Pre-Market Actions: Interest rates will continue to rise. How high will they go?

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What will the Federal Reserve do at the December meeting? Analysts can speculate all they want, but Fed officials they say they will use hard economic data to make their next decision.

That means key reports on housing, labor and inflation are likely to have outsized effects on the market as investors speculate about what they could mean for the future of interest rates.

What is happening: No one can move markets like Federal Reserve Chairman Jerome Powell, whose words on Wednesday dashed investors’ hopes for a turnaround in interest rates and sent stocks tumbling. “We have a ways to go,” Powell said of the Fed’s current hiking regime aimed at combating persistent inflation. “It’s very premature, in my opinion, to be thinking or talking about taking a break.”

But Powell added an important caveat. The Fed it could begin to slow the pace of those painful climbs as early as December. “Our decisions will depend on the totality of incoming data and its implications for the outlook for economic activity and inflation,” Powell said on Wednesday.

So what will the Fed be looking at between today and theirs? the next political decision on December 14?

The labor market: The Fed’s biggest concern is the super-tight US labor market, and Friday’s jobs report isn’t likely to calm nerves.

The government report is expected to show the economy added another 200,000 positions in October, down from last month but still a very strong figure as job demand continues to outpace labor supply.

That means more inflation. Companies must pay higher wages to attract employees and can charge more for their goods and services. The Fed will take a close look at hourly wage growth in the report. In September, wages rose 5% from a year ago.

There is a possible upside: Another jobs report is expected in December before the Fed meeting. If both reports show a downward trajectory for employment, that could be enough to appease Fed officials, even if the unemployment rate remains historically low.

Inflation data: Expect new data from two main indexes that measure the pace of inflation ahead of the next Federal Reserve meeting.

The October consumer price index (CPI), which tracks changes in the prices of a fixed set of goods and services, is out on November 10.

Core CPI prices, which exclude oil and food, rose 0.6% month-on-month in September, matching August’s pace and well above expectations for a 0.4% rise , not a good sign for the Fed. And analysts expect to see another big increase of 0.5%. in October

The Fed will also be able to see October data on its favorite measure of inflation, personal consumption expenditures (PCE), on December 1.

The PCE reflects changes in the prices of goods and services purchased by consumers in the United States. The Fed believes the measure is more accurate than the CPI because it takes into account a wider range of purchases by a wider range of buyers.

Core PCE rose 5.1% annually in September, higher than August’s rate of 4.9% but below the consensus estimate of 5.2%, according to Refinitiv.

Housing: The housing market has been deeply affected by the Fed’s efforts to fight inflation and is one of the first areas of the economy to show signs of cooling.

The 30-year fixed rate mortgage averaged 6.95% last week, up from 3.09% just a year ago, and high borrowing costs are causing demand to decline.

“The housing market was very overheated in the two years after the pandemic as demand increased and rates were low,” Powell said Wednesday. “We understand that this is really where there is a very significant effect of our policies.”

New and existing home sales figures for October, due on November 18 and 23, will show the continued impact of this policy ahead of the next meeting.

The US economy is still holding strong in the face of rising interest rates, but things are softening much faster across the pond.

Britain will face tough economic times and high interest rates well into next year, officials warned this week.

The Bank of England raised interest rates by three-quarters of a percentage point on Thursday, the biggest hike in 33 years, as it tries to fight rising inflation.

But the bank also issued a strong warning. He said that economic production is already contracting and that he expects a The recession will continue into the first half of 2024 “as high energy prices and materially tighter financial conditions weigh on spending.”

A two-year recession would be longer than the one that followed the 2008 global financial crisis, although the Bank of England said any fall in GDP in the run-up to 2024 was likely to be relatively small.

The central bank also doesn’t think inflation will start falling until next year. That will require more interest rate hikes in the coming months, policymakers warned.

Elon Musk has been busy at Twitter headquarters. Aside from tweeting and debunking a conspiracy theory, he’s talked about implementing some big changes to his $44 billion acquisition. Here’s what’s happened so far:

Layoffs begin: Elon Musk began laying off Twitter employees Friday morning, according to a memo sent to staff. The email sent Thursday evening notified employees that they will receive a notice by 12:00 pm ET on Friday informing them of their employment status.

The email added that “to help ensure the security” of Twitter’s employees and systems, the company’s offices “are temporarily closed and all badge access is suspended.”

Twitter had around 7,500 employees before Musk’s acquisition.

Several Twitter employees have already filed a class-action lawsuit alleging the layoffs violate the federal Worker Adjustment and Retraining Notification Act.

The WARN Act requires any company with more than 100 employees to give 60 days’ written notice if it intends to cut 50 or more jobs in a “single job.”

Consolidation of strength: In less than a week since Musk acquired Twitter, the company’s C-suite appears to have been almost completely wiped out, through a mix of layoffs and resignations.

Twitter’s board of directors also dissolved last week, according to a securities filing.

The company’s filing states that all of Twitter’s previous board members, including recently ousted CEO Parag Agrawal and Chairman Bret Taylor, are no longer directors “in accordance with the terms of the merger agreement.” That makes Musk, according to the filing, “the sole director of Twitter.”

Collection of blue checks: Musk said Tuesday that he planned to charge $8 a month for Twitter’s subscription service, called “Twitter Blue,” promising to let anyone pay to receive a coveted blue checkmark to verify their account. That’s a steep haircut from its original plan to charge users $19.99 a month to get or keep a verified account.

In a tweet, the world’s richest man used an expletive to describe his assessment of Twitter’s “current lords and peasants system of whether or not you have a blue tick.” He added: “Power to the people!” Blue for $8 a month.

Advertisers paused: Elon Musk wrote an open letter to advertisers just hours before consolidating his acquisition of Twitter, explaining that he did not want the platform to become a “free-for-all hellscape.” But this attempt to reassure the advertising industry, which makes up the vast majority of Twitter’s business, doesn’t seem to be working.

General Mills ( GIS ), Mondelez International ( MDLZ ), Pfizer ( PFE ) and Audi ( AUDVF ) have joined a growing list of companies that have paused their Twitter advertising in the wake of Musk’s acquisition.

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