Fed decision, Icahn targeted, regional lenders slip – what’s moving markets


Investing.com — The Federal Reserve gears up to reveal its latest rate decision as investors eagerly await comments from the U.S. central bank’s chair Jerome Powell. A battle begins between two leading activist investors, while the pressure on midsize lenders fails to abate.

1. One more and done?

The Federal Reserve is set to deliver its latest policy decision later today, with the U.S. central bank widely tipped to raise interest rates by another 25 basis points.

Should this come to pass, the Fed will have hiked borrowing costs from 0% to a floor of 5% in the span of about a year. The unprecedented scale and pace of these increases highlight just how desperate policymakers have been to bring down soaring inflation.

The toll of the tightening is starting to show. The U.S. banking system is creaking, while recent data suggests that the labor market is cooling and the economy as a whole is slowing.

Yet, price growth remains stubbornly elevated. So, investors will be keen to find out if the Fed will now push pause on its rate-rising campaign and, if so, for how long.

2. Futures edge up ahead of Fed decision

U.S. stock futures pointed higher on Wednesday, but stayed broadly near the flatline, as investors await the Fed decision and any commentary around the central bank’s future plans.

At 04:53 ET (08:53 GMT), the Dow futures contract was up by 39 points or 0.12%, S&P 500 futures traded 6 points or 0.15% higher, while Nasdaq 100 futures moved up 23 points or 0.18%.

Comments on the path ahead for borrowing costs and the state of the financial system will be in focus when Fed chair Jerome Powell makes his scheduled remarks following the interest rate announcement later today.

3. Hindenburg’s new target

Billionaire Carl Icahn’s publically-listed fund saw its shares shed nearly a fifth of their value in one day on Tuesday after it became the latest target of short-seller Hindenburg Research.

The Nathan Anderson-led Hindenburg alleged in a report that Icahn Enterprises LP (NASDAQ:IEP) was inflating the value of its assets, adding that the fund is trading at a heavy premium relative to its peers. Hindenburg claimed that IEP was driving its shares higher by, in effect, using sales of newly issued stock to pay out to old investors a frothy cash dividend of around 16% – the highest of U.S. large-cap firm, according to data cited by Reuters. Icahn, meanwhile, receives his dividend in stock rather than in cash, Hindenburg said.

Icahn, an activist investor whose storied Wall Street career has seen him press big-name brands into making sweeping changes, stood by the fund’s public disclosures. He also hit out at Hindenburg, saying its allegations were a self-serving ploy to boost its own short position.

Such a public feud is nothing new for Hindenburg. Earlier this year, a report from the New York-based group wiped out $100 billion in value from shares in India’s Adani Group (NS:ADEL) and, just last month, payments firm Block, Inc. (NYSE:SQ) was in its crosshairs.

4. U.S. regional lenders slump

Midsize U.S. banks saw their shares fall sharply on Tuesday, in a sign that the rescue of First Republic Bank has not yet assuaged all concerns over the state of the banking sector.

A broader index of regional lenders slipped to its weakest close since 2020. Among the biggest decliners were Western Alliance (NYSE:WAL), which dropped by 15%, and Los Angeles-based PacWest Bancorp (NASDAQ:PACW), where shares plummeted by 28%. The two have now lost over $5B in market value this year and are lower in premarket trading on Wednesday, as comparisons are drawn with recently failed peers like Silicon Valley Bank and First Republic.

On Monday, JPMorgan (NYSE:JPM) swooped in to snap up most of First Republic’s operations after the San Francisco-based lender was seized by regulators. At the time, JPMorgan chief Jamie Dimon said that “this part of the crisis is over.”

But investors have yet to be totally persuaded and remain on the lookout for another weak link in the financial system.

5. Qualcomm headlines earnings rush

A fresh batch of results from U.S. companies is due out today, highlighted by mobile chip supplier Qualcomm (NASDAQ:QCOM).

Investors hope that the San Diego-based group’s returns, which are expected out after close of trading, will provide some insight into the state of the country’s smartphone market.

Economic concerns and stubbornly elevated inflation have impacted consumer spending, which is causing stockpiles of handset parts at Qualcomm’s customers to grow. As a result, analysts worry that demand for Qualcomm’s semiconductors may soften.

Other key corporate names scheduled to release their latest earnings on Wednesday include pharmacy chain CVS (NYSE:CVS) and cosmetics brand Estee Lauder (NYSE:EL).


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