Powell on the Hill
Get ready for Fed Chair Jerome Powell’s semiannual monetary policy testimony before Congress, which will take on additional importance this time around as investors size up last week’s FOMC meeting. While policymakers kept rates on hold, or what some are calling a hawkish pause, an additional two hikes were telegraphed for later this year. “Nearly all policymakers” felt similarly about monetary tightening, while Powell portrayed the skip as an opportunity for the central bank to evaluate how policy direction was impacting the overall economy.
Snapshot: Heading over to Capitol Hill, Powell will answer questions from the Senate Banking Committee at 10 AM ET and appear before the House Financial Services Committee on Thursday. Lawmakers are likely to delve deeper into why he felt that now was the right time to pause hikes, and what metrics the central bank continues to analyze following one of the swiftest hiking campaigns in history. Inflation is also running well above the Fed’s 2% target, while the labor market remains tight by historical standards.
Stock traders shrugged off last week’s FOMC decision and forecasts, with equities rising since the gathering. It builds upon the market rally in 2023, with big risks like broader banking contagion off the table and debt ceiling drama resolved until after the next election cycle. Other economic indicators have also come in stronger than expected, like the surprise jump in monthly construction of new homes.
Elsewhere: The closely-watched yield curve inversion on Tuesday widened to a four-decade high, reaching 97 basis points for the 2Y10Y. While it may make for a good headline, SA premium user mmt59 said it is “not much more.” “Another prediction of a future recession, that will probably end up being much milder and shorter, than anticipated,” he added. “Having many years investing in the markets, I am much more interested in the earnings of the companies owned in my portfolio, which so far this year have been much better than expected!” (49 comments)
Charging standards
Texas will be the first U.S. state to mandate Tesla’s (TSLA) electric vehicle charging system, in a huge win for CEO Elon Musk who is working towards making the connector the industry standard. Experts believe the decision could push other states to adopt the system. In addition, Tesla is poised to benefit from China’s $72-billion tax break for EVs, while Musk hinted at launching Tesla in another major Asian market. Investing Group Leader JR Research believes Tesla’s NACS plug is “well-primed” to assume leadership as the national standard. This automaker also just became the latest to add the connector to its EVs, following Ford (F) and General Motors (GM). (9 comments)
False advertising
Novo Nordisk (NVO) is suing medical spas and wellness clinics for allegedly selling copycat versions of its GLP-1 drugs, such as Ozempic and Wegovy, popularly used for weight loss. The Food and Drug Administration recently warned consumers not to use off-brand versions of these drugs as they may not be safe or effective. Sales of semaglutide medications soared in recent years, but demand has outstripped supply, leading to drug shortages. The World Health Organization has also sounded the alarm, cautioning that the weight-loss drugs were not a “silver bullet”. (3 comments)
Recycling plan
Mastercard (MA) has launched a global project to recycle debit and credit cards from any issuer to ensure these cards don’t end up in landfills. The pilot, which will run for six months, will be a partnership with British lender HSBC (HSBC) and will see shredding machines installed at bank branches. Once full, these will be transferred to a plastic recycling plant. Mastercard has around 3.1B cards in circulation at present and estimates that the industry produces around 600M cards per year. (1 comment)
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