Aurelia Butler

JACKSON HOLE, Wyoming (Reuters) -The Federal Reserve may need to raise interest rates further to cool still-too-high inflation, Fed Chair Jerome Powell said on Friday, promising to move with care at upcoming meetings as he noted both progress made on easing price pressures as well as risks from the surprising strength of the U.S. economy.While not as hawkish a message as he delivered this time a year ago at the annual Jackson Hole Economic Policy Symposium, Powell’s remarks still delivered a punch, with investors now seeing one more rate hike by year-end more likely than not.”We will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data,” Powell said in a keynote address. “It is the Fed’s job to bring inflation down to our 2% goal, and we will do so.” The Fed has raised rates by 5.25 percentage points since March 2022, and inflation by the Fed’s preferred gauge has moved down to 3.3% from its peak of 7% last summer. Although the decline was a “welcome development,” Powell said, inflation “remains too high.””We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” he said.But with “signs that the economy may not be cooling as expected,” including “especially robust” consumer spending and a “possibly rebounding” housing sector, Powell said that above-trend growth “could put further progress on inflation at risk and could warrant further tightening of monetary policy.” His remarks showed the Fed wrestling with conflicting signals from an economy where inflation has by some readings slowed a lot without much cost to the economy – a good outcome, but one that has raised the possibility that Fed policy is not restrictive enough to complete the job. Unlike in last year’s speech at the closely watched conference hosted by the Federal Reserve Bank of Kansas City – a terse warning of more tightening to come – Powell did not flag coming “pain” to households from further policy tightening. But neither did he signal that rate cuts were anywhere close, or nod as some policymakers have done to the need to adjust rates downward once inflation cools more sustainably.’FINGER ON THE TRIGGER’At day’s end, futures contracts tied to the Fed policy rate were pricing in just less than a 20% chance of a rate hike in September, but a better-than-50% chance of the policy rate ending the year in a 5.5%-5.75% range, a quarter-point higher than the current range. Fed policymakers will also meet in November and December. The yield on the two-year Treasury note ended the day at 5.08%, its highest close since June 2007.”My main takeaway is that when it comes to another rate hike, the chair still very much has his finger on the trigger, even if it’s a bit less itchy than it was last year,” said Inflation Insights’ Omair Sharif. It is difficult, Powell said, to know with precision how high above the “neutral” rate of interest the current benchmark rate stands, and therefore hard to assess just how much restraint the Fed is imposing on growth and inflation.Powell repeated what has become a standard Fed diagnosis of inflation progress – with a pandemic-era jump in goods inflation easing and a decline in housing inflation “in the pipeline,” but concern that continued consumer spending on a broad array of services and a tight labor market may make a return to 2% difficult.Recent declines in measures of underlying inflation, stripped of food and energy prices, “were welcome, but two months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably,” Powell said. “Given the size” of the broader services sector, excluding housing, “some further progress will be essential,” the Fed chief said, and it will likely require an economic slowdown to deliver it.”Restrictive monetary policy will likely play an increasingly important role. Getting inflation sustainably back down to 2% is expected to require a period of below-trend economic growth as well as some softening in labor market conditions,” Powell said.While Powell’s tone was not as stern as last year, when in a very abrupt set of remarks he disabused market notions that the Fed was then nearing the end of its rate-hike cycle and would cut rates through this year. Still, it was clear he did not want to set aside any options.“Powell continues to walk a tightrope,” said Michael Arone, chief investment strategist at State Street (NYSE:STT) Global Advisors. “This year I think he is demonstrating that he is pleased with how far monetary policy has come and how inflation has been reduced. But he is still holding on tightly to this notion that they are watching it carefully and they still have work to do.”In interviews on the sidelines of the conference, other Fed policymakers expressed a range of views. “We probably have some work to do,” Cleveland Fed President Loretta Mester said. Chicago Fed President Austan Goolsbee felt the focus may turn to figuring out how long to keep rates high, rather than on how much higher they should go. Powell ended his speech on Friday with nearly the same line he finished with last year at Jackson Hole: “We will keep at it until the job is done.” More

NEW YORK (Reuters) – U.S. stock investors are bracing for a potentially volatile September as the market faces key economic data reports, a Federal Reserve meeting and worries over a possible government shutdown during a month of historically muted equity performance. In Septembers since 1945, the S&P 500 has declined an average of 0.7%, the worst performance of any month, according to CFRA.Recent weeks have been volatile. The S&P 500, which is up nearly 15% this year, has retreated more than 4% from its July 31 high as investors reacted to weakness in China’s economy and a surge in Treasury yields that threatens to make equities less attractive.The market is “coming up on a number of key inflection points at a time when the market is still on edge given the rise in rates,” said Jack Janasiewicz, portfolio manager and lead portfolio strategist at Natixis Investment Manager Solutions.The U.S. non-farm payrolls report kicks off the month next Friday. A hotter than expected employment reading for August would likely revive inflation concerns, while a much weaker number could fuel worries that the Fed’s interest rate hikes are starting to crack the economy, Janasiewicz said. Consumer price data due on Sep. 13 needs to walk a similar tightrope to satisfy investors. The Fed’s monetary policy meeting on Sep. 20 stands as another potential source of volatility: Friday’s speech from Fed Chairman Jerome Powell in Jackson Hole fueled expectations of another rate increase this year, though a move in September was seen as less likely.”It’s looking like a time to sell the offense and buy the defense if you think that September is going to be a little more volatile than normal,” said Sandy Villere, a portfolio manager at Villere & Co, who has been moving into healthcare stocks such as Pfizer (NYSE:PFE) and Abbott Laboratories (NYSE:ABT). Investors will also watch what happens with roughly $82 billion worth of student loans held by the government whose payments will begin in October. This could sap consumer spending ahead of the holiday shopping season. Meanwhile, a feud over spending cuts between hardline and centrist Republicans in the U.S. House of Representatives raises the risk that of a fourth federal government shutdown in a decade if lawmakers cannot reach a deal by Sep. 30, when funding runs out with the end of the current fiscal year.A government shutdown stands to directly reduce U.S. economic growth by around 0.15 percentage points for each week it lasts, analysts at Goldman Sachs wrote this week. Of course, bullish stock investors have largely been rewarded for looking past potential pitfalls this year. The S&P 500 rallied despite the regional bank crisis in Feb., concerns over a debt default in June, and fear that the Federal Reserve’s most aggressive pace of interest rates hikes since the early 1980s will push the economy into a recession and derail corporate earnings growth.Some investors believe further gains could come from a resilient economy and continued excitement over the business potential of artificial intelligence, fanned this week by chip maker Nvidia’s strong earnings report and $25 billion stock buyback announcement. Tim Hayes, chief global investment strategist at Ned Davis Research, expects a relief rally in September. The August decline looks similar to the 6% fall between Feb and March of this year which relieved “excessive optimism” and set the market on course for more gains, he said. “The correction started on the first day of the month, and now it has corrected the conditions that made it vulnerable,” Hayes said. More

Gathering in Jackson Hole, Wyoming for the annual Federal Reserve Bank of Kansas City economic symposium, both Fed Chair Jerome Powell and ECB President Christine Lagarde made plain their views: There will be no change to central bankers’ shared objective of getting inflation back down to 2%. “Two percent is and will remain our inflation target,” Powell said in his keynote address. “We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to that level over time.” Inflation soared around the world as economies emerged from pandemic lockdowns and a surge in demand ran into a wall of supply chain failures and labor market constraints.After aggressive interest rate increases by the Fed and the ECB, among others, inflation has fallen but has not yet reached the 2% goal in either Europe or the United States. At lunch, Lagarde was asked about the idea of “moving the goalposts” to accommodate that new reality. Like Powell, she said no. “We are playing a game; there are rules; don’t change the rules of the game halfway through — I’m not saying that we are halfway through, probably a bit more than that,” Lagarde said. Increasing the target could undermine efforts to anchor inflation expectations, she said, and anchored expectations are key to keeping inflation constrained. More

SentinelOne has struggled to become profitable, with clients slashing their information technology spending amid an uncertain economy and sticky inflation.Earlier in the week, people familiar with the matter told Reuters SentinelOne was exploring options that could include a sale.”We consistently evaluate potential opportunities that will support our business growth… SentinelOne has a strong cybersecurity offering,” Wiz’s spokesperson Rachel Ratchford told Reuters. SentinelOne has hired investment bank Qatalyst Partners to advise on discussions with potential acquirers, including private equity firms, the sources had said.”The deal (to acquire SentinelOne) would broaden Wiz’s platform into endpoint security and bring strong cloud and identity security solutions from SentinelOne,” D.A. Davidson analyst Rudy Kessinger said.Wiz and SentinelOne in March had announced an exclusive partnership to deliver end-to-end cloud security. SentinelOne, which was launched in Israel in 2013, has more than 10,000 customers as of January 31, 2023, which include major companies and the U.S. government. More