Fed's Largest Rate Hike Since 1994

• 3 min read
Fed's Largest Rate Hike Since 1994

MARKET MOVERS

  • Fed raises rates by 0.75 percentage point, the largest increase since 1994. Officials approved the large interest rate increase at their two-day policy meeting. The Fed also signaled it would continue lifting rates this year to slow the economy and combat inflation that is running at a 40-year high. This will increase the Fed’s benchmark federal-funds rate to a range between 1.5% and 1.75%.

  • U.S. retail sales declined 0.3% in May. Consumers pulled back at auto dealerships, and online shopping, and spent more at gasoline stations. If households cut back too much, however, it could be a blow to the economy. Consumer spending accounts for about 70% of U.S. economic activity. Auto and parts sales fell 4% last month. Sales at gas stations jumped 4% last month mostly because of higher oil prices.

  • Oil giant BP buys a 40.5% stake in massive renewables and a green hydrogen project. BP said it has the potential to be one of the largest renewables and green hydrogen hubs in the world. Located in the Pilbara region of Western Australia, the project will develop up to 26 gigawatts of combined solar and wind generating capacity. The hydrogen and ammonia would be used in Australia and exported internationally.

  • GM invests $10 million in a wind-energy start-up. GM is putting the money—using GM Ventures, or GMV—into Wind Catching Systems, a start-up developing floating offshore wind-power electricity generation systems. The start-up’s aim is to reduce the capital cost of offshore wind power generation. Its main owners are Ferd and North Energy, both Norwegian-based investment companies. Read more here.

  • PayPal launches a monthly buy-now-pay-later option. Consumers will be able to spread payments over longer periods, the company said Wednesday. Consumers who have been approved will be able to break the total cost of purchases between $199 and $10,000 into monthly payments over a six to 24-month period. The first payment will be due one month after purchase. Read more here.

  • YouTube says it is gaining on TikTok in the short-video race. More than 1.5 billion people watch YouTube Shorts every month, Alphabet Inc. disclosed on Wednesday, indicating the short-video service had reached a comparable scale to rival app TikTok. Although apples-to-apples data aren’t publicly available, YouTube’s newly published viewership number would give Shorts a similar audience to TikTok and its Chinese counterpart Douyin. Read more here.

  • U.S. home equity hits $27.8 trillion. Total U.S. home equity increased almost 20% in the first quarter, a record high, according to the Federal Reserve. The increase is another consequence of a red-hot housing market. Double-digit price gains have driven some would-be homeowners out of the market. At the same time, rising home values are boosting the finances of the Americans who already own them.

  • Apple scores deal for Major League Soccer streaming rights worth $2.5B. Sports packages are clearly the next battleground for tech giants. Apple has agreed to a two-and-a-half billion-dollar broadcasting rights package with Major League Soccer. Apple is already streaming live sports with Major League Baseball, but this is the first comprehensive rights package with the league. Read more here.

  • The rise in the dollar to a 20-year high costs US companies billions in earnings. The financial technology firm Kyriba reports that a strong dollar has already knocked off $40bn from North American companies' earnings. And that’s just in the first half of this year. When the dollar is stronger, it means that companies that have large exposures to international markets often lose money because the cost of their products goes up abroad. Source(3:50)

WHAT TO WATCH

  • EU aims to clinch a deal on landmark crypto law this month. Regulators for the 27-member countries met on June 14th and then a second time on June 20th to talk about harmonizing crypto regulations. They kicked off this effort in September of 2020 and they basically want to try to unify the fragmented regulations across the union. They plan to talk about frameworks on whether a cryptocurrency will be considered a security or not.  Source(23:18)

  • Cathie Wood says the market is pretty close to a bottom. She believes technology stocks will hit the bottom before the broader market, repeating a historical trend from past crises. In the wake of the dot-com bubble and 2008 financial crisis, the tech-heavy Nasdaq Composite hit its trough months before the S&P 500 did and therefore recovered first. The innovation-focused investor believes the history will repeat itself this time around. Read more here.

  • Meta prevailed on five of the six grounds of a legal appeal in the U.K. The Competition Appeal Tribunal ruled in favor of the company, which was appealing the reversal of its acquisition of animated images site Giphy. However, despite Meta's victory, the Tribunal could still quash its decision and send the matter back to the Competition and Markets Authority.
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