Finance

Stock futures rose on Wednesday night after the Dow Jones Industrial Average and S&P 500 turned lower following a Federal Reserve update by chair Jerome Powell, at the conclusion of its two-day meeting.
Futures tied to the Dow rose 128 points, or 0.3%. S&P 500 futures and Nasdaq 100 futures gained 0.5% and 0.8%, respectively.

Some tech shares were higher in extended trading, after continued swings in the regular session. Netflix jumped more than 4% on news that Pershing’s Bill Ackman bought 3.1 million shares. Tesla gained almost 3% following a strong earnings report. Meanwhile, Intel lost 2%, despite strong earnings.
In regular trading, the Dow ended the day down 129 points, after gaining more than 500 points at one point, following the Fed update. The S&P 500 lost 0.2% and the Nasdaq Composite was little changed, with a boost from Microsoft’s post-earnings gain.
The week’s volatility continued on Wednesday and stocks took a turn lower after the Fed concluded its two-day meeting and signaled the central bank would hikes rates to fight persistent inflation. Powell said there’s “quite a bit of room” to do so before hurting the labor market. The benchmark 10-year Treasury yield climbed above 1.8% following his remarks.
“While offering some clarity on how the Fed would begin the process of removing policy accommodation, the outcome of the meeting fell short in providing the needed guidance on the timing and magnitude of the shift in policy,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.
Some investors have started to bet on as many as five rate hikes this year, following Powell’s press conference. Uncertainty about the timing and magnitude of the Fed’s plans to tighten monetary policy had been building since the December meeting.

“Today’s meeting has market participants fully convinced that a March hike is certain, but with Chairman Powell not making any timing commitments, the door is slightly open for a slower moving Fed,” Ripley added.

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Upholdings’ Robert Cantwell said the markets experienced a relief rally following Microsoft’s strong earnings report Tuesday night, which appeared to be a “good bellwether” for social media, gaming, software and other Nasdaq categories before the Fed update.
“The market in our view is totally overshooting and losing its mind, creating great opportunities for long term growth investors to snap up lots of great shares because, interestingly, it hasn’t really affected companies that actually carry debt,” Cantwell said of the Fed rates. “Since the end of last year the market has been most aggressively discounting companies that are going to generate more cash in the future than they’re generating today… We’re a little upside down now.”
Thursday is a packed morning for earnings, with Mastercard, Deutsche Bank, Blackstone, Southwest Air and JetBlue all scheduled to report quarterly results before the bell. Danaher, Valero and Northrop Grumman are also set to report.

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The Federal Reserve on Wednesday provided the clearest hint yet that it could start raising interest rates as soon as March.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the central bank said in a statement that concluded its two-day meeting this week.
Fed Chairman Jerome Powell said asset purchases also are likely to halt in March, and the central bank released a paper outlining principles to start “significantly reducing” the bond holdings on its balance sheet without indicating a specific time frame.

Facing both turbulent financial markets and raging inflation, the Federal Reserve on Wednesday indicated it could soon raise interest rates for the first time in more than three years as part of a broader tightening of historically easy monetary policy.
In a move that came as little surprise, the Fed’s policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the first rise since December 2018.

Chairman Jerome Powell added that the Fed could move on an aggressive path.
“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” Powell said at his post-meeting news conference. After being up strongly earlier, the major stock market averages turned negative shortly following Powell’s pronouncement.
The committee’s statement came in response to inflation running at its hottest level in nearly 40 years. Though the move toward less accommodative policy has been well telegraphed over the past several weeks, markets in recent days have been remarkably choppy as investors worried that the Fed might tighten policy even more than expected.
The post-meeting statement from the Federal Open Market Committee did not provide a specific time for when the increase will come, though indications are that it could happen as soon as the March meeting. The statement was adopted without dissent.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the statement said. The Fed does not meet in February.

In addition, the committee noted the central bank’s monthly bond-buying will proceed at just $30 billion in February, indicating that program is expected to end in March as well at the same time that rates increase.
There were no specific indications Wednesday when the Fed might start to reduce bond holdings that have bloated its balance sheet to nearly $9 trillion.
However, the committee released a statement outlining “principles for reducing the size of the balance sheet.” The statement is prefaced with the notion that the Fed is preparing for “significantly reducing” the level of asset holdings.

That policy sheet noted that the benchmark funds rate is the “primary means of adjusting the stance of monetary policy.” The committee further noted that the balance sheet reduction would happen after rate hikes start and would be “in a predictable manner” by adjusting how much of the bank’s proceeds from its bond holdings would be reinvested and how much would be allowed to roll off.
“The Fed’s announcement that it will ‘soon be appropriate’ to raise interest rates is a clear sign that a March rate hike is coming,” noted Michael Pearce, senior U.S. economist at Capital Economics. “The Fed’s plans to begin running down its balance sheet once rates begin to rise suggests an announcement on that could also come as soon as the next meeting, which would be slightly more hawkish than we expected.”

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Markets had been anxiously awaiting the Fed’s decision.
Investors had been expecting the Fed to tee up the first of multiple rate hikes, and in fact are pricing in a more aggressive schedule this year than FOMC officials indicated in their December outlook. At that time, the committee penciled in three 25 basis point moves this year, while the market is pricing in four hikes, according to the CME’s FedWatch tool that computes the probabilities through the fed funds futures market.
Traders are anticipating a funds rate by the end of the year of about 1%, from the near-zero range where it’s currently pegged.
Fed officials have been expressing concern lately about persistent inflation, following months of insisting that the price increases were “transitory.” Consumer prices are up 7% from a year ago, the fastest 12-month pace since the summer of 1982.

The durability of inflation has caused officials to rethink a strategy that has produced the easiest monetary policy in Fed history. The central bank slashed its benchmark rate to a target of 0%-0.25% in the early days of the Covid pandemic and has been buying billions of dollars in Treasurys and mortgage-backed securities each month.
“Part of this will be the Fed moving away from very high accommodative policy to substantially less accommodative policy and over time to a policy that’s not accommodative,” Powell said.
The bond-buying program, sometimes called quantitative easing, has brought the Fed’s total assets on its balance sheet to nearly $9 trillion. Powell said the Fed will wait a few months then probably start allowing some of the proceeds from its bond holdings to run off each month while reinvesting the rest. As things stand now, the Fed reinvests all of those proceeds.
“The balance sheet is substantially larger than it needs to be,” Powell said. “There’s a substantial amount of shrinkage in the balance sheet to be done. That’s going to take some time. We want that process to be orderly and predictable.”
Goldman Sachs said a few days ago that it expects the balance sheet reduction to start in June at a pace of $100 billion a month, about double the pace of the previous move of a runoff several years ago.

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The Tesla dealership in Eatonville, Florida is seen on March 1, 2019, the day after Tesla announced that it was closing its retail stores as a cost-cutting measure, in a shift to on-line only sales.
Paul Hennessy | NurPhoto | Getty Images

Check out the companies making headlines after the bell Wednesday:
Netflix — Shares of Netflix jumped more than 5% after hours after Pershing Square’s Bill Ackman said his firm “recently” purchased more than 3.1 million Netflix shares, making it a top-20 holder of the stock.

LendingClub — Shares of LendingClub slid 14.7% despite reporting strong earnings and revenue for the most recent quarter. The fintech company’s first-quarter income and revenue guidance were both lower than analysts had expected, according to Refinitiv.
Intel — The tech company saw its shares fall 2% after hours despite reporting better-than-expected results and delivering upbeat guidance. The company’s gross margin forecast or 52% in the first quarter missed estimates of almost 53%.
Tesla — Shares of the electric vehicle maker fell 2.6% after the company said its supply chain issues could persist throughout 2022, in its quarterly earnings report. Tesla beat analysts’ expectations on both earnings and revenue for the most recent quarter.
Levi Strauss — The apparel retailer’s shares gained 2.6% after the company reported its quarterly results. It reported earnings of 41 cents per share, beating estimates by 1 cent. Revenue beat expectations as well.
ServiceNow — Cloud company ServiceNow jumped 8.5% after it named Chirantan “CJ” Desai, its chief product and engineering officer, its new chief operating officer. It also reported earnings excluding items that beat Wall Street forecasts.
Lam Research — The semiconductor company’s shares fell 4.9% after Lam reported a revenue miss in its most recent quarter’s results. It logged $4.23 billion in revenue for the quarter, compared to expectations of $4.42 billion, according to FactSet.

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Barbie dolls for sale at a Target store.
Scott Mlyn | CNBC

Check out the companies making headlines in midday trading.
Corning — Shares of the tech and specialty glass company rallied 11.1% after beating on the top and bottom lines of its quarterly results. Corning earned 54 cents per share on revenue of $3.71 billion. Wall Street expected earnings of 52 cents per share on revenue of $3.59 billion, according to Refinitiv.

DraftKings — The sports-betting stock jumped 5.2% following an upgrade to overweight from equal weight from Morgan Stanley. The firm said in a note that DraftKings was likely to be one of the long-term winners in the competitive online gambling space.
F5 — Shares of the cloud security company slid 8.4% following current quarter guidance issued by F5 that fell below analysts’ expectations. The company also cut its full-year outlook, citing supply chain issues.
Mattel — The toy stock jumped 4.3% after Mattel announced that it had won back the license to make toys based on the Walt Disney princess lineup. The company had lost the license to rival Hasbro in 2016.
Microsoft — Shares of Microsoft climbed 2.8% after the company gave an upbeat forecast for the current quarter on continued growth in cloud services revenue. It also reported a quarterly profit of $2.48 per share, beating analysts’ estimates by 17 cents, as well as revenue that beat forecasts.
Automatic Data Processing — Shares of ADP dropped 8.9% despite the payroll firm reporting better-than-expected fiscal second-quarter earnings. The company earned $1.65 per share, topping estimates of $1.63 per share, according to Refinitiv. ADP also beat Wall Street’s revenue forecasts.

Kimberly-Clark Corporation — The consumer products maker’s shares fell 3.3% after issuing weaker-than-expected guidance on earnings and revenue. The company beat expectations for per-share earnings and revenue for the fourth quarter, however.
Boeing — The aerospace company’s shares dropped 4.8% after it reported a much wider-than-expected fourth-quarter loss and missed on revenue. It also said it took a $3.5 billion pretax charge on its 787 Dreamliners after production issues delayed its delivery of the planes for the last 15 months.
Moderna — Moderna shares added 1.5% after Deutsche Bank upgraded the stock to hold from sell, mainly on valuation. Deutsche noted the shares “now both through our prior price target and discounted cash flow and at a more reasonable c$65bn valuation.”
Rollins — Rollins’ shares fell 4.9% after the company reported quarterly earnings or 13 cents per share. That was slightly lower than analysts’ expectations of 15 cents per share, according to FactSet. The pest control company also reported a revenue beat for the quarter.
Clorox — Shares of the cleaning products company fell 5.6% after Credit Suisse downgraded the stock to underperform, noting that pandemic-era sales growth may reverse. The firm said that if growth slows, Clorox could have difficulty navigating inflation in its supply chain.
 — CNBC’s Maggie Fitzgerald and Jesse Pound contributed reporting.

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Marko Geber | DigitalVision | Getty Images

The IRS has issued all third-round stimulus payments to eligible Americans, the agency said Wednesday. However, new parents and other recipients who added dependents in 2021 may still qualify for additional money.
The payments, up to $1,400 a person, were authorized by the American Rescue Plan Act, a pandemic-relief bill Democrats passed in March.

The IRS also issued two other Economic Impact Payments (of up to $1,200 and $600) that were authorized by earlier, bipartisan relief packages.

Eligibility and total funds received by households were based on income and other requirements.
Some $1,400 payments may still be in the mail, but the IRS is no longer issuing funds from the first, second or third rounds, the agency said. The IRS issued more than 175 million third-round payments to households worth over $400 billion through Dec. 31.

Who qualifies for more?

Some households will qualify for additional third-round funds when they file their 2021 income tax return this year, however. This is true for those whose circumstances changed in 2021 relative to 2020.
For example, children born in 2021 qualify for an additional payment of up to $1,400, which parents didn’t receive last year.

Families who added a dependent (like a parent, nephew, niece or grandchild) on their 2021 tax return and who was not listed as a dependent on their 2020 return may also qualify, the IRS said.
Most other eligible people already received the full third-round amount and won’t qualify for more, the agency said.
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Families can recover additional stimulus payments on their tax return by claiming the 2021 Recovery Rebate Credit. (Stimulus checks are technically an advanced payment of the Recovery Rebate Credit.)
The tax season started Monday and runs through April 18 for most people.
To claim the 2021 Recovery Rebate Credit, individuals must know how much money they received in total third-round stimulus payments.
That information is available through their online IRS account or via Letter 6475, which the agency is mailing through March to those who were issued third-round payments. (Married individuals filing a joint tax return will need to determine their individual information and add it together.)
The IRS is urging taxpayers to file an accurate, electronic return to speed up processing and get a faster refund. Errors or incomplete returns require further review, which might cause delays, the agency warned.
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The number of Black certified financial planners grew by more than 10% in 2021 from 2020, according to the CFP Board. The growth rate was 15% and 4.2% for Hispanic and female CFPs, respectively.
However, the industry remains overwhelmingly white and male.
Boosting diversity is important for the profession and for prospective clients.

The Good Brigade | DigitalVision | Getty Images

Diversity among financial planners improved in 2021 though the industry remains one that leans heavily toward white men, according to statistics issued Wednesday by the Certified Financial Planner Board of Standards.
The group, which issues the certified financial planner designation, saw a pronounced uptick in female, Black and Hispanic practitioners last year. The number of Black financial planners grew by more than 10% from 2020; the growth rate was 15% for Hispanic CFPs and 4.2% for women.

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All exceeded the growth rate of CFPs overall, which hit an all-time high of 92,055, an increase of 3.8% from 2020.
“2021 is the largest and most diverse class in the CFP Board’s history,” according to Kamila Elliott, chair of the group’s board of directors.
Despite last year’s improvements, officials recognize that the current metrics still fall short.

There were 76,435 white financial planners in 2021, about 83% of the total — dwarfing the other racial and ethnic groups.

About 4%, or just over 3,600, of CFPs are Asian or Pacific Islanders; almost 3% (about 2,500) are Hispanic or Latino, and over 1,600 (nearly 2%) are Black or African American.
By comparison, the U.S. population is about 76% white, 19% Hispanic or Latino, 13% Black or African American, and 6% Asian, according to Census Bureau data.

Meanwhile, almost 77% of CFPs are male and 23% are female, according to the CFP Board. (Females make up about 51% of the overall U.S. population.)
“Our goal is that the number of CFP professionals represent the demographics of the U.S.,” said Elliott, who in 2022 became the first African American to serve as the CFP Board’s chair. “I’d love a day when we see 13% of CFP professionals be Black, and 19% be Hispanic.”

Diversity among financial planners isn’t just important for the industry, but also for the broader American population — it may encourage more minority households to seek financial advice if that advice is more readily available from someone who looks like them, Elliott said.

The CFP Board has tried raising awareness and availability of the financial-planning profession, via scholarships for preparation courses for individuals taking the CFP exam, as well as encouraging mentorship and internship programs among advisors, and hosting an annual diversity summit, for example, officials said.

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The Consumer Financial Protection Bureau issued a request for information on Wednesday asking consumers for input on hidden and excessive fees from a range of lenders.
The agency wants to know about “junk” fees associated with consumers’ bank, credit union, prepaid or credit card account, mortgage, loan or payment transfers.
The federal agency will use the information to target new rules, issue guidance to financial firms, and focus its supervisory and enforcement resources, it said.

Rohit Chopra, director of the Consumer Financial Protection Bureau.
Alex Edelman/Bloomberg via Getty Images

The Consumer Financial Protection Bureau on Wednesday signaled a broad crackdown on hidden and excessive fees charged by banks, mortgage lenders and other financial entities.
The federal agency, created in the wake of the 2008 financial crisis, is seeking consumers’ input on so-called junk fees associated with their bank, credit union, prepaid or credit card account, mortgage, loan or payment transfers.

Such experiences related to a product or service include: Fees people thought were covered by its baseline price; unexpected fees; fees that seemed too high; and fees where it was unclear why they were charged, according to the agency’s announcement Wednesday.
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There’s been an “explosion” in junk fees, such as overdraft fees charged by banks, late fees levied by credit-card companies, and closing fees when buying a home, CFPB Director Rohit Chopra said during a press call Wednesday morning.
“In many cases, junk fees act like penalties” instead of compensation for a legitimate service, according to Chopra, who was appointed by President Joe Biden. They also make it difficult for consumers to choose a product or service since they’re unaware of its true cost upfront, Chopra said.
The CFPB will use public comments to target new rules, issue guidance to firms, and focus its supervisory and enforcement resources, the agency said. The comment period ends March 31.

“Today, with our request for public comment on junk fees, we are beginning the process of ending banks’ reliance on these exploitative income streams,” making costs more transparent and perhaps saving American consumers billions of dollars, Chopra said.
Richard Hunt, the president and CEO of the Consumer Bankers Association, a trade group representing retail lenders, said the CFPB’s initiative was an attempt to “fearmonger,” calling it “fuzzy math at its best and political theater at its worst.”
“The reality is, despite their claims to the contrary, overdraft fees as a percent of total revenue across the industry made up less than 2% in 2019,” Hunt said in an emailed statement. “The Bureau has a responsibility to communicate with clarity and precision — not with overblown rhetoric to attack one industry.”

Competition

Credit card companies earned $14 billion in “punitive” late fees in 2019, while banks earned $15 billion in overdraft and non-sufficient-funds fees, the CFPB estimates.
The initiative is also a response to Biden’s call to spur more competition in the U.S. economy, according to Chopra, who framed high, inflated fees as an anti-competitive practice that has grown with industry consolidation.

This is progress, but it is not enough.

Rohit Chopra
CFPB director

“Capitalism without competition is — is not capitalism; it’s exploitation,” Biden said Monday at a meeting with the White House Competition Council.
Hunt pushed back on the notion of the banking industry being anti-competitive.
“The well-regulated, well-supervised banking industry is also among the most competitive in the world,” he said. “Consumers benefit from the ability choose one of the nation’s nearly 5,000 banks to meet their financial needs.”
Some banks like Bank of America and Capital One have recently moved to eliminate or reduce overdraft fees on their own.
“This is progress, but it is not enough,” Chopra said of some large banks adopting more consumer-friendly policies.
It’s also somewhat unclear as to how effectively the CFPB will be able to regulate the fees that lenders charge. The public input will better help the agency target its efforts, according to a senior CFPB official speaking on background.
“We do have substantial authorities, rulemaking,” the official said. “We’re going to use our authorities as best we can.”
The CFPB is also soliciting public feedback from small business owners, non-profit organizations, legal aid attorneys, academics and researchers, state and local government officials, and financial institutions, including small banks and credit unions, it said.
The agency also maintains a separate complaint database related to all financial products and services.

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A Walmart-backed financial technology start-up is acquiring two more companies as it looks to build an all-in-one app where consumers can manage their money.
Omer Ismail, a former Goldman Sachs executive, will lead the combined business that will be called ONE.
When the two acquisitions close, the growing start-up will have more than 200 employees and over $250 million in cash on the balance sheet to fuel growth.

Black Friday shoppers walk out of Walmart with a full shopping cart on November 26, 2021 in Westminster, Colorado.
Michael Ciaglo | Getty Images

A financial technology start-up that Walmart created and backed said Wednesday it is acquiring two more companies as it aims to build an all-in-one app where consumers can manage their money.
The combined company will be called ONE, the name of one of the firms that the fintech start-up is acquiring. It is also purchasing another fintech company, Even. Financial terms were not disclosed.

Walmart — the country’s largest private employer and biggest grocer — announced an effort last year to develop unique, affordable financial products that it could offer its millions of customers and employees. It said it was teaming up with Ribbit Capital, one of the investment firms behind Robinhood, to launch an independent fintech start-up.
The venture hired two Goldman Sachs bankers to help spearhead the effort, including Omer Ismail, who led Goldman’s consumer bank. Ismail will lead ONE, according to Wednesday’s news release.
Walmart has the majority stake of the start-up, which until now had been called Hazel, and its board includes several top executives, including Walmart’s chief financial officer, Brett Biggs, and Walmart U.S. CEO John Furner.
The start-up plans to capitalize on Walmart’s huge reach: its 1.6 million U.S. employees and more than 100 million weekly shoppers. It has also pointed to an untapped customer base of millions of Americans who don’t have a bank account, can’t access credit and struggle to build up savings — including many who already shop at Walmart stores.
The acquisitions will help the start-up build an app that’s a singular place for consumers to spend, save and borrow. Even already has an app that employers can offer their workforce to help with budgeting and setting aside emergency savings. It counts Walmart, PayPal, Humana and Mattress Firm among its customers.

ONE, the other company that the Walmart-backed start-up is acquiring, offers debit cards, checking and savings accounts, and an app that helps people track their money and budget.
When the two acquisitions close, the combined business will have more than 200 employees and more than $250 million in cash on the balance sheet to fuel growth, Walmart and Ribbit Capital said. The start-up said it expects the transactions to close in the first half of 2022.
The acquisitions were first reported by The Wall Street Journal.

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