Live Updates
US stocks lost steam Wednesday afternoon and ended in the red after an initial rally.
It has been a few volatile days in the market and clearly the volatility isn’t behind us just yet. Beyond the newly identified Omicron variant, the first case of which has been identified in the United States, investors can also worry about Washington’s gridlock over the debt ceiling, as well as a looming government shutdown if stopgap funding isn’t agreed on.
Smaller firms and lawmakers alike have put pressure on banks to get rid of overdraft fees — and now, the first top-ten bank has committed to doing so.
Capital One (COF), the sixth-largest US retail bank, said Wednesday it will stop penalizing clients for taking out more cash or writing checks for more money than they have in their accounts.
Smaller banks like Ally and digital-only financial firm Alliant kicked off the trend, but a big name like Capital One getting into the game could inspire other large outfits to follow suit.
The fees have been moneymakers for financial institutions, and many lawmakers and regulators have criticized banks for penalizing already cash-strapped customers with onerous overdraft fees that have generated billions of dollars in revenue.
For example, Senator Elizabeth Warren lambasted JPMorgan Chase (JPM) CEO Jamie Dimon earlier this year, referring to him as “the star of the overdraft show.”
The market has run out of juice a little this afternoon. All three major indexes have come off their highs by quite a bit.
The Dow was up 0.3%, or about 110 points, while the S&P 500 was up 0.6%. The Nasdaq Composite was up 0.2%.
In Omicron news, the first US case of the new variant has been diagnosed in California.
To say that the market has been choppy lately would be a ridiculous understatement. Ever since the identification of the Omicron variant, stocks have been a hot mess of a rollercoaster.
But per usual, that doesn’t mean you shouldn’t invest in them — just don’t look at your accounts on the rockier days, one expert says.
“When you invest in equities, you invest for the long haul. You’ve got to keep that mindset,” said Tony DeSpirito, chief investment officer of BlackRock’s US fundamental equities and the portfolio manager of the BlackRock Equity Dividend Fund.
“Don’t try to time the market, but just try to stay in the market.”
At the end of the day, stocks are still a great place to be in this higher inflation environment, DeSpirito said on the CNN Business’ digital live show Markets Now.
“I’ve been recommending balance, more cyclical, more stable sectors,” he said, pointing at energy and financials, though he’s also bullish on the non-cyclical healthcare sector.
Federal Reserve Chairman Jerome Powell surprised investors and lawmakers yesterday when he said the central bank might roll off its pandemic stimulus program sooner than expected.
But what if it wasn’t just Powell talking?
Greg Valliere, chief US policy strategist at AGF Investments, suspects that when Powell went to the White House to talk to President Joe Biden about his renomination for a second term at the Fed, the President asked him for help in managing the nation’s high inflation.
Business Roundtable CEO Joshua Bolten acknowledged on Wednesday the Omicron coronavirus variant has the potential to disrupt the economic recovery but said it’s too early to say for sure.
“If it does turn out to be as dramatic a shift as the Delta variant was, that will definitely put a damper on things,” Bolten told reporters during a press conference in Washington.
Bolten said the trade group’s CEO members are adopting the view that it’s too early to tell what the economic impact will be.
“We don’t know, because the experts don’t know. Everyone’s got fingers crossed that it’s not too bad,” Bolten said.
Despite the Omicron news, Business Roundtable CEOs still plan to convene in Washington on Thursday.
“Pretty much everyone who said they were going to show up, is showing up,” Bolten said. “We are following a very right protocol of insisting that everyone who enters the space get vaccinated and recently tested, including staff, vendors and caterers.”
Bolten added on Omicron, “It’s TBD, with a lot of people pretty concerned.”
It’s lunchtime, and we have only a few minutes left before the end of the House Financial Services Committee hearing with Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen.
Stocks have held onto their sharp gains today, even as Powell reiterated comments from Tuesday that the Fed might wind down its pandemic stimulus sooner than expected.
“The taper need not be a disruptive event for markets,” he said, adding that the central bank has telegraphed well what it is doing.
The Dow was up 1.1%, or nearly 400 points, around midday, while the broader S&P 500 was up 1.6%. The Nasdaq Composite rose 1.3%.
Here’s a PSA from Federal Reserve Chairman Jerome Powell: Economic forecasts are no crystal ball.
The Fed predicts inflation will be come down next year as supply chain problems sort themselves out over time. As of September, the Fed’s median PCE inflation forecast was 4.2% for this year and 2.2% for next year.
But we shouldn’t take this forecast as fact, Powell said.
“Inflation has been more persistent and higher than we have expected,” he pointed out while testifying before the House Financial Services Committee.
Inflation is high. There’s no two ways about that. But that’s not solely because of the government’s massive pandemic stimulus packages, according to Treasury Secretary Janet Yellen.
Sure, pandemic stimulus payments supported the American people and therefore propped up demand, but it’s not the only factor driving up prices, Yellen told the House Financial Services Committee on Wednesday.
The supply chain problems the pandemic has unleashed is still at the heart of it all.
And it’s not just an American problem:
Federal Reserve Chairman Jerome Powell no longer thinks the price increases consumers are currently seeing are not particularly large and only temporary, a change from what he has previously maintained during the Covid recovery.
“No that is no longer my view,” Powell told lawmakers Wednesday.
He reiterated that his use of the word “transitory” to describe the inflationary environment wasn’t clearly communicating what he meant. Although to some, transitory implies a short time span, the Fed’s terminology actually means that inflation won’t leave lasting marks on the economy once the period has passed.
Wages are moving up in America, and that could keep inflation elevated in the long-term. But the Federal Reserve isn’t worried just yet.
“At the moment [wages are] not moving up at a troubling rate,” Powell told the House Financial Services Committee, so it’s not making the already high inflation worse.
“The inflation we’re seeing is still clearly related to pandemic factors,” he said, even though higher prices have spread more broadly.
In Washington, the House Financial Services Committee is getting ready to hear from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen.
Yesterday’s hearing before the Senate Banking Committee was a bombshell, with Powell announcing that the Fed might wind down its monthly asset purchases sooner than expected. So investors are all ears today.
America’s manufacturing sector expanded in November, data from the Institute for Supply Management showed this morning.
The ISM’s purchasing managers’ index stood at 61.1 last month, slightly above economists’ expectations and above October’s level of 60.8. Any reading over 50 indicates expansions — and this was the 18th straight month of expansion for the sector following the pandemic downturn.
The ongoing growth is a positive, but the industry is also struggling with some of the challenges that the economic recovery has brought.
“All segments of the manufacturing economy are impacted by record-long raw materials and capital equipment lead times, continued shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee.
Meanwhile, continued “pandemic-related global issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential,” he added.
In other economic data from the morning, US construction spending increased 0.2% in October. That was slightly less than forecast, but it reverses a decline in September.
There’s no end to the stock market volatility: US stocks opened sharply higher on Wednesday, attempting to bounce back from Tuesday’s losses.
As fears rise about the Omicron coronavirus variant, investors have been struggling to assess its potential impact on the recovery and their portfolios.
Friday’s selloff was followed by Monday’s rebound — and then another selloff on Tuesday.
Not helping matters: Federal Reserve Chairman Jerome Powell told the Senate Banking Committee Tuesday that the central bank could end its monthly bond buying program sooner than expected.
Powell, as well as Treasury Secretary Janet Yellen, are testifying before the House Financial Services Committee Wednesday.
In economic news, the ADP Employment Report showed 534,000 private payroll jobs added in November
It’s jobs week, and as usual we’re kicking off with the ADP Employment Report.
A total of 534,000 jobs were added to private payrolls in November, slightly outpacing economists’ expectations.
Large companies added the most jobs last month. Leisure and hospitality, as well as professional and business services, added the most jobs by sector.
The report shows there’s “good potential for the rest of the year,” ADP Chief Economist Nela Richardson told reporters on a call.
“Some of the bottlenecks we talked about this summer have receded,” Richardson said, pointing at generous unemployment benefits.
Meanwhile the remarkable rally in the stock market and home prices “has given some higher income people options. We already saw a large portion of the Boomer workforce retiring. And they’re in a better position now,” she added.
That said, the recovering US labor market is also still struggling with a shortage of workers. Meanwhile there are still concerns about child care issues, as well as the pandemic as a whole. And the new Omicron virus variant isn’t helping.
Richardson said Omicron’s “impact will depend on a whole host of factors. But what we can say is in terms of the health conditions on the ground, we has a country are in a much better position than last year when case counts were skyrocketing and very few people were vaccinated.”
Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen are back to testifying in Washington today. After yesterday’s visit to the Senate Banking Committee, they will today testify before the House Financial Services Committee. No doubt Omicron and the Fed’s path to policy normalization will come up again.
The latter was the big news yesterday: The central bank might end its pandemic-era stimulus sooner than expected, Powell said on Tuesday.
The Fed announced a tapering of its monthly asset purchases during its monetary policy update at the start of November, cutting bond buying by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities.
But this pace might no longer be appropriate, Powell suggested.
“At this point the economy is very strong and inflationary pressures are high and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner,” Powell said.
It looks like a strong start to the day on Wall Street where stock futures are rallying higher.
Futures for the S&P 500, the broadest gauge of the US equity market, are up 1.2%, while Nasdaq Composite futures are up 1.3%.
Futures for the Dow are lagging behind a little, up 0.8%, or some 280 points.
It’s been a rollercoaster in the market since the identification of the Omicron variant of the coronavirus last week, sparking memories of the highly infectious Delta variant which put a damper on the recovery over summer.
Even though information is thin at this point, investors are trying to assess what Omicron could mean for the economy and their portfolios.
