Goldman Updates Its Rate Hike Forecast; Zillow Surging

Federal Reserve Chairman Jerome Powell in December.

Pool/Getty Images

Yesterday's data from the Consumer Price Index (CPI) came in hotter than expected, and St. Louis Federal Reserve President James Bullard suggested the Fed may have to hike interest rates more aggressively to fight inflation.

U.S. stocks were mixed while bond yields rose further, reflecting investor uncertainty over interest rate hikes amid strong corporate earnings and a potential easing in geopolitical concerns.

Zillow Group Inc. (Z) shares are up nearly 10% after the online real estate company reported revenue that beat expectations and offered an upbeat forecast, while the yield on the 10-year note reached 2.03%, holding above 2% for the first time since August 2019.

Key Takeaways

  • U.S. stocks gained, while bond yields rose further.
  • The mixed picture may reflect investors' uncertainty over interest rate hikes amid strong corporate earnings and a potential easing in geopolitical concerns.
  • Zillow shares soared after the online real estate firm provided an upbeat outlook.

Today's Market Movers

European stocks pared losses as U.S. markets turned mostly higher. The U.K. reported that its economy grew 7.5% last year, rebounding from a 9.4% plunge in 2020. Stocks in Asia were also lower. 

Later this morning, the University of Michigan releases its preliminary Consumer Sentiment Index for February. The consensus estimate is for a reading of 67.5, roughly even with the January figure. The January reading was the lowest for the survey since November of 2011, driven by consumers’ expectations of future inflation and rising housing costs.

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Shares in Apollo Global Management Inc. (APO), Dominion Energy Inc. (D), Cleveland-Cliffs Inc. (CLF), and Under Armour Inc. (UA) all fell after reporting earnings.

Oil prices are back above $90 a barrel after falling yesterday. Light sweet crude is set for its first weekly decline after seven straight weeks of gains. The dollar was stronger against the euro.

Cryptocurrencies overall edged lower, while Bitcoin rose. 

Quick Hits: Today's Headlines

Comcast Corp.'s (CMCSA) NBCUniversal is near a deal to shift content from Hulu to its Peacock streaming platform, according to The Wall Street Journal. NBCUniversal co-owns Hulu with Disney (DIS), and this marks the latest move to unwind that partnership.

An FDA committee voted against Eli Lilly’s (LLY) cancer treatment amid concerns about trials that were conducted only in China. The committee said that the trial population of mostly Asian men did not represent the diversity of U.S. patients who would use the monoclonal antibody treatment, sintilimab.

Shares of Affirm (AFRM) sank after the company accidentally released some key financial results early on Twitter. Shares of the “buy now, pay later” company initially rose on the release, but fell after full results showed a wider loss in the first quarter and raised concerns about its profit margins and guidance.

Amazon Inc. (AMZN) is easing its mask requirements for warehouse workers and is adjusting its paid time off policies for sick leave, according to a memo to employees. Amazon began to require masks for all employees in December, following the rapid rise of the omicron variant.

Zendesk Inc. (ZEN) has rejected a $16 billion takeover offer from a private equity consortium. The software company has been under pressure to abandon its $4 billion acquisition of the parent company of online survey firm SurveyMonkey.

A record 31.4 million Americans plan to bet on the Super Bowl, a 35% increase from last year’s game, according to the American Gaming Association. Bettors are expected to wage nearly $8 billion on this year’s game between the Cincinnati Bengals and the Los Angeles Rams, a nearly 80% jump from a year ago as more states open up for legalized sports betting.

The Big Story: The Fed's Dilemma

An unexpectedly large jump in consumer prices in January has helped fuel the debate on whether the Federal Reserve may be more aggressive in the fight against inflation.  

The data increased trader bets that the Fed will have to start its predicted March interest increase with a half-percentage-point increase, rather than a quarter-percentage-point increase. In the wake of the January report, trader bets on the possibility of a 50-basis-point increase in March rose to nearly 90%. The Fed will meet on Mar. 15 and 16, and will have one more CPI report before then.

Goldman Sachs Group Inc. (GS) is now predicting the Fed will have to hike interest rates seven times this year, up from its previous forecast of five rate hikes. Citigroup Inc. (C) now anticipates the Fed will raise rates by 50 basis points at its March meeting.

At his last press conference in January, Fed Chair Jerome Powell did not rule out a half a point move. But other Fed officials' comments were less hawkish yesterday.


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