The Federal Reserve will conclude its latest two-day meeting this afternoon and the stakes couldn't be higher. The central intends to end its pandemic-era bond purchases, a process known as "tapering," by stepping away from a historic level of support for the economy. Since June 2020, the Fed has been buying $120B in monthly asset purchases, including $80B in Treasury bonds and $40B in mortgage-backed securities.

Bigger picture: As described in the last FOMC minutes, the "illustrative tapering path" would trim purchases by $15B per month beginning in November or December, bringing an end to the program by June or July. The reductions will also proceed at about twice the pace as the last time the Fed ended a bond buying program in 2014. Less is known about the remainder of the Fed's balance sheet - which currently stands at $8.6T - as discussions have not even surfaced yet on when it would actually reduce those holdings (that likely won't come until rate hikes are underway).

Investors will also be looking for comments on the surge in inflation, which is lasting longer than anticipated. Headline rates are running at twice the Fed's 2% target, while rising prices, low business inventories and a growing labor shortage may mean the high pace of increases will continue for the foreseeable future. Meanwhile, the jobs market has taken on a different course than Fed officials have expected, with participation improving only slowly despite near-record numbers of openings.

Commentary: "Will they hold on to the transitory description of inflation? My best guess is they will, in order to keep their commitment to support the economic recovery until the economy is closer to full employment," said Aneta Markowska, an economist at Jefferies. "If they were being intellectually honest they would probably drop it, but given what is happening in the market the Fed has to tread carefully."

Hikes on horizon

While the market is sanguine about the Fed's tapering, there's a lot of questions on how Fed Chair Jay Powell will address the market pricing in rate hikes starting in the middle of next year. If he pushes back strongly, short-term yields could reverse in a hurry (the 2-year Treasury rate fell 5 basis points yesterday to 0.46%). Last week, the yield curve flattened with shorter-term rates shooting up more than longer-term rates as rate traders brought forward their expectations for policy tightening.

Snapshot: On Monday, the Reserve Bank of Australia scrapped its short-term rate target in the face of a huge move recently in three-year yields. The Bank of England and the Bank of Canada have changed their tones as well, shifting to more hawkish policy given inflation concerns and the recent rise at the short end of the curve. The ECB also fought back against market expectation of a rate hike last week, but investors believed the message was too weak and added to bets that it would soon raise rates.

With "tapering around the corner and the prospect of a rate rise towards the end of 2022, we are now witnessing sharp bouts of increase in the 2-year yield, raising the prospects of a bear flattening," Jefferies added in a research note. "The last proper bear flattening cycle was witnessed in 2018, when 2-year bond yields steadily rose, while the yield curve flattened. Beyond that, we have witnessed only fleeting instances of a bear flattening post-GFC, lasting for an average of just 2 months."

Go deeper: Even if central banks tighten policy sooner rather than later, the effects could fail to drag real yields higher, if the market assumes that it's not enough to catch up with inflation. Furthermore, much of the inflation being felt in the economy is from transportation bottlenecks and supply shortages, so hiking rates may not help that front. What they could do is hit the brakes on the demand side, but depending on who you ask, that could risk damaging the economic recovery or prevent it from overheating.

Home flopping

Zillow (Z) is winding down its Zillow Offers iBuying Service after the real-estate fintech decided forecasting home prices is too unpredictable. The company's Q3 results include a $304M writedown of inventory as a result of purchasing homes in Q3 at higher prices than its current estimates of future selling prices, while it expects to take an additional $240M-$265M of losses in Q4. It will sell its portfolio of roughly 7,000 homes over the next several quarters, which will also include a reduction of Zillow's workforce by around 25%.

Market movement: Zillow shares closed down 10% on the news on Tuesday, and are off another 17% in premarket trading to $72. That's down from last week's peak of nearly $104, bringing losses over the three sessions to 30%.

"We've determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility," said Zillow Group (NASDAQ:ZG) co-founder and CEO Rich Barton.

More explaining: "We went into the business as a big swing on the bet that we could accurately predict the price of a home six months into the future, and what happened was... COVID happened," he later told CNBC. The company also noted that market watchers shouldn't interpret Zillow's decision as a call of a top in the housing market, but it rather stemmed from higher-than-expected volatility. In fact, fundamentals of the housing market remain "quite strong," according to Barton, who stressed that the firm will "wind down our inventory in an orderly way."

Big win for Atlanta

The Braves have a reason to celebrate after winning the 2021 World Series, defeating the Houston Astros 7-0 on Tuesday night in Game 6. The victory at Minute Maid Park caps off one of the most spectacular late-season surges in baseball history as the team was still below .500 until Aug. 8. It's also the Braves' first title since 1995, which until now was the only championship by a major professional sports team in Atlanta history, barring soccer (the Atlanta United won the MLS Cup in 2018).

Quote: "We hit every problem, every bump you could possibly hit this year," exclaimed star first baseman Freddie Freeman. "Injuries, every single kind of thing that could have happened, that could go wrong, went wrong, and we overcame every single one of those things."

Interestingly enough, the Braves are one of only two publicly traded MLB teams (the other is the Toronto Blue Jays (NYSE:RCI)). In 1976, the Braves were purchased by media magnate Ted Turner, owner of superstation WTBS, to keep the team (one of his major programming staples) in Atlanta. Time Warner then inherited the team after purchasing Turner Broadcasting in 1996, but sold the group to Liberty Media for $400M in 2007. The company also includes Formula One (NASDAQ:FWONA) and Sirius XM (NASDAQ:LSXMA), though the Braves segment has traded on the Nasdaq as a tracking stock under ticker "BATRA" since 2016.

Why don't more teams IPO? Most U.S. sports groups are owned by wealthy individuals who don't want to deal with the public markets (the same goes for the league). Public ownership is also burdensome, especially for a team whose priority is to win games even at the expense of some profits (might be different for shareholders). Regulatory accountability and labor laws are also a problem that could be further complicated by director or proxy action, while for teams operating at a loss, it could prevent them from using a tax shield against earnings.

Today's Markets

In Asia, Japan closed. Hong Kong -0.3%. China -0.2%. India -0.4%.
In Europe, at midday, London -0.2%. Paris flat. Frankfurt -0.1%.
Futures at 6:20, Dow -0.1%. S&P flat. Nasdaq +0.1%. Crude -2.3% at $82.02. Gold -0.3% at $1783.60. Bitcoin unchanged at $63220.
Ten-year Treasury Yield -1 bps to 1.53%

Today's Economic Calendar

Auto Sales
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Composite Final
10:00 Factory Orders
10:00 ISM Service Index
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:30 PM Chairman Press Conference

Companies reporting earnings today »

What else is happening...

Avis Budget (NASDAQ:CAR) doubles after wild trading halts, short squeeze action.

Yahoo (NYSE:APO) exits China as new privacy law goes into effect.

McDonald's (NYSE:MCD) begins running tests of McPlant menu.

Facebook (NASDAQ:FB) is shutting down its facial recognition program.

Bed Bath & Beyond (BBBY) jumps 85% on $1B buyback plans.

New vertical... Netflix (NASDAQ:NFLX) launches its first mobile games.

Activision Blizzard (NASDAQ:ATVI) delays two key titles: Overwatch 2 and Diablo IV.

CDC gives green light for first COVID vaccine for children.

Pfizer (NYSE:PFE) expects $65B in COVID vaccine sales in 2021/22.

Deere (NYSE:DE) strike stays on as workers reject second contract offer.