Federal Reserve Governor Christopher Waller said he sees interest rate increases continuing through the rest of the year as part of an effort to bring inflation under control.  Specifically, the central bank official said he would support hikes that exceed the “neutral” level which would be restrictive for growth of the US economy.  Estimates Fed officials provided in March point to a 2.5% neutral level, so that means Waller sees rates increasing at least another 2 percentage points from here.

The University of Michigan’s gauge of consumer sentiment fell to a final May reading of 58.5 from the initial reading of 59 earlier in the month, its lowest level in more than 10 years.  Americans’ expectations for overall inflation over the next year fell to 5.3% in May from 5.4% in April, while expectations for inflation over the next 5 years remained at 3%.  High inflation remains at the top of consumers minds, though data indicate that price pressures may be easing somewhat, aided by small declines in gas prices.  A key measure of U.S. inflation released Friday showed prices for a typical basket of consumer goods rising 6.3% year-over-year in April, down from a 40-year high of 6.6% in March.

Rising mortgage rates did not slow down rising home prices in March.  Nationally, home prices were 20.6% higher than they were in March 2021, according to the S&P CoreLogic Case-Shiller Home Price Index. That is higher than the 20% gain in February. 

Almost one in five of home sellers have lowered their price during the four-week period ended May 22, the highest rate since October 2019, suggesting homebuyers are starting to reject historically high prices, according to a report from real estate brokerage Redfin.  The median home sale price jumped 16% Y/Y to a record $400K, as the supply-side of the housing market remains tight, Redfin noted, citing data from more than 400 U.S. metro cities. Furthermore, pending home sales fell 5.4% Y/Y.

The core personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose 4.9% from a year ago in April, in line with estimates and a deceleration from March.  Personal income rose slightly less than expected, but spending beat estimates as consumers tapped savings. The number excludes volatile food and energy prices that have been a major contributor to inflation running at forty-year highs.

Chinese technology shares leapt this morning after the country’s largest internet groups beat first-quarter earnings estimates despite the damage caused by Beijing’s zero-Covid policy and widespread lockdowns in the world’s second-biggest economy. Hong Kong-listed shares of Alibaba surged more than 12 per cent after the ecommerce group reported revenues had risen 9 per cent year on year in the first three months of 2022 $30bn.

The Federal Reserve minutes of the May meeting gave investors a pretty clear roadmap for the summer. The minutes, out Wednesday afternoon, painted a picture of an FOMC strongly focused on inflation, with rate hikes of 50 basis points in the June and July meetings. But some members also indicated that price pressures may not be getting worse. There are already signs that the U.S. economy is weakening. Of the last 19 major economic indicators, 13 have missed economists' expectations. The question is whether that will bring about a Fed pause, which stock bulls are hoping for, or will it stiffen the central bank's resolve.

Nvidia shares dropped sharply in extended trading after the chipmaker reported strong first-quarter results but issued weak guidance for the upcoming quarter.  However, the company said it expects second-quarter sales to be $8.1B, well below analyst estimates. Nvidia attributed the shortfall to roughly a $500M decline due to Russia's invasion of Ukraine and COVID-related lockdowns in China.

Apple is boosting pay for workers amid rising inflation, a tight labor market and unionization pushes among hourly store employees. The iPhone maker on Wednesday told employees in an email that the company is increasing its overall compensation budget. Starting pay for hourly workers in the U.S. will rise to $22 an hour, or higher based upon the market, a 45% increase from 2018.

Any Fed talk these days is being put under the microscope as the central bank embarks on a tightening cycle in its fight against inflation. It was only three weeks ago that the FOMC hiked rates by a half percentage point for the first time since 2000, meaning minutes from the May meeting will be released later today at 11am, Investors will particularly be watching for any new details and discussions from the officials, which have pledged to raise borrowing costs until it has fully tamed inflation.  A series of 50-basis-point rate hikes are now expected over the next several months, triggering fears that the increases could send the world's largest economy into recession.

Shares of Wendy's are 10% higher this morning after its largest shareholder Trian proposed a potential acquisition of the fast-food chain. Trian Partners, which is run by famed billionaire investor Nelson Peltz, owns nearly a 20% stake.

The U.S. Treasury Department does not plan to renew a license that allows Russia to pay its debtholders through American banks, almost guaranteeing the first Russian foreign debt default since the Bolshevik Revolution. Up until now, the Kremlin had been using JPMorgan and Citigroup as channels to pay its obligations, but the provision that allows it to do so will expire at midnight. Russia last defaulted on its domestic debts in 1998 – this one will end up in the courts – as they’re able and willing to pay. 

Stock markets are set to renew a selloff this morning as a grim forecast from Snapchat owner Snap gave investors another excuse to shed tech shares. The company warned of a macro environment that "deteriorated further and faster than we anticipated," saying it was unlikely to meet its (already conservative) revenue and profit guidance for Q2.  Snap only reported earnings a month ago, meaning that the economic landscape appears to have changed drastically over the last several weeks. The firm will also slow hiring and postpone some planned staff additions until next year.  The stock had fallen over 50% this year so far, and is down another 38% this morning. 

The latest gathering of the world's political and business elite, plus the usual smattering of celebrities, is taking place this week at the Swiss Alpine resort of Davos. While the annual meeting of the World Economic Forum is usually broadcast in January, it was delayed multiple times this year due to COVID-19. As a result, headlines aren't making as much of their usual waves, but then again, many have already dismissed the pure hypocrisy of the gathering. 

China's zero-COVID policy is having many knock-on effects across its economy, as well as for multinationals located in the country. Airbnb is shutting down its domestic operations from the summer, halting its rental home offerings and experience listings.

Chipmaker Broadcom is in talks to acquire cloud service provider VMware in what could be one of the biggest deals of 2022. It would see the deal-hungry semiconductor group diversify into the enterprise software business as sentiment in the market sends stock prices lower. Demand for cloud computing services and data centers has surged in recent years and VMware has long been considered one of the industry's most important companies.

A day doesn't go by without Elon Musk making headlines, especially in recent weeks. His space venture called SpaceX is looking to bring in up to $1.7B in new capital, at a price of $70 per share, according to a company-wide email obtained by CNBC. That would boost its valuation to $127B, making it the second largest startup in the world behind China's ByteDance, which owns popular video-sharing app TikTok.

This morning, President Biden, on his first trip to Asia since taking office, has announced an agreement that he hopes represents the future of trade policy. It’s known as the Indo-Pacific Economic Framework and includes India, Japan, Indonesia, South Korea, Australia, Vietnam, the Philippines, Thailand and a handful of other countries.

New claims for U.S. unemployment benefits unexpectedly rose last week, but the labor market remains tight amid worker shortages, with the number of Americans on jobless rolls at its lowest level since 1969 in early May.  Initial claims for state unemployment benefits increased 21,000 to a seasonally adjusted 218,000, the highest level since January.

Sales of previously owned homes in April fell to the lowest pace since the pandemic started, according to the National Association of Realtors.  Existing home sales declined 2.4% compared with March to a seasonally adjusted annualized rate of 5.61 million units. Sales were 5.9% lower than in April 2021. That is the slowest rate since June 2020, which was artificially slow since the economy was struggling with sweeping shutdowns due to the coronavirus. This count represents closings during the month, so it reflects contracts likely signed in February and March, when mortgage rates were rising. The average rate on the 30-year fixed mortgage started February at 3.66% and ended March at 4.78%. It is now hovering around 5.45% so sales numbers in June will likely drop again.

Intel said they are going to build a $700 million research center at their Jones Farm campus in Hillsboro where the company will study new technologies for cooling data centers.  The new “mega lab” will investigate ways to make data centers operate more efficiently, primarily by reducing their heating, cooling and water needs. The 200,000-square-foot facility, slated to open late next year, will also provide space for Intel to test new data center technologies.

Construction of new houses fell slightly in April for the second month in a row, suggesting that rising mortgage rates, record home prices and the high cost of building materials are starting to bite.  Housing starts dipped 0.2 % to an annual pace of 1.72 million. That’s how many homes would be built in 2022 if construction took place at same rate over the entire year as it did in April.  New construction rose to a nearly 16-year high in February before backsliding in the past two months.  The number of permits, meanwhile, slipped 3.2% to a 1.82 million rate.  Permits foreshadow how many houses are likely to be built in the months ahead assuming a stable economy. They hit a 15-year high at the end of last year as mortgage rates tumbled to record lows, but permits have since leveled off.

How well is the American consumer holding up against sky-high inflation? It depends on whom you ask.  Four major retailers — Walmart, Target, Home Depot and Lowe’s — reported quarterly financial results this week, and they each offered a different perspective on where and how people are spending their money.  Walmart said some of its more price-sensitive customers are beginning to trade down to private-label brands, while Home Depot emphasized the resiliency among its customer base, a sizable percentage of which is professional home builders and contractors.  The reports came after Amazon in late April flashed warning signs for the retail industry when they booked the slowest revenue growth for any quarter since the dot-com bust in 2001 and offered up a bleak forecast.  Still, expectations on Wall Street were higher this week for both Walmart and Target. Analysts and investors didn’t anticipate that the two big-box retailers would take such a massive hit to their profit. Walmart closed Tuesday down 11.4%, marking its worst day since October 1987, while Target had its worst day in 35 years.

Federal Reserve Chairman Jerome Powell emphasized his resolve to get inflation down, saying yesterday he won’t hesitate to continue interest rate increases until prices start falling back toward a healthy level.  “We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, and we see inflation coming down.”

Shares of Walmart are sharply lower after the company reported quarterly earnings that missed Wall Street’s expectations by a wide margin, as the nation’s largest retailer felt pressure from rising fuel costs and higher levels of inventory.  Walmart is a much-watched company as investors and economists look for clues about how the American consumer is weathering inflation.

Production at U.S. factories increased more than expected in April amid continued strong demand for motor vehicles and other goods, which should help to underpin manufacturing activity.  Manufacturing output increased 0.8% last month after a similar gain in March. But manufacturing, which accounts for 12% of the economy, faces challenges from renewed supply chain bottlenecks because of Russia's invasion of Ukraine and China's zero-tolerance COVID policy.

Retail Sales in April rose .9%, a solid increase that underscores Americans’ ability to keep ramping up spending even as inflation persists at a 40 year high.

Shares of Twitter traded sharply lower after Elon Musk hinted that he could seek to renegotiate the price of his Twitter takeover, saying a deal at a lower price wasn’t out of the question.  Twitter shares have also erased all of the gains since Musk disclosed his buyout. Musk said Friday that the acquisition was “on hold” while he researches the proportion of fake and spam accounts on the platform, which he believes Twitter has misstated.  Musk on Monday estimated that fake users make up at least 20% of all users. Twitter, meanwhile, has said the accounts made up fewer than 5% of its monetizable daily active users in the past quarter.

U.S. officials reached an agreement to allow baby formula maker Abbott to restart its largest domestic factory, though it will be two months or more before any new products ship from the site to help alleviate the national shortage facing parents.  Under the agreement, Abbott must work with outside experts to upgrade their standards and reduce bacterial contamination at the Sturgis, Michigan, facility, which the Food and Drug Administration has been investigating since early this year. The deal, which must be reviewed by a federal judge, amounts to a legally binding agreement between the FDA and the company on steps needed to reopen the factory.

The Senate has finally confirmed Fed Chair Jerome Powell for a second four-year term following delays surrounding other nominees the Biden administration had pitched for the central bank. In his first term, Powell has had to battle two major crises, including the COVID pandemic and 40-year high in inflation, recently turning to tighter monetary policy to combat the price pressures. "Chairman Powell presided as Fed chair during some of the most challenging moments in modern American history," Senate Majority Leader Chuck Schumer said after the bipartisan 80-19 vote.

Sam Bankman-Fried, the billionaire founder of crypto exchange FTX, just disclosed a 7.6% stake in Robinhood, sending the beaten-down shares of the popular retail brokerage up 20% in AH trading yesterday.  Whether he’ll be able to re-direct a business slated to lose $1.2bn on $1.4bn in revenue remains to be seen.

Soaring inflation and supply chain bottlenecks have begun to crack the $1.5tn US high yield bond market, as the lowest-quality borrowers show signs of stress. Junk bonds had largely escaped worries over the US economy as surging prices add costs for companies. Many bond issuers were flush with cash because they locked in low interest rates before the Federal Reserve started to tighten monetary policy.  Negative earnings surprises this week helped to drag the broader high-yield bond market to its worst level in 17 months.

It already happened once during the intraday session on Monday, but Saudi Aramco has officially topped Apple as the world's most valuable company. The state-owned energy giant closed the session yesterday with a market capitalization of $2.43T, while the iPhone maker ended the day valued at $2.37T. In fact, it's a trend that has accelerated this year, with the energy sector buoyed by a surge in oil prices following an inflation surge that has curbed demand for high-flying tech stocks. Aramco shares are up 30% YTD, while Apple's stock has slid 20% since the start of the year.

Tech stocks got hammered again on Wednesday after the closely-watched Consumer Price Index soared 8.3% in April, which was close to the highest level in more than 40 years. Furthermore, core CPI (excluding food and energy) was higher than expected, rising 6.2%, while shelter costs - which account for one-third of the CPI - advanced at their fastest pace since 1991. There was also a big jump in underlying services inflation, which has been climbing in recent months, suggesting that price pressures are becoming more entrenched in the economy.

Shares of Disney are lower after the company’s CFO acknowledged that the second half of the year may not be quite as strong relative to the first half when it comes to streaming. Disney’s fiscal second-quarter revenue rose 23% to to $19.25 billion, helped by strong theme park sales.

Inflation rose again in April, continuing a climb that has pushed consumers to the brink and is threatening the economic expansion, the Bureau of Labor Statistics reported Wednesday. The consumer price index, a broad-based measure of prices for goods and services, increased 8.3% from a year ago, higher than the Dow Jones estimate for an 8.1% gain. That represented a slight ease from March’s peak but was still close to the highest level since the summer of 1982.

Phillip Morris International, which is best known for selling Marlboro outside the US, has agreed to buy a Swedish tobacco company for $16 billion in its biggest bet yet on the alternative cigarette market. Swedish Match owns the largest maker of oral nicotine pouches — or so-called snus — which have grown in popularity beyond their home market in recent years.

Peloton shares continued their descent towards zero yesterday after the fitness bike maker reported higher losses than expected and revealed it has borrowed $750mn from its banks to strengthen its balance sheet. The company has been left with excess inventory after consumers returned to gyms and fitness centers following the relaxation of Covid-19 restrictions.

Confidence among small-business owners in the U.S. leveled off in April after three consecutive months of drops, but inflation and labor shortages continued to weigh heavily on short-term economic expectations.  The number of small-business owners who expected better business conditions in the next six months fell again in April, albeit less than in the previous months. However, the index fell to the lowest level recorded in the survey's history.

The world’s largest technology companies have shed over $1 trillion in value in just three trading sessions.  Stocks at large have sold off since the Federal Reserve raised their benchmark interest rate last Wednesday, but technology has endured more pain than other sectors of the economy. Investors now have less interest in what drove business during a strong bull market in recent years, including during the pandemic, and are now pushing more money toward safer pockets of the market, including consumer staple stocks.

Shares of the electric car maker Rivian are down over 20% after one of their largest shareholders, Ford, announced they are selling 8 million shares of Rivian stock.

Bitcoin is now 55% below its November peak, and 40% of Bitcoin holders are now underwater on their investments, according to new data from Glassnode.  That percentage is even higher when you isolate for the short-term holders who got skin in the game in the last six months when the price of bitcoin peaked at around $69,000.

Stonks only go up... until they go down.  Nasdaq has been in a bear market since March, with nearly half of the index's constituents off more than 50% below their 52-week highs. Assets with no intrinsic value have been hit the hardest – cryptocurrencies are down 50% from recent highs.  Fund flows fell to their lowest level since the depths of the COVID crisis as inflows from institutional money and retail investors dried up.

Recession fears continue to be rife amid fresh warnings from tech companies that aren't helping the situation. Uber just became the latest to sound the alarm, announcing a hiring slowdown to address the severe swing in economic sentiment. Last week, Facebook also told staff it would stop or slow the pace of adding mid-level or senior positions, while Robinhood previously declared that it would slash its workforce by around 9%.  Banks are also starting to trim mortgage origination and underwriting staff.  

Chinese export growth slowed sharply last month, as the world’s second-biggest economy was battered by draconian coronavirus lockdowns and weakening global demand. Exports increased 3.9 per cent in April from a year earlier — the slowest rate in two years — after growing almost 15 per cent the previous month, official data showed, as supply chains were choked by unpredictable and ambiguous Covid-19 rules.  The hit to the country’s manufacturers has also dimmed hopes that Beijing will be able to achieve its goal of 5.5 per cent annual growth, its lowest target in three decades.