Fed’s Powell Made Cryptic Comments. How He’s Guiding the Market.

What he did say is that he’s not confident the Fed has raised rates enough, noted that inflation has given a few “head fakes” in the past, and said he wouldn’t hesitate to move again if needed. Oddly, that only cemented expectations for another pause in December–the
CME
FedWatch tool says there’s now a 91% chance of no change, compared with an 85% chance the day before.

But that was enough to push up bond yields again–the 10-year yield is around 4.6% Friday after falling as low as 4.5% earlier in the week. A Treasury auction that suggested weak demand helped push borrowing costs higher, and worries about another government shutdown might have added to jitters. Whatever the reason, higher bond yields have been poisonous for stocks over the past few months.

Of course, Powell also said the Fed is sensitive to overtightening policy as well—and that the central bank is making decisions meeting by meeting.

What Powell said Thursday, technically, isn’t much different from what he said at the last interest-rate decision. Much of what he said is true at all times, regardless of whatever situation the Fed happens to find itself in. But he knows what he’s doing: By choosing what to emphasize and nuance, he’s guiding the market.

—Brian Swint

*** Join Mansion Global reporter Leslie Hendrickson today at noon when she talks with Danielle Hale, chief economist at Realtor.com, Katie Hogan, founder of boutique agency Reside in Maine, and Dan Gutfreund, global real estate advisor of DG Realty Group, about the hottest luxury housing markets in secondary cities in the Northeast and trends heading into 2024. Sign up here.

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Central Bank Officials Won’t Declare End to Rate Increases

Federal Reserve Chairman Jerome Powell said it isn’t time yet to declare the end of interest rate increases. Fed officials aren’t fully confident monetary policy is sufficiently restrictive enough to bring inflation back to its target level of 2%, he said during a conference panel discussion in Washington.

• Powell said the Fed was “gratified” to see price growth decelerate in recent months, and that officials expect economic growth to moderate in coming quarters. But his remarks, more hawkish than on Nov. 1, made clear that they would raise rates again if conditions require it.

• Other officials made similar comments. Richmond Fed President Thomas Barkin said that despite real progress on inflation, he isn’t yet convinced inflation is on a smooth path down to 2%. He said the Fed will need to “walk a fine line” between doing too much and too little.

• Chicago Fed President Austan Goolsbee told The Wall Street Journal the Fed needs to watch longer-term bond yields. Goolsbee added that a “golden path” landing toward the 2% target is possible if external economic shocks aren’t bigger than expected.

• Fed Governor Michelle W. Bowman said she supported not raising the federal funds rate at the November meeting. But she is open to doing so at a future meeting if incoming data show that progress has stalled.

What’s Next: The Fed’s next policy meeting is Dec. 12-13. Powell said it would start reviewing its policy-setting framework later in 2024 to see if shifts in investing and savings patterns are influencing where rates are headed. The results of the review will be released in 2025.

—Megan Cassella and Janet H. Cho

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Lawmakers Race to Extend Funding While Manchin Heads for Exit

While lawmakers race to produce a temporary extension to government spending before the Nov. 17 deadline and avoid a shutdown, West Virginia Democratic Sen. Joe Manchin sent shock waves across the Hill by announcing he won’t be running for another term. That puts the Senate in play for Republicans.

• Democrats hold a slim 51-49 Senate majority, and West Virginia is seen as a state where the GOP could gain a seat to help flip that, along with Montana and Ohio. Manchin, a centrist, has flirted with becoming independent. The state’s popular Gov. Jim Justice is running for Senate.

• Manchin said he would travel around the country trying to assess whether there is interest in creating a movement that could mobilize people in the middle of the political spectrum. Democratic Sens. Jon Tester of Montana and Sherrod Brown of Ohio are running for reelection.

• House GOP lawmakers pulled their second appropriations bill this week. On the Senate side, Majority Leader Chuck Schumer said he was moving ahead on passing a short-term extension to funding, an idea newly elected House Speaker Mike Johnson has also supported.

• Separately, Sens. Bob Casey of Pennsylvania and Rick Scott of Florida introduced a bill to require private equity and venture capital funds to disclose assets invested in countries such as China annually to the Securities and Exchange Commission and make those investments publicly known.

What’s Next: Congress left Washington on Thursday and won’t come back until Monday. Johnson has to produce a strategy to pass a continuing resolution—one that could also get through the Senate—with enough time so members can read and vote on it before the shutdown deadline.

—Liz Moyer

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Plug Power
Is Latest Clean-Energy Stock in Trouble

Plug Power joins the list of clean-energy stocks to suffer from a widespread slump in the sector. The hydrogen-technology company issued a warning about its financial position late Thursday and the stock plunged in after-hours trading.

• Plug Power said it was hit by “unprecedented supply challenges” causing hydrogen shortages, as it reported third-quarter earnings below expectations. The company said it might not be able to fund its operations through the next 12 months from its existing resources and said that raised “substantial doubt about [its] ability to continue as a going concern.”

• Plug is pursuing a potential loan from the Department of Energy, which could be worth $1.5 billion. It is also looking at corporate debt and partnership deals to swell its finances. Analysts estimated it could need $750 million or more to boost its liquidity over the next 12 months.

• Clean-energy shares are suffering across the board with 76 of the 77 stocks in the Invesco WilderHill Clean Energy exchange-traded fund—a green-power benchmark— falling over the past three months as higher interest rates take their toll.

• Solar-energy stocks have been hit hard by supply-chain issues, falling demand in Europe, and new rules in California on payments to solar customers. Meanwhile, offshore wind projects have been delayed or canceled due to increasing costs.

What’s Next: Plug Power is waiting anxiously for details about a planned tax credit for hydrogen production in the U.S., which could help its clean-hydrogen plans. However, in the meantime it could face tougher conditions on a potential debt-financing or project-partnership deal to overcome its funding difficulties.

—Adam Clark and Avi Salzman

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SoftBank Finds Lessons in WeWork, Sees AI as Future

SoftBank Group
CFO Yoshimitsu Goto said the Japan-based investment company had learned a lesson from its substantial investment in flexible office space firm
WeWork,
which filed for bankruptcy this week, leaving SoftBank with $14.3 billion in cumulative losses. It sees its investment in
Arm Holdings
as the future.

• SoftBank posted an unexpectedly large September-quarter net loss of $6.2 billion, its fourth consecutive quarterly loss, reflecting ongoing losses in its Vision Fund venture portfolios. SoftBank reported a $20 billion profit a year ago, after unwinding its stake in Alibaba Group Holding.

• SoftBank got a boost from Arm’s initial public offering at $51 a share in September. Arm’s shares have fallen since its IPO, but Goto said SoftBank intends to be an Arm investor for the long term—and remains bullish on Arm’s positioning in the market for artificial-intelligence technology.

• As for WeWork, SoftBank has recorded $1.6 billion in losses for the year so far. SoftBank still holds a majority position in WeWork’s equity. “We need to accept this reality and learn a lesson from this for our future investment activity,” Goto said.

• For its fiscal second quarter, SoftBank’s sales rose 3.4% to $11.1 billion. SoftBank’s stake in Arm is valued around $46 billion, about 78% of SoftBank’s recent market value of $58.4 billion. SoftBank said Arm now accounts for about a quarter of its total net asset value.

What’s Next: After making $1.5 billion in investments during the quarter, Goto said SoftBank has entered an investing mode, saying: “We have plenty of cash so we are ready for big positions,” if it finds attractive deals.

—Janet H. Cho and Eric J. Savitz

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Mortgage Rates Drop, But Still Not Enough for Homebuyers

Mortgage rates had their biggest one-week drop in a year, according to
Freddie Mac.
That may not be enough for budget-conscious house buyers. Still, mortgage application data indicate some interest is tiptoeing back into the housing market.

• Mortgage rates fell to 7.5% this week, about a quarter of a percentage-point lower than last week’s average rate. The new weekly rate is the lowest since early October, and erases some, but not all, of mortgage rates’ climb through the second half of this year.

• The decline follows a fall in the 10-year Treasury yield after cooler-than-expected economic data. Mortgage rates typically move with the 10-year yield, though there has been a wider-than-usual gap between the two rates this year.

• Home affordability dropped to its lowest level on record in the third quarter for first-time buyers and buyers more broadly, according to the National Association of Realtors. Single-family home prices rose in more than four-in-five metropolitan areas in the third quarter, the trade group said.

• The Mortgage Bankers Association said Wednesday that as mortgage rates dropped, its index tracking the volume of home purchase loan applications rose 3% from last week’s 28-year low. Applications are still 20% lower than this time last year.

What’s Next: Many consumers are feeling strained by the high cost of living, and household debt is rising because of mortgage, credit card, and student loan debt. “So unless mortgage rates decrease significantly, the housing market will remain stagnant,” said Sam Khater, Freddie Mac’s chief economist.

—Shaina Mishkin and Janet H. Cho

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Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to [email protected].

1. Elon Musk’s artificial intelligence company xAI released its own chatbot as the billionaire
Tesla
CEO enters the generative AI race. What is the name of the platform?

a. Tronc

b. Grok

c. MuskAI

d. xAIbot

2. Flexible office space company WeWork, once valued as much as $47 billion, filed for bankruptcy protection this week. The collapse dealt a black eye to this investment firm, which held about 72% of the stock.

a. GIC

b. Norges Bank Investment Management

c. SoftBank

d. Public Investment Fund

3.
Eli Lilly
is expected to get a sales boost after the Food and Drug Administration approved a version of its tirzepatide drug for weight loss. Marketed under the name Mounjaro for Type 2 diabetes, the drug will be sold for weight loss under which of the following names?

a. Zepbound

b. Jounmaro

c. Saxenda

d. None of the above

4. Hollywood actors and performers reached a tentative agreement with production studios and streaming companies, putting an end to a strike that has lasted how many days?

a. 148 days

b. 138 days

c. 128 days

d. 118 days

5. Sotheby’s auctioned a painting by Pablo Picasso on Wednesday from the estate collection of Emily Fisher Landau during a busy two weeks of art sales in New York. How much money did the painting fetch?

a. $120 million

b. $139 million

c. $150 million

d. $169 million

Answers: 1(b); 2(c); 3(a); 4(d); 5(b)

—Barron’s Staff

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner