Cramer says avoid all speculative investments like crypto as the Fed stays hawkish

CNBC's Jim Cramer on Tuesday implored investors to stay away from speculative assets such as cryptocurrencies, warning that they will continue to struggle during the ongoing Federal Reserve tightening cycle. "Look, Fed chief Jay Powell told us that we need to stop doing stupid things with our money. That was the thrust of his speech on Friday," the "Mad Money" host said, referring to the top U.S. central banker's Jackson Hole address, in which Powell warned the Fed's commitment to squashing inflation could bring "some pain" to American businesses and households. Wall Street has finished lower in three straight sessions as investors digest Powell's Friday morning remarks. Powell is "going to bring the pain until it puts an end to the gambling," Cramer said. "Of course, he'll also hurt some good investments in the process ... but we won't see the end of this decline until we get a giant washout of all things that are speculative." That includes, but is not limited to, cryptocurrencies, said Cramer, who also acknowledged he no longer believes in the argument that bitcoin is a store of value. In Cramer's opinion, other speculative parts of the market to avoid are money-losing firms that went public via special purpose acquisition companies and meme stocks. "This is what it looks like when the Fed gets serious," Cramer said. What matters is that we just have to get through it intact. Don't get memed. Don't get SPAC'd. Don't get crypto'd. And you'll get through this thicket and find yourself in a much better time when we are sufficiently oversold for a huge bounce."

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nonfarm payrolls, unemployment, Fed, recession

Investors are closely monitoring the health of the U.S. economy after recent numbers showed a second consecutive negative gross domestic product reading.

As a result, upcoming data releases related to the labor market will be highly anticipated by many money managers.

Nonfarm payrolls data will be released at 8:30 a.m. ET, alongside unemployment and average hourly wage numbers.

Richmond Fed President Tom Barkin is scheduled to deliver remarks at 8 a.m. ET on Friday.

Cleveland Fed President Loretta Mester on Thursday said the Federal Reserve plans to keep raising interest rates into 2023, in another sign that the central bank does not yet see an economic recession.

Source https://www.globalcourant.com/nonfarm-payrolls-unemployment-fed-recession/?feed_id=6882&_unique_id=62ecd0e131404

Market jump after Fed hike is ‘trap,’ Morgan Stanley warns investors

Morgan Stanley is urging investors to resist putting their money to work in stocks despite the market's post-Fed-decision jump.

Mike Wilson, the firm's chief U.S. equity strategist and chief investment officer, said he believes Wall Street's excitement over the idea that interest rate hikes may slow sooner than expected is premature and problematic.

"The market always rallies once the Fed stops hiking until the recession begins. … "[But] it's unlikely there's going to be much of a gap this time between the end of the Fed hiking campaign and the recession," he told CNBC's "Fast Money" on Wednesday. "Ultimately, this will be a trap."

According to Wilson, the most pressing issues are the effect the economic slowdown will have on corporate earnings and the risk of Fed over-tightening.

"The market has been a bit stronger than you would have thought given the growth signals have been consistently negative," he said. "Even the bond market is now starting to buy into the fact that the Fed is probably going to go too far and drive us into recession."

'Close to the end'

Wilson has a 3,900 year-end price target on the S&P 500, one of the lowest on Wall Street. That implies a 3% dip from Wednesday's close and a 19% drop from the index's closing high hit in January.

His forecast also includes a call for the market to take another leg lower before getting to the year-end target. Wilson is bracing for the S&P to fall below 3,636, the 52-week low hit last month.

"We're getting close to the end. I mean this bear market has been going on for a while," Wilson said. "But the problem is it won't quit, and we need to have that final move, and I don't think the June low is the final move."

Wilson believes the S&P 500 could fall as low as 3,000 in a 2022 recession scenario.

"It's really important to frame every investment in terms of 'What is your upside versus your downside,'" he said. "You're taking a lot of risk here to achieve whatever is left on the table. And, to me, that's not investing."

Wilson considers himself conservatively positioned — noting he's underweight stocks and likes defensive plays including health care, REITs, consumer staples and utilities. He also sees merits of holding extra cash and bonds at the moment.

And, he's not in a rush to put money to work and has been "hanging out" until there are signs of a trough in stocks.

"We're trying to give them [clients] a good risk-reward. Right now, the risk-reward, I would say, is about 10 to one negative," Wilson said. "It's just not great."

Disclaimer

Source https://www.globalcourant.com/market-jump-after-fed-hike-is-trap-morgan-stanley-warns-investors/?feed_id=3094&_unique_id=62e1db90e5c88

US stocks rally, dollar retreats as Fed hikes interest rates

Analysts said the central bank's move met market expectations and they took heart in Powell's statements that implied the central bank could undertake smaller interest rate hikes later in 2022 after two straight super-sized increases.

All three major US indices enjoyed solid gains, with the S&P 500 finishing up 2.6 percent. (AP)

Wall Street stocks rallied and the dollar retreated as the Federal Reserve again proceeded with a large interest rate hike, maintaining its forceful stance to combat inflation.

The US central bank carried out the second straight 75 basis point increase on Wednesday, and the fourth rate hike this year, moving aggressively to cool the strongest surge in inflation in more than four decades without derailing the world's largest economy.

But equities pushed even higher during Fed Chair Jerome Powell's news conference, where he described the US economy as slowing but not in recession.

Analysts said the central bank's move met market expectations and they took heart in Powell's statements that implied the central bank could undertake smaller interest rate hikes later in 2022 after two straight super-sized increases.

Wall Street "is contemplating less aggressive monetary policy at least on the Fed Funds rate as we move from the third quarter into the fourth quarter," said Art Hogan, chief market strategist at B Riley Wealth Management.

All three major US indices enjoyed solid gains, with the S&P 500 finishing up 2.6 percent.

The dollar also pulled back against the euro and other currencies in a sign the Fed's stance was seen as less hawkish than expected.

READ MORE: US Fed announces biggest interest rate hike in nearly three decades

[embed]https://www.youtube.com/watch?v=7pe5kXoYHOU[/embed]

'Markets signal of economic strength'

GDP in the first quarter contracted 1.6 percent. Two quarters of negative growth are generally considered a sign the economy is in recession, although that is not the official criteria.

Powell noted the Fed's mandate is to promote price stability and full employment, not to make declarations about recessions — but added he did not consider current conditions consistent with such a categorization.

A recession is "a broad-based decline across many industries that is sustained for more than a couple months," Powell told reporters.

"What we have right now doesn't seem like that. The real reason is that the labor market is just sending such a strong signal of economic strength that it makes you really question the GDP data."

In Europe, shares in London rose 0.6 percent, Paris climbed 0.8 percent and Frankfurt added 0.5 percent.

READ MORE: Eurozone business activity contracts as price rises bite

[embed]https://www.youtube.com/watch?v=hgNKELdX1iU[/embed]

Source: AFP

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China tried to obtain info, build network inside the Fed, report says

The Marriner S. Eccles Federal Reserve building in Washington, D.C., US, on Wednesday, July 6, 2022. The Chinese government tried to obtain sensitive internal information and build a network of influence and informants inside the Federal Reserve, according to a new report released Tuesday by Republican staff members of the Senate Homeland Security and Governmental Affairs Committee.

Al Drago | Bloomberg | Getty Images

The Chinese government tried to obtain sensitive internal information and build a network of influence and informants inside the Federal Reserve, according to a new report released Tuesday by Republican staff members of the Senate Homeland Security and Governmental Affairs Committee.

The report from the committee staff of Sen. Rob Portman of Ohio, the ranking member, did not conclude whether the attempts, which included the detention of a Federal Reserve employee, were successful.

Since at least 2013, the report found, China has targeted the Federal Reserve System and sought to recruit U.S.-based economists to share information in exchange for money and other benefits. Thirteen Federal Reserve employees working across eight of the Fed's 12 locations were identified as the "P-Network" by a Federal Reserve analysis that deemed them to be of potential concern, according to the report. 

One of the members of the "P-Network" was detained four times on a 2019 trip to Shanghai, and his family was threatened, according to the report. The Fed employee's phones, computers and contact information were hacked during his trip to China, and Chinese officials copied contact information of other Federal Reserve officials, the report said.

The Senate committee obtained the Federal Reserve's counterintelligence analysis of the P-Network in 2020, but it said the central bank now disputes many of the findings. At least one of the employees of the network was fired for "violating certain [Federal Reserve System] rules," according to the analysis obtained by the committee. NBC News has not reviewed the original Federal Reserve analysis.

The report also found what it called close ties between Federal Reserve employees and the People's Bank of China, Chinese media outlets and the Chinese Thousand Talents Program, which U.S. intelligence officials say encourages economic espionage.

At least one Fed employee tried to transfer large volumes of data in an unapproved transfer to an external site after having had "continuous contacts with Chinese nationals and universities," according to the report. It is not clear from the report whether the transfer was successful. 

The Senate committee's staff criticized the Federal Reserve for not doing a better job policing its own employees, citing a "lack of internal counterintelligence competency at the Federal Reserve or sufficient ongoing cooperation with federal law enforcement and intelligence agencies."

The Federal Reserve recently told the committee that some of the information it provided in its counterintelligence analysis reports from 2015 to 2020 can no longer be verified, according to a source familiar with the Senate investigation.

The source also said the Federal Reserve has been resistant to security measures that could mitigate some threats, like reporting foreign contacts. The FBI made 70 recommendations for better security measures, and to date the Fed has implemented only one or possibly two, the source said.

Two weeks ago, the committee got a classified briefing from the FBI that backed up a lot of information about the threat to the Fed, according to an official familiar with the investigation.

Fed Chairman Jerome Powell strongly pushed back against the report in a letter to Portman, citing "strong concerns about assertions and implications in the report." 

"We are deeply troubled by what we believe to be the report's unfair, unsubstantiated, and unverified insinuations about particular individual staff members," Powell said. "We are confident that Federal Reserve staff understand their obligations and are committed to maintaining both the confidentiality of sensitive information and the integrity of our workforce."

The Chinese government, the FBI and the Federal Reserve did not immediately respond to requests for comment.

Source https://www.globalcourant.com/china-tried-to-obtain-info-build-network-inside-the-fed-report-says/?feed_id=2630&_unique_id=62e0ae60790e2

Ahead of key Fed meeting, Biden says US will not enter recession

WASHINGTON

President Joe Biden on Monday threw cold water on fears the US could be heading into a recession, pointing to low unemployment and continued investment in the American economy ahead of a key Federal Reserve meeting.

"We're not gonna be in a recession," the president told reporters. "The unemployment rate is still one of the lowest we've had in history. It is in the 3.6 area. We still find ourselves with people investing.

“My hope is we go from this rapid growth to a steady growth, and we'll see some coming down, but I don't think we're going to, God willing, that we'll see a recession."

The comments come as the US Federal Reserve prepares to conclude a two-day meeting on Wednesday in which it is widely expected to again raise interest rates in its further drive to tamp down inflation.

Economists are anticipating another 0.75 basis point hike. Major Wall Street firms, including Apple, Google parent company Alphabet, and Microsoft are also due to release major corporate earnings reports this week.

Year-end projections put the central bank's benchmark rate at least at 3.5%.

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