Fed Chair Jerome Powell will hold a follow-up press conference at 12:30 CST. While investors widely expect the Fed will leave its benchmark interest rate "unchanged", there is really no expectation that the central bank will announce that rate hikes are over. The Fed's updated "dot plot" will be a main focus with investors highly anxious to see where officials think rates should be in the short-, mid-, and long-term.
Most Wall Street insiders think the Fed still wants to send a "hawkish" message so expect the dot plot projections to show a higher end-of-year rate in 2024 than previously forecast. Some economists anticipate the forecast could also indicate at least one more rate hike for this year or early 2024, as well as fewer rate cuts for next year.
Most expect Powell's remarks will likewise lean more hawkish and reiterate the Fed's plan to hold rates higher for longer. Powell's speech will be closely watched for any signals that central bankers believe the inflation battle is near an end, as the bulls believe.
Overall, there does seem to be more room for a dovish surprise than a hawkish one and Powell's speech is the most likely place to find it, particularly if he highlights progress against some of the most stubborn inflation drivers such as the labor market and housing.
Bears, however, warn that the stock market has not fully priced in the possibility of "higher rates for longer" and suspect there could be some major portfolio adjustments ahead if the Fed forecasts ending 2024 considerably higher than its previous projection of +4.6%.
Bears also suspect that once we move past the Fed event today, investor sentiment may sink as attentions turn more fully to the looming U.S. government shutdown at the end of the month, as well as the ongoing UAW strike.
On the earnings front, FedEx and General Mills are both the highlights today.
From FedEx, investors are keen to learn how shipping demand is faring while General Mills should provide some insights into the health of consumer spending.
Keep in mind, real rates continue to push as the two-year Treasury yield closed at new highs yesterday at 5.09% and the ten-year Treasury yields closed at its own new high of 4.37%. In other words, the bond market is trying to tell us that real rates are going to stay higher for longer.
$100 Oil??? Crude Futures Hit New Highs for 2023: That’s because aggressive oil supply cuts in Saudi Arabia and Russia and deadly flooding in Libya have sent crude prices on a tear. Oil prices hit a 10-month high recently and are on pace to hit their largest quarterly increase since Russia first invaded Ukraine in the beginning of 2022. If there’s some other shock, i.e. some big storm in the Gulf of Mexico, it could spike prices even higher. Another thing is that the US has whittled away its Strategic Petroleum Reserve, we’ve reduced that a lot. There was an inventory overhang we could use to try to balance the market, and it’s not as big as it was. Looking ahead, however, US production is growing very rapidly — we’re currently producing more crude oil than either Russia or Saudi Arabia. This is going to be a record year for US liquid fuel production, and next year is going to be even stronger. Bottom line, nearby oil prices could continue to push even higher, but longer-term the green energy transition should start to limit some of the growth in demand and work to pressure prices. Source Forbes
California's "Fast-Food Bill" Creating Worry for Business Owner... Others Hoping it Doesn't Spread: After California lawmakers passed a landmark fast-food bill, an independent advocacy group of McDonald’s owners is pushing back against what it says will be a “devastating financial blow” to its franchisees in the state. The bill, AB 1228, was passed by the state Senate late Thursday and heads to Gov. Gavin Newsom’s desk for signature. He has already pledged to sign the bill into law. It includes a wage floor of $20 for California workers at fast-food chains with at least 60 locations nationwide, starting April 1. Labor groups pushed for even higher wages in previous legislation, but the resulting $20 an hour floor prevailed. Even in a state where the minimum wage is $15.50 and the pay floor is even higher in some municipalities, the deal will bring a significant raise for many workers. But despite support from franchisee and restaurant advocacy groups, some owners are concerned about what the bill means for operations in a challenging labor market and during a period of high inflation. Source CNBC
America's Newest Trend... Pringles and Caviar: Pringles announced a brand new collaboration with The Caviar Company which will pair the iconic chips with high-end caviar. The limited edition partnership was borne out of the popular TikTok trend which has been viewed 10 billion times, where users add a dollop of caviar onto Pringles. From TikTok reviews to reality TV housewives, the nation is craving Pringles and caviar, Pringles US marketing lead Mauricio Jenkins said in a statement. Unlike a regular tube of Pringles, which retails for less than $3 at most stores, the Pringles x Caviar collab is going to cost you quite a bit more. Customers will have three options to choose from, priced at $49, $110, and $140 respectively. The most deluxe package is the “Crisps and Caviar” flight, which includes both caviar types as well as Original, Sour Cream & Onion and BBQ Pringles. You can purchase yours at PringlesandCaviar.shop. This might make for a fun gift. Source CNBC
Elon Musk's 'Neuralink' Seeks Volunteers for First Human Trial of its Brain Implant Chip: Elon Musk’s brain implant company "Neuralink" announced Tuesday it received approval from an independent review board and hospital to begin its first in-human clinical trial for a chip that is implanted in one’s brain to control movement, and is now recruiting participants. Neuralink’s “Precise Robotically Implanted Brain-Computer Interface” (PRIME) study has been working to create a fully implantable, wireless brain-computer interface that could enable people with paralysis to use devices with their thoughts. The study received approval from the Food and Drug Administration in May, after previously testing its devices on animals. The company is now recruiting participants who have “quadriplegia due to cervical spinal cord injury or amyotrophic lateral sclerosis,” or ALS, are at least 22 years old and “have a reliable caregiver” to participate in a trial that will evaluate safety of the chip. According to the study brochure, it will take about six years to complete. Neuralink was valued at around $5 billion in a series of June stock trades. Source Forbes
Amazon and Target to Hire Combined +350,000 Workers Ahead of Holiday Season... Plus Raise Wages! Amazon said on Tuesday that it will hire 250,000 full- and part-time workers for the holiday season, a +67% jump compared to last year. Raising warehouse and delivery workers’ average pay from $19 per hour to $20.50 per hour. Target announced separately it will add nearly 100,000 seasonal roles during the holidays, the same number as it did last year. Amazon noted more jobs are available because the company has opened over 50 new fulfillment centers, delivery stations and same-day delivery sites in the U.S. this year. Amazon’s announcement stood out since overall holiday hiring is expected to be the lowest since 2008, according to Challenger, Gray & Christmas, which estimates retail employers will add 410,000 jobs in the fourth quarter. That’s in part because Amazon continues to benefit from consumers’ shift online. US e-commerce sales are expected to surge 9.3% this year to $1.14 trillion, faster than overall retail spending growth, according to Insider Intelligence. The United States Postal Service, meanwhile, announced it would hire 10,000 seasonal workers, down from 28,000 a year earlier, because the agency has added more full-time workers to its ranks. Source Bloomberg
Uncle Sam Has Been on a Hiring Spree: While many companies have been cutting staff and freezing new hires this year, the government is laying out the welcome mat. Public-sector jobs at the federal, state and local level have risen by 327,000 positions so far in 2023, according to the Bureau of Labor Statistics. That is approaching one-fifth of all new American jobs created in the first eight months of the year. In contrast, public-sector jobs accounted for 5% of employment growth during the equivalent period last year. “After two years of very underwhelming government hiring, it’s a necessary catch-up,” said Julia Pollak, an economist at online jobs site ZipRecruiter. Much of the recent hiring spree has been to backfill jobs left open by millions of teachers, police officers and other public servants who quit during the pandemic. Other roles at government agencies languished because the public sector couldn’t effectively compete against private employers. But just as layoffs hit sectors from tech to finance, government agencies have boosted funding for new hires and have dangled richer perks. This year’s growth in public-sector jobs represents the highest share of overall U.S. payroll gains since 2001, when the government hired masses of workers focused on public safety after the 9/11 terrorist attacks, Pollak said. Source WSJ
Disney to Nearly Double Parks Spending to $60 Billion: Walt Disney said on Tuesday it would nearly double its capital expenditure for its parks business to about $60 billion over the next 10 years. Disney CEO Bob Iger and Josh D'Amaro, the company's parks chief, announced the accelerated pace of investment at a gathering of Wall Street analysts and investors at Walt Disney World Resort in Orlando, Florida, focused on the company's parks business. Parks have become a reliable profit engine for Disney and has helped cushion losses in the Disney+ streaming business, which is expected to become profitable only next year. Iger has described the parks as "a tremendous business" for the California-based global entertainment company. Disney said its parks, experiences and products segment has expanded at a combined annual growth rate of 6% since fiscal 2017, and generated $32.3 billion in operating income over the last 12 months, according to a presentation included in a regulatory filing. Source Reuters
Amazon Introduces New Cashierless Tech for Clothing Stores: Amazon has introduced a new version of its Just Walk Out retail technology that allows customers to skip the cashier lines when they make a purchase by having their payment card automatically charged. The prior system leveraged a combination of ceiling-mounted cameras, shelf sensors and computer vision techniques to allow customers to shop and then leave the store without waiting to pay. The new system, designed for apparel retailers, instead uses RFID (Radio-frequency identification) tags that let customers grab clothes, shoes, hats and more and then walk out of the store without having to stand in line to pay. The system would even allow customers to wear their purchases out of the store, Amazon notes. The updated system allows Just Walk Out to expand beyond products that sit on shelves or tables, where cameras can watch which items are taken. The system has now been launched at Lumen Field, home of the NFL’s Seattle Seahawks, for the 2023-24 NFL season. The stadium already used Just Walk Out at eight of its concession stands. Source Techcrunch
Auto Suppliers Fear Extended UAW Strikes Could Mean End for Many: On Monday night, UAW President Shawn Fain announced a new strike deadline of this Friday at noon. If Ford Motor Co., General Motors or Stellantis have not made substantial progress toward an agreement with the UAW by that time, Fain will expand the Stand Up Strike to more plants. A broader and prolonged strike would mean parts suppliers couldn't keep production going if the vehicle assembly plants that use their parts are idled. No one is sure of just how long suppliers could hold out. The Biden administration has been preparing to offer emergency economic aid to auto suppliers to mitigate any long-term damage caused by a prolonged strike, according to published reports. But the strike has already had some impact. A component maker in Michigan, CIE Newcor, warned it may have to lay off 293 people. U.S. Steel said Monday it is temporarily idling furnace B at the Granite City steel plant in Illinois as a "risk mitigation" in response to the UAW strike. The company said it is evaluating how many of its 1,450 employees there will be affected. Source YahooNews
Which languages take the longest to learn? The difficulty in learning a foreign language lies not only in its inherent complexity. Languages are complex in different ways (though all are learnable by infants). The main reason a language is hard is that it is different from your own. America’s State Department places the languages it teaches diplomats into four categories (see chart), with estimates of how long they take to learn them ranging from 24 to 88 weeks. What underlies the difficulty of such languages for an English-speaker? The first thing many learners will think of is the writing system. Indeed none of the State Department’s hardest languages is written with the Latin alphabet used by most European languages. Chinese stands out for its difficulty. It is commonly said that a learner must memorize around 2,000 characters to be able to read a newspaper. A second way languages can be hard is with sounds and distinctions that do not exist in the learner’s language. For instance, the clicks of many African languages. The lexicon obviously matters too. Most European languages share an ancestor and so their words, too, often come in related pairs. Languages unrelated to the European ones will not only lack the “genetic” overlap in vocabulary. If you want to learn a language just for fun, experts recommend starting with Swedish. If you want to rack up an impressive number, stay in Europe. But if you really want to impress, bulking up your brain to master Cantonese or Korean is the sign of the true linguistic Ironman. Source Economist
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