Raphael Stevens

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    Powell says more ‘restriction’ is coming, including possibility of hikes at consecutive meetings

    Federal Reserve Chairman Jerome Powell talked tough on inflation Wednesday, saying at a forum that he expects multiple interest rate increases ahead and possibly at an aggressive pace.
    “We believe there’s more restriction coming,” Powell said during a monetary policy session in Sintra, Portugal. “What’s really driving it … is a very strong labor market.”

    The comments reiterate a position taken by Powell’s fellow policymakers at their June meeting, during which they indicated the likelihood of another half percentage point of increases through the end of 2023.
    Assuming a quarter point per meeting, that would mean two more hikes. Previous comments from Powell pointed to a possibility of the rises coming at alternate meetings, though he said Wednesday that might not be the case depending on how the data come in.
    The Fed hiked at each meeting since March 2022, a span that included four straight three-quarter point moves, before taking a break in June.
    “I wouldn’t take, you know, moving at consecutive meetings off the table,” he said during an exchange moderated by CNBC’s Sara Eisen. The question-and-answer session took place at a forum sponsored by the European Central Bank.
    Markets took a modest hit as Powell spoke, with the Dow Jones Industrial Average off more than 120 points.

    Central to the Fed’s current thinking is the belief that the 10 straight rate hikes haven’t had time to work their way through the economy. Therefore, officials can’t be sure whether policy meets the “sufficiently restrictive” standard to bring inflation down to the Fed’s 2% target.
    Most economists think the rate increases ultimately will pull the U.S. into at least a shallow recession.
    “There’s a significant possibility that there will be a downturn,” Powell said, adding that it’s not “the most likely case, but it’s certainly possible.”
    Asked about banking stresses, Powell said the issues in March that led to the closure of Silicon Valley Bank and two other institutions did weigh into this thinking at the last meeting.
    Though Powell repeatedly has stressed that he considers the general state of the U.S. banking industry to be solid, he said the Fed needs to be mindful that there could be some issues with credit availability. Recent surveys have shown a general tightening in standards and declining demand for loans.
    “Bank credit availability and credit can move down a little bit with a bit of a lag. So we’re watching carefully to see whether that does appear,” he said.
    Powell’s fellow central bankers at the forum also spoke forcefully about needing to control inflation.
    ECB President Christine Lagarde said she feels “we still have ground to cover” and thinks “we will very likely hike again in July.” Bank of Japan Governor Kazuo Ueda said his institution could tighten its ultra-loose policy if inflation doesn’t ease up, while Bank of England Governor Andrew Bailey stressed the importance of bringing down prices and said he wouldn’t consider raising the 2% inflation target.
    “It’s going to take some time. Inflation has proven to be more persistent than we expected and not less,” Powell said. “Of course, if that day comes when that turns around, that’ll be great. But we don’t expect that.” More

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    Watch Fed Chair Jerome Powell speak live at a policy forum in Portugal

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    Federal Reserve Chairman Jerome Powell and other global central bank leaders speak Wednesday at a monetary policy forum in Sintra, Portugal.

    Joining Powell at the event, presented by the European Central Bank, are ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Japan Governor Kazuo Ueda.
    The forum comes two weeks after Powell and his Fed colleagues decided to take what is expected to be a temporary respite from a series of 10 consecutive interest rate increases that began in March 2022. Other central banks, though, have continued to be aggressive in the fight against inflation, with the ECB and Bank of England both recently announcing rate hikes.
    Markets expect the Fed to approve one more 0.25 percentage point rise at its July meeting, then go on hold as officials observe the impact that the increases are having on the economy. Fed officials at the June meeting, though, penciled in two more hikes.
    Read more:Powell expects more Fed rate hikes ahead as inflation fight ‘has a long way to go’Fed Chair Powell says smaller banks likely will be exempt from higher capital requirementsListen to the music play: Fed Chair Jerome Powell admits to being a Deadhead
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    Stocks making the biggest moves before the bell: General Mills, Nvidia, AMD and more

    Boxes of General Mills Lucky Charms cereal are displayed on a shelf at a Safeway store April 18, 2022 in San Anselmo, California.
    Justin Sullivan | Getty Images

    Check out the companies making headlines in premarket trading.
    General Mills — Shares dropped 3.9% following mixed fiscal fourth-quarter results. The Betty Crocker and Cheerios owner beat Wall Street expectations on earnings, reporting $1.12 in adjusted earnings per share against a Refinitiv consensus estimate of $1.07 per share. But General Mills missed on revenue, posting $5.03 billion while analysts forecasted $5.17 billion.

    Nvidia, Advanced Micro Devices — The chip stocks lost 3.1% and 2.8%, respectively, after The Wall Street Journal reported that the Biden administration was looking at possible new restrictions on exporting artificial intelligence chips to China. The iShares Semiconductor ETF (SOXX) slipped more than 2%.
    Pinterest — Shares of the social media platform jumped nearly 5% in the premarket after Wells Fargo upgraded the stock to overweight from equal weight. The Wall Street bank said Pinterest is making the strategic move to outsource monetization to third-parties to overcome its attribution and scale challenges, including a partnership with Amazon.
    Snowflake — The data cloud stock rose 1.7% in premarket trading coming off the company’s investor day on Tuesday, at which it reiterated full-year guidance. Goldman Sachs reiterated its buy rating on the stock following the event, while Morgan Stanley said it would stay overweight.
    ZoomInfo — Shares of the software company added 3.9% in premarket trading after Needham initiated coverage of ZoomInfo with a buy rating. Needham said in a note to clients that ZoomInfo has “best in class unit economics.” Morgan Stanley also reiterated its overweight rating on ZoomInfo.
    — CNBC’s Yun Li and Jesse Pound contributed reporting More

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    Mortgage demand grows, driven by sales of new homes

    The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.75% from 6.73%.
    Applications to refinance a home loan rose 3% for the week but were 32% lower than the same week one year ago.
    Applications for a mortgage to purchase a home also climbed 3% for the week and were 21% lower year over year.

    A home is constructed at a housing development on June 21, 2023 in Lemont, Illinois.
    Scott Olson | Getty Images

    Mortgage rates turned higher again last week. But the increase did not cut into mortgage demand, as buyers sought newly built homes.
    Total mortgage application volume rose 3% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made for the Juneteenth holiday.

    Applications for a mortgage to purchase a home rose 3% for the week but were 21% lower year over year. These applications have increased for three straight weeks to the highest level since early May, despite still-high mortgage rates.
    “New home sales have been driving purchase activity in recent months as buyers look for options beyond the existing-home market,” said Joel Kan, MBA’s vice president and deputy chief economist, in a release. “Existing-home sales continued to be held back by a lack of for-sale inventory as many potential sellers are holding on to their lower-rate mortgages.”
    Sales of newly built homes in May soared 12% compared with April and were 20% higher than May 2022, according to a report Tuesday from the U.S. Census. Builders are driving demand in part by offering incentives, like paying down mortgage rates.
    Last week the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.75% from 6.73%, with points remaining at 0.64 (including the origination fee) for loans with a 20% down payment. The average rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) rose more sharply to 6.91% from 6.80%.
    “The spread between the jumbo and conforming rates widened to 16 basis points, the third week in a row that the jumbo rate was higher than the conforming rate,” Kan said. “To put this into perspective, from May 2022 to May 2023, the jumbo rate averaged around 30 basis points less than the conforming rate.”

    The widening spread and the increase in the jumbo rate stem from the recent regional bank failures. Lenders hold jumbo loans on their balance sheets, because Fannie Mae and Freddie Mac don’t buy loans of that size. Bank credit, especially at community banks, has tightened substantially, resulting in higher rates.
    Applications to refinance a home loan rose 3% for the week but were 32% lower than the same week one year ago. The vast majority of borrowers today have mortgages with interest rates below 4%. More

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    ECB chief economist warns markets against pricing in rate cuts within the next two years

    Earlier this month, the ECB hiked its main rate by 25 basis points to 3.5%, making the latest in a series of increases since July 2022, as policymakers strive to reel in record-high inflation in the euro zone.
    “Where I do think the market should ask itself questions is about the timing or the speed of reversal of restrictive policy,” Lane told CNBC on Tuesday.

    Philip Lane, chief economist of the European Central Bank.
    Bloomberg | Bloomberg | Getty Images

    European Central Bank Chief Economist Philip Lane on Tuesday warned markets against pricing in cuts to interest rates within the next two years.
    Earlier this month, the ECB hiked its main rate by 25 basis points to 3.5%, making the latest in a series of increases since July 2022, as policymakers strive to reel in record-high inflation in the euro zone.

    Headline inflation across the bloc came in at an annual 6.1% in May, down from 7% the previous month. Core inflation, which excludes volatile food and energy prices, was 5.3% year on year. Both remained well above the ECB’s 2% target.
    Speaking to CNBC’s Annette Weisbach at the Sintra central bank meeting in Portugal on Tuesday, the former Central Bank of Ireland governor said the euro zone economy is in an “adjustment phase,” as higher rates feed through and wages attempt to catch up with price increases.
    “Where I do think the market should ask itself questions is about the timing or the speed of reversal of restrictive policy,” Lane said.
    “We will not be back towards 2% for a couple of years. We will make good progress even this year, especially in the later part of the year, but it’s not going to collapse to 2% within a few months.”
    His comments echoed those of ECB President Christine Lagarde, who said in a keynote address Tuesday that the central bank had made “significant progress” but “cannot declare victory yet.”

    The ECB has raised rates by 400 basis points since July 2022. Markets have priced in another 25 basis-point increase next month and are mulling a further hike in September, but some economists have speculated that the ECB may have to reverse its monetary tightening, as higher rates push the euro zone economy into reverse.
    The U.S. Federal Reserve earlier this month opted to pause its rate hiking cycle, leaving its target rate unchanged. It struck a hawkish tone in pre-empting two further rises this year.
    Lane suggested policymakers will need to stay the course and keep monetary conditions restrictive for some time.
    “We will have a sustained period where rates need to remain restrictive to make sure we don’t have any new shock that takes us away from 2% and that durability of restrictiveness is very important,” he said.
    “When I look at the horizon for the next couple of years, I don’t see rapid rate cuts, so I don’t think it’s appropriate to have rapid rate cuts price in in expectation.” More

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    Fanatics increases its offer to $225 million to acquire PointsBet’s U.S. assets

    Fanatics increased its offer from $150 million to $225 million to acquire PointsBet’s U.S. assets.
    The PointsBet board unanimously approved and recommended the proposal and will vote on it Thursday night.
    The deal would give Fanatics access to 15 U.S. states that it operates in.

    Fanatics founder and CEO Michael Rubin at his office in New York.
    The Washington Post | Getty Images

    Fanatics has raised the stakes as it looks to acquire PointsBet’s U.S. business.
    The sports platform company increased its offering by 50% to $225 million in an effort to outbid DraftKings, which made a non-binding offer of $195 million earlier this month.

    PointsBet shareholders will formally vote on the new offer Thursday night.
    “The Board unanimously supports the improved proposal from Fanatics Betting and Gaming, which provides a superior price plus certainty,” PointsBet Chairman Brett Paton said in a statement.
    PointsBet gave DraftKings until 6 p.m. on Tuesday (Melbourne time) to make a binding offer and they failed to do so.
    DraftKings CEO Jason Robins previously told CNBC that while the deal wouldn’t have been transformative for DraftKings, it would allow the company to grow market share.
    If the deal is formally approved by PointsBet shareholders and regulators, it will give Fanatics much needed U.S. real estate in the 15 U.S. states where they operate. PointsBet is the seventh-largest U.S. sports betting operator.

    “Our U.S. team will have a strong future as part of the Fanatics Betting and Gaming group and PointsBet will build on the opportunities in Australia and Canada underpinned by a strong balance sheet,” Paton said.
    Fanatics CEO Michael Rubin told CNBC after the DraftKings announcement that he was highly skeptical of their proposed offer, which he viewed as DraftKings attempting to slow Fanatics down.
    “It’s a move to delay our ability to enter the market,” Rubin said. “I guess they are more concerned about us than I would have thought.”
    DraftKings and Fanatics both declined to comment on the news. More

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    Severe weather, FAA shortfalls kick off rocky start to summer air travel

    Thunderstorms prompted thousands of flight delays and cancellations since the weekend.
    The disruptions come ahead of the busy Fourth of July travel period, when millions are expected to fly.
    United Airlines’ CEO blamed FAA staffing shortfalls for worsening disruptions that stemmed from bad weather.

    Passengers wait at the Newark Liberty International Airport as more than 2000 flights were canceled due to the nationwide storm in New Jersey, United States on June 27, 2023. 
    Fatih Aktas | Anadolu Agency | Getty Images

    Flight disruptions mounted Tuesday as severe storms and staffing issues kicked off a rocky start to summer.
    More than 6,400 flights U.S. flights were delayed as of Tuesday evening and another 1,800 were canceled, FlightAware data showed, as thunderstorms that derailed thousands of trips over the weekend lingered in airspace that is heavily congested on a clear-weather day. That’s on top of more than 8,800 U.S. delays and 2,246 cancellations Monday.

    The Federal Aviation Administration paused flights bound for New York’s LaGuardia Airport, John F. Kennedy International Airport and Newark Liberty International Airport in New Jersey. Delays were averaging three hours or longer at those airports. The FAA said that the thunderstorms were blocking arrival and departure routes.
    The disruptions come ahead of the busy Fourth of July holiday travel period, when millions are expected to fly. The Transportation Security Administration said it could screen more travelers than in 2019, before the pandemic, raising competition for spare seats.
    The Biden administration has pressured airlines to improve their operations after widespread flight disruptions last spring and summer, which prompted carriers to trim their overambitious schedules. But the industry struggled to recover this past weekend from a series of thunderstorms that didn’t let up for days.
    Thunderstorms are difficult for airlines because they can form with less warning than other major weather obstacles like winter storms or hurricanes. Rolling delays could force crews to reach federally mandated workday limits and further worsen disruptions.
    About 30,000 flights have arrived late since Saturday, FlightAware data showed, with cancellation rates from Saturday through Monday up more than three times the average for the year.

    Some airline executives have also blamed some of the disruptions on shortages of air traffic controllers.
    United Airlines CEO Scott Kirby told staff on Monday that “the FAA frankly failed us this weekend.” He said that during Saturday’s storms the FAA reduced arrival rates by 40% and departures by 75% at Newark Liberty International Airport in New Jersey, one of the airline’s biggest hubs.
    “It led to massive delays, cancellations, diversions, as well as crews and aircraft out of position,” Kirby wrote in a staff note, which was seen by CNBC. “And that put everyone behind the eight ball when weather actually did hit on Sunday and was further compounded by FAA staffing shortages Sunday evening.”
    An FAA spokesman said in a statement, “We will always collaborate with anyone seriously willing to join us to solve a problem.”
    The staffing challenges aren’t new. The Covid-19 pandemic derailed hiring and training of new air traffic controllers, and the agency is now trying to catch up.
    The Department of Transportation’s Office of Inspector General said in a report last week that air traffic control staffing shortfalls put air traffic operations at risk. In March, the FAA and some airlines agreed to reduce flights to help ease congestion at busy New York airports because of the staffing issues.
    But the problems persist at a time when airlines are readying crews and schedules for a busy summer season, fueled by sustained travel demand.
    And the disruptions frustrated flight crews who were left waiting on hold for reassignments.
    The Association of Flight Attendants-CWA, which represents flight attendants at United and others said in a memo to members Monday that hold times for crew scheduling were longer than three hours.
    “There is an absolute recognition by Union leadership and Inflight management that something must be done in order to permanently address these adverse situations resulting from irregular operations,” the union said.
    In response to the union’s memo, United said it has “deployed all available resources to catch up on call volume, including increasing staffing in crew scheduling and mandatory overtime on the scheduling team.”
    New York-based JetBlue Airways also faced high levels of flight delays over the past few days and acknowledged it can improve how it handles disruptions in a note to crew members Monday, which was reviewed by CNBC.
    Don Uselmann, vice president of inflight experience at JetBlue, said the airline could have updated crew reporting times more efficiently so staff wouldn’t be waiting for flights and reducing wait times for hotel assignments.
    “Summer peak is officially underway, and extreme weather events, ATC staffing constraints, and the resulting delays will put all airlines to the test,” he said in his note. “This weekend’s [irregular operation] won’t be our last, but the combination of events put acute pressure on the operation and made it more challenging than most.” More

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    Regeneron shares fall after FDA rejects high-dose eye disease treatment

    Shares of Regeneron fell nearly 9% after the FDA declined to approve a higher-dose version of the company’s blockbuster eye disease treatment.
    The company was seeking approval for an 8-milligram dose of the injection for patients with wet age-related macular degeneration and two other eye diseases that are common in people with diabetes. 

    A view of the Regeneron Pharmaceuticals headquarters in Tarrytown, New York.
    Lev Radin | LightRocket | Getty Images

    Shares of Regeneron fell nearly 9% Tuesday after the U.S. Food and Drug Administration declined to approve a higher-dose version of the company’s blockbuster eye disease treatment.
    The company was seeking approval for an 8-milligram dose of its injection, Eylea, for patients with wet age-related macular degeneration — the leading cause of blindness among the elderly — and two other eye diseases that are common in people with diabetes. 

    Regeneron said the rejection was “solely due to an ongoing review of inspection findings at a third-party filler.”
    The company did not provide further details on those findings or identify the third party, but said the decision was not related to the drug’s efficacy, safety, trial design, labeling or drug substance manufacturing. 
    That suggests the drug could potentially win approval down the road. 
    But a delay won’t help the company fight off threats to its Eylea drug franchise, which is facing competition from Roche Holdings’ eye drug, Vabysmo. Roche’s treatment was approved last year.

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    Regeneron stock fell nearly 9% Tuesday after an FDA rejection of a higher-dose version of the company’s blockbuster eye treatment. More