JP Morgan CEO Jamie Dimon warns of a recession in the next 6-9 months, blaming market volatility coupled with erratic financial conditions
Here are the highlights of Tuesday it may affect trading.
FEED DEPUTY CHAIRMAN ON INFLATION: Federal Reserve Vice Chair Lael Brainard on Monday reaffirmed the US central bank’s plan to continue tightening monetary policy until there is clear evidence of slowing inflation, warning that the US economy is likely to slow further as interest rates rise.
“For some time, monetary policy will be restrictive to ensure that inflation eventually returns to the target level,” Brainard said. “It will take time for the cumulative effect of monetary tightening to work on the economy and lower inflation.”
The Fed has already raised interest rates five times this year in an attempt to fight inflation, which is still nearing a 40-year high, and bring it back to its 2% target.
Fed’s War on Inflation Could Cost $1M in Jobs
In its latest move, the Fed approved a third consecutive 75 basis point rate hike, raising the federal funds rate to a range of 3% to 3.25%, close to restrictive levels. It also indicates that a larger increase is likely to occur in the coming months.
Brainard – number two on the Fed and a permanent voting member of the Federal Open Market Committee – said during a prepared speech to the National Business Economics Association in Chicago that the economy is likely to cool next year as rates remain elevated.
“The moderation in demand due to the tightening of monetary policy has so far been only partially implemented,” she said.
The U.S. economy has already cooled significantly, with gross domestic product – the broadest measure of goods and services produced in the country – down 1.6% in the winter and 0.6% in the spring.
Brainard noted that Americans’ savings were also declining faster than the Fed had expected, suggesting that spending could soon come down.
Expectations are rising on Wall Street that the Federal Reserve will trigger an economic downturn as it raises interest rates at the fastest pace in three decades to catch up with runaway inflation.
Fed Chairman Jerome Powell all but admitted that the central bank would send the economy into recession with its rapid rate hikes, warning that higher rates would cause economic “pain”.
THE WAVE OF CRIME IS DEVELOPING: Hotels fall into a wave of national crime.
The father of a Marist College student was killed at the Courtyard by Marriott in what Poughkeepsie, New York officials described as an “accidental” and “unprovoked” shooting. On Friday, two men were charged with the murder of their father, Paul Kutz, who was visiting the area for a “Family Weekend” at the college of one of his three children.
FOX Business has reached out to Marriott for comment on the incident and how it is dealing with the U.S. crime wave, but the hotel company has not responded as of press time.
The FBI crime statistics for 2021, released last week, show that the crime rate is not declining. “Violent crime continued to be a significant problem in the United States, remaining at or near 2020 levels, up 5.6% from 2019,” the FBI’s Uniform Crime Report said.
CREDIT SUISSE TO PURCHASE $3 BILLION IN DEBT AND SELL HOTEL SAVOY
Meanwhile, law enforcement responded Thursday to an “active shooting” situation at the Hampton Inn, a Hilton brand located in Dearborn, Michigan, according to a state police release. A Hilton spokesperson told FOX Business that the Dearborn Hampton Inn is “independently owned and operated” and that they “cannot act on behalf of the hotel.”
A suspected shooter barricaded himself in a Hampton Inn hotel room after allegedly shooting someone, Fox 2 Detroit reported. After several hours of barricading on Thursday, the man was taken into custody by the authorities.
“The well-being, safety and security of our guests and team members is of the utmost importance to Hilton, and we continue to work hard to ensure that all practices and standards comply with strict safety guidelines,” said a Hilton FOX Business spokesman. .
In recent months, business leaders in other industries have raised concerns about crime.
During a call to the company in late September, Rite Aid’s director of retail sales, Andre Persaud, complained about rampant shoplifting in New York City stores.
“I think the headline here is that the environment in which we operate, especially in New York, is not conducive to loss reduction just based on everything you read and see on social media and city news,” he said. .
INVITED RECESSION: JPMorgan CEO Jamie Dimon warned on Monday that the US is heading for a recession in the next six to nine months as market volatility coincides with volatile financial conditions.
Speaking to CNBC correspondent Julianne Tatelbaum at the JPM Techstars conference in London, Dimon said that this time around, US consumers will be in better shape than the 2008 global financial crisis, but the current factors contributing to the recession are still worrisome.
“But you can’t talk about the economy without talking about things in the future — and those are serious things,” Dimon said, citing inflation, quantitative easing and Russia’s war with Ukraine.
“These are very, very serious things that I think could push the US and the whole world — I mean, Europe is already in recession and they will probably put the US in some kind of recession in six to nine months. ,” he said.
BRAINARD Fed WARNING HIGH RATES FURTHER SLOWDOWN US ECONOMY
Dimon’s comments come after the September jobs report, released last Friday, showed businesses continued to hire at a rapid pace, unemployment fell to a half-century low and average wages rose.
However, the employment report raised concerns that the Federal Reserve has not made significant headway in fighting inflation. As the Fed is likely to continue rapidly raising borrowing costs, the risk of a recession will also increase.
Employers cut hiring slightly last month and average wage growth slowed. But economists say none of them are falling fast enough for the Fed to slow down its efforts to fight inflation.
As a result, another sharp three-quarter-point rate hike is likely at the next Fed meeting in November, the fourth in a row.
The Fed’s rate hike is intended to cool the economy and curb inflation. The increase, in turn, pushed up the cost of borrowing in the economy, especially for homes, credit cards, and business loans.
Dimon said the Fed, looking back, “waited too long and did too little.
MARKETS BELOW: US stocks tumbled on Monday, extending a period of volatility as worries about a tightening of the Federal Reserve, an escalating war in Ukraine and China’s trade policy shake markets.
The S&P 500 turned lower after opening slightly higher, shedding 27.27 points, or 0.7%, to close at 3612.39. The Dow Jones Industrial Average fell 93.91 points, or 0.3%, to 29202.88, while the Nasdaq Composite fell 110.30 points, or 1%, to 10542.10. This is the lowest close for the high-tech Nasdaq since July 2020, according to Dow Jones Market Data.
Chip maker stocks suffered losses due to the Biden administration’s new restrictions on semiconductor exports aimed at countering the Chinese military. The PHLX semiconductor sector fell 3.5% on Monday to its lowest close since November 2020. These losses also helped lower stocks of businesses that are major users of chips.
“The new restrictions on semiconductor sales to China are an important reason we are seeing a downtrend in these stocks,” said Randy Frederick, managing director of trading and derivatives at the Schwab Financial Research Center.
CALIFORNIA DROUGHT TOMATOES COMING OUT, INCREASING FOOD PRICES
Technology stocks make up about a quarter of the S&P 500, Frederick noted.
Shares of chip maker Qualcomm fell $6.31, or 5.2%, to $114.60 on Monday, while shares of Broadcom fell $22.78, or 5%, to $437.70. Technology performed the worst among the 11 sectors of the S&P 500, down 1.6%.
Changes in expectations regarding further interest rate hikes by the Fed have been the main reason behind the recent fluctuations in equities. Friday’s jobs report showed the job market remains tight as the unemployment rate fell to a half-century low, fueling fears that the Fed could tighten financial conditions more aggressively.
Hopes for a “Fed rollover,” in which the central bank would pause interest rate hikes and push stocks higher, have largely been dashed. Traders now expect the federal funds benchmark rate to reach 4.7% by the second quarter of 2023, according to derivatives FactSet data, more aggressive than the Fed’s own forecasts.
“Inflation is still high and the labor market is red hot—there is no reason to believe the Fed will be dovish or will stick to a reversal for at least a few months,” said Michael Antonelli, market strategist at Baird.
Investors are looking forward to the next release of US inflation data on Thursday as another important indicator of the possible direction of monetary policy.
“There are still hangovers in the markets. The US labor market is still incredibly strong and the Fed has one mandate right now: inflation,” said Fahad Kamal, chief investment officer of Kleinwort Hambros. According to him, “the most important figure in the world right now” is the upcoming inflation.
THE REPORTING SEASON FOR THE 3rd QUARTER IS ON: Reporting season is gaining momentum, and well-known companies from the consumer and financial sectors will report this week.
|DAL||DELTA AIR LINES INC.||28.84||-0.57||-1.94%|
|WBA||WALGREENS BOOTS ALLIANCE INC.||32.61||+0.77||+2.42%|
|JPM||JPMORGAN CHASE & CO.||102.01||-3.01||-2.87%|
|WFC||WELLS FARGO & CO.||40.23||-1.24||-3.00%|
PepsiCo is under review on Wednesday and Delta Air Lines, Walgreens Boots Alliance and BlackRock will submit updates on Thursday. JPMorgan, Wells Fargo, Morgan Stanley and Citigroup will report on Friday.
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“Everyone expects a bad reporting season, but a lot of it is already priced in,” said Estee Dweck, chief investment officer of FlowBank.
Credit: www.foxbusiness.com /