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July FOMC decision looms amid inflation, recession concerns

Investors on Wall Street are split over what the Fed's next rate hike move is going to be at July's FOMC meeting.

Video Transcript

RACHELLE AKUFFO: I mean, honestly, when you look at some of the action that we're seeing, it's a huge week. So in all different aspects, we're going to hear from some consumer goods companies as well. And we know that Wall Street essentially split over what's going to come next from the Federal Reserve. We have these fears of a recession on the horizon.

You have strategists at Morgan Stanley saying, look, it's too early for the Fed to loosen its reins on the economy. You have stubborn inflation, says the bank's Michael J. Wilson that will keep the Fed hawkish for the foreseeable future. You have JP Morgan, meanwhile, saying, look, they seem to believe that inflation has actually peaked and that the Fed will pivot as the economy improves.

Now the head of global and European equity strategy, Mislav Matejka, was saying in a note earlier today that a softening labor market could lead to a more balanced policy out of the central bank and a peak in the dollar and inflation. Now that's a sentiment shared by Treasury Secretary Janet Yellen, who implied the economy is headed in the right direction on "Meet the Press" Sunday morning. Let's take a listen.

JANET YELLEN: The economy is slowing down. Last year, it grew very rapidly at about 5 and 1/2%. And that succeeded in putting people back to work who had lost their jobs during the pandemic. The labor market is now extremely strong. Even just during the last three months, net job gains averaged 375,000. This is not an economy that's in recession.

JARED BLIKRE: Well--

RACHELLE AKUFFO: It's interesting because as a consumer, as an American, you wonder, does it actually feel that way, though? So I want to get your take on this, Jared.

JARED BLIKRE: Well, I got to tell you. The labor market is incredibly strong. You take a look at the three-month trend here. If it's above 400,000, that's incredibly strong. 200,000 is quite acceptable for a normal market. Now, we've had tons and tons going on here with respect to the job market. We're going to break that down in a second, Dave.

DAVE BRIGGS: Look, I'm going to take the Yellen side here. You're hearing this parsed all morning long on the shows. And I want to look at this through a political spectrum. Look, she's right. It's not a broad-based recession. It might be technical when we find that GDP number, but you don't have a recession when you're at 3.6% unemployment, when you're producing almost 400,000 jobs per month, when 75% of the S&P 500 companies exceed expectations on their earnings. Look, do you feel, do you see a recession that we're in right now? It doesn't add up.

JARED BLIKRE: I think we might be in an industrial-- or we might get an industrial recession, something that doesn't affect all sectors of the economy. But look, we're going to be talking about this throughout the entire show, Rachelle.

RACHELLE AKUFFO: I mean, when you think about people who are trying to buy a house and can't afford them, when you see where rents hitting another record high, when it comes to sort of the conversations you have around the kitchen table, it doesn't feel like you're doing much better, when you look at how wages aren't keeping pace with inflation. None of it feels as if you're doing better, even though the technicalities might say, look, the economy is actually stronger than it appears. So we'll be breaking a lot of that down with some of our guests later on today.

DAVE BRIGGS: Self-fulfilling prophecy. Let's not talk ourselves into a recession with this strong a labor market. I'll continue to beat that drum until we see something otherwise.