Department of Education Grants

According to Federal Reserve projections released on Wednesday, the central bank will raise interest rates as high as 5.6% by 2023 after pausing its hike campaign in June. On Wednesday, the Federal Reserve maintained its target range for the key lending rate at 5% to 5.25%. But its projections, the so-called dot-plot, moved markets, sending them lower as the central bank projected two more increases. That’s if the central bank keeps its rate-hiking pace at quarter-point increments. Fed Chairman Jerome Powell said the next committee meeting in July remains a “live” meeting, signalling that a quarter-point hike isn’t baked in yet. “We didn’t we didn’t make a decision about July. … Of course it came up in the meeting from time to time, but really the focus was on what to do today,” Powell said in a press conference Wednesday. “I would say … two things: One, a decision hasn’t been made. Two, I do expect that it will be a live meeting.”
Eighteen Federal Open Market Committee members indicated their expectations for rates in 2023 and further in the dot plot. Four members saw another rate increase this year, and nine expect two. Two more members added a third hike, while one saw four more. Only two members signalled that they don’t see more hikes this year. The central bank also hiked its forecasts for the next two years, now projecting a fed funds rate of 4.6% in 2024 and 3.4% in 2025. That’s up from respective 4.3% and 3.1% forecasts. Meanwhile, Fed members raised economic growth expectations. The Summary of Economic Projections now shows a 1% expected GDP gain compared to the 0.4% estimate in March. Officials also were more optimistic about unemployment, now seeing a 4.1% rate by year’s end compared to 4.5% in March. On inflation, the central bank raised its forecast to 3.9% for core (excluding food and energy) and lowered it slightly to 3.2% for the headline. Those numbers had been 3.6% and 3.3%, respectively, for the personal consumption expenditures price index, the central bank’s preferred inflation gauge.

Earlier this month, JPMorgan Chase raised its performance target following the government-brokered takeover of First Republic. The bank will generate about $84 billion in net interest income this year, New York-based JPMorgan said Monday in slides for an all-day investor presentation. That’s $3 billion more than April’s guidance. JPMorgan raised its net interest income outlook by $7 billion, causing its stock to jump on earnings day for the first time in 20 years. In addition, the bank said that “sources of uncertainty” regarding deposits and the economy could affect its outlook. Net interest income is the difference between what banks earn from loans and investments and what they pay depositors.
Among the banks that have benefited from the recent regional banking turmoil is JPMorgan Chase, the fourth-largest U.S. bank by assets. It was one of the only banks to see deposits rise in the first quarter as panicked customers sought safety at large institutions. It won an auction to acquire First Republic, a move expected to boost earnings and advance its efforts to attract wealthy clients. The bank also announced on Monday that it expects expenses to rise to $84.5 billion, unchanged from its previous guidance, excluding $3.5 billion in costs associated with the integration of First Republic. CFO Jeremy Barnum said that about half of those integration expenses would be recognized this year. The bank said trading and investment banking revenue in the second quarter would decline by 15% compared with the year-earlier period. Longtime JPMorgan CEO Jamie Dimon wrapped up the event with a question-and-answer session. He was asked how many years he expected to serve as CEO after rival chief James Gorman of Morgan Stanley announced plans to step down within a year last week. Dimon deflected the question, saying his plans hadn’t changed. “I can’t do this forever, I know that,” Dimon said. “But my intensity is the same. I think when I don’t have that kind of intensity, I should leave.”

Following the March jobs report, which showed a resilient economy and moderate inflation, S&P 500 futures and Treasury yields increased on Friday. S&P 500 futures gained 0.2%. Dow Jones Industrial average futures added 64 points. Nasdaq-100 futures rose 0.1%. The 2-year Treasury yield jumped 17 basis points to 3.99%. The 10-year Treasury yield added 12 basis points to 3.41%. (One basis point equals 0.01%, and yields move inversely to prices.) The U.S. added 236,000 jobs in March, about in line with expectations, with the unemployment rate falling to 3.5% from 3.6% a month earlier. Based on the consensus estimate from Dow Jones economists, expectations were for a 238,000 increase in non-farm payrolls. Those same economists anticipated the unemployment rate to hold steady at 3.6%. Average hourly earnings increased by 4.2% on a 12-month basis, the lowest level since June 2021. The New York Stock Exchange is closed for Good Friday so regular trading won’t begin until Monday. Futures and bond trading close early on Friday.
The S&P 500 lost 0.1% for the week that ended Thursday, breaking a 3-week win streak as a series of weak labor data points hinted to investors that a recession could be near. The Nasdaq Composite was down 1.1% for the week, while the Dow squeaked out a small gain. Earlier this week, ADP said private payrolls slowed significantly in March, Labor Department data showed job openings falling to the lowest in nearly two years, and weekly jobless claims came in higher than expected. Friday’s jobs report contradicts that weak data and will likely divide investors. Some may like the resilient economy, while others may not mind a slight weakening in the labor market to get the Federal Reserve to back off its ongoing tightening campaign. The Fed’s next decision on interest rates is May 3.

The Federal Reserve is expected to raise interest rates by a quarter percentage point next week, despite turmoil in the banking industry and uncertainty ahead. Many experts expect the rate on Wall Street to rise by a quarter percentage point. The expectations for interest rates have been on a rapid swing over the past two weeks, ranging from a half-point hike to holding the line and even at one point talk that the Fed might be willing to reduce rates. However, a consensus has emerged that Fed Chairman Jerome Powell and his fellow central bankers will want to signal that while they are attuned to the financial sector upheaval, continuing the fight to bring down inflation is essential. That likely will take the form of a 0.25 percentage point, or 25 basis point, increase, accompanied by assurances that there’s no preset path ahead. The outlook could change depending on market behavior in the coming days, but the indication is for the Fed to hike.
“They have to do something, otherwise they lose credibility,” said Doug Roberts, founder, and chief investment strategist at Channel Capital Research. “They want to do 25, and the 25 sends a message. But it’s really going to depend on the comments afterward, what Powell says in public. … I don’t think he’s going to do the 180-degree shift everybody’s talking about.” Markets largely agree that the Fed is going to hike. As of Friday afternoon, there was a 75% chance of a quarter-point increase, according to CME Group data using Fed funds futures contracts as a guide. The other 25% was in the no-hike camp, anticipating that the policymakers might take a step back from the aggressive tightening campaign that began just over a year ago. Goldman Sachs is one of the most high-profile forecasters seeing no change in rates, as it expects central bankers in general “to adopt a more cautious short-term stance in order to avoid worsening market fears of further banking stress.”

After his attempts in consumer finance failed, Goldman Sachs CEO David Solomon announced Tuesday that asset management and wealth management would be the bank’s growth engines. “The real story of opportunity for growth for us in the coming years is around asset management and wealth management,” Solomon told CNBC’s, Andrew Ross Sorkin. Solomon added that Goldman was already the fifth-biggest active asset manager in the world. “There’s real opportunity across the firm for us to continue to make the firm more durable,” Solomon said. He also acknowledged that the company didn’t “execute well” on parts of his consumer push but added that management would reflect and learn from the episode.
Shares of the New York-based company slipped 3% in midday trading. Goldman was scheduled to hold its second-ever investor day later Tuesday. The firm released a slideshow for the event online, giving updated targets for growth in its asset and wealth management division and a 2025 break-even target for its money-losing platform solutions division. It also reiterated its target for a 15% to 17% return on tangible equity, a key metric tracked by bank investors. Solomon stated during his opening remarks at Goldman’s investor conference that the bank was considering “strategic alternatives” for its consumer platforms. Consequently, Goldman may further retrench from retail banking if it decides to sell GreenSky lending, which it purchased just last year for $2.24 billion, or restructure its card agreements with Apple or General Motors.

According to a person with knowledge of the situation, Goldman Sachs, the storied investment bank, plans on cutting up to 8% of its employees as it girds for a tougher environment next year. The layoffs will impact every division of the bank and will likely happen in January, according to the person who declined to be identified as speaking about personnel decisions. That’s ahead of an upcoming conference for Goldman shareholders in which management is expected to present performance targets. The New York-based investment bank typically pays bonuses in January, and it’s possible the layoffs could be a way to preserve bonus dollars for remaining employees. Read More

Despite a muted level of inflation, consumers pulled back on their spending in November, according to data released Thursday by the Commerce Department. Retail sales declined by 0.6% for the month, exceeding the Dow Jones estimate of a 0.3% decline. The number is not adjusted for inflation as gauged by the Labor Department’s consumer price index, which increased by 0.1% in November and was below expectations. Measures that exclude autos and both autos and gas sales showed 0.2% declines. Stocks fell sharply following a mostly disappointing round of economic data released Thursday morning. The Dow Jones Industrial Average was off nearly 500 points in early trading. Read More

Following a big market rally on Monday, Credit Suisse shares recovered their losses and ended the day down around 1%. In the wake of a report in the Financial Times that the Swiss bank’s executives are in discussions with its major investors to assuage their concerns over the lender’s finances, the company’s shares dropped as much as 10%. One executive in the talks told the publication that teams at the bank were actively engaging with its top clients and counterparties over the weekend, adding that they were receiving “messages of support” from top investors. Shares ended the trading session down around 1%. Read More

According to sources with knowledge of the discussions, Sam Bankman-Fried’s crypto conglomerate FTX is currently in talks with investors to raise up to $1 billion in new capital, which would keep the company’s valuation at approximately $32 billion. Negotiations are ongoing, and the terms may change, according to the sources who requested anonymity, as the discussions are confidential. After FTX’s last capital raise in January, Coindesk previously reported on an upcoming investment at a flat valuation. Existing investors include Singapore’s Temasek, SoftBank’s Vision Fund 2, and Tiger Global. An FTX spokesperson declined to comment. Read More

President Joe Biden will nominate former Treasury Department official, Michael Barr, to be the Federal Reserve’s top regulator in charge of big banks. Barr is the White House’s frontrunner for the top regulatory job. If appointed, the financial law author perhaps becomes the most powerful U.S. bank regulator: the Fed Vice chair supervision. Read More