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It’s vital for investors to manage risk right now no matter where interest rates go, according to CME Group CEO Terry Duffy.
“Everybody that I’ve talked to over the last year has been dead wrong when it comes to what the Fed was going to do,” Duffy told CNBC’s “Fast Money” on Wednesday. “It’s really hard to predict what the Fed is ultimately going to do.”

Duffy’s call followed the Federal Reserve’s decision to hike rates by a quarter point to a 22-year high. It’s the central bank’s 11th rate hike since March 2022.
“Everybody said the Fed would raise 25 basis points, 50 basis points, 100 basis points and stop,” he said. “If you would have managed your risk based on what you thought the Fed was going to do or not be doing, you would be out of business like we’ve seen a lot of the smaller banks.” A basis point is one-hundredth of a percentage point.
Duffy added that inflation is still unpredictable and critically important to positioning.
“People need to manage that risk because margins are thin,” he said.
The markets barely flinched after the latest Fed decision. The Dow Jones Industrial Average rose for the 13th day in a row for its longest win streak since 1987. The blue chip index gained 82 points to close at 35,520. Meanwhile, the S&P 500 and tech-heavy Nasdaq closed slightly lower.

“Boy, if you’re going to try to sit around and try to make a prediction, sometimes it’s better instead of talking the markets, you should listen to the markets,” Duffy said. “They’ll tell you what they want to do.”

CME earnings beat

Duffy’s Fed reaction came hours after his company reported that both quarterly earnings and revenue beat estimates.
The CME Group, which is world’s largest futures exchange, reported earnings per share of $2.30 —10 cents above the the Refinitiv estimate. It reported revenue of $1.36 billion versus $1.34 billion expected by Refinitiv.
Shares rallied almost 4% on Wednesday and are now up more than 11% over the past month.
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Meta headquarters in Menlo Park, California, US, on Thursday, July 21, 2022.
David Paul Morris | Bloomberg | Getty Images

Check out the companies making headlines after the bell: 
Meta Platforms – Shares of Meta Platforms jumped nearly 6% on stronger-than-expected quarterly results. The social media company issued optimistic sales guidance for the third quarter and showed an 11% uptick in revenue.

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Chipotle Mexican Grill — The burrito chain’s stock tumbled 9% in extended trading after sales fell short of Wall Street expectations. Chipotle reported adjusted earnings of $12.65 a share on $2.51 billion in revenue. Analysts polled by Refinitiv had expected EPS of $12.31 and revenues of $2.53 billion.
Imax — Imax shares added 5% after reporting better-than-expected quarterly results. The entertainment technology company reported adjusted earnings of 26 cents a share. That topped the 16 cents expected by analysts, per Refinitiv. Revenue came in at $98 million, above the $86.6 billion expected.
Lam Research – Shares of the semiconductor firm got a more than 2% boost after the company reported a strong quarter. Lam posted adjusted earnings of $5.98 per share, beating estimates by 91 cents per share, per Refinitiv. Revenue of $3.21 billion beat expectations of $3.13 billion. Financial guidance topped estimates as well.
ServiceNow — ServiceNow dropped 3% despite reporting a beat on the top and bottom lines. The cloud computing company posted second-quarter adjusted earnings of $2.37 per share on revenue of $2.15 billion. Analysts had expected per-share earnings of $2.05 on revenue of $2.13 billion. The company also unveiled new generative artificial intelligence tools.
eBay – The e-commerce stock slid about 5% after eBay issued weak guidance for the current quarter. The company said it anticipates third-quarter adjusted earnings per share of 96 cents to $1.01 per share, while analysts polled by FactSet anticipated $1.02 in earnings. The company posted $1.03 in adjusted earnings per share on revenue of $2.54 billion. Analysts called for earnings of 99 cents per share on revenue of $2.51 billion, according to Refinitiv.

Sunnova Energy – Shares of the solar company slid more than 7% after hours following weaker-than-expected financial results for the second quarter. Sunnova posted a wider-than-expected loss of 74 cents per share, while analysts expected a loss of 42 cents per share, according to FactSet. Revenue came in at $166.4 million compared to expectations of $195.5 million.
Align Technology – The orthodontics company saw its shares pop 12% after it posted adjusted earnings of $2.22 per share for the second quarter, beating estimates of $2.03 per share, according to Refinitiv. Revenue for the quarter also topped estimates, and revenue guidance for the year was above analyst expectations.
Mattel – Shares of the toymaker were flat. Mattel announced the departure of Richard Dickson, chief operating officer, who is leaving to become CEO of Gap. The company also posted second-quarter adjusted earnings of 10 cents a share on revenue of $1.09 billion. Analysts called for a per-share loss of 2 cents and revenue of $1 billion, according to Refinitiv.
Seagate Technology — Shares fell 2% in extended trading. The data storage company posted revenue for the fourth fiscal quarter that came in at $1.60 billion, while analysts called for revenue of $1.68 billion, per FactSet.
L3Harris Technologies — The aerospace and defense stock fell more than 2% even after earnings came in above expectations. L3Harris reported adjusted earnings of $2.97 a share on $4.69 billion in revenue, and lifted earnings and revenue guidance. Analysts anticipated $2.94 in EPS on revenue of $4.37 billion for the latest quarter, according to Refinitiv. Aerojet Rocketdyne shares added more than 1% on news the Federal Trade Commission will not block its acquisition by L3Harris.
— CNBC’s Tanaya Macheel, Sarah Min and Darla Mercado contributed reporting More

It was never in doubt. In the run-up to the Federal Reserve’s meeting this week, investors assigned a probability of nearly 99% to a decision by the central bank to raise interest rates once again. On July 26th policymakers duly fulfilled those expectations, with their 11th increase in 12 meetings, together making for America’s sharpest course of monetary tightening in four decades. The central bank’s next steps, however, are clouded by uncertainty.Some economists are convinced that this will be the Fed’s last rate rise in this cycle. Inflation has come down from its highs in 2022, with consumer prices rising just 3% year-on-year in June. Core inflation—which strips out volatile food and energy costs—has been a little more stubborn, but even it has started to soften, in a sign that underlying price pressures are easing. This opens a pathway for the Fed to relent, hopefully guiding America to a much-discussed soft landing. Ellen Zentner of Morgan Stanley, a bank, expects an “extended hold” for the Fed, presaging a rate cut at the start of next year. Others are not so sure. Inflation has consistently wrong-footed optimists over the past couple of years. Were, for instance, energy prices to rally, consumers and businesses could quickly revise up their expectations for inflation, nudging the Fed towards another rate increase. If an incipient rebound in housing prices gathers pace, that would also fuel concerns. Vigour in the labour market adds to the worries, because fast-rising wages feed into inflation. Remarkably, the Fed’s aggressive actions have barely affected American workers thus far: the unemployment rate today is 3.6%, identical to its level in March 2022 when the Fed raised rates for the first time in this cycle (see chart). The pace of tightening would normally be expected to drive up unemployment. Instead, the recovery from the covid-19 pandemic, including an increase in the number of willing workers, seems to have cushioned the economy.Opposing views among economists are mirrored within the Fed itself. For the past two years America’s central bankers have spoken in similar terms about the peril of inflation, and have been nearly unanimous when it comes to big rate moves. In recent months, however, divisions have surfaced. Christopher Waller, a Fed governor, has come to represent the more hawkish voices. This month he warned that the central bank could continue raising rates until there is sustained improvement in inflation, dismissing the over-optimism bred by the weaker-than-expected price figures for June. “One data point does not make a trend,” he warned. At the other end of the spectrum is Raphael Bostic, president of the Fed’s Atlanta branch, who said even prior to the latest rate increase that the central bank could stop hiking. “Gradual disinflation will continue,” he assured listeners in late June.Even if the latest rate increase does end up marking the peak for the Fed, Jerome Powell, its chairman, has maintained a hawkish tilt in his pronouncements. “What our eyes are telling us is that policy has not been restrictive enough for long enough,” he told a press conference following the rate hike. Financial conditions have loosened in recent months. The s&p 500, an index of America’s biggest stocks, is up nearly one-fifth from its lows in March, when a handful of regional banks collapsed. With his sterner tone, Mr Powell may want to restrain investors from getting ahead of themselves, which could add to inflationary momentum.Central bankers wanting to preserve their reputations as inflation-fighters may prefer to err towards toughness. Steven Englander of Standard Chartered, a bank, likens the Fed to a weather forecaster who thinks there is a 30% chance of rain. It still makes sense to highlight the potential for wet weather, because predicting sun but getting rain is perceived as worse than predicting rain and ending up with sun.In practice, the Fed is sure to be flexible, reacting to economic data. It can look north of the American border for an example of the impossibility of maintaining a fixed policy stance. The Bank of Canada had stopped its rate-rise cycle in January, thinking that inflation had crested. But in June it was forced to resume tightening because economic growth had remained too hot, and inflation too sticky, for comfort.Ultimately, though, there are no risk-free choices for the Fed. What is seen as the more doveish option—holding rates steady for the rest of this year—will in fact take on an increasingly hawkish hue if inflation does continue to recede. Unchanged nominal rates would be ever more restrictive in real terms (assuming that inflationary expectations diminish alongside waning price pressures). In such a scenario central bankers wishing to maintain their current policy stance should therefore think about cutting rates (see chart). When inflation was sky-high, the Fed’s task was tough yet its decisions quite straightforward: officials did not really have much choice but to raise rates. From here on, its task looks easier but its decisions more fraught. ■ More

The Federal Reserve approved a much-anticipated interest rate hike that takes benchmark borrowing costs to their highest level in more than 22 years.
The quarter percentage point increase will bring the fed funds rate to a target range of 5.25%-5.5%.
While policymakers indicated at the June meeting that two rate hikes are coming this year, markets are pricing in a better-than-even chance that there won’t be any more moves this year.
Chair Jerome Powell said the central bank will make data-driven decisions on a “meeting-by-meeting” basis.

WASHINGTON – The Federal Reserve on Wednesday approved a much-anticipated interest rate hike that takes benchmark borrowing costs to their highest level in more than 22 years.
In a move that financial markets had completely priced in, the central bank’s Federal Open Market Committee raised its funds rate by a quarter percentage point to a target range of 5.25%-5.5%. The midpoint of that target range would be the highest level for the benchmark rate since early 2001.

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Markets were watching for signs that the hike could be the last before Fed officials take a break to watch how the previous increases are impacting economic conditions. While policymakers indicated at the June meeting that two rate rises are coming this year, markets have been pricing in a better-than-even chance that there won’t be any more moves this year.
During a news conference, Chairman Jerome Powell said inflation has moderated somewhat since the middle of last year, but hitting the Fed’s 2% target “has a long way to go.” Still, he seemed to leave room to potentially hold rates steady at the Fed’s next meeting in September.
“I would say it’s certainly possible that we will raise funds again at the September meeting if the data warranted,” said Powell. “And I would also say it’s possible that we would choose to hold steady and we’re going to be making careful assessments, as I said, meeting by meeting.”
Powell said the FOMC will be assessing “the totality of the incoming data” as well as the implications for economic activity and inflation.
Markets initially bounced following the meeting but ended mixed. The Dow Jones Industrial Average continued its streak of higher closings, rising by 82 points, but the S&P 500 and Nasdaq Composite were little changed. Treasury yields moved lower.

“It is time for the Fed to give the economy time to absorb the impact of past rate hikes,” said Joe Brusuelas, U.S. chief economist at RSM. “With the Fed’s latest rate increase of 25 basis points now in the books, we think that improvement in the underlying pace of inflation, cooler job creation and modest growth are creating the conditions where the Fed can effectively end its rate hike campaign.”
The post-meeting statement, though, offered only a vague reference to what will guide the FOMC’s future moves.
“The Committee will continue to assess additional information and its implications for monetary policy,” the statement said in a line that was tweaked from the previous months’ communication. That echoes a data-dependent approach – as opposed to a set schedule – that virtually all central bank officials have embraced in recent public statements.
 The hike received unanimous approval from voting committee members.
 The only other change of note in the statement was an upgrade of economic growth to “moderate” from “modest” at the June meeting despite expectations for at least a mild recession ahead. The statement again described inflation as “elevated” and job gains as “robust.”
The increase is the 11th time the FOMC has raised rates in a tightening process that began in March 2022. The committee decided to skip the June meeting as it assessed the impact that the hikes have had.
Since then, Powell has said he still thinks inflation is too high, and in late June said he expected more “restriction” on monetary policy, a term that implies more rate increases.
The fed funds rate sets what banks charge each other for overnight lending. But it feeds through to many forms of consumer debt such as mortgages, credit cards, and auto and personal loans.
The Fed has not been this aggressive with rate hikes since the early 1980s, when it also was battling extraordinarily high inflation and a sputtering economy.
News lately on the inflation front has been encouraging. The consumer price index rose 3% on a 12-month basis in June, after running at a 9.1% rate a year ago. Consumers also are getting more optimistic about where prices are headed, with the latest University of Michigan sentiment survey pointing to an outlook for a 3.4% pace in the coming year.
However, CPI is running at a 4.8% rate when excluding food and energy. Moreover, the Cleveland Fed’s CPI tracker is indicating a 3.4% annual headline rate and 4.9% core rate in July. The Fed’s preferred measure, the personal consumption expenditures price index, rose 3.8% on headline and 4.6% on core for May.
All of those figures, while well below the worst levels of the current cycle, are running above the Fed’s 2% target.
Economic growth has been surprisingly resilient despite the rate hikes.
Second-quarter GDP growth is tracking at a 2.4% annualized rate, according to the Atlanta Fed. Many economists are still expecting a recession over the next 12 months, but those predictions so far have proved at least premature. GDP rose 2% in the first quarter following a large upward revision to initial estimates.
Employment also has held up remarkably well. Nonfarm payrolls have expanded by nearly 1.7 million in 2023, and the unemployment rate in June was a relatively benign 3.6% – the same level as a year ago.
“It has been my view consistently, that … we will be able to achieve inflation moving back down to our target without the kind of really significant downturn that results in high levels of job losses,” Powell said.
Along with the rate hike, the committee indicated it will continue to cut the bond holdings on its balance sheet, which peaked at $9 trillion before the Fed began its quantitative tightening efforts. The balance sheet is now at $8.32 trillion as the Fed has allowed up to $95 billion a month in maturing bond proceeds to roll off. More

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 12, 2023. 
Brendan McDermid | Reuters

The Dow Jones Industrial Average just won’t stop going higher it seems like. What is behind this historical momentum for the blue chip measure created more than a century ago?
The Dow on Wednesday rose for a 13th straight day, matching its longest winning streak since 1987. If it closes higher Thursday, it would be a streak not seen since 1897 — about a year after the benchmark was created — when the Dow advanced for 14 sessions in a row. During this latest run, the Dow has outperformed, gaining 5%.

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That momentum hasn’t been seen in the broader S&P 500 and Nasdaq Composite indexes, however. Both are up just 3% since the Dow’s streak began. The S&P 500 has fallen twice in that time, while the Nasdaq has posted three losing sessions.
There are several reasons for the Dow’s streak, but none may be bigger than recession fears easing.

Stock chart icon

Dow riding 12-day winning streak

No more recession?

“So far, there’s no evidence of a recession. So as long as there’s no evidence of recession … I think the market will probably continue to melt up; people are chasing,” Steve Eisman, senior portfolio manager at Neuberger Berman, told CNBC’s “Squawk Box” earlier this week. Eisman rose to prominence for profiting from the subprime mortgage crisis. He was profiled in Michael Lewis’ book “The Big Short.”
Recession fears are easing in large part due to data showing inflation is coming down. In turn, traders are betting the Fed will stop hiking interest rates, moves that have been restraining the economy’s potential. Federal Reserve Chief Jerome Powell hinted Wednesday after the central bank hiked rates that they could hold steady at its next meeting in September.
Near the start of the Dow’s winning streak, the consumer price index, a widely used measure of inflation that tracks prices on goods ranging from food to electronics, rose just 3% on a year-over-year basis. That was less than economists expected. The next day, the producer price index, which gauges what wholesalers pay for raw goods, climbed just 0.1% in June month over month, also less than forecast.

On top of that, employment data points to a resilient economy. Companies continue to hire at a steady pace, as the most recent U.S. jobless claims data showed a decline.
The key reason strong economic data, along with weakening inflation numbers, can benefit the Dow more than other indexes is because of its make-up. Many of the stocks composing the Dow are levered to an improving economy (think American Express, Chevron, Goldman Sachs, and 3M).

Dow winners during streak

Symbol
Name
% during streak

MMM
3M Company
12.9

GS
Goldman Sachs Group, Inc.
12.5

UNH
UnitedHealth Group Incorporated
10.7

JPM
JPMorgan Chase & Co.
8.6

JNJ
Johnson & Johnson
8.3

CRM
Salesforce, Inc.
7.8

AMGN
Amgen Inc.
7.6

HD
Home Depot, Inc.
7.4

INTC
Intel Corporation
7.1

CAT
Caterpillar Inc.
6.9

Source: FactSet

Strong earnings

The smaller Dow has also gotten a boost as many of its 30 members reported strong quarterly reports.
On Wednesday, Boeing shares rallied 8% to push the index into the green. The aerospace giant reported a smaller-than-expected loss and revenue that exceeded analyst expectations. The company also said it delivered 136 planes in the second quarter, up from 121 in the year-earlier period.
Meanwhile, Coca-Cola gained 1% on Wednesday after the beverage giant raised its full-year outlook and reported better-than-expected earnings. CEO James Quincey pointed to supply chain pressures easing and added that “concern surrounding the bank sector diminished and energy prices continue to pull back from record highs.”
Industrial giant 3M also reported strong second-quarter figures, with earnings and revenue exceeding analyst expectations. The stock popped 5% on Tuesday after the results were released.
The Dow’s mechanics could also be playing a part in its rally. The average is price weighted, meaning that a stock with a higher share price will exert greater influence on the overall Dow level than one with a lower share price. The S&P 500 and Nasdaq, meanwhile, are market cap weighted — meaning stocks with higher market caps will have more sway in how the indexes trade.
Goldman Sachs, the stock with the second-highest price in the Dow, is up more than 10% this month. UnitedHealth, which has the highest price, is up more than 5.7% in that time.
Bottom line: Several factors have conspired to push the Dow into a potentially historic winning streak. More

“Limited but intensive”. That is how a regulatory filing described, with something approaching wry understatement, the few days of due diligence before ubs announced its deal to rescue Credit Suisse on March 19th. The acquisition was the first ever tie-up between two “global systemically important banks”, a designation introduced after the global financial crisis of 2007-09. Since it was announced, the pace has barely slowed. In April Sergio Ermotti, a Swiss cost-cutter who ran ubs between 2011 and 2020, returned as the firm’s chief executive. The same month Credit Suisse’s results laid bare the brutal run it had suffered. Combined financial statements followed in May. The fine print of an agreement with Swiss authorities to absorb potential losses emerged in June. Scores of Credit Suisse bankers have rushed for the exit.ubs finally got the keys to the building on June 12th. The tie-up is the most watched deal in finance. It creates a giant with $5trn of invested assets and a balance-sheet twice the size of the Swiss economy. The acquisition’s outcome will say much about the future of global banking. Regulators are eyeing proceedings closely on account of the new institution’s size. Bank bosses, meanwhile, are watching the difficult strategic decisions faced by management for lessons applicable to their own firms. UBS shareholders, who did not vote for the deal, have traded a staid investment for something much riskier. Despite absorbing its risk-taking rival, bosses hope that the new ubs will be able to emerge as an enlarged version of the old ubs. European banks were slow to recapitalise after the global financial crisis; their profitability largely reflected ailing domestic economies. Amid this inauspicious crowd, ubs stood out. After being rescued in 2008, the bank focused on wealth management. It won enough wallets to be rewarded with one of the highest price-to-book multiples of any European bank, trading at an average of 1.1 times its book value last year. ubs’s focus on managing money will continue, but the shape and scale of its other banking businesses is still the subject of internal debate. Nobody expects a smooth ride in the years ahead.Since the deal was announced, shares in ubs have risen only a little. Yet the acquisition ought to be a boon, at least eventually. ubs bought Credit Suisse at a bargain: it will report an estimated $35bn of “negative goodwill”, the difference between what it paid and the higher book value of Credit Suisse’s equity. Turning this scale into profit hinges on the mammoth task of integrating the two institutions’ operations. All the usual post-merger headaches—combining it systems, aligning accounting standards, laying off staff and resolving culture clashes—are especially troublesome at a bank, let alone a failed one. Compared with ubs, Credit Suisse was appallingly inefficient: the bank had a higher ratio of costs to income in every one of its businesses. Its collapse was preceded by five consecutive quarters of losses and a stunning evaporation of confidence among clients and counterparties.When ubs unveils its plans and delayed quarterly results at the end of August, investors will scrutinise any outflow of assets managed by the bank. There is little to suggest a large exodus has taken place. Julius Baer, a Swiss outfit that is likely to benefit from any flight, reported only modest inflows at its quarterly results on July 24th. But investors should also focus on two strategic decisions—ones which will ultimately determine the success of the deal. Both require knife-edge calls and present enormous execution challenges.Credit Suisse’s domestic business is the first question mark. Bosses at ubs are debating whether to keep none, some or all of Credit Suisse Schweiz, which was established in 2016 as part of a plan, later shelved, to spin off the business. The Swiss bank was Credit Suisse’s only profitable division during the first quarter of 2023. Last year Schweiz’s equity had a book value of SFr13bn ($14bn). Selling the outfit at a valuation near this figure might be impossible given the speed with which clients fled before March. A shaky balance-sheet would hinder efforts to pick off better bits of the business, since the rump might struggle to support itself as a standalone operation. Taking the SwissAnger over the tie-up is still simmering in Switzerland. The fate of Credit Suisse’s domestic business could emerge as something of a political lightning rod. Shedding Schweiz might stave off demands for higher capital requirements in the future by calming worries about the parent bank’s size. According to data from Switzerland’s central bank, last year ubs and Credit Suisse had combined domestic market shares of 26% in loans and deposits. In less dramatic circumstances, it would have been possible to imagine the deal falling foul of competition watchdogs.Yet whereas gains from second-guessing political currents are uncertain, gains from keeping the business and making cuts are almost guaranteed. Assuming ubs’s shears are sufficiently sharp, and 70% of Credit Suisse Schweiz’s costs can be chopped, separating the whole business would mean forgoing nearly a third of the deal’s total annual cost savings, according to Barclays, a bank. Lay-offs affecting Credit Suisse’s 16,700 employees in Switzerland, such as from shutting retail branches, would draw particular ire from politicians and the public. According to Jefferies, an investment bank, around 60% of UBS and Credit Suisse branches are located within a kilometre of each other.The second question mark concerns Credit Suisse’s investment bank, which accounted for a third of the institution’s costs last year, and will bear the brunt of the cuts. Mr Ermotti is no stranger to felling bankers: the number of people employed in ubs’s investment bank declined from about 17,000 in 2011 to 5,000 in 2019, leaving behind a leaner operation to play second fiddle to the bank’s elite wealth-management division. Credit Suisse failed to accomplish similar manoeuvres of its own. Therefore ubs last year generated nearly five times as much revenue per dollar of value at risk.Winding down these operations will be a slog. Much of Credit Suisse’s investment-banking operations will be shoved into a “non-core” unit, along with some small parts of Credit Suisse’s money-managing businesses. Modern “bad banks” do not contain masses of toxic derivatives, like an older generation did after the global financial crisis. But they are still hard to shutter without incurring significant losses.Protection against losses from selling some of Credit Suisse’s assets is provided by the Swiss government. As part of the acquisition agreement, the authorities committed themselves to absorbing up to SFr9bn of losses, so long as the first SFr5bn are shouldered by ubs. They are unlikely to have to cough up, however, given the relatively small pool of assets covered by the agreement. As a result, ubs could move to end the agreement before it has wound down the portfolio. The guarantee proved reassuring to investors during March’s turmoil. Today it carries a lot of political risk for not all that much financial gain.Moreover, the loss guarantee fails to insure against the greatest danger when it comes to winding down an investment bank: that revenues plummet faster than costs, creating uncomfortable losses. Even excluding the sizeable cost of employees and one-off items, outgoings in Credit Suisse’s investment bank last year amounted to more than 60% of revenue. Many of these costs, such as the technology systems required to run a trading floor, will remain high even as assets are sold off. Consider Credit Suisse’s own wind-down unit, which the bank created as part of its failed restructuring programme. The unit’s assets have fallen by almost half since 2021, to SFr98bn; its costs, at SFr3bn in 2022, have hardly changed.How quickly ubs is able to shutter this unit will be closely watched. So will what the bank’s bosses do with their remaining investment bank. European investment banks have retreated since the financial crisis, especially in America. Both Barclays and Deutsche Bank have struggled to convince investors their businesses are worth retaining. ubs’s investment bank is profitable, but would need a mighty boost to woo billionaires with its dealmaking advice. The prospect of building an elite, capital-light bank might be appealing in theory, and was the crux of Credit Suisse’s plan to spin out its own investment bank under the moniker of “First Boston”, a famous old institution that it acquired in 1990. But in practice this would require significant turnover among ubs’s own bankers, too. Put the axe awayIt is not clear that such bloodletting is required. In time, the success of the merger will be judged by ubs’s price-to-book multiple. Morgan Stanley, which has ridden its wealth-management success to a multiple of more than two, is a worthy target. After the deal, ubs will remain a measly competitor in investment banking, but growth in the money it manages means it will close the gap in wealth management and overtake its rival in asset management. A bigger bank means bigger ambitions. ■ More

Leon Neal | Getty Images News | Getty Images

The Securities and Exchange Commission wants corporate America to tell investors more about cybersecurity breaches and what’s being done to fight them. Much more. 
The SEC has voted 3-2 to adopt new rules on cybersecurity disclosure. It will require public companies to disclose “material” cybersecurity breaches within 4 days after a determination that an incident was material. 

The SEC says it is necessary to collect the data to protect investors. Corporate America is pushing back, claiming that the short announcement period is unreasonable, and that it would require public disclosure that could harm corporations and be exploited by cybercriminals. 
The final rules will become effective 30 days following publication of the release in the Federal Register. 
Current cybersecurity rules are fuzzy 
Current rules on when a company needs to report a cybersecurity event are fuzzy. Companies have to file an 8-K report to announce major events to shareholders, but the SEC believes that the reporting requirements for reporting a cybersecurity event are “inconsistent.” 
In addition to requiring public companies to disclose cybersecurity breaches within four days, the SEC wants additional details to be disclosed, such as the timing of the incident and the material impact on the company. It will also require disclosure of management expertise on cybersecurity. 
The pushback from corporate America sounds strikingly similar to the pushback from many of the other rulemaking proposals SEC Chair Gary Gensler has made or proposed: too much. 

“The SEC is calling for public disclosure of considerably too much, too sensitive, highly subjective information, at premature points in time, without requisite deference to the prudential regulators of public companies or relevant cybersecurity specialist agencies,” the Securities Industry and Financial Markets Association (SIFMA), an industry trade group, said in a letter to the SEC. 
Industry objections
The most prominent industry concerns are: 

Four days is too short a period. SIFMA and others claim that four days denies companies time to first focus on remediating and mitigating the impacts of any incident. 
Premature public disclosure could harm companies. The NYSE, on behalf of its listed companies, has written to the SEC saying that corporations should be allowed to delay public disclosures in two circumstances: 1) pending remediation of the incident, and 2) if law enforcement determines that a disclosure will interfere with a civil or criminal investigation. 

The proposed rule allows the Attorney General to delay reporting if the AG determines that immediate disclosure would pose a substantial risk to national security. 
“Premature public disclosure of an incident without certainty that the threat has been extinguished could provide bad actors with useful information to expand an attack,” Hope Jarkowski, NYSE Group general counsel, said in the letter. 
Nasdaq, in a separate letter to the SEC, agrees, noting that “the obligation to disclose may reveal additional information to an unauthorized intruder who may still have access to the company’s information systems at the time the disclosure is made and potentially further harm the company.” 
Concerns about duplicate reporting 
Another concern is overlapping regulations. Many public companies already have procedures in place to share critical information about cyber incidents with other federal agencies, including the FBI. 
The lead agency that deals with cybersecurity is the Cybersecurity and Infrastructure Security Agency (CISA) in the Department of Homeland Security. Under legislation passed last year, CISA is adopting cybersecurity rules that require “critical infrastructure entities,” which would include financial institutions, to report cyberbreaches within three days to CISA. 
This would conflict with the SEC’s four-day rule, and would also create duplicate reporting requirements. 
All this goes to the central issue of who should be regulating cybersecurity. “The Commission is not a prudential cybersecurity regulator for all registrants,” SIFMA said. 
What is the SEC trying to accomplish? 
Cybersecurity is only a small part of the more than 50 proposed rules Gensler has out for consideration, nearly 40 of which are in the Final Rule stage. 
If there is an underlying theme behind much of Gensler’s extensive rulemaking agenda, it is “disclosure.”  More disclosure about cybersecurity, board diversity, climate change and dozens of other issues. 
“Gensler is claiming he wants more transparency and thinks that will protect investors,” Mahlet Makonnen, a principal at Williams & Jensen, told me. 
“The fear the industry has is that the data collected will put unnessary burdens on industry, does not actually protect investors, and that the data can be used to grow the aggressive enforcement tactics under Gensler,” she said. 
“The more information they have, the more the SEC can determine if there are any violations of rules and regulations. It allows them to expand enforcement actions. The SEC will say they have broad authority to protect investors, and the disclosures can be used to expand the enforcement actions.” 
Another long-time observer of the SEC, who asked to remain anonymous, agreed that the ultimate goal of stepped up disclosure is to expand the SEC’s enforcement power. 
“It will enable the SEC to claim they are protecting investors, and it will enable them to ask Congress for more money,” the observer told me. 
“You don’t get more money from Congress by asking for money for market structure. You get more money by claiming you are protecting grandma.” More

The Federal Reserve kept its benchmark lending rate near what economists call “the effective lower bound” for the better part of 15 years.
Low interest rates can in some cases distort the basic assumptions of personal finance and business, shifting how investors calculate risk.
The Federal Reserve is in the midst of its fastest interest rate hiking cycle in the modern era, setting up the U.S. economy for conditions not seen in generations

The United States is entering a new economic era as the Federal Reserve hikes its benchmark interest rate.
In July 2023, the federal funds effective rate stood above 5% for the first time in four decades. As interest rates climb, economists say financial conditions are headed back to being more normal.

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“Having interest rates at zero for such a long period of time is very unusual,” said Roger Ferguson, a former vice chair at the Federal Reserve. “Frankly, no one ever thought we’d get to that place.”
Back-to-back financial crises gave past Fed policymakers the conviction to take interest rates as low as they can go, and keep them there for extended periods of time. Along the way, they disrupted the basic math of personal finance and business in America.
For example, the Fed’s unconventional policies helped to sink the profits investors received from safe bets. Government bonds, Treasury securities and savings accounts all return very little yield when interest rates are low. At the same time, low interest rates increase the value of stocks, homes and Wall Street firms that make money by taking on debt.
As the Fed hikes interest rates, safer bets could end up paying off. But old bets could turn sour, particularly those financed with variable loans that increase alongside the interest rate. A wave of corporate bankruptcies is rippling through the U.S. as a result.
“You’re, to some extent, limiting nonproductive investments that would not necessarily generate revenue in this high interest rate environment,” said Gregory Daco, chief economist at EY-Parthenon. “It’s very different in a low interest rate environment where money is free and essentially any type of investment is really worth it because the cost of capital is close to zero.”

In recent years, economists have debated the merits of zero lower-bound policy. As the Fed lifts that federal funds rate, policymakers warn that rates may stay high for some time. That could even be the case if inflation continues to subside.
“Barring a catastrophe, I don’t think we’ll see lower interest rates any time soon,” said Mark Hamrick, Washington bureau chief at Bankrate.com.Watch the video above to learn more about the new economic era unfolding in the U.S. More