Stocks rise as Fed announces historic rate hike

If the Fed hikes by three-quarters of a point, the high end of the Fed’s target range would be 2.5%. That would match the peak of the last rate hiking cycle, which ended in December 2018.

But that’s less than half as high as the peak during the rate hiking cycle that ended in 2006.

Still, what’s different this time is how rapidly rates have gone up and how this is happening after years of dirt-cheap borrowing costs.

What does this mean for real people? Aggressive rate hikes mean borrowing costs are going up, swiftly. Credit cards, car loans, appliance financing and of course mortgages. Mortgage rates have basically doubled over the past year. Families are not only dealing with sticker shock on their purchases, but they are being squeezed by higher financing costs too. But that’s what the Fed wants: Cool off red-hot demand to give supply a chance to catch up and ease prices.

Yes.

As of this morning, the markets are pricing in a 26% chance the Fed raises interest rates by a full percentage point for the first time in the modern era, according to the CME FedWatch Tool.

Although this was viewed as a real possibility in the hours after the brutal June inflation report, the odds have been slipping because inflation expectations have showed signs of easing. The markets are pricing in a 74% chance of a three-quarters point rate hike and zero chance of something smaller or no hike at all.

It’s a slam dunk that the Federal Reserve will jack up interest rates today to try to get inflation under control. The only question is by how much and whether it will hint at less aggressive moves at the next meeting in September.

For the second meeting in a row, the Fed is widely expected to hike interest rates by three-quarters of a percentage point. The Fed hasn’t done anything like that in back-to-back meetings in the modern Fed era (at least not since the central bank introduced explicit targets for rates in the late 1980s under Alan Greenspan).

Prior to the June meeting, the Fed hadn’t raised rates by three-quarters of a point in a single meeting since 1994. 

Credit Suisse has named asset management boss Ulrich Koerner as its new CEO, who is tasked with scaling back investment banking and cutting more than $1 billion in costs to help the bank recover from a string of scandals and losses.

The Swiss bank has dubbed 2022 a "transition" year with a change of guard, restructuring aimed at curtailing risk-taking in investment banking, and bulking up of wealth management, while batting away speculation that it could be acquired or broken up.

A new strategic review announced on Wednesday, the bank's second in less than a year, will evaluate options for its securitized products business to attract third-party capital, while reaffirming its commitment to asset management.

Koerner, 59, is considered a restructuring expert in Switzerland and will succeed CEO Thomas Gottstein on Aug. 1.

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Cryptocurrency brokerage firm Coinbase (COIN) has had a miserable year. Now one of its biggest fans appears to be losing faith.

Tech/momentum stock guru Cathie Wood's Ark Invest disclosed in its daily holdings data that three Ark ETFs — including its flagship Ark Innovation ETF (ARKK) — collectively sold more than 1.4 million Coinbase shares on Tuesday.

Ark didn't share its reasoning, but Coinbase stock has plunged nearly 80% in 2022 as the prices of bitcoin, ethereum and other digital assets have plummeted. (Tesla (TSLA) even recently sold some of its bitcoin holdings!)

Coinbase shares fell more than 20% alone Tuesday. That was after a Bloomberg report said the Securities and Exchange Commission is investigating crypto listings at the company.

The SEC claims Coinbase is illegally letting customers trade securities. Coinbase's chief legal officer has denied this, writing in a recent blog post that the company "does not list securities on its platform. Period."

Coinbase shares appeared set to rebound slightly Wednesday as bitcoin prices stabilized. But if all the regulatory hot water and crashing cryptos weren't enough to deal with, the SEC also recently charged a former Coinbase product manager with insider trading.

It makes you wonder if Coinbase would've been better off using the money it spent on that bizarre (albeit buzzy) 60-second bouncing QR code Super Bowl ad for its legal bills instead.

Wall Street has a serious case of recession dread.

Inflation is at a 40-year high and the Federal Reserve is aggressively hiking interest rates. Economic growth is slowing and, and so is the job market. Cracks are forming in the home-building and home-buying markets as mortgage rates have surged. Consumer sentiment has plunged. No wonder stocks are in bear territory.

Alongside the slow, steady drip of sour economic data, investors have fallen into a foul mood. CNN Business' Fear & Greed index has been stuck in "Fear" territory for months. But the anticipation of pain is often worse than reality, and the stock market is hoping someone will just rip the Band-Aid off, and declare a recession already.

The longer we talk about a recession, the more likely it is that the economy will continue to ache, said Ritholtz Wealth CEO Josh Brown. Recession fears themselves lead to more pullback. Consumer and investor psychology impacts the economy and we can "talk ourselves into a recession," he wrote in a note.

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US stock futures rose ahead of a consequential decision by the Federal Reserve.

Investors expect the Fed to raise rate by three quarters of a percentage point in its effort to tame inflation. Markets have cleaved to every word Fed Chair Jerome Powell has said in previous statements and press conferences, and there's a strong chance markets could rise or fall sharply this afternoon.

Dow futures were up 170 points, or 0.5%.

S&P 500 futures rose 1%.

Nasdaq futures were 1.6% higher.

US oil rose 0.8% to $96 a barrel. Average US gas prices fell to $4.30 a gallon.

Investors are uneasy as the Federal Reserve gears up for its latest policy announcement on Wednesday. But their hope is that the central bank and Chair Jerome Powell will keep talking tough, providing a dose of clarity on the path forward at an uncertain moment.

What's happening: The Fed is expected to hike interest rates by three-quarters of a percentage point as it continues with its ambitious campaign to bring down inflation, which hit a 40-year high in June. There had been some speculation that the Fed could raise rates by a full percentage point for the first time in its modern history, but that now looks less likely.

Even the more conservative option would have major ripple effects.

"That would be unprecedented that we've gone with that large a move in two consecutive meetings," St. Louis Federal Reserve President Jim Bullard said in an interview earlier this month.

And to Wall Street, that's a good thing. Investors concede that the Fed has a difficult task at hand as it tries to control inflation without raising borrowing costs so aggressively that it tips the US economy into a recession. 

But for now, they'd rather the Fed indicate that it plans to stay tough than see it adopt a more accommodating stance. In unstable times, the argument goes, consistency is key.

What seemed unfathomable just six months ago -- a 75-basis-point rate hike by the Federal Reserve – could now happen twice in a row as the central bank moves to strike down broad and persistent inflation across the US economy.

Over the last three decades, the Fed has nudged its benchmark interest rate up or down by an average of 25 basis points, preferring to steer the economy at low speed. But surging inflation compelled the central bank last month to implement a rate hike of three times that size, marking the first time since 1994 that the Fed has rolled out a 75-basis point increase.

Wednesday's rate hike of 75 bps would represent the first time in modern Fed history that the central bank has raised interest rates by this level twice in a row.

The FOMC policy announcement, aka Fed rate hike, will be announced at 2 p.m. ET.