10 Things You Need To Know: September 27, 2022

Key data releases this week include: durable goods orders (Tue), FHFA House Price Index (Tue), consumer confidence (Tue), new home sales (Tue), pending home sales (Wed), Q2 GDP revision (Thu), personal income and spending (Fri), PCE deflator (Fri), and consumer sentiment (Fri).

Haver

September 21, 2022

The Federal Reserve announced a 75-basis point increase in the target for the Federal funds rate to 3.00% – 3.25%. It was the third consecutive increase of that magnitude and places the rate at the highest level since January 2008. The Fed “… anticipates that ongoing increases in the target range will be appropriate.” The move was expected by the Action Economics Forecast Survey.

Haver

September 21, 2022

Existing home sales fell 0.4% m/m (-19.9% y/y) to 4.800 million units (SAAR) in August after, according to the National Association of Realtors (NAR). The August reading was the seventh consecutive monthly fall and the eighth in nine months to the lowest level since May 2020. The Action Economics Forecast Survey expected August sales of 4.69 million units.

Haver

September 22, 2022

The Conference Board’s Composite Leading Economic Indicators Index fell 0.3% (-1.0 y/y) in August following a 0.5% July decline, revised from -0.4%. The Action Economics Forecast Survey expected no change in the Leading Indicators index for last month. Four of the Leading Index’s ten components made negative contributions in August.

Reuters, Bloomberg

September 26, 2022

The British pound gave up almost 5% of its value against the dollar, plummeting to a low of $1.0327 today in trading on Asian markets, a level not seen since 1985. The UK currency also declined against the euro, as markets reacted to a package of tax cuts and new spending funded by debt unveiled by chancellor Kwasi Kwarteng.

Barron’s

September 26, 2022

Jason De Sena Trennert, who heads Strategas Research, sees a profit recession that could cut 2023 S&P earnings to just $200. Earnings recessions typically happen twice as often as economic contractions, and this one would reflect the faster rise in producer prices than in consumer prices. The estimated drop of about 10% would be far less than the median slide during a recession, however. And the falling earnings estimates could mean the next leg of the bull market is upon us.

Barron’s

September 26, 2022

“The economy probably won’t be able to sustain that level of rates for any period of time,” says Michael Darda, the chief economist and market strategist at MKM Partners, about the fed-funds rate potentially hitting 4.5% early next year. The Fed’s projections agree. They suggest that after next year, the fed-funds rate will fall in 2024 and 2025, by a total of 1.75 percentage points. Darda believes that it will happen faster; he sees inflation falling toward 2% in a year to a year and a half.

Bloomberg

September 25, 2022

Federal Reserve Bank of Atlanta President Raphael Bostic said the strong US job market suggests the economy could slow down in “a relatively orderly way” as the central bank bears down on inflation by raising interest rates. “It’s going to be hard — it’s not going to be easy,” he said.

The Hill

September 21, 2022

Republican lawmakers are at odds over a measure to establish stopgap funding to prevent a government shutdown Oct. 1. Some lawmakers want the funding to go into early 2023 to delay action on long-term funding until after midterm elections, while others say the move would adversely affect spending priorities.

The Wall Street Journal, TechCrunch

September 20, 2022, September 21, 2022

Investor Chamath Palihapitiya, a promoter of special-purpose acquisition companies who came to be known as the “SPAC King,” is closing the doors on two SPACs that he supports after being unable to find companies to take public through mergers. The money investors paid for their shares in the SPACs will be returned to them.