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Open Interest Changes
Coming off a sizzling jobs report, which showed non-farm payrolls accelerating by 353,000 in January, investors tuned into the latest commentary from Jay Powell, who appeared on a 60 Minutes episode aired on Sunday. The Fed Chair was quick to highlight the robust U.S. economy and path towards a soft landing, as well as inflation that has come down sharply over the past year. Central bank watchers had much to digest in his latest remarks, with much of it echoing comments he made at his press conference on Wednesday, when the Fed kept its policy rate at 5.25%-5.50% and dented expectations that it would cut rates in March.
Is inflation dead? "I wouldn't go quite so far as that. We're making good progress, [but] the job is not done. Restoring price stability means inflation is low and predictable and people don’t have to think about it in their daily lives."
Why not cut the rates now? "Well, we have a strong economy and feel like we can approach the question of when to begin to reduce interest rates carefully. Growth is going on at a solid pace. The labor market is strong: 3.7% unemployment. And inflation is coming down."
What is it you're looking at? "It's not that the data aren't good enough. We just want to see more good data along those lines. It doesn't need to be better than what we've seen, or even as good. It just needs to be good. And so, we do expect to see that. And that's why almost every single person on the Federal Open Market Committee believes that it will be appropriate for us to reduce interest rates this year."
What's the danger of moving too soon? "Danger of moving too soon is that the job’s not quite done and that the really good readings we’ve had for the last six months somehow turn out not to be a true indicator of where inflation's heading."
What is the danger of moving too late? "Policy would be too tight and that could easily weigh on economic activity and on the labor market."
Are you committed to getting all the way to 2% before you cut the rates? "No, no. That’s not what we say at all, no. We’re committed to returning inflation to 2% over time. I've said that we wouldn’t wait to get to 2% to cut rates."
Is the national debt a danger to the economy in your review? "In the long run, the U.S. is on an unsustainable fiscal path. The U.S. federal government is on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don't think that's at all controversial. And I think we know that we have to get back on a sustainable fiscal path."
Other highlights: Powell doesn't expect that the slump in commercial real estate will lead to a banking crisis. Some smaller banks may collapse or have to merge with other banks, but he doesn't foresee the CRE market triggering a 2008-like financial crisis. Powell also flagged geopolitical risks as the greatest threat to the world economy, as recently identified in a Wall Street Breakfast poll, but said that engagement with the world and American leadership could benefit security and economic arrangements. Take the latest WSB survey here. (62 comments)
Ready for the big game
The 2024 Super Bowl is setting up to be a jackpot for the Las Vegas Strip and sports betting operators. The perfect mix of sports betting legalization in new states and a high-interest game featuring the Kansas City Chiefs and San Francisco 49ers has some forecasters predicting that legal wagers could top $1.35B, while headlines involving Taylor Swift and Kansas City Chiefs star Travis Kelce could also prove a significant factor. Meanwhile, hotel room rates have soared in Las Vegas since the Chiefs and 49ers nailed down their spots in the Super Bowl, and it looks like high-end consumers are not pulling back on spending. Check out some stocks linked to all the action. (42 comments)
While no specifics have yet been disclosed, Chinese regulators are pledging support for the country's beleaguered stock market. The development comes amid a steep selloff in mainland Chinese stocks, with the benchmark CSI 300 index (SHSZ300) notching a fresh five-year low last week. The index was down 6.3% in January, a record sixth-straight losing month, as macro concerns overshadowed any hopes of a significant rescue package from Beijing. Elsewhere, former President Donald Trump said in an interview over the weekend that he would consider tariffs on imported Chinese goods of more than 60%. (24 comments)
Shipping and handling
The U.S. has vowed to step up its retaliatory strikes against Houthi rebels and Iran's proxies in the Middle East if attacks on ships in the Red Sea continue, though President Biden confirmed he "is not looking for a wider war." Dozens of strikes were leveled against Houthi targets in Yemen this weekend, adding to the wave of unilateral American attacks on Iran-linked targets in Syria and Iraq in response to last month's drone attack that killed three U.S. soldiers. Tensions in the Red Sea region have prompted shipping companies to reroute their vessels around Africa, leading to delays impacting companies across sectors including automakers, energy firms, and even retailers. (4 comments)
In Asia, Japan +0.5%. Hong Kong -0.2%. China -1%. India -0.5%.
In Europe, at midday, London +0.5%. Paris +0.1%. Frankfurt +0.3%.
Futures at 7:00, Dow flat. S&P -0.2%. Nasdaq -0.2%. Crude -0.6% to $71.86. Gold -0.5% to $2,044. Bitcoin +0.2% to $43,153.
Ten-year Treasury Yield +6 bps to 4.09%.
Today's Economic Calendar
9:45 PMI Composite Final
10:00 ISM Service Index
2:00 PM Fed’s Bostic Speech
Companies reporting earnings today »
What else is happening...
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