job openings, yet there are limits as to how much companies can push wages higher to attract new talent — because they also have existing workers to pay.
Meanwhile, Richardson also noted that “hiring is still a challenge” even as “there are millions of people still unemployed.”
For many people looking to return to the workforce, especially women, many barriers that still exist: The lack of affordable day care is a particular problem for working mothers, she noted, adding that women overall continue to be paid less than their male counterparts.
ADP data shows the wage gap has narrowed somewhat lately, with women now making 82% of salaries for men in comparable jobs. But the main reason that this has improved from 80% previously is because more lower-paid women have dropped out of the workforce during the pandemic.
Federal Reserve Chairman Jerome Powell acknowledged Wednesday that home prices are skyrocketing in the United States but downplayed concerns about another housing bubble.
“Housing prices are moving up across the country at a high rate,” Powell told lawmakers. “I suppose the good news is this is not being driven by the kind of reckless, irresponsible lending that led to the housing bubble and that led to the last financial crisis.”
The Fed chief added that this kind of risky lending is not happening, “at least so far.”
Still, Powell conceded that surging home prices — existing home prices spiked by 24% in May from a year earlier – is hurting for first-time homebuyers.
“Housing prices are moving up and of course that makes it more difficult for entry level buyers to move into the housing market,” Powell said. “That is a concern.”
Some economists have warned that the Fed’s massive bond-buying program is making the situation worse, effectively pouring gasoline on a housing market that is already on fire.
Fed chair Jerome Powell told a House panel Wednesday to not worry about inflation, even as housing prices soar.
Darius Dale, founder and CEO of investment research firm 42 Macro, agrees with Powell.
“Inflation is more than likely to be transitory,” Dale said on the CNN Business “Markets Now” show, using the word that Powell often cites to describe the (hopefully) temporary spike in prices of items ranging from houses and used cars to chicken wings and diapers.
Dale conceded that the Fed is in a bit of a bind though.
Because it has the dual mandate of monitoring inflation and the labor market, Dale said that it probably is “not warranted” for the Fed to cut back on — or taper — its massive bond purchases. There are “still headwinds in the labor market,” which has not fully recovered from the hit it took during the pandemic, he added.
Dale noted that the job market seems to be operating in two speeds right now. It’s a good time for anyone looking for a white collar job. But the Fed is also now looking to promote inclusion and diversity in the labor market, and low wage workers have not recovered to the same extent as those in higher paying professions.
Despite this, Dale is still optimistic that a Goldilocks type scenario exists for the markets and the economy. Earnings have been coming in better than expected, but investors are clearly nervous about the impact inflation will have on future profits.
Cue the Nina Simone. Consumers around the world are feeling good. The Conference Board said Wednesday that global consumer confidence hit a new all-time high during the second quarter, up slightly from the first quarter.
The reasons are pretty obvious. More Covid-19 vaccine distributions have helped boost the economy and stock market. People are going back to work. They’re traveling. And coronavirus cases, despite an alarming uptick in some parts of the world due to the Delta variant, are still declining.
The Conference Board said that confidence was up in 42 of 65 markets surveyed, with the biggest jumps in North America and Europe — where vaccination rates are higher. But confidence fell in Asia (particularly in India) as well as Latin America.
The global economic recovery “remains highly uneven“, according to Dana Peterson, chief economist of The Conference Board.
She added that many economies are still struggling to contain Covid-19 because of a shortage of vaccines, new variants, and supply-chain bottlenecks that are raising prices.
Still, Peterson noted that “the elevated level of global consumer confidence bodes well for spending and, consequently, the global economic revival in the second half of this year and into 2022.”
Of course, consumers aren’t always the most reliable judges of what’s next for the economy. Sentiment is a tricky thing that often follows news headlines and the state of the stock market.
Consumers have notoriously been overly bullish just before economic or market meltdowns. That was the case in January 2000. Consumer confidence hit a then record high just as tech stocks were about to implode. Sentiment was also at a high level in 2007 before the housing market crashed.
Former Treasury Secretary Steven Mnuchin suggested Wednesday that Federal Reserve Chairman Jerome Powell is not worried enough about inflation.
“I respectfully disagree with him on his not being concerned,” Mnuchin told CNBC, referring to Powell’s stance on inflation.
Mnuchin, who pushed former President Trump to nominate Powell, praised the Fed chairman’s performance and described him as a “close friend who I have a lot of admiration for.”
But Mnuchin said he agrees with BlackRock CEO Larry Fink, who said Wednesday he doesn’t think inflation will be transitory.
“It’s important for the Fed to make sure they get ahead of the curve so they don’t end up with 4% or 5% interest rates, which would really slow down this recovery,” Mnuchin said, adding that Treasury and Fed models “can’t really predict” what will happen to inflation after massive stimulus by the central bank and federal government.
The former Treasury Secretary also called for the Fed to scale back its asset purchases.
During prepared remarks on Wednesday, Powell reiterated his view that inflation will remain “elevated in coming months before moderating.”
Meanwhile in the CNBC interview, though Mnuchin confidently expressed his take on inflation, he repeatedly declined to say whether Trump is lying when he says the 2020 election was stolen.
Wells Fargo swung back into the black during the second quarter as the US economy rebounded from the pandemic.
The troubled bank earned $6 billion, recovering from a loss of $3.8 billion a year ago. Wells Fargo’s per-share profit blew away expectations.
Wells Fargo (WFC) also slashed its allowance for credit losses by $1.6 billion, with CEO Charlie Scharf saying credit quality remained “exceptionally strong.”
Booming markets also sparked big gains for Wells Fargo’s venture capital and private equity investments.
Kyle Sanders, analyst at Edward Jones, said his team was “encouraged” Wells Fargo did not report new costs linked to the bank’s various scandals.
However, like other banks, Wells Fargo is dealing with shrinking demand for its key money maker: loans. The bank reported a 10% drop in average consumer loans and a 22% tumble in commercial loans.
Scharf acknowledged the “headwinds of low interest rates and tepid loan demand remained.”
Wells Fargo’s share price, which for years badly trailed rivals, climbed 3% Wednesday morning.
US markets kicked off trading solidly higher on Wednesday.
The rally comes despite another hotter-than-expected inflation report that showed producer prices jumped by 7.3% in June.
Federal Reserve Chairman Jerome Powell is likely to get grilled on inflation by lawmakers during a hearing later on Wednesday. In his prepared remarks, Powell reiterated that inflation will remain elevated for several months before cooling off.
US stocks retreated modestly on Tuesday on renewed inflation worries.
Federal Reserve Chairman Jerome Powell expects inflation to stay hot in the coming months before cooling off, according to prepared remarks Wednesday.
“Inflation has increased notably and will likely remain elevated in coming months before moderating,” Powell said in testimony to the House Financial Services Committee.
Powell noted that inflation metrics are being exaggerated by the fact that prices completely crashed last spring when the pandemic erupted. As the year-over-year comparisons become more typical, this temporary phenomenon will go away in the coming months.
But the Fed chief expects these “rapid” price hikes to “partially reverse” as bottlenecks ease.
Powell reiterated that the Fed “would be prepared” to act if officials saw signs that inflation expectations were persistently above the central bank’s goals.
Given the rapid recovery and surging inflation, the Fed discussed removing some of its emergency stimulus during its June meeting. Powell said the Fed will continue to discuss in upcoming meetings whether it should scale back its asset purchases.
“We will provide advance notice before announcing any decision to make changes to our purchases,” Powell said.
Citigroup CEO Jane Fraser took over the bank earlier this year, making her the most powerful woman on Wall Street. The bank is off to a roaring start during her brief tenure at the top.
Citigroup announced Wednesday that its earnings and revenue easily topped analysts’ forecasts. Fraser credited the rebounding economy for the bank’s solid results. Shares of Citigroup (C) were up slightly following the report.
“The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising. We saw this across our businesses,” Fraser said in the release, noting that Citi’s investment banking unit posted a strong quarter and that the bank also benefited from “markedly increased spending” from its credit card customers.
Citi, like rivals JPMorgan Chase (JPM), Bank of America (BAC) and other banks, also released some of its reserves for bad loans, a sign that the bank feels consumer credit quality is increasing following last year’s Covid-related economic downturn.
“While we have to be mindful of the unevenness in the recovery globally, we are optimistic about the momentum ahead,” Fraser added.
Still, Citi is lagging its big bank brethren in one regard. The company held its dividend steady following the most recent Federal Reserve stress tests. Most other top banks boosted their payouts to shareholders.
Delta reported another quarterly loss Wednesday but said that it returned to profitability in June and expects to be profitable going forward.
“Domestic leisure travel is fully recovered to 2019 levels and there are encouraging signs of improvement in business and international travel,” said CEO Ed Bastian, who added that this week it bought additional used aircraft to restore some of the capacity it shed during the pandemic.
“The recovery picking up steam, we are making investments to support our industry-leading operation,” he said.
The company lost $678 million when adjusted for special items such as another round of financial support from US government. But that’s far better than the loss of nearly $900 million expected by Wall Street, let alone the $2.8 billion loss it reported a year ago.
Revenue has not fully recovered to pre-pandemic level due mostly to the lucrative business and international travel still being only a fraction of pre-pandemic levels. Overall revenue from airline operations was down 49% compared to the same quarter of 2019, ahead of the pandemic.
Shares of Delta climbed in pre-market trading as did shares of the other three major US airlines - American, United and Southwest.
Federal Reserve chairman Jerome Powell and other central bankers continue to say ad infinitum that inflation is “transitory.” The rising prices for used cars, food and other goods are due to Covid-related supply chain disruptions and will eventually pass.
But Larry Fink, the CEO of asset management giant BlackRock (BLK), isn’t buying that argument.
“I worry about inflation. I do not believe inflation is going to be transitory. It’s going to be more systematic,” Fink said in an interview on CNBC Wednesday morning after the company reported stellar earnings. He added that it will be “very important” to see how the Fed and other global central banks navigate the threat of higher inflation.
Fink told CNBC he’s also concerned about the extremely contagious Delta variant of Covid-19.
“Can that slow down parts of Asia? We are seeing a real disconnect between the companies that are very vaccinated and moving forward on vaccination and countries that have been late in vaccination,” he said.
Fink said that as a result, there will be “unevenness” in the global recovery and there could be “disappointments going forward.” But he’s still bullish because of continued fiscal and monetary stimulus.
Wall Street is growing increasingly excited about the likely debut of a new iPhone later this year. (The unlucky 13? Skip and go straight to the 14? The XIII if Apple wants to adopt Roman numerals like the Super Bowl? Scrap the number nomenclature entirely? I digress.)
Shares of Apple (AAPL) were up about 2% in premarket trading and are on track to open at another new all-time high. The company is now worth a stunning $2.4 trillion. But Apple could have a lot more room to run.
Citi analyst Jim Suva raised his earnings forecasts for Apple Wednesday morning, saying in a report that “we expect shares will outperform ahead of the new iPhone launch in September,” adding that “consensus estimates are too low.”
Apple is apparently expecting the device to fly off the shelves. Bloomberg reported late Tuesday that the company is looking to ramp up iPhone production by 20% this year.
And Suva added that he likes Apple’s product diversity, noting that there should be strong demand for PCs and wearables like the Apple Watch.
Apple has lagged the broader market rally with a gain of “only” about 10% this year, compared to a 16% pop for the S&P 500. The stock also hasn’t done as well as rivals such as Microsoft (MSFT), Amazon (AMZN) and Google owner Alphabet (GOOGL).
The world’s largest money manager has gotten even bigger. BlackRock (BLK), which owns the popular iShares family of exchange-traded funds, now has $9.5 trillion in assets under management. That’s up from $7.3 trillion a year ago.
BlackRock, like many other financial firms, has benefited from the stunning rebound in stocks since the depths of the Covid-induced bear market of March 2020. Shares of BlackRock, which reported earnings and revenue that topped forecasts Tuesday, are up more than 25% in 2021.
The company has also made waves for championing ESG investing causes, an effort led by CEO Larry Fink.
“Our commitment to helping more and more people experience financial well-being guides our long-term strategy and how we use our voice on behalf of our stakeholders,” Fink said in the earnings release. “We will continue to invest and evolve so we can deliver value for our clients, employees, shareholders and the communities where we operate.”
But BlackRock’s growing clout on Wall Street has raised some alarm bells in Washington. In a heated exchange earlier this year, Sen. Elizabeth Warren repeatedly asked Treasury Secretary Janet Yellen why BlackRock was not considered a “too big to fail” financial institution like other big banks are.
Fitch Ratings warned on Tuesday that the United States could lose its perfect credit rating due in part to the ongoing assault on democracy and worsening political polarization.
The credit ratings firm said that governance is a “weakness” for the United States, specifically citing the January 6 insurrection and ongoing efforts to curb voting rights in dozens of states.
“In light of developments since the last review and future risks, a deterioration in governance represents a further risk to the rating,” Fitch Ratings said in the report.
Although Fitch reaffirmed America’s AAA credit rating, it said that could change due to rising debt levels and the state of politics in the world’s largest economy.
India’s biggest IPO of the year is here.
Food delivery startup Zomato is looking to raise some $1.3 billion this week in an initial public offering in Mumbai, the company said in a recent regulatory filing. It expects to close its books on Friday, and is the biggest offering in the country so far in 2021, according to Dealogic.
The company plans to sell shares priced between 72 and 76 rupees (97 cents to $1.02) per share. At the upper end of the range, Zomato would be valued at almost $8 billion.
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