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Stocks Prepare to Rebound Ahead of Big Fed Rate Decision

BY THE NUMBERS

US stock futures rose on Wednesday as Wall Street braced for what could be an even more aggressive Federal Reserve interest rate hike than the market expected just days ago. After last week’s hotter-than-expected consumer inflation data, investors and the Fed watched as those higher prices hurt buyers, as May retail sales unexpectedly fell 0.3%. (CNBC)

The Dow Jones and S&P 500 on Tuesday fell for five sessions in a row. The Nasdaq advanced modestly, snapping a losing streak of four straight trading days. The Dow closed more than 17% below its January record high, still in a sharp correction. The S&P 500 and the Nasdaq remained in bear markets. (CNBC)

Fed policymakers are considering a 75 basis point interest rate hike as they wrap up their two-day June meeting on Wednesday. That is what the markets are now expecting after everyone until this week was practically counting on another 50 basis point hike. The rate decision is scheduled for 2 pm ET, with Fed Chairman Jerome Powell’s usual post-meeting press conference 30 minutes later. (CNBC)

* The European Central Bank will create a new tool to address the risk of fragmentation after the increase in bond yields (CNBC)

TODAY IN THE NEWS

President Joe Biden on Wednesday called on US oil refiners to produce more of their products, saying they need to help ease the burden of high prices on consumers. “In wartime, the historically high profit margins of refiners being passed directly to American families are not acceptable,” the president said in a letter to oil companies including Exxon (XOM) and Chevron (CVX). (CNBC)

The total volume of mortgage applications has fallen by half from last year, according to the latest seasonally adjusted index from the Mortgage Bankers Association. Soaring interest rates are decimating refinancing volume, and those rates, along with soaring home prices and a dearth of homes for sale, are weighing on demand from potential buyers. (CNBC)

Last week, the average 30-year fixed-rate mortgage increased to 5.65%. And now this week, the 30-year mortgage hit 6.28% on Tuesday, according to a daily measure from Mortgage News Daily. After hitting record lows of around 2.7% at the end of 2020, it started 2022 at 3.29%. (CNBC)

Bitcoin fell to a new 18-month low on Wednesday, triggering a sharp drop in crypto markets triggered by crypto lender Celsius freezing customer withdrawals. The world’s largest cryptocurrency fell below $21,000. Bitcoin has lost around 28% since Friday and around 70% since its all-time high in November. (Reuters)

MicroStrategy (MSTR) lost ground again pre-market as bitcoin price hit an 18-month low. The business analytics firm has extensive holdings in bitcoin. MicroStrategy said it has not received a margin call against a $205 million bitcoin-backed loan it took in March, according to a Reuters report on Wednesday.

Moderna (MRNA) on Tuesday won the recommendation of an FDA panel for the use of its Covid vaccine in children aged 6 to 17 years. A full FDA vote could come within days. That FDA panel on Wednesday will consider Moderna’s vaccines for children under 6 and Pfizer’s (PFE) vaccines for children under 5. (CNBC)

ACTIONS TO SEE

Stellantis (STLA) will begin permanent layoffs next week at its stamping plant in Sterling Heights, Michigan. The world’s fourth-largest automaker, behind the Jeep, Chrysler, Dodge, Fiat and Alfa Romeo brands, did not specify how many workers would be affected. Stellantis was up 3.4% before trading.

Zendesk (ZEN) is in settlement talks with activist investor Jana Partners after ending a failed attempt to sell the software company, according to The Wall Street Journal. The newspaper said the proposed changes could involve the resignation of CEO Mikkel Svane, as well as changes to the board of directors. Zendesk added 1% on pre-market trading.

Robinhood Markets (HOOD) was downgraded to underweight from neutral in Atlantic Equities, which cited Robinhood’s earnings trends. Atlantic Equities has a price target of $5 per share on Robinhood, about 30% below Tuesday’s close of $7.23. Shares of the trading platform operator fell 4.2% before trading.

Snowflake (SNOW) has been updated to buy on hold at Canaccord Genuity. Shares of the cloud computing company are down more than 65% in 2022. However, Canaccord said shares are now at an attractive entry point, given growing demand and promising new products. Snowflake gained 3.6% before trading.

Wheels Up (UP) rose 2.1% in premarket trading after Goldman Sachs began hedging the private jet company with a buy rating. Goldman said that Wheels Up is a leading company in an established and growing end market.

Sonos (SONO) was downgraded to the same weight from overweight Morgan Stanley, which is concerned about the impact of more cautious consumer spending. Shares of the high-end speaker maker fell 3.1% before trading.

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