Stock futures bounce in wake of hawkish Fed; Japan supports yen in first currency intervention since 1998; JPMorgan CEO calls bitcoin ‘decentralized Ponzi scheme’; Lennar shares are rising as home prices boost the bottom line and Costco earnings in focus as customers seek inflation relief.
Here are five things you need to know for Thursday, September 22:
1. — Stock futures bounce in wake of Hawkish Fed
Stacker compiled a list of the countries Georgia imports the most goods to using data from the US Census Bureau. Countries are ranked by the highest value of imports in 2021 with Georgia. Click for more.
U.S. stock futures rose on Thursday, with the dollar testing new two-decade highs against its global rivals, as investors unpacked a hawkish rate hike by the Federal Reserve and braced for the impact of policy tightening by major central banks around the world.
The Fed’s decision to raise the benchmark Fed Funds rate by 75 basis points, to a range of 3% to 3.25%, was largely expected, but signals from Chairman Jerome Powell, as well as his suggestion that taming inflation is likely to lead to a recession, pushed shares sharply lower in late trading on Wednesday, pushing the US dollar to a fresh 20-year high against a basket of its global rivals.
“Reducing inflation will likely require a sustained period of below-trend economic growth,” Powell told reporters in Washington. ““No one knows whether this process will lead to a recession or, if so, how significant that recession will be.”
The strong rating, which included warnings of rising unemployment and further weakness in the housing market, was paired with a big boost in 2-year Treasury yields, which rose to as high as 4.12% in the wake of Powell’s comments.
The move now puts the spread over benchmark 10-year notes at about 56 basis points, indicating that traders are pricing in an increased chance of a near-term recession even if they see the Fed Funds rate rising by at least 1.25% this year and beyond as high as 4.5% in early 2023.
The US dollar index, meanwhile, hit a two-decade high of 111.81 in overnight trade before falling to 110.743 after a move by the Bank of Japan to intervene in currency markets to strengthen the yen for the first time since 1998 following the decision. to keep rates stable.
The BoJ’s move was followed by an interest rate increase from Norway’s central bank, which increased the key rate by 50 basis points to 2.25%, and a 75 basis point increase from the Swiss National Bank. The Bank of England is likely to make a similar move when it reveals its latest policy decision at 7:00 a.m. ET, although bets on a 75-basis-point increase, the biggest since 1989, are still being made in futures markets.
Shares in Europe trended lower in early trade after yesterday’s sell-off on Wall Street, with the Stoxx 600 marked 0.4% lower in Frankfurt and the FTSE 100 little changed heading into the BoE interest rate decision.
It followed a 1.05% decline for the MSCI ex-Japan index in Asia, as shares in China remained stuck at four-month lows on renewed growth concerns in the world’s second-largest economy.
In the US, futures contracts linked to the S&P 500 indicate an opening gain of 15 points, while those linked to the Dow Jones Industrial Average are priced for a gain of 143 points. Futures linked to the technology-focused Nasdaq indicate a 43-point move to the upside.
2. — Japan supports the yen in first currency intervention since 1998
The Bank of Japan intervened directly in global currency markets overnight, the first such move since 1998, when officials moved to support the yen amid a two-decade low against the US dollar.
Masato Kanda, Japan’s vice finance minister for international affairs, told reporters in Japan that the government was taking “decisive action” in currency markets following a policy decision by the Bank of Japan that kept rates unchanged at near-record lows.
The move triggered the dollar’s biggest one-day decline against the yen since March 2020, to peg the pairing at 141.89.
Japan’s economy, though export-focused, is sensitive to currency weakness as it raises the cost of imported energy, increases the nation’s inflationary pressures and reduces the purchasing power of its aging population.
3. — JPMorgan CEO Calls Bitcoin ‘Decentralized Ponzi Scheme’
JPMorgan Chase (JPM) – Get JP Morgan Chase & Co. Report CEO Jamie Dimon told lawmakers late Wednesday that cryptocurrencies, including bitcoin, were little more than “decentralized Ponzi” schemes and that stablecoins required stricter regulation from market watchdogs.
Speaking as part of a panel of top-level bank executives appearing before the House Finance Committee on Capitol Hill, Dimon said that while his bank was an active participant in the development of blockchain technology for the financial industry, he remains unconvinced. with respect to the power or influence of bitcoin.
“I’m a big skeptic of crypto-tokens, which you call currency, like bitcoin,” Dimon said. “They are decentralized Ponzi schemes and the notion that this is good for anyone is unbelievable.”
Stablecoins, with a security tied to the US dollar, could benefit with proper regulation, Dimon said, as the government moves to apply restrictions to new and existing tokens following the collapse of TerraUSD earlier this year.
Bitcoin prices, which have fallen more than 60% so far this year, were last seen 3.6% higher on the session at $19,124.80 each.
4. — Lennar shares rise as home prices boost the bottom line
Lennar Corp. (LEN) – Get Lennar Corporation Class A Report shares fell in premarket trading after the second-largest U.S. homebuilder posted stronger-than-expected third-quarter earnings, driven in part by rising home prices.
Lennar said adjusted earnings for the three months ending in August, the group’s third quarter, came in at $5.03 a share, well ahead of Street forecasts, on sales of $8.93 billion.
Solid price gains for new homes, which were up almost 11% from a year ago to around $404,000 during the final month of the quarter, boosted the group’s bottom line, as did a lack of new inventory in a market that remains affected of supply chain problems and labor costs.
Looking into the final months of the fiscal year, Lennar said it is seeing home deliveries of about 20,500, compared to the July quarter’s figure of 17,248, and new orders in the order of 14,500.
Lennar shares were marked 0.83% higher in pre-market trading to indicate an opening price of $76.55 each.
5. — Costco earnings in focus as customers seek inflation relief
Analysts are looking for a bottom line of $4.16 for the three months ending in early August, the group’s fourth quarter, on total revenue of $72.07 billion.
Rising inflation, which hit a four-decade high of 8.5% in July, drove many shoppers to bulk and value-focused retailers, particularly in food, amid a broader decline in discretionary spending. That will likely support revenue growth, but could eat into margins unless Costco is able to raise prices to compensate.
However, falling gas prices could reduce overall sales, although the lost sales value could be made up in merchandise and food volume as customers use cash saved at the pumps to stock up on staples and household items.
Last month, Walmart (WMT) – Get Walmart Inc. Report delivered stronger-than-expected earnings for the three months ending in July, thanks in part to a big jump in same-store sales. Still, the world’s biggest retailer said broader macro headwinds, as well as the rising US dollar, would lead to a decline of between 9% and 11% for its full-year profit.
Cost shares were marked 0.54% lower in premarket trade to indicate an opening bell of $490.40 each.
