Finance

BNY Mellon’s global head of ETFs suggested exchange-traded funds using options overlays could become next year’s hot product.
“We are absolutely going to see more of these options-based products come to market,” Ben Slavin told CNBC’s “ETF Edge” on Monday. “We see it in our own book.”

Options overlays are a way for investors to hedge against downside.
“Ultimately, there’s going to be more issuers that are continuing to chase this trend that we’re seeing,” Slavin said.
Disclaimer More

Citigroup told most of its employees that they can work remotely the final two weeks of December, CNBC has learned.
Workers can log in remotely from anywhere in their country of employment from Dec. 18 to Dec. 29, according to people with knowledge of the situation.
The policy applies to hybrid workers, which make up the majority of the bank’s 240,000 employees, said the people, who declined to be identified.

Citigroup told most of its employees that they can work remotely the final two weeks of December, CNBC has learned.
Workers can log in remotely from anywhere in their country of employment from Monday to Dec. 29, a Friday, making this week the last in-person experience this year for many staffers, according to people with knowledge of the situation.

The policy applies to hybrid workers, which make up the majority of the bank’s 240,000 employees, said the people, who declined to be identified.
Unlike last year, when the perk was introduced, employees are on edge over CEO Jane Fraser’s sweeping corporate reorganization, and some expressed concern over whether their jobs will still exist next year. Citigroup has said that Fraser’s review of the third-biggest U.S. bank by assets will be complete by the end of March.
The project, known internally by its code name Bora Bora, has already resulted in executive departures and the shuttering of the firm’s municipal bond business. Citigroup will disclose severance expenses tied to the project in January and again in April, the bank has said.
“This past year has been one of significant change across the firm, and as we approach the end of 2023, we look forward to this special time of year,” Citigroup’s human resources chief said last week in a staff memo announcing the remote policy.
“We hope that you will enjoy a break from commuting while continuing to stay focused on closing out the year,” the HR chief said.

Read more: Citigroup considers deep job cuts for CEO Jane Fraser’s overhaul, called ‘Project Bora Bora’Don’t miss these stories from CNBC PRO: More

Scammers may try to dupe people expecting a package with fake shipping and delivery notifications, the Federal Trade Commission warned.
Thieves can use them to steal money and sensitive personal information.
According to one estimate, about 82 million parcels per day will ship during the peak holiday season.

Andresr | E+ | Getty Images

Are you expecting a package delivery this holiday season?
If so, scammers may try to dupe you with bogus emails or text messages about a shipment to steal your personal information, the Federal Trade Commission warned in a consumer alert.

People who buy items online typically get several notifications related to that purchase, such as order, shipping and delivery confirmations.
But scammers send seemingly identical notes: They may send messages about a missed delivery attempt, urging you to click a link to reschedule delivery, according to the FTC. The scammers might also say an item is ready to ship but the buyer needs to update their shipping preferences.
More from Personal Finance:How this 77-year-old widow lost $661,000 in a common tech scamQR codes may be a gateway to identity theft, FTC warns’Phantom hacker’ scams that target seniors’ savings are on the rise, FBI says
These con artists try to coax people to click fake website links, where unsuspecting victims may enter their personal or financial information, the FTC said.
“It’ll capture all the information you enter,” Alvaro Puig, a consumer education specialist, wrote in the alert. “The link could also install harmful malware on your phone or computer that steals your information.”

Usernames and passwords to online banking, email or social media accounts may be compromised, he said. Scammers can use that data to steal a victim’s identification and open new accounts in their name.
Such digital frauds happens all year round, but people may be especially susceptible during the holidays, when shippers are expected to send about 82 million parcels a day, according to ShipMatrix.

To protect yourself, don’t click on links in messages about unexpected package deliveries, the FTC warns.
Further, if you think the message may be legitimate, don’t contact the shipper via information provided in the note. Reach out via a website or phone number you know is real. Look up delivery status on the site where you bought the item, according to the FTC.Don’t miss these stories from CNBC PRO: More

New York Federal Reserve President John Williams said Friday rate cuts are not a topic of discussion at the moment for the central bank.
“We aren’t really talking about rate cuts right now,” he said on CNBC’s “Squawk Box.” “We’re very focused on the question in front of us, which as chair Powell said… is, have we gotten monetary policy to sufficiently restrictive stance in order to ensure the inflation comes back down to 2%? That’s the question in front of us.”

The Dow Jones Industrial average shot to a record and the 10-year Treasury yield fell below 4.3% this week as traders took the Fed’s Wednesday forecast for three rate cuts next year as a sign the central bank was changing its tough stance and would start cutting rates sooner than expected next year.
Traders are betting that the central bank would cut rates deeper than three times, according to fed funds futures. Futures markets also indicate that the Fed could start cutting rates as soon as March.
Williams is reining in some of that enthusiasm a bit, it appears.
“I just think it’s just premature to be even thinking about that,” Williams said, when asked about futures pricing for a rate cut in March.
Williams said the Fed will remain data dependent, and if the trend of easing inflation were to reverse, it’s ready to tighten policy again.

“It is looking like we are at or near that in terms of sufficiently restrictive, but things can change,” Williams said. “One thing we’ve learned even over the past year is that the data can move and in surprising ways, we need to be ready to move to tighten the policy further, if the progress of inflation were to stall or reverse.”
The Fed projected that its favorite inflation gauge — the core personal consumption expenditures price index — will fall to 2.4% in 2024, and further decline to 2.2% by 2025 and finally reach its 2% target in 2026. The gauge rose 3.5% in October on a year-over-year basis.
“We’re definitely seeing slowing in inflation. Monetary policy is working as intended,” Williams said. “We just got to make sure that … inflation is coming back to 2% on a sustained basis.”Don’t miss these stories from CNBC PRO: More

Median combined 401(k) and IRA balances for 35- to 44-year-olds declined to $50,000 in 2022 from $63,500 in 2019, according to the Center for Retirement Research at Boston College.
401(k) access increased for these workers over those three years.
Stock ownership in nonretirement accounts also jumped.

Valentinrussanov | E+ | Getty Images

Retirement balances for midcareer workers declined between 2019 and 2022, despite gains on financial assets such as stocks during that period, according to new research.
However, the loss isn’t necessarily as bad as it may initially seem, financial experts said.

Median combined 401(k) plans and individual retirement account balances for people ages 35 to 44 declined to $50,000 in 2022 from $63,500 in 2019, according to a recent study by the Center for Retirement Research at Boston College, which analyzed triennial data from the Federal Reserve’s recently issued Survey of Consumer Finances.
Savers in the analysis span two generations: older millennials and younger members of Generation X.

The CRR report analyzed balances among working households with a 401(k) plan. The balances aren’t adjusted for inflation, which touched a 40-year high in 2022 and eroded the buying power of that money.
Meanwhile, retirement balances for older age groups increased during the same period. Savings for 45- to 54-year-olds jumped to $119,000 from $105,800, while those for 55- to 64-year-olds increased to $204,000 from $144,000, the study found.

Automatic enrollment creates many smaller accounts

At first glance, falling balances among younger savers doesn’t make sense. U.S. stocks had a nearly 25% return between 2020 and 2022, according to the study, and younger savers tend to be tilted more heavily toward stocks due to their longer investment time horizon.

Investment-grade U.S. bonds lost 6.5% during that period.
More from Personal Finance:A 401(k) rollover is ‘the single largest transaction’ many investors makeMore retirement savers are borrowing from their 401(k) planHere’s how advisors are using Roth conversions to reduce taxes for inherited IRAs
Falling retirement balances for younger households is partly for a good reason, though. The share of Americans ages 35 to 44 who have access to a 401(k) plan at work increased by more than two percentage points between 2019 and 2022, said Anqi Chen, assistant director of savings research at the CRR and a co-author of the report.
Since new, young savers tend to have small 401(k) balances, they dragged down the median balances for the whole age group, Chen said.
The share of employers that automatically enroll new workers has gradually increased over the years, and some even enroll existing workers. Fifteen states had also created so-called auto-IRA programs as of June 30, according to the Georgetown University Center for Retirement Initiatives. The programs generally require businesses to offer a workplace retirement plan or facilitate automatic enrollment into a state retirement plan.
As more employers adopt retirement plans and auto enrollment, more people “will be scooped up who wouldn’t otherwise actively participate,” said David Blanchett, a certified financial planner and head of retirement research at PGIM, the asset management arm of insurer Prudential Financial.

Still, nearly half of Americans don’t have access to a workplace retirement plan.
The workers who do save in a 401(k) aren’t representative of the average American, Blanchett said. Such savers are in the top 20% of the income distribution, and are much wealthier than the average person, he added.

More investors hold stocks in nonretirement accounts

Another potential explanation for declining balances among 35- to 44-year-olds: The share of these households holding stocks in nonretirement accounts jumped to 20% from 14%, a “pretty substantial” increase, Chen said.
It’s unclear if that increase cannibalized savings in retirement accounts, Chen said.
That wouldn’t necessarily be bad, since nonretirement money is still a bucket of savings, Chen said.
However, retirement savings is generally locked up for the long term, and people saving in nonretirement accounts may be losing money to taxes that they otherwise wouldn’t in tax-preferred retirement accounts, she said.Don’t miss these stories from CNBC PRO: More

KTSDesign | Science Photo Library | Getty Images

It’s arguably the biggest stock story of 2023: a small number of giant technology companies now make up a very large part of big indexes like the S&P 500 and the Nasdaq-100. 
Five companies (Apple, Microsoft, Amazon, Nvidia and Alphabet) make up about 25% of the S&P 500. Six companies (Apple, Microsoft, Amazon, Nvidia, Alphabet and Broadcom) make up about 40% of the Nasdaq-100. 

The S&P 500 and the Nasdaq are rebalancing their respective indexes this Friday. While this is a routine event, some of the changes may reflect the concerns over concentration risk. 
A ton of money is pegged to a few indexes 
Now that the CPI and the Fed meeting are out of the way, these rebalances are the last major “liquidity events” of the year, corresponding with another notable trading event: triple witching, or the quarterly expiration of stock options, index options and index futures. 
This is an opportunity for the trading community to move large blocks of stock for the last gasps of tax loss harvesting or to position for the new year. Trading volume will typically drop 30%-40% in the final two weeks of the year after triple witching, with only the final trading day showing significant volume.
All of this might appear of only academic interest, but the big move to passive index investing in the past 20 years has made these events more important to investors. 
When these indexes are adjusted, either because of additions or deletions, or because share counts change, or because the weightings are changed to reduce the influence of the largest companies, it means a lot of money moves in and out of mutual funds and ETFs that are directly or indirectly tied to the indexes. 

Standard & Poor’s estimates that nearly $13 trillion is directly or indirectly indexed to the S&P 500. The three largest ETFs (SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, and Vanguard S&P 500 ETF) are all directly indexed to the S&P 500 and collectively have nearly $1.2 trillion in assets under management. 
Linked to the Nasdaq-100 — the 100 largest nonfinancial companies listed on Nasdaq — the Invesco QQQ Trust (QQQ) is the fifth-largest ETF, with roughly $220 billion in assets under management. 
S&P 500: Apple and others will be for sale. Uber going in 
For the S&P 500, Standard & Poor’s will adjust the weighting of each stock to account for changes in share count. Share counts typically change because many companies have large buyback programs that reduce share count. 
This quarter, Apple, Alphabet, Comcast, Exxon Mobil, Visa and Marathon Petroleum will all see their share counts reduced, so funds indexed to the S&P will have to reduce their weighting. 
S&P 500: Companies with share count reduction
(% of share count reduction)

Apple        0.5%
Alphabet   1.3%
Comcast    2.4%
Exxon Mobil  1.0%
Visa                0.8%
Marathon Petroleum  2.6%

Source: S&P Global
Other companies (Nasdaq, EQT, and Amazon among them) will see their share counts increased, so funds indexed to the S&P 500 will have to increase their weighting. 
In addition, three companies are being added to the S&P 500: Uber, Jabil, and Builders FirstSource.  I wrote about the effect that being added to the S&P was having on Uber’s stock price last week.  
Three other companies are being deleted and will go from the S&P 500 to the S&P SmallCap 600 index: Sealed Air, Alaska Air and SolarEdge Technologies. 
Nasdaq-100 changes: DoorDash, MongoDB, Splunk are in 
The Nasdaq-100 is rebalanced four times a year; however, the annual reconstitution, where stocks are added or deleted, happens only in December. 
Last Friday, Nasdaq announced that six companies would be added to the Nasdaq-100: CDW Corporation (CDW), Coca-Cola Europacific Partners (CCEP), DoorDash (DASH), MongoDB (MDB), Roper Technologies (ROP), and Splunk (SPLK). 
Six others will be deleted: Align Technology (ALGN), eBay (EBAY), Enphase Energy (ENPH), JD.com (JD), Lucid Group (LCID), and Zoom Video Communications (ZM).
Concentration risk: The rules
Under federal law, a diversified investment fund (mutual funds, exchange-traded funds), even if it just mimics an index like the S&P 500, has to satisfy certain diversification requirements. This includes requirements that: 1) no single issuer can account for more than 25% of the total assets of the portfolio, and 2) securities that represent more than 5% of the total assets cannot exceed 50% of the total portfolio. 
Most of the major indexes have similar requirements in their rules. 
For example, there are 11 S&P sector indexes that are the underlying indexes for widely traded ETFs such as the Technology Select SPDR ETF (XLK). The rules for these sector indexes are similar to the rules on diversification requirements for investment funds discussed above. For example, the S&P sector indexes say that a single stock cannot exceed 24% of the float-adjusted market capitalization of that sector index and that the sum of the companies with weights greater than 4.8% cannot exceed 50% of the total index weight. 
At the end of last week, three companies had weights greater than 4.8% in the Technology Select Sector (Microsoft at 23.5%, Apple at 22.8%, and Broadcom at 4.9%) and their combined market weight was 51.2%, so if those same prices hold at the close on Friday, there should be a small reduction in Apple and Microsoft in that index. 
S&P will announce if there are changes in the sector indexes after the close on Friday. 
The Nasdaq-100 also uses a “modified” market-capitalization weighting scheme, which can constrain the size of the weighting for any given stock to address overconcentration risk. This rebalancing may reduce the weighting in some of the largest stocks, including Apple, Microsoft, Amazon, Nvidia and Alphabet. 
The move up in these large tech stocks was so rapid in the first half of the year that Nasdaq took the unusual step of initiating a special rebalance in the Nasdaq-100 in July to address the overconcentration of the biggest names. As a result, Microsoft, Apple, Nvidia, Amazon and Tesla all saw their weightings reduced. 
Market concentration is nothing new
Whether the rules around market concentration should be tightened is open for debate, but the issue has been around for decades.
For example, Phil Mackintosh and Robert Jankiewicz from Nasdaq recently noted that the weight of the five largest companies in the S&P 500 was also around 25% back in the 1970s.
Disclosure: Comcast is the corporate parent of NBCUniversal and CNBC. More

[The stream is slated to start at 8:45 a.m. ET. Please refresh the page if you do not see a player above at that time.]
European Central Bank President Christine Lagarde is due to give a press conference following the bank’s latest monetary policy decision.

The ECB on Thursday held interest rates steady for the second meeting in a row, as it revised its growth forecasts lower.
The bank was widely expected to leave policy unchanged in light of the sharp fall in euro zone inflation, as investors instead chase signals on when the first rate cut may come and assess the ECB’s plans to shrink its balance sheet.
Subscribe to CNBC on YouTube.  More

The Monetary Policy Committee voted 6-3 in favor of holding rates steady for a third consecutive meeting. The three dissenting members favored a further 25 basis point hike to 5.5%.
“As illustrated by the November Monetary Policy Report projections, the Committee continues to judge that monetary policy is likely to need to be restrictive for an extended period of time,” the MPC said.
The MPC noted in Thursday’s report that “key indicators of U.K. inflation persistence remain elevated,” although tighter monetary policy is leading to a looser labor market and weighing on activity in the real economy.

Buses pass in the City of London financial district outside the Royal Exchange near the Bank of England on 2nd July 2021 in London, United Kingdom.
Mike Kemp | In Pictures | Getty Images

LONDON — The Bank of England on Thursday kept its main interest rate unchanged at 5.25% and said monetary policy is “likely to need to be restrictive for an extended period of time.”
The Monetary Policy Committee voted 6-3 in favor of holding rates steady for a third consecutive meeting. The three dissenting members favored a further 25 basis point hike to 5.5%.

U.K. headline inflation fell to an annual 4.6% in October, its lowest point in two years, while wage growth has also undershot expectations of late but at over 7% still remains uncomfortably high for the central bank, as it looks to bring inflation down towards its 2% target sustainably.
The MPC noted in Thursday’s report that “key indicators of U.K. inflation persistence remain elevated,” although tighter monetary policy is leading to a looser labor market and weighing on activity in the real economy.
Real U.K. GDP was flat in the third quarter, in line with the Monetary Policy Committee’s projections, but the economy unexpectedly shrank by 0.3% month-on-month in October.
The central bank ended a run of 14 straight hikes in September, after lifting its benchmark rate from 0.1% to a 15-year high of 5.25% between December 2021 and August 2023.
The U.S. Federal Reserve on Wednesday revealed that policymakers were penciling in at least three interest rate cuts in 2024, offering a dovish surprise that sent global stock markets surging.

However, the MPC once again pushed back against market expectations, reiterating that rates will need to stay in restrictive territory for an extended period of time in order to return inflation to target over the medium term.

“As illustrated by the November Monetary Policy Report projections, the Committee continues to judge that monetary policy is likely to need to be restrictive for an extended period of time,” the MPC said.
“Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.”
The November report projected that the consumer price index will average around 4.75% in the fourth quarter of 2023, before dropping to around 4.5% in the first quarter of next year and 3.75% in the second quarter.
At the same time, GDP is expected to grow by just 0.1% in the fourth quarter after flatlining in the third.
The Bank last week warned that although household finances are faring better than expected, higher borrowing costs have yet to fully feed through to the economy.
‘Unnecessarily damaging’
Suren Thiru, economics director at ICAEW, said the Thursday decision was further confirmation that interest rates have peaked, but suggested that the Bank was at risk of keeping monetary policy too tight for too long, given the fragile economic backdrop.
“The Bank’s rhetoric on rates is unnecessarily hawkish given slowing wage growth and a deteriorating economy, raising fears that it will keep rates high for too long, unnecessarily damaging an already struggling economy,” Thiru said.
“With inflation trending downwards and the economy at risk of recession, the case for interest rate cuts is likely to grow over the coming months. Against this backdrop, the Monetary Policy Committee could well start loosening policy by next summer.”

Hetal Mehta, head of economic research at St James’s Place, said that the Bank’s decision to communicate a hawkish message sets it “markedly apart from the Fed.”
“Underlying inflation is still uncomfortably high and the recent pricing of multiple rate cuts from early next year was clearly an easing of financial conditions that the BoE felt the need to push back against,” she said.
“The fall in wage inflation so far is not enough to be consistent with the 2% inflation target.”
Despite concerns about persistently tight monetary policy tipping the economy into recession, a Treasury spokesperson said by email that the U.K. had “turned a corner” in the fight against inflation. The spokesperson noted that real wages are rising, but said the country must “keep driving inflation out of the economy to reach our 2% target.” More