Stocks won't be satisfied until the Fed beats them into submission
Crypto is collapsing. Mortgage rates are soaring. Here's what it all meansReplayMore Videos ... (16 Videos)Crypto is collapsing. Mortgage rates are soaring. Here's what it all meansExecutives torn on recession risk as fears grow for global economyThe Fed anticipates more rate increases after announcing biggest hike in 28 yearsWhat the interest rate hike means for youRealtor.com chief economist shares her advice for homebuyers and sellersHe predicted US inflation would rise. Hear what he thinks about a recessionHere's what the US economy can expect if a recession hits Former labor secretary on how Biden administration can combat inflationHow this mom is using coupons to combat inflation Wyndham Hotels CEO: Demand is outpacing inflation in hotel industry 'Tough number to swallow': Romans breaks down inflation dataRetirees becoming homeless at higher rate than other age groups amidst inflationOECD secretary-general explains global cost of the Russian oil embargoStrategist: We're at peak pessimism (and why that's a good thing)World Bank president on handling 'biggest slowdown of the global economy in 80 years'Treasury secretary warns of 'unacceptable levels of inflation'New York (CNN Business)Editor's Note: This story is part of CNN Business' Nightcap newsletter. To get it in your inbox, sign up for free, here.
You don't need to look far to see that the economy is going to hell. Just today:Kroger said shoppers are buying less and "aggressively" switching to store brands.Revlon declared bankruptcy, blaming the messed up supply chain for its inability to get out from under its crushing debt.Mortgage rates soared to 5.78%, their biggest single-week jump since 1987.The Atlanta Fed's GDPNow model is predicting no growth for the US economy this quarter. Like, literal zero, zilch, nada, bupkis, down from 0.9% a week ago. So it should come as no surprise that the stock market, which plunged into a bear market earlier this week, fell sharply again Thursday. Read MoreThe problem is that investors are like my tween daughter, wanting two contradictory things at the same time. For my daughter, it's simultaneously "leave me the f**k alone" and "can you take me to my friend's house?" For Wall Street, it's, "Pretty please, Jay Powell, raise rates to gain control of runaway inflation" and "Stop! Higher rates are going to crash the economy into a recession."The tough medicine the Fed is giving the US economy magob y indeed kill the patient and start a recession. But, as Powell said Wednesday: "We have to restore price stability. We really do. It's the bedrock of the economy, If you don't have price stability, the economy won't work.... Wages will be eaten up."So, what now?At this point, economists worry it may be too late to save the economy from a recession. And, as Allison noted yesterday, her boy Jay admitted for the first time Wednesday that much of the inflationary pressure the Fed is trying to counteract is beyond his power to fix. Sky-high oil prices caused in part by a war in Ukraine, Covid, a screwed-up supply chain ... Powell can't change those things. (If only!)The good news, (ok, it's not that good, but we're taking what we can get), is that a recession could fix some of those problems. If the economy goes down, it should sap demand and take prices down with it. If people stop buying stuff and traveling, people won't need as much fuel, and prices should fall.Wall Street isn't predicting a massive recession like the Covid-lockdown-induced economic calamity of two years ago or the 2008 financial crisis. The job market has been holding up, and many people still have a reasonable amount of money saved up from those sweet, sweet stimmy checks they got a year ago."Our forecasted recession would be one of the milder downturns in the post-WWII era," said Wells Fargo economist Jay Bryson in a note to investors. Bryson said a looming recession, which he believes is a certainty, would be far less severe than the two most recent recessions, which were "bruising affairs." "Because many of the underlying fundamentals of the economy are generally sound at present (i.e. household and business balance sheets are generally in good shape and the banking system is well capitalized), we think a mild and relatively short downturn is more likely than a deep and protracted one," he wrote.NUMBER OF THE DAY: $3 millionVince McMahon, the CEO of WWE, is being investigated by the company's board for agreeing to pay a secret $3 million settlement to a former employee he allegedly had an affair with, according to a Wall Street Journal report.HAPPY PRIME DAY Amazon announced Prime Day will take place July 12 and July 13 this year.Hey, Amazon, meet me at camera 3...Oh hi, how are you, Amazon? I know you're working hard. How's peeing in a bottle going for you? So, prices are surging, and we all want some discounts right now. But, this year, can you just work on knocking prices down on stuff that we actually need?Every year, I get excited about Prime Day. And every year, I see a bunch of TVs (got one of those), Echoes (already hit mine with a hammer) and other crap I'd never buy or don't need a 20% discount on (20 cents off cotton balls -- cool!).And, sure enough, this year, Amazon announced a bunch of TVs will be available up to half off. And, this year, Amazon is pushing "Buy Now, Pay Later." So you can enter crushing debt to buy stuff you don't need.How about a different strategy this year: Make Whole Foods prices resemble costs from Planet Earth. Or just discount toilet paper, cardboard boxes and canned beans for the recession. Enjoying Nightcap? Sign up and you'll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day week around here.)Click Here To Get Funded!