Today in the Market (12/14/2022)

Good Evening. Wednesday’s turbulent trading saw a decline in U.S. equities after the Federal Reserve’s seventh and last interest rate hike of 2022 and Chairman Jerome Powell’s bullish assertion that additional tightening would occur in the new year.

After two days of advances, the S&P 500 sank 0.61%, while the Dow Jones lost 0.42%. The Nasdaq Composite fell 0.76%.

SKIN IN THE GAME

SoFi Technologies (SOFI) was trading more than 8% higher after a regulatory filing revealed that CEO Anthony Noto had acquired $5 million worth of shares.

Why does this matter? When the CEO of a firm acquires shares, it is a bullish sign for the market since it indicates that the CEO believes the company is undervalued and now has skin in the game. What price did Noto get the shares? Noto acquired the shares between $4.29 and $4.58 per share.

Undervalued or Just Hurting? The firm is still losing a significant amount of money, its expenditures are high, and it has grappled with regulatory-related concerns such as the student loan moratorium and now probes into its cryptocurrency activity. On top of that, like many fintech and tech businesses this year, the company has been hammered by increasing interest rates and market volatility. This year, the stock is down about 69%.

INCREASE RATES

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The Federal Reserve hiked short-term interest rates by 0.50% on Wednesday, pushing benchmark rates to their highest level since 2007 and signaling more rate increases in 2023.

Any signs of stopping? In its statement announcing Wednesday’s action, the central bank said that it expected “ongoing increases” in interest rates, meaning that it has no immediate plans to suspend rate hikes. By how much though?  7 authorities predict that rates will increase by more than 5% in the next year, with 5 predicting a rise of between 5.25% and 5.6% and 2 predicting a peak of 5.6%.

What does this mean for inflation? Officials do not anticipate core inflation to return to a level near to the goal until 2024, with inflation ending this year at 4.8%, decreasing to 3.5% in 2023 and 2.5% in 2024.

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