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Corporate America Unfazed by Fed Rate Hikes, Proceeding with Deals and IPOs

  • Corporate America not spooked by potential Fed rate hikes, still doing deals and IPOs.

  • Cisco spending $28B on Splunk deal despite higher interest rates. Not afraid of economic slowdown.

  • General Mills CEO still wants to do acquisitions despite higher rates. Will be "disciplined".

  • IPO activity continues with chip player Arm and food delivery Instacart.

  • Execs betting Fed can achieve soft landing, not expecting markets to fall off cliff.

yahoo.com
Relevant topic timeline:
The U.S. economy is forecasted to be growing rapidly, which is causing concern for the Federal Reserve and those hoping for low interest rates.
The Federal Reserve faces new questions as the U.S. economy continues to perform well despite high interest rates, prompting economists to believe a "soft landing" is possible, with optimism rising for an acceleration of growth and a more sustainable post-pandemic economy.
Hiking interest rates can discourage innovation and curtail long-term economic growth potential, according to a study presented at the Federal Reserve's annual conference. A percentage point increase in interest rates could lead to a 5% reduction in economic output, suggesting the need for increased government funding for innovation to offset rate increases. Higher interest rates make borrowing more expensive, reducing consumer and business demand and hindering the development of new offerings and efficiency-increasing innovations. Additionally, research and development spending, venture capital investment, and patents all decline with rising interest rates. However, the study does not advocate for refraining from raising rates if needed to control inflation.
Federal Reserve Chair Jerome Powell stated that the strength of the U.S. economy may require further interest rate hikes to reduce inflation, despite uncertainties surrounding the economic outlook.
U.S. economic growth, outpacing other countries, may pose global risks if the Federal Reserve is forced to raise interest rates higher than expected, potentially leading to financial tightening and ripple effects in emerging markets.
Higher interest rates are impacting corporate profits, but stock prices remain steady for now.
Major companies are becoming more cautious about borrowing in a higher interest rate environment, leading to a decrease in corporate bond issuances.
Deutsche Bank strategists warn that the U.S. economy has a greater chance of entering a recession within the next year due to high inflation and the Federal Reserve's aggressive interest rate hike campaign.
Bank of America warns that the US economy still faces the risk of a "hard landing" due to rising oil prices, a strong dollar, and potential interest rate hikes by the Federal Reserve, contrasting with the optimistic outlook of other Wall Street banks.
Federal Reserve policymakers are not eager to raise interest rates, but they are cautious about declaring victory as they monitor data such as inflation and job growth; most do not expect a rate hike at the upcoming policy-setting meeting.
Goldman Sachs predicts that the Federal Reserve will not raise interest rates at its upcoming annual meeting due to favorable inflation news and projected economic growth, but they expect a further hike later in the year.
The Federal Reserve is expected to hold off on raising interest rates, but consumers are still feeling the impact of previous hikes, with credit card rates topping 20%, mortgage rates above 7%, and auto loan rates exceeding 7%.
The Federal Reserve is expected to signal that another rate hike may be necessary due to strong economic growth and inflation metrics, creating a difference of opinion between the equity and bond markets.
Investors are more focused on the release of new forecasts from the Federal Reserve, which will reveal their views on the prospect of an economic "soft landing" and the rate environment that will accompany it.
Two former Federal Reserve policymakers disagree on whether the central bank should raise interest rates, with one saying rates have likely peaked and the other saying they need to be raised further, but both agree that achieving a soft landing for the economy is unlikely.
The Federal Reserve left interest rates unchanged while revising its forecasts for economic growth, unemployment, and inflation, indicating a "higher for longer" stance on interest rates and potentially only one more rate hike this year. The Fed aims to achieve a soft landing for the economy and believes it can withstand higher rates, but external complications such as rising oil prices and an auto strike could influence future decisions.
Stocks may not be as negatively impacted by higher interest rates as some fear, as the Federal Reserve's forecast of sustained economic growth justifies the higher rates and could lead to increased stock valuations.
The rise in real-world borrowing costs in Corporate America due to Federal Reserve hawkishness is posing a monetary danger to stock investors and putting pressure on the tech sector's high valuations.
The Federal Reserve's decision to hold interest rates and the possibility of rates remaining higher for longer may have triggered a sell-off in the US equities and cryptocurrency markets, with risk assets typically underperforming in a high-interest-rate environment.
At least one more interest-rate hike is possible, according to Federal Reserve officials, who suggest that borrowing costs may need to remain higher for longer in order to address inflation concerns and reach the central bank's 2% target.
Chris Harvey of Wells Fargo Securities believes that the Federal Reserve will no longer increase interest rates, while Tom Kennedy from J.P. Morgan Global Wealth Management advocates for multi-asset investing.
JPMorgan Chase CEO Jamie Dimon warns that the Federal Reserve could raise interest rates by another 1.5 percentage points, potentially reaching 7%, which would be the highest since 1990, and urges Americans to be prepared for the possibility.
The Federal Reserve's aggressive interest rate hikes have resulted in a decline in the profitability of S&P 500 companies, with the return on equity ratio falling this year, and the trend could worsen if interest rates remain high.
The Federal Reserve is in a better position to deliver a soft landing for the U.S. economy due to facing different problems compared to the 2007-2008 financial crisis, according to F/m Investments CIO and President Alex Morris.
The Federal Reserve's shift towards higher interest rates is causing significant turmoil in financial markets, with major averages falling and Treasury yields reaching their highest levels in 16 years, resulting in increased costs of capital for companies and potential challenges for banks and consumers.
The Federal Reserve's acceptance of the recent surge in long-term interest rates puts the economy at risk of a financial blowup and higher borrowing costs for consumers and companies.
Surging interest rates pose challenges for the US economy and threaten the Federal Reserve's efforts to control inflation without causing a deep recession, as borrowing costs rise for mortgages, auto loans, and credit card debt, and other factors such as higher gas prices, student loan payments, autoworker strikes, and the risk of a government shutdown loom large, potentially reducing consumer spending and slowing economic growth.
The U.S. stock market may not deserve to fall due to higher interest rates alone, as the belief that stock prices decline when interest rates rise can lead to erroneous assumptions, and the correlation between interest rates and inflation is crucial in determining stock market behavior.
Despite efforts by Federal Reserve Chair Jerome Powell to curb borrowing and spending habits, many American companies, both investment-grade and sub-investment grade, have continued to borrow more money, potentially indicating that interest rates may need to be raised even higher to effectively break the cycle. Increased borrowing has raised concerns about the financial health and stability of businesses, with indicators of companies' ability to make payments deteriorating. The borrowing spree is primarily a North American phenomenon, as European and Asian companies have added far less debt or decreased their borrowing.
Higher-for-longer interest rates are expected to hinder U.S. economic growth by 0.5%, potentially leading unprofitable public companies to cut their workforce, according to strategists at Goldman Sachs, who also noted that the Federal Reserve's current benchmark rate is insufficient to cause a recession. Additionally, the firm warned that the high rates could increase the U.S. debt-to-GDP ratio to 123% over the next decade without a fiscal agreement in Washington.
The US Federal Reserve should proceed carefully when deciding whether or not to hike interest rates further to bring down inflation, according to two senior officials, as they aim for a "soft landing" to tackle inflation without harming the US economy.
The Federal Reserve officials suggested that they may not raise interest rates at the next meeting due to the surge in long-term interest rates, which has made borrowing more expensive and could help cool inflation without further action.
Top Federal Reserve officials are considering that tighter financial conditions resulting from an increase in US Treasury yields may replace the need for further interest rate hikes.
Housing trade groups have warned the Federal Reserve that further interest rate hikes could lead to a hard landing in the form of a recession, and have urged the Fed to take two steps to avoid this outcome.
Atlanta Federal Reserve Bank President Raphael Bostic believes that the US central bank does not need to raise interest rates further and does not see a recession on the horizon, despite the slowing economy and falling inflation caused by previous rate hikes. He also emphasized that the recent conflict between Israel and Hamas creates uncertainty and could impact the global economy.
Investors are betting that the Federal Reserve may not raise interest rates again due to recent market moves that are expected to cool economic growth.
Federal Reserve officials are cautious about raising interest rates further due to the risks of stifling economic growth and increasing unemployment, despite expectations of a potential rate hike, according to newly released minutes from their September meeting.
The Federal Reserve officials are uncertain about the U.S. economy's outlook and plan to proceed cautiously in deciding whether to raise interest rates, with some acknowledging the risks of raising rates too high or not enough to curb inflation.
US corporate bankruptcies are increasing due to higher interest rates set by the Federal Reserve, leading to higher borrowing costs and putting pressure on companies with high levels of debt.
Interest rates are a major focus in financial markets as rising rates have far-reaching consequences, making future projections less valuable and hindering investments, and there is still uncertainty about the full impact of rate hikes on the economy, potentially delaying the start of a recession until mid-2024.
Renowned investor Peter Schiff predicts that interest rates in the US will remain "much higher, forever," which could lead to financial challenges such as increased borrowing costs, reduced economic activity, and potential job losses. However, individuals can mitigate the impacts by saving in high-yield accounts, diversifying investments, and considering alternative assets like real estate.
Federal Reserve Chair Jerome Powell's upcoming remarks at the Economic Club of New York may provide insight into the central bank's strategy on interest rates, potentially affecting the market and indicating if the Fed agrees with recent speakers who believe rate hikes are over.
Federal Reserve Chair Jerome Powell indicated that the strength of the U.S. economy and tight labor markets could warrant further interest rate increases, countering market expectations that rate hikes had come to an end. Powell also acknowledged that inflation is still too high and further rate increases could be necessary.