Here are five things you must know for Thursday, September 22:
1. -- Stock Futures Bounce In Wake of Hawkish Fed
U.S. equity futures bumped higher Thursday, while the dollar tested fresh two-decade highs against its global peers, as investors unpacked a hawkish Federal Reserve rate hike and braced for the impact of policy tightening from major central banks around the world.
The Fed's decision to boost its benchmark Fed Funds rate by 75 basis points, to a range of 3% to 3.25%, was largely expected, but the signaling from Chairman Jerome Powell, as well as his suggestion that taming inflation is likely to induce recession, pushed stocks sharply lower by the close of trading Wednesday and carried the U.S. dollar to a fresh 20-year high against a basket of its global peers.
"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 would be."
The stark assessment, which included warnings about rising unemployment and further weakness in the housing market, was paired by a big move higher for 2-year Treasury note yields, which surged 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 around 56 basis points, indicating traders are pricing in an increased chance of near-term recession even as they see the Fed Funds rate rising by at least 1.25% this year and then to as high as 4.5% in early 2023.
The U.S. dollar index, meanwhile, touched a two-decade peak of 111.81 in overnight trading before easing to 110.743 following a move by the Bank of Japan to intervene in currency markets in order to strengthen the yen for the first time since 1998 following its decision to hold rates steady.
The BoJ's move was followed by a rate hike from Norway's central bank, which boosted its key rate by 50 basis points to 2.25%, and a 75 basis point hike from the Swiss National Bank. The Bank of England is likely to execute a similar move when it unveils it latest policy decision at 7:00 am Eastern time, although bets on a 75 basis point hike, the biggest since 1989, are still being made in futures markets.
Stocks in Europe were trending lower in early trading following last night's sell-off on Wall Street, with the Stoxx 600 was marked 0.4% lower in Frankfurt and the FTSE 100 little-changed heading into the BoE rate decision.
That followed a 1.05% decline for the MSCI ex-Japan index in Asia as stocks in China remain stuck at four-month lows on renewed growth concerns in the world's second-largest economy.
In the U.S., futures contracts tied to the S&P 500 are indicating a 15 point opening bell gain while linked to the Dow Jones Industrial Average are priced for a 143 point advance. Futures tied to the tech-focused Nasdaq are indicating a 43 point move to the upside.
2. -- Japan Supports Yen In First Currency Intervention Since 1998
The Bank of Japan directly intervened in global currency markets overnight, the first such move since 1998, as officials moved to support the yen amid its two-decade lows against the U.S. dollar.
Masato Kanda, Japan's Vice Finance Minister For International Affairs, told reporters in Japan that the government took "decisive action" in the currency markets following a Bank of Japan policy decision that kept rates unchanged at their near-record lows.
The move triggered the biggest one-day decline for the dollar against the yen since March of 2020, to peg the pairing at 141.89.
Japan's economy, while export-focused, is sensitive to currency weakness as it boosts the cost of imported energy, adding to the nation's inflation pressures and reducing the purchasing power of its aging population.
3. -- JPMorgan CEO Calls Bitcoin 'Decentralized Ponzi Scheme'
JPMorgan Chase (JPM) CEO Jamie Dimon told lawmakers late Wednesday that cryptocurrencies, including bitcoin, were little more than "decentralized Ponzi" schemes and that stablecoins demanded tighter regulation from market watchdogs.
Speaking as part of a panel of top-tier bank bosses appearing before the House of Representatives Financial Services Committee on Capitol Hill, Dimon said that while his bank was an active participant in the development of blockchain technology for the financial services industry, he remains unconvinced with respect to the power or influence of bitcoin.
"I'm a major skeptic on crypto tokens, which you call currency, like bitcoin," Dimon said. "They are decentralized Ponzi schemes and the notion that this is good for anybody is unbelievable."
Stablecoins, with a collateralized link to the U.S. dollar, could be of use with the proper regulation, Dimon said, as the government moves to apply restrictions on 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 Gain As Home Prices Boost Bottom Line
Lennar Corp. (LEN) shares moved lower in pre-market trading after the second-largest U.S. homebuilder posted stronger-than-expected third quarter earnings powered in part by rising home prices.
Lennar said adjusted earnings for the three months ending in August, the group's fiscal third quarter, were pegged at $5.03 per share, well ahead of Street forecasts, on sales of $8.93 billion.
Solid new home price gains, which were up nearly 11% from a year ago at around $404,000 over the final month of the quarter, boosted the group's bottom line, as did a dearth of new inventory in a market still impacted by supply chain issues and labor costs.
Looking into the final months of its fiscal year, Lennar said it sees home deliveries of around 20,500, compared to the July quarter tally of 17,248, and new orders in the range of 14,500.
Lennar shares were marked 0.83% higher in pre-market trading to indicate an opening bell price of $76.55 each.
5. -- Costco Earnings In Focus As Shoppers Seek Inflation Relief
Costco Wholesale Corp. (COST) shares edged lower in pre-market trading ahead of the bulk retail giant's fourth quarter earnings after the closing bell.
Analysts are looking for a bottom line of $4.16 for the three months ending in early August, the group's fiscal fourth quarter, on overall revenues of $72.07 billion.
Surging 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 pullback in discretionary spending. That is likely to support revenue growth, but could eat into margins unless Costco is able to raise prices as an offset.
Tumbling gas prices, however, could trim its overall revenue total, although the lost sales value could be made up in goods and food volumes as customers use cash saved at the pumps to stock up on staples and homeware.
Last month, Walmart (WMT) posted 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 surging U.S. dollar, would lead to a decline of between 9% and 11% for its full-year profits.
Cost shares were marked 0.54% lower in pre-market trading to indicate an opening bell price of $490.40 each.
