Stocks Inch Lower as Investors Await Fed Minutes | By Riva Gold Updated May 18, 2016 4:56 a.m. 23 MINUTES AWAY

U.S. Federal Reserve to release minutes from April policy meeting later Wednesday

Global stocks edged lower Wednesday as the possibility of higher U.S. interest rates quelled investors’ appetite for risk.

The Stoxx Europe 600 inched down 0.3% in morning trade, following losses on Wall Street and in Asia.

Futures pointed to a small opening loss for the S&P 500. Changes in futures don’t necessarily reflect market moves after the opening bell.

Minutes from the Fed’s April policy meeting, due later Wednesday, could offer insight into the possibility of a U.S. interest rate increase in June.

Upbeat U.S. inflation and industrial production data, as well as speeches from Federal Reserve officials including Atlanta Fed President Dennis Lockhart and Dallas Fed President Robert Kaplan on Tuesday, raised market expectations for interest rate rises this year, weighing on stocks while boosting the dollar.

“I think that the data to my mind are lining up to make a good case for rate increases in the next few meetings, not just June, which means it’s very live in terms of that,” San Francisco Fed President John Williams said in an interview with The Wall Street Journal.

U.S. Federal Reserve Chair Janet Yellen speaks during a news conference in Washington, D.C., on March 16.
U.S. Federal Reserve Chair Janet Yellen speaks during a news conference in Washington, D.C., on March 16. Photo: Zuma Press

Regulators Reject ‘Living Wills’ of Five Big U.S. Banks – By Ryan Tracy Updated April 13, 2016 10:48 a.m. ET

Fed, FDIC rebuke bankruptcy plans of J.P. Morgan, Wells Fargo, Bank of America, Bank of New York, State Street

Federal Reserve building in Washington, D.C.

Federal Reserve building in Washington, D.C. Photo: Reuters

WASHINGTON—Regulators ordered five big U.S. banks to make significant revisions to their so-called living wills by Oct. 1 or face potential regulatory sanctions, a stern warning that will fuel criticism the firms are “too big to fail.”

J.P. Morgan Chase & Co., Wells Fargo & Co., Bank of America Corp., Bank of New York Mellon Corp., and State Street Corp. were told by the Federal Reserve and the Federal Deposit Insurance Corp. that the regulators felt their plans for a possible bankruptcy don’t meet the legal standard laid out in the 2010 Dodd-Frank law, which requires that firms have credible plans to go through bankruptcy at no cost to taxpayers

They said those firms had until October to present plans regulators find acceptable, or the agencies or regulators could impose higher capital requirements, restrictions on growth or activities, or other sanctions.

Bank stocks, however, rallied in recent trading, led by J.P. Morgan, which reported smaller-than-expected declines in earnings and revenue for the first quarter despite difficult trading conditions.

The regulators split in their assessments of Goldman Sachs Group Inc. and Morgan Stanley. The FDIC said that Goldman Sachs’s plan didn’t meet the legal standard, while the Fed didn’t give that negative assessment.

The two regulators took the opposite stance on Morgan Stanley. The Fed “identified a deficiency” in Morgan Stanley’s plan that it said didn’t meet the legal standard, but the FDIC didn’t go that far, the agencies said in a news release.

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Global Stocks Rally After Fed Interest-Rate Decision – By RIVA GOLD Updated Dec. 17, 2015 6:15 a.m. ET

Screen Shot 2015-12-17 at Dec 17, 2015 4.22

Global stocks surged on Thursday as investors around the world reacted positively to the Federal Reserve’s decision to raise interest rates and the confidence in the U.S. economy that underpinned the move.

European stocks moved higher in early trade, following sharp gains across Asian markets and a higher close on Wall Street in response to the widely expected move by the Fed to end a seven-year experiment with near-zero interest rates.

The Stoxx Europe 600 rose 2.2% by midmorning, with gains across the board, while Japan’s Nikkei Stock Average gained 1.6% and the Shanghai Composite was up 1.8% on signs of a strengthening U.S. economy.

Futures markets pointed to a 0.3% opening gain for the S&P 500. Changes in futures don’t necessarily reflect market moves after the opening bell.

While ultralow interest rates have boosted equity markets in recent years, investors were reassured by the Fed’s relatively upbeat outlook on the world’s biggest economy and its plans to raise rates only gradually over the next three years.

“What we see today is basically a sigh of relief,” said Johan Javeus, chief strategist at SEB Group. “Equity markets are taking comfort in the fact that this is not the path of a rapid hiking cycle.”

“The messaging around the decision is about as positive as one could expect for investors: a positive economic assessment paired with fairly dovish central bank guidance,” said Eric Lascelles, chief economist at RBC Global Asset Management, in a note.

These Seven Charts Can Help You See What The Fed Is Doing : NPR

Brace yourself: News outlets are about to hit you hard with coverage of the Federal Reserve’s decision Wednesday on interest rates.That’s because nearly everyone believes the Fed is going to raise interest rates for the first time since June 2006. If that does indeed happen, the federal funds rate — the rate banks charge each other for overnight loans — will tick up a quarter-percentage-point from near zero.That may begin a chain reaction that leads to lots of rates moving up in 2016.  But why have rates been so low for so long? And is it really time to raise them?Here are some charts to help explain the thinking of the nation’s central bankers.

Source: These Seven Charts Can Help You See What The Fed Is Doing : NPR

The Mystery of Missing Inflation Weighs on Fed Rate Move – By Josh Zumbrun Updated Dec. 13, 2015 8:36 p.m. ET

U.S. near full employment, but inflation hasn’t risen as predicted; Fed officials can’t figure out why

Fed Chair Janet Yellen, in a speech at the University of Massachusetts Amherst in September, acknowledged "significant uncertainty" about her prediction that inflation would rise.

Fed Chair Janet Yellen, in a speech at the University of Massachusetts Amherst in September, acknowledged “significant uncertainty” about her prediction that inflation would rise. Photo: Scott Eisen/Bloomberg News

Federal Reserve officials this week are expected to raise interest rates for the first time in nine years on the expectation that employment and inflation will hit targets reflecting a healthy U.S. economy.

But Fed officials face a troubling question: Jobs are on track, but inflation isn’t behaving as predicted and they don’t know why. Unemployment has fallen to 5%, a figure close to estimates of full employment, while inflation remains stuck at less than 1%, well below the Fed’s 2% target.

Central bank officials predict inflation will approach their target in 2016. The trouble is they have made the same prediction for the past four years. If the Fed is again fooled, it may find it raised rates too soon, risking recession.

Low inflation—and low prices—sound beneficial but can stall growth in wages and profits. Debts are harder to pay off without inflation shrinking their burden. For central banks, when inflation is very low, so are interest rates, leaving little room to cut rates to spur the economy during downturns.

The Fed’s poor record of predicting inflation has set off debate within the central bank over the economic models used by central bank officials. Fed Chairwoman Janet Yellen, in a 31-page September speech on the subject, acknowledged “significant uncertainty” about her prediction that inflation would rise. Conventional models, she said, have become “a subject of controversy.”

Ms. Yellen faces dissent from Fed officials who want to keep interest rates near zero until there is concrete evidence of inflation rising, voices likely to try to put a drag on future rate increases.

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Wall Street Has Doubts About Fed Lifting Interest Rates – By MIN ZENG and IRA IOSEBASHVILI Sept. 16, 2015 7:35 p.m. ET

Skepticism reflects concerns about the economy and the state of the markets


Wall Street is skeptical that the Federal Reserve has room to raise short-term interest rates Thursday, underscoring persistent doubts about the health of the global economy and financial markets following seven years of easy policy.

Some of the biggest names in the financial industry say a rate rise now would be unwise. And some executives whose firms would benefit from higher rates nevertheless don’t expect an increase Thursday. The view marks a sharp reversal from earlier this year, when a mid-2015 increase was widely expected.

“I wouldn’t do it,” Goldman Sachs Group Inc. Chief Executive Lloyd Blankfeinsaid Wednesday at a breakfast interview with The Wall Street Journal. He said wage growth has been anemic, a sign of labor-market slack, and inflation quiescent. Former Treasury Secretary Lawrence Summers and investor Warren Buffett have lately conveyed similar sentiments.

The central bank Thursday afternoon is expected to disclose its decision on the short-term benchmark interest rate at the conclusion of its two-day policy meeting. The Fed has kept rates near zero since December 2008 in a bid to hold down financing costs for consumers and businesses and bolster economic growth. It hasn’t raised rates since June 2006.

Some say doing so would risk a repeat of central-bank moves that have drawn criticism, such as the European Central Bank’s decision to raise interest rates in 2008, just before the acute stage of the financial crisis, and the Fed’s decision to tighten policy in 1937, a move some commentators say added years to the Depression.

Others warn of financial-market volatility that could spill over into the economy, setting back what has been an uneven recovery.


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Fed Appears to Hold Line on Rate Plan By JON HILSENRATH And BEN LEUBSDORF Aug. 30, 2015 2:25 p.m. ET

Stock-market volatility and China’s woes fail to alter policy makers’ view of improving job market, economy

Federal Reserve Vice Chairman Stanley Fischer, attending the Jackson Hole, Wyo., symposium, avoided sending a signal about whether the Fed will act to raise rates at its next meeting. PHOTO: JONATHAN CROSBY/REUTERS

Federal Reserve Vice Chairman Stanley Fischer, attending the Jackson Hole, Wyo., symposium, avoided sending a signal about whether the Fed will act to raise rates at its next meeting. PHOTO: JONATHAN CROSBY/REUTERS

JACKSON HOLE, Wyo.—Federal Reserve officials emerged from a week of head-spinning financial turbulence largely sticking to their plan to raise U.S. interest rates before the end of the year.

During the Federal Reserve Bank of Kansas City’s annual economic symposium here, many policy makers signaled that stock-market volatility and China’s woes haven’t seriously dented their view that the U.S. job market is improving, and that domestic economic output is expanding at a steady, modest pace.

Inflation might remain low for longer thanks to falling oil prices and a strong dollar. Officials will continue to keep a close watch on markets and China. But they hope U.S. consumer-price inflation will start inching toward their 2% annual target as the economy’s untapped capacity gets used up, leaving them in position to start raising rates after several months of forewarning.

“There is good reason to believe that inflation will move higher as the forces holding inflation down—oil prices and import prices, particularly—dissipate further,” said Fed Vice Chairman Stanley Fischer in comments delivered to the conference, which ended Saturday.

The Fed has said it will raise rates when it is reasonably confident the inflation rate will rise again to 2%. Mr. Fischer’s comments suggested he believed the economy is closer to that point, although he pointedly avoided sending a signal about whether the Fed will act at its next meeting.

“I will not, and indeed cannot, tell you what decision the Fed will reach by Sept. 17,” Mr. Fischer said.

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Investors Flinch as Fed Rate Hike Looms – By Andrew Soergel March 12, 2015 | 7:06 p.m. EDT

A trader works on the floor of the New York Stock Exchange during the afternoon of Monday, April 7, 2014, in New York City.

Stocks slumped in recent days despite surprisingly positive employment reports.

Better-than-expected employment figures issued in recent days by the Labor Department have preceded some slippery days for the stock market, as investors are flinching at the prospect of a thriving American economy and what it could lead to in the near future.

The market shed more than 332 points Tuesday following the release of largely positive job-opening figures for the month of January. The dive effectively erased all gains the market had made so far in 2015 as the Nasdaq, Dow Jones industrial average and Standard & Poor’s 500 index all dipped by more than 1.5 percent.

The idea that January’s 5 million job openings – making it the best month for position availability in 14 years – actually hurt the stock market is seemingly counterintuitive.

A high number of job openings suggests people have flexibility in the labor market, a concept further supported by the nearly 3 million “quits” – or people who left their job – in the month of January.

A high number of quits in a given month generally means people in the workforce are confident about their prospects of landing another job. So aren’t these numbers a good thing for the domestic economy?

[READ: 5 Things to Know About the Economy This Week]

The short answer: Yes, but that’s exactly what’s spooking investors, because an improving economy also portends the first Federal Reserve interest rate hike since 2006.

“In prior Fed tightening cycles, what you see is that in and around Fed rate hikes, the first one at least you get market volatility and usually a down stock market,” says John Canally, a vice president and economist at LPL Financial. “The uncertainties around the Fed are when, how much and how fast. And that is certainly reason for markets to hiccup, but they’re probably being premature.”

The Fed has held interest rates to near-zero levels since the Great Recession, effectively making loans less daunting prospects. But many economists speculate that an interest rate hike is inevitable in the near future, as the job market is doing well, the dollar is strong and home sale values have ticked up.

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How Rand Paul’s Crusade to Audit the Fed Could Make His Worst Nightmares Come True – By Jordan Weissmann FEB. 24 2015 7:16 PM

Rand Paul is quickly turning his absurd crusade to audit the Federal Reserve into a mainstream conservative cause célèbre—enough so that today, during her testimony before the Senate, Janet Yellen herself weighed in. (Like just about every other Fed official who has addressed the issue, the central bank’s chair trashed the idea, saying it would “politicize monetary policy.”) Given the White House’s opposition to Paul’s legislation, it shouldn’t become law any time soon. But let’s say it did. What would happen?

This man would like more influence over our monetary policy. -- Reuters

This man would like more influence over our monetary policy. —

Ironically, it might just lead to higher inflation—which is supposedly the last thing the senator from Kentucky wants.

Like his father, Paul is a monetary-policy paranoiac, the sort of person who goes on about the debasement of the dollar and flirts with the idea of linking our currency to a commodity.(Though not necessarily gold. Because, you know, the man’s not that crazy.) He has referred to the Fed as an “an enormous creature, a creature that creates its own money,” as if he were describing Cthulhu with a printing press. He has fretted about Weimar-like hyperinflation just around the corner, even though prices are rising at less than 2 percent per year. He has delivered a factually challenged rant suggesting the Fed would be considered insolvent if we judged it like a normal bank (it wouldn’t be).*

While Paul acknowledges that the Fed is, in fact, already audited—its books are verified by Deloitte & Touche, and Congress can and does request separate audits by the Government Accountability Office—he says that the scrutiny isn’t enough, that those are “a bunch of fake audits.” Sure, you can go online and see every asset on the Fed’s balance sheet, including its serial tracking number. But, Paul says, that doesn’t tell readers “who they bought them from or whether they were bought at fair market price or whether they were bought at a haircut and whether or not there were any conflicts of interests in the buying and selling.”

Closing the gap. – Feb 15th 2014

IT TOOK barely a month for the bubble of optimism that formed over the American economy at the start of the year to deflate. Job growth slowed sharply in December, and stayed weak in January, suggesting more than bad weather was to blame.

The unemployment rate, though, tells a much cheerier story: it dropped to 6.6% in January from 7% in November. Indeed, it could soon hit the Federal Reserve’s 6.5% threshold at which it may consider raising interest rates.

The jobless number has been sending a strangely upbeat message about America’s recovery for some years now. Yet the Fed and other researchers have downplayed its significance, linking the rate less to buoyant demand for labour than to stagnant supply, as discouraged workers stop hunting for jobs. On February 11th Janet Yellen, in her inaugural appearance before Congress as chairman of the Fed, called the recovery in the labour market “far from complete” and averred that she would consider “more than the unemployment rate” in deciding when to declare it healed.

Listen to the numbers

Even so, recent research suggests the unemployment rate is saying something important. It’s just that the message is a depressing one: America’s labour supply may be permanently stunted. If so that would mean that the economy is operating closer to potential—using all available capital and labour—than generally thought, and that there is less downward pressure on inflation than the Fed has assumed.

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