Markets are waiting for the Fed’s next interest rate change

Waiting for Fed and Treasury

The Fed has made no changes to interest rates since July, and is expected to make another stance today. Still, a worried Wall Street will keep a close eye on any changes to the central bank’s higher-longer-term strategy on rates, including the possibility of a new hike as soon as next month.

Investors will have to face a double blow. Before Fed Chair Jay Powell speaks this afternoon, the Treasury Department will take center stage. At 8:30 a.m. Eastern, it will give its quarterly refund update, laying out a road map for how much it will borrow in the coming months.

Generally this is a routine announcement. But this Treasury update comes against a backdrop of great stress in the bond market. Yields on 10-year Treasury notes hit a 16-year high last month as investors dumped bond holdings, pushing up borrowing costs for consumers and businesses.

Treasury said this on Monday will auction it He will have more than $1.5 trillion in debt in the next six months and today he will reveal details of how he will do it.

One big concern: Issuing a stream of debt into an already saturated market could lead to greater volatility in both stocks and bonds. The S&P 500 suffered its third consecutive month of losses yesterday, as a potential escalation of the Israel-Hamas war emerged as a threat to global growth. Meanwhile, US Treasuries have sold off in each of the past six months, according to Deutsche Bank.

Big questions are revolving around what Powell will say. Investors will be analyzing the language it uses to describe the outlook for rates. At their last meeting in September, Fed policymakers said they saw scope for another rate hike if inflation rises again.

Since then, indicators have shown that hiring and consumer spending are increasing rapidly. Wage data published yesterday showed a rise in employment costs, another sign that efforts to control inflation will take longer than expected.

Wall Street is divided on what happens next. Economists at Vanguard and Bank of America say the Fed will probably have to raise interest rates again to reduce inflation. But Mohit Kumar, chief financial economist at Jefferies, said “the likelihood of another hike is high.”

There is greater consensus that rates will remain high for a long time. The futures market was pricing in 50-50 odds this morning that the Fed’s first rate cut would not come before next June, and that the key lending rate would remain at or above 5 percent until next year.

What’s going on over here

Vice President Kamala Harris proposed new AI rules. Ahead of her appearance at Britain’s international summit on how to regulate artificial intelligence, Harris announced initiatives including a draft policy on how federal agencies can deploy the technology and a global push for its military use. A “political declaration” on the establishment of criteria. Meanwhile, Chinese scientists called for an international regulatory body Focus on “existential” risks That AI pose.

WeWork is reportedly planning to file for bankruptcy. Troubled Co-Working Company May seek Chapter 11 protection Interest payments on bonds last month were missed as soon as next week, The Wall Street Journal reports. This would be a new low for WeWork, whose fortunes have declined rapidly over the past four years.

A jury acquitted Tesla in a lawsuit over its driver-assistance software. No fault was found in the carmaker’s Autopilot system in a 2019 California crash that killed a Tesla owner and injured two pedestrians. This decision may dictate how other cases related to Tesla’s software will play out.

A major British hedge fund has closed in the wake of sexual misconduct allegations against its founder. Oday Asset Management Said it was closing, with some of its executives and funds moving to different firms. The move comes months after a Financial Times report in which 13 women alleged that company founder Crispin Odey had assaulted them.

Bankman-Fried trial approaches climax

Closing statements in the crypto fraud trial of Sam Bankman-Fried are scheduled to begin this morning, meaning jury deliberations could begin as soon as tomorrow.

Bankman-Fried, the head of collapsed cryptocurrency exchange FTX, is accused of masterminding a years-long fraud that cost customers, investors and trading partners nearly $10 billion. He has pleaded not guilty. If found guilty, he could face a punishment equivalent to life imprisonment.

This is what we learned from his third day on the stand yesterday.

• Bankman-Fried said she was not aware that FTX customer funds had been misused… until it was too late. He previously testified that he became aware of the missing funds around last October — essentially, they had flowed from FTX to Alameda Research, the hedge fund Bankman-Fried had founded. His timeline contradicts that of company insiders, including former FTX developer Adam Yedidia, who testified that he informed him about the $8 billion hole in FTX’s accounts in the summer of 2022. (Bankman-Fried said she did not recall Yedidia using that language.)

• He called Alameda’s nearly unlimited credit line with FTX a “theoretical maximum.” on Monday, He acknowledged that Alameda could borrow up to $65 billion From FTX. yesterday he said The actual credit line used by Alameda was $2 billion in 2022,

• He gave special treatment to Bahamians. At the time of FTX’s collapse last November, regulators in the Bahamas, where it was based, were investigating the exchange. Amid overwhelming requests from customers to withdraw funds, Bankman-Fried offered to open a special window so that Bahamian customers could withdraw their money.

Meanwhile, Michael Lewis has doubts. The author of “Going Infinite,” a new book detailing the rise and fall of Bankman-Fried that some critics believe is too sympathetic, is less likely to win for the FTX founder. “I think it’s very unlikely that he won’t go to jail,” They told CNN’s Fareed Zakaria yesterday.

An “earthquake” hits the US home sales market

A blockbuster court decision in Missouri yesterday against the National Association of Realtors, the powerful group representing more than 1.5 million U.S. real estate agents, and big brokerages, could impact the business of buying and selling homes in America.

What happened: Midwestern homeowners had accused NAR, which charges agents for the right to call themselves Realtors, and several brokerage companies of conspiring to keep commissions artificially high. Under the existing rules, home owners have to pay buyer agent fees while listing their properties.

If they don’t agree to the terms, the total fee including sellers’ fees averages 5 to 6 percent, then their home probably won’t be seen on the database that underpins most home-listing services. Plaintiffs argued that this reduced the ability of buyers and sellers to negotiate lower rates and added thousands of dollars to home prices.

The jury took less than three hours to find for the plaintiffs, and awarded them approximately $1.8 billion in damages – which the presiding judge could have tripled to more than $5 billion.

“It’s an earthquake,” Jason Haber, a real estate agent at Compass and a critic of NAR and its leadership, told The Times. Analysts at Keefe, Bruyette & Woods have estimated that the commission changes could reduce $100 billion of what consumers pay annually. by about a third,

The prospect of lower commissions immediately hit shares at publicly traded brokerages: EXP World Holdings fell 8.7 percent, while Compass fell 6 percent.

NAR promised to appeal, While the other defendants in the case, Berkshire Hathaway’s HomeServices of America and Keller Williams, said they were at least considering appealing.

The industry’s legal troubles are not over. NAR faces another antitrust lawsuit. And the Justice Department is trying to reopen a settlement reached during the Trump administration over brokerage fees.

“If he wasn’t already worried about what could go wrong with AI before that movie, he saw a lot more to worry about.”

, bruce reedWhite House Deputy Chief of Staff, who said President Biden became more concerned about the perceived dangers of artificial intelligence in the wrong hands after watching “Mission: Impossible – Dead Reckoning Part One.”

How to Use Economic Advantage in the Israel-Hamas War

As the US and others take steps to prevent the Israel-Hamas war from escalating across the Middle East, analysts at the Atlantic Council, a think tank, have pointed to a potential tool in that effort.

Subsidies Countries like Egypt, Jordan and Lebanon could be encouraged to help prevent conflict, writes Josh Lipsky, senior director of the council’s Geoeconomics Center:

For example, the IMF’s $5 billion program is currently on hold and Cairo is desperate to get at least a portion of the money. Jordan was to receive a $100 million loan from Japan to upgrade its electricity grid. Before October 7, France had promised (but has not yet fully sent) more than 30 million euros of financial relief to Lebanon.

The West is expected in the coming days to seek greater cooperation at the Rafah crossing for humanitarian relief, to reconvene the canceled Arab leaders’ summit in Amman with President Biden and to send a deterrent signal to Hezbollah to avoid an escalation in violence. Dozens of similar financial levers can be pulled. Answer. If ever there was a chance to take advantage of the combined impact of the dollar, pound, euro and yen, this is it.

An additional incentive for the West to provide financial support, writes Lipsky, is to prevent others, such as China, from using their own money to exert influence in the region.

• In related news: Egypt is preparing to receive the first humanitarian departure from Gaza since the start of Israel’s military operation. The Senate confirmed former Treasury Secretary Jack Lew as the next Ambassador to Israel. And billionaire financier Bill Ackman came forward Reconsider his last call Publicly identifying individuals who criticize Israel at Harvard and elsewhere.

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• Health care payments company Waystar will reportedly do so Its initial public offering was delayed By December or next year after the poor performance of recent IPOs. (WSJ)

• Private equity firms, which used cheap borrowing to finance acquisitions for a decade, are now doing so suppressed by high rates And struggling to raise money for deals. (FT)

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