Stocks rise even as Fed signals three rate hikes next year

A robust housing market has continued to prop up America's economy. But are consumers finally tapped out? Home improvement retailer Lowe's (LOW) issued revenue and earnings per share guidance for 2022 that was below analysts' forecasts.

Lowe's said that same-store sales, which measure the performance of locations open at least a year, are expected to be flat to down 3% next year. Wall Street had been expecting an increase of 2.1% according to Refinitiv.

Shares of Lowe's tumbled 2% in early trading Wednesday. Rival Home Depot (HD) fell more than 1%. Both stocks have surged in 2021 thanks to the housing boom and strong retail spending. Lowe's shares have soared nearly 60% this year while Home Depot's are up more than 50%. That makes Home Depot the best performing stock in the Dow.

Still, there are growing concerns that consumers may be tapped out. The US government also reported Wednesday that retail sales for November grew at a much slower rate than economists had predicted. That is doubly bad for Lowe's and Home Depot since their success is highly dependent on healthy overall demand for retail and a vibrant housing market.

US retail sales grew by 0.3% in November, a sharp decline from the previous month and less than economists had predicted.

Even so, sales were 16.1% higher than in the same period last year.

Americans have been struggling with rising prices this year, but economists and retail sector experts still believe that the holiday shopping season will be strong.

President Joe Biden is taking the political punches for high inflation. But price stability is the responsibility of the Federal Reserve, not the White House. And prices are anything but stable right now.

Consumer prices spiked in November at the fastest pace since 1982. Producer prices soared by nearly 10%, suggesting inflationary pressures are not subsiding anytime soon.

The good news is that the Federal Reserve knows how to fight inflation: By tapping the brakes on the economy. The bad news is the harder it hits the brakes, the greater the risk of an accident that ends the economic recovery, freaks out financial markets -- or both.

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US stock futures were mostly unchanged Wednesday morning as investors await the results of the Fed’s final meeting of 2021.

Wall Street expects the Fed to leave rates near zero -- but believes the Fed will say it is prepared to speed up the winddown of its asset purchases that it had built up during its emergency stimulus program. But rising Covid cases make the Fed’s tightrope walk even more precarious.

At 2 pm ET today, the Fed is scheduled to release its new policy statement.

The central bank is expected to:

1) acknowledge worsening inflationary pressures

2) speed up the demise of its bond-buying stimulus program

3) ramp up its inflation projections for at least 2022

4) acknowledge recent strength in the jobs market.

During the 2:30 pm ET press conference, Powell will need to reassure the public that the Fed is serious about taming inflation. But Powell will also need to reassure investors that the Fed won’t overdo it and sink the US economy. Not an easy task ahead for Powell. 

One of the more insidious myths this year was that young people didn't want to work because they were getting by just fine on government aid. People had too much money, went the narrative.

Only trouble is, the numbers don't back it up.

Instead, early retirement — whether forced by the pandemic or made possible otherwise — is playing a big role in America's evolving labor market.

People have left the workforce for myriad reasons in the past two years — layoffs, health insecurity, child care needs, and any number of personal issues that arose from the disruption caused by the pandemic. But among those who have left and are not able to -- or don't want -- to return, the vast majority are older Americans who accelerated their retirement.

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