Good day. Investors anxious about potential interest-rate
increases by the Federal Reserve sold stocks and bonds across the
board on Tuesday, while interest-rate futures markets indicated
investors are betting on four to five rate increases this year, up
from three to four Friday. Some analysts are even bracing for a 50
basis point rate increase in March, a move that would help impress
upon markets that the Fed is serious about trying to rein in the
surge in inflation, according to a former top staffer at the
central bank. Meanwhile in another sign of inflationary pressures,
crude prices rose to their highest level since the 2014
shale-induced oil crash, gathering momentum with geopolitical
tensions threatening to knock supply.
Now on to today's news and analysis.
Top News
Stocks End Lower as Bond Yields Hit Two-Year High
U.S. stock indexes fell Tuesday and bond yields hit two-year
highs as investors fretted over whether the Federal Reserve will
raise interest rates more quickly and aggressively than
expected.
All three indexes fell, with the S&P 500 sliding 1.8% and
the Dow Jones Industrial Average shedding 1.5%. The Nasdaq
Composite retreated 2.6%.
Meanwhile, the yield on the benchmark 10-year Treasury note
ticked up to 1.866% -- its highest level in two years -- from
1.771% Friday.
With Rate Increases Looming, Investors Dump Shares of
Money-Losing Companies
Oil Prices Hit Seven-Year High on Rising Geopolitical
Tensions
Among the factors driving an oil-price rally are concerns that
tensions in the Middle East and Europe will spill into energy
markets by denting supplies from major crude producers, including
Russia and the United Arab Emirates.
Oil Demand to Exceed Pre-Covid Levels in 2022, IEA Says
U.S. Economy
As Employers Scramble to Fill Jobs, Workers Relish Feeling of
Power
The U.S. clocked 4.5 million worker resignations in November,
the highest quit rate on record, and as the economy continues to
rebound, workers are feeling empowered to seek new opportunities,
knowing that they are more in demand than ever.
Bitcoin Sags in 2022 Under Weight of Stock Selloff and Fed
Policy
The Federal Reserve is casting a shadow over cryptocurrencies.
Like stocks, cryptocurrencies have extended a selloff to start the
year because of expectations that the central bank will raise
interest rates as early as March.
How to Navigate Rising Food Prices as Inflation Surges
Sticker shock is becoming a regular feature of many consumers'
grocery store trips. Given it is unlikely to dissipate anytime
soon, consumers should evaluate changes to their shopping habits,
writes the Journal's J.J. McCorvey.
Key Developments Around the World
U.K. Inflation Hits 30-Year High, Prompting Expectations of
Rates Rise
Consumer prices in the U.K. rose at the fastest annual rate in
nearly three decades last month, strengthening the case for further
increases in the Bank of England's key interest rate as the country
emerges from the Omicron wave.
German Benchmark Bond Yield Positive for First Time Since
2019
Europe's most closely watched government bond yield turned
positive for the first time since 2019, part of a broad
readjustment by investors to rising inflation and the global
economic rebound from the pandemic.
Debt Crisis in Sri Lanka Stokes Controversy Over Chinese
Lending
A deepening debt crisis has left Sri Lanka struggling to pay for
imports and has stoked political controversy over Chinese lending
to the South Asian nation as part of Beijing's global Belt and Road
infrastructure program.
Violent Crime, Rising Costs Put South African Mining in a Deep
Hole
South Africa's $24 billion mining sector, which has provided the
raw material for nearly half the gold bullion and gold jewelry ever
produced, is waning under pressure from violent crime, growing
costs and regulatory uncertainty, as well as tapped-out mines.
Financial Regulation Roundup
Some Lawmakers Push to Ban Stock Trading by Colleagues
Federal judges and central bank officials have faced stepped-up
scrutiny over stock trades, due to concerns about possible
conflicts of interest or access to nonpublic information. Now, the
spotlight is turning to Congress.
Crypto.com Platform Halts Withdrawals After Suspicious
Activity
Singapore-based online platform crypto.com suspended customer
withdrawals for about 14 hours on Monday, after reports of
unauthorized activity in the accounts of some users, the company
said.
Big Tech and Foes Spar Over Bill to Curb Power of Internet
Platforms
Big technology companies and their critics are ramping up
lobbying efforts in Congress this week as a key Senate panel takes
up legislation that seeks to blunt the market power of dominant
tech platforms.
China Notifies Firms of Tougher Investment Rules for Big
Tech
Forward Guidance
Wednesday (all times ET)
8:30 a.m.: U.S. Commerce Department releases December housing
starts
9:15 a.m.: Bank of England's Bailey and Cunliffe testify on
financial stability report
Wednesday
4 a.m.: Norges Bank policy rate decision
6 a.m.: Central bank of Turkey interest rate decision
7:30 a.m.: European Central Bank releases minutes of Dec. 15 and
16 governing council monetary policy meeting
10 a.m.: National Association of Realtors releases U.S. existing
home sales report of December
6:50 p.m.: Bank of Japan releases Dec. 16-17 meeting minutes
Research
Former Fed Staffer: Real Possibility of 50 Basis Point Rate
Increase
Speculation about the potential for a 50 basis point rate rise
is rumbling through markets as the Federal Reserve makes a hawkish
shift aimed at restraining high inflation. In a note Tuesday, Bill
Nelson, a former top Fed staffer now at the Bank Policy Institute
industry group, wrote that the central bank "needs to prepare the
public for the possibility that they will tighten by 50 basis
points in March." He added that such a big increase may be
necessary because the Fed is behind the curve in getting inflation
under control, and it could have some value in reshaping market
expectations toward a monetary policy stance that is serious about
lowering inflation. Even as Fed officials have broadly moved toward
expecting a March rate rise and the prospect of a series of rate
increases after that, none have offered clear support for a big
opening rate salvo.
-- Michael S. Derby
Commentary
A Politicized Fed Endangers the Economy
The more improvisational and discretionary the Fed's conduct of
monetary policy, the more difficult it is to withstand political
pressures, so the central bank should move to a more systematic,
predictable and transparent policy framework, Jeb Hensarling
writes.
Mr. Hensarling served as a U.S. representative from Texas
(2003-19) and chairman of the House Financial Services Committee
(2013-19).
Basis Points
Factory activity in New York state leveled off in January from
the previous month as demand for goods declined, according to data
from a survey compiled by the Federal Reserve Bank of New York. Its
Empire State Manufacturing Survey's general business conditions
index fell to minus 0.7 in January from 31.9 in December, missing
the 25.5 consensus estimate from economists polled by The Wall
Street Journal. Readings above zero suggest regional manufacturing
is expanding. (Dow Jones Newswires)
U.S. homebuilder confidence fell in January following four
months of gains as growing inflation concerns and supply-chain
disruptions outweighed solid consumer demand, according to the
National Association of Home Builders. Its housing-market index,
which gauges the single-family housing market, fell to 83 from 84
in December. A number above 50 indicates more builders view
conditions as good than poor. (DJN)
Puerto Rico received court approval to leave bankruptcy through
the largest restructuring of U.S. municipal debt ever, ending years
of conflict with creditors as the U.S. territory confronts other
stubborn economic problems.
An early indicator of global trade flows developed by the
Journal points to a 0.76% decline in November from the previous
month, adjusted for the seasonal ups and downs of exports of goods
between countries, indicating the movement of goods across borders
was leveling out as 2021 drew to a close. (DJN)
Housing starts in Canada dropped 22% in December from November,
Canada Mortgage and Housing Corp. said. (DJN)
Malaysia's central bank is expected to maintain its overnight
policy rate at 1.75% at its upcoming monetary policy committee
meeting, according to all 11 economists polled by the Journal. Bank
Negara Malaysia is is due to announce its policy decision tomorrow.
(DJN)
Economic expectations in Germany have rebounded, lifting the ZEW
economic research institute's index of economic expectations from
29.9 in December to 51.7 this month. Economists polled by the
Journal had forecast a level of 32.5. (DJN)
(END) Dow Jones Newswires
January 19, 2022 13:58 ET (18:58 GMT)
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