tv The Claman Countdown FOX Business December 15, 2021 3:00pm-4:00pm EST
each other? >> thank you. charles: thank you for being on set as well. the news came out. the initial move was the market got a little weaker. we're sort of marking time. i got a feeling last hour of trading will be gangbusters. liz claman, buckle up liz: well, he's being very clear , charles and while still higher the markets are hanging on every single word, yes the federal reserve has announced what people expected it sped up the taper and announced to raise rates three times next year but fed chair jerome powell just said basically, admitted that inflation is much worse than he had originally thought it be at this point, he is still speaking to the media at this hour, let's go back and listen. >> into an economy that was recovering rapidly, and in which there were these supply side barriers which effectively led to, you know, certain parts of the economy you might call a vertical supply curve, so you
know, automobile purchases are very interest rate sensitive and you'd think demand would drive up the quantity of cars, but it can't, because they don't have semiconductors, so that is a very different kind of inflation this is not the inflation we were looking for under our framework at all. it's nothing to do with our framework and the way we've approached it is really nothing to do with our framework, but come to maximum employment which is really your question, how do you know? so i think you look at prices and quantities, if you want to look at maximum employment you look at prices and quantities and the main price you look at is wages, it's one of the things you look at, and, you know, so i mentioned a number of the things you could get to 20 if you wanted to easily but labor force participation, unemployment rate , different age-groups, prime age labor force participation gets a lot of focus, the jolts data get a lot of focus and wages. that's really one of the great signals. the quits rate is another one.
the quits rate is really one of the very best indicators according to a lot of labor economists because people quit because they feel like they can get a better job and there's record amounts historically high levels of that going on suggesting again that you've got a very tight labor market, so on wages that's the price indicator we look at to tell us, along with all the other data, whether we have labor market conditions that are consistent with maximum employment, and so that's how we think about it, but one of the complications is that again, we've got to make policy in realtime so how do we think about that? if we think we can make participation might move up if we let's say we knew it would start to move up in two years. would we wait two years or when inflation is running way above target? probably not. so you have to make an assessment that what is the level of maximum employment that is consistent with price stability in realtime is one way to think about it.
reporter: just to follow-up on that for a second. if you do raise interest rates next year and you're not certain whether you're at maximum employment, are you all going to point when you raise interest rates are you going to point to ways in which the labor market could still improve? >> yes. i mean, absolutely. i think, well whether or not, whether or not we say we're at conditions labor market conditions consistent with maximum employment next year, we would all be open and i think expect overtime that the level of maximum employment that's consistent with price stability would increase further overtime. for example, through increasing participation, so we would certainly, we would not in any way want to foreclose the idea that the labor market can get even better, but again, with inflation as high as it is, we have to make policy in realtime. we've gotta make that assessment in realtime.
>> thank you we'll go to olivia from bloomberg. reporter: thank you. good afternoon, chair powell and thank you for taking our question. i wanted to follow-up on some of your earlier comments about labor force participation and i wondered what do you think needs to change in the economy to kind of get a meaningful recovery in labor force participation and also why they're running the economy hot like in the last is one way of doing that. >> well, the labor market is, by so many measures, hotter than it ever ran in the last expansion if you think about it. the ratio of job openings, for example, to vacancies is at all times highs, quits the wage, all those things are even hotter, but what would it take for labor force participation to move up more? you know, that really, why is it low is the question. so there are a bunch of answers, and all of them probably have some validity.
part of it will be that people, for certain people, they don't want to go back into the labor force because either they're medically vulnerable or not comfortable going back while covid is still everywhere. that's one thing. the lack of availability of child care made for caretakers is certainly part of it, not just for children but for older people. it has been point out by many that the stock market is high, people's portfolios are stronger they may go back to being a one income to two income family. the same thing with people's houses. people, they have a mortgage and , you know, with leverage and house price increases, the equity they have in their home might have doubled and they might just reach the same conclusion, so and people have savings on their balance sheet because of forced savings, because they couldn't spend on travel and things like that and also because of government transfers, so for all of those reasons, and it's hard to know exactly the part each of them plays, we have a situation
where we've had a shock to labor force participation that is not unwinding as quickly as many as expected, and people, it affects a good part of it is voluntary. this is how they want to maximize their welfare, that's their, certainly their choice. in other cases it's something that will abate very quickly if and when the pandemic gets under control, and the longer the pandemic goes on, you know, maybe the less likely that people will come back because they get used to their new life and lose contact with their old jobs, that's what the evidence would say. so it's a range of things. it isn't that the economy lacks stimulus. usually, in every other expansion, it's that there aren't enough jobs and people can't find jobs, and, you know, we're stimulating demand and trying to get demand to come up. that's not the problem here. the problem is a supply side problem which what it would take to work it out i think it's
going to be time and number one thing it would really be to have the pandemic get under control. that's what everyone would really like to see. what does the labor market look like in a world without covid? that be the thing that would really like to see , but, you know, it doesn't look like that's coming anytime soon. reporter: just to quickly follow-up on that. if some of the reason that we would force participation isn't back to february 2020 levels because people are voluntarily making life decisions that are different, does that make you think we're going to end up at a lower rate overall? >> well, there's a demographic trend underlying all of this , and we actually got above the demographic trend at the end of the last expansion, but so one would expect overtime that labor force participation would move down because an aging population, the older people are the lower their participation rate is, so you would expect
that the trend be lower and that overtime, participation would move down. the question of how much we can get backup closer to where we were in february of 2020 and indeed for the year or so before that is a good one, and i mean, what we can do is try to create the conditions. there's a lot of good for society when you have a tight, but stable labor market, where people are coming in, they're getting in the labor force, they are getting paid well. in the labor market we had before, we had, the biggest wage increases were going to people at the bottom end of the wage spectrum for the last couple of years and a lot of really desirable aspects of the labor market like that higher participation is one of them and we love to get back there, but again ultimately, we have the tools that we have, which are essentially to stimulate demand, and also to control inflation. really, it might be one of the two big threats to getting
back to maximum employment is actually high inflation, because to get back to where we were, the evidence grows that it's going to take sometime, and what we need is another long expansion, like the ones we've been having over the last 40 years. we've had i think three of the four longest in our recorded history, including the last one, which was the longest in our recorded history. that's what it would really take to get back to the kind of labor market we'd like to see and to have that happen, we need to make sure that we maintain price stability. >> okay let's go go to edward lawrence at fox. reporter: thanks, michelle and thanks for taking the question, chair powell. so i was looking at the census data estimate and monthly changes on sales and what you're seeing is fewer people spending at restaurants and more people spending at grocery stores, you see electronic sales down 4.6% month over month also department store sales down 5.4% month over
month. how concerned or what is your level of concern the consumer maybe turning away from this economy or pulling back because of inflation, the virus or something else? thank you. >> we see consumer expenses very strong in this quarter. i don't know, edward, whether you're talking about more shopping online versus shopping in the store, but consumer demand is very strong. incomes are very strong, because people are going back to work and getting wage increases, admittedly some of the wage increases have been eaten away by inflation but nonetheless incomes overall are going up really significantly because of increased employment and spending has been strong. there maybe something in the seasonality that this years holiday spending may have been pulled forward and of course there maybe effects from delta and there might be going forward from omicron, but fundamentally though, the consumer is really healthy and we expect personal consumption expenditures to be pretty strong in the fourth quarter. >> let's go to mike at
bloomberg. reporter: mr. chairman, the median forecast for inflation in this meetings economic projections has been revised up significantly for 2021 but barely move for 2022 and 2023. you've said you expect inflation to fall significantly. is that because you're going to raise interest rates or because the virus is going to fade and the effects are going to fade? in other words is it a question of when, not if you raise interest rates and does it suggest that maybe your critics are correct and you might be afraid you're behind the curve? >> so actually, i'm looking at the sep and the median forecast for core and headline inflation did move up by four-tenths each so that's a significant in an s ep, it's a pretty
significant move up. it's based on both of those things, i suppose. i do think there's a broad expectation among forecasters including our own that the bottlenecks will alleviate sometime over the course of this year. if you look at where blue chip forecasts are, which is the group of well-resourced large forecasting operations with a long track record, they'll show inflation coming back down significantly toward the back end of next year. i would say though as well that our policy should begin to have an effect, there will be a lag but it should begin to have an effect on that as well and, you know, that's the most likely case. i guess what the thing i would want to say though is we can't about as though that's a certainty and we're not going to about as though that's a certainty. there's a real risk now, we believe, i believe, that inflation maybe more persistent and that maybe putting inflation
expectations under pressure and that the risk of higher inflation becoming entrenched has increased. its certainly increased. i don't think it's hyatt this moment but i think its increased and i think that's part of the reason behind our moved to is to put ourselves in a position to be able to deal with that risk and i think we are in a position to deal with that risk. we need to see more data. we need to see how the inflation data and all of the data evolve in coming months but we are prepared to, you know, use our tools to make sure that higher inflation doesn't get entrenched , for one reason, as i just mentioned. it's one of the two big threats the other being the pandemic itself, to getting back to maximum employment. >> let's go to michael the wall street journal. reporter: yeah, thank you for taking my question. so as the fed shifts towards an accelerated taper, i wonder what your read is on financial stability risks right now,
periods can be seems like the taper process has gone fairly smooth so far but what do you see in terms of stability risks, are there any parts of the financial sector that concern you right now and are there any significant systemic issues that are on your way or maybe from the cryptocurrency sector or something like that? >> you know, we have had now for a decade and more, four-part financial stability framework that we use so we can hold ourselves to the same kind of framework, and not just treat each event individually, and there are four key areas, asset valuations, debt owed by households and businesses, funding risk, and leverage among financial institutions, so i would say asset valuations i'm going to go really superficially here but asset valuations are somewhat elevated i would say. debt owed by businesses, you know, and households. households are in very strong financial shape. businesses actually have a lot of debt, but their default rates
are very very low, but nonetheless it's something we're watching. funding risk is by and large low among financial institutions, but we do see money-market funds as a vulnerability and would applaud the sec's action this week. leverage among financial institutions is low in the sense that capital is high, so overall , financial stability and that's how i would make an overall characteristic that we break it down into those pieces. in terms of the things that we're looking for , looking at, it's the things we've already talked about to some extent. it's the emergence of a new variant that could lead to significant economic, if there were to be a variant, for example, that were quite resistant to vaccines it could have another significant effect on the economy. we don't see that. we don't have any basis for
thinking that's a new variant that we have is that one but it's certainly one we're looking at. i would say cyber risk, the risk of a successful cyber attack is, for me, always the most, one that we be very difficult to deal with, i think we know how to deal with bad loans and things like that. i think more a cyber attack that were to take down a major financial institution or financial market utility be a really significant financial stability risk that we haven't actually faced yet, so i could go on with a list of horribles, but i think that's a decent picture where i would start. reporter: how about the cryptocurrency issue? anything that worries you there that's going on in terms of the timing in that sector? does that concern you at all? >> you know, i think the concerns there are not so much current financial stability concerns. i of course would support the
views expressed in the president 's working group report on stablecoins. stablecoins can certainly be a useful, efficient consumer- serving part of the financial system if they're properly regulated and right now they aren't, and they have the potential to scale particularly if they were to be associated with one of the very large tech networks that exist, and you could have a payment network that was immediately systemically important that didn't have appropriate regulation and protections. the public relies on the government and the fed in particular to make sure that the payment system is safe and reliable, as well as the dollar and to provide a safe and reliable trusted currency, so but i do think those are longer term. in terms of the more cryptocurrencies that are really speculative assets, i don't see
them as a financial stability concern at the moment. i do think they are risky, they aren't backed by anything, and i think they are a big consumer issues for consumers who may or may not understand what they're getting and there's certainly developments in the markets that are worth following which are really not in our jurisdiction but things like the kind of leverage that's built into those sorts of things is certainly worth watching. >> let's go to nancy marshall g enser at marketplace. reporter: chair powell, thanks for the question. i was going back to an inflation and if it's backed behind the current getting inflation under control? >> so i would say this. i actually think we are well-
position to deal with what's coming, with a range of plausible outcomes that can come , i do, and i think if you look at how we got here, i do think we've been adapting to the incoming data, really all the way along, and noticing and calling out that both the effect s and the persistence of inflation, of bottlenecks and labor shortages and things like that, so we've been calling out the fact that those were becoming longer and more persistent and larger and now, we're in a position where we're ending our taper within the next , well by march in two meetings and we'll be in a position to raise interest rates as and when we think it's appropriate and we will, to the extent that's appropriate. at the same time, we're going to be seeing a few more months of data. i don't actually think we're at a position now. i think this was an important move for us to make.
i think that the data that we got toward the end of the fall was a really strong signal that inflation is more persistent and higher and that the risk of it remaining higher for longer has grown and i think we're reacting to that now and we'll continue to adapt our policy, so i wouldn't look at it that we're behind the curve. i would look at it that we're actually in position now to take the steps that we'll need to take in a thoughtful manner to address all of the issues, including that of too high inflation. >> let's go to evan at market news. reporter: hi, chair powell, thank you. i was wondering if we should still be seeing taper and interest rate hikes as separate and secondly, in the last cycle the fed started shrinking the balance sheet when short-term interest rates were
about 1.25% range. do you think the fomc might be able to potentially start running off assets before that this time? >> are they separate so are interest rate, i mean, they are separate tools, so, you know, the asset purchases are a separate tool from interest rates, stopping asset purchases does not remove a combination. it just stops adding further accommodation whereas raising interest rates starts to remove accommodation from what it is a highly-accommodative stance. to the extent to which they'll be separated in time is something we haven't really discussed at the committee yet. we will be discussing that, obviously, in coming meetings. i don't think that the last cycle that was quite a long separation before interest rates i don't think that's at all likely in this cycle. we're in a very very different place with high inflation, strong growth, really strong economy that as i mentioned the medians are for 4% growth
next year, 3.5% unemployment at the end of the year, and the headline inflation of 2.6% next year, core 2.7% so this is a strong economy, one in which it's appropriate for interest rate hikes, so they are separate i would say. sorry your second question was? reporter: my second question was about runoff in the last cycle. >> so with the balance sheet, we did have a balance sheet discussion or sort of a first discussion of balance sheet issues today at our meeting this week. we'll have another at the next meeting and another after the meeting after that. i suspect these are interesting issues to discuss. didn't make any decisions today. we looked back at what happened in the last cycle, and people thought that was interesting and informative, and but to one degree or another, people noted that this is just a different situation and those differences
should inform the decisions we make about the balance sheet this time, so haven't made any decisions at all about when runoff would start, but we'll be continuing to, in relation to when either lift off happens or the end of the taper, but those are exactly the decisions we'll be turning to in coming meetings. >> thank you we'll go to scott horsely at npr. reporter: thanks, mr. chairman. i think you said a few minutes ago that the inflation that we got during the pandemic was not the inflation that you anticipated when you crafted the framework and you described it as a collision of a lot of monetary and fiscal stimulus with these supply side pick-ups. does that mean the stimulus was mistaken or is the inflation just a consequence we have to put up with because of that? >> no, i'm not expressing any
judgment about the stimulus in that comment. what i'm saying is there's a sense among some that you wanted inflation, this is what you wanted, how do you like it, and the truth is, this is not the inflation we were, what we were talking about in the framework was inflation that comes from a tight labor market. so we had 3.5% unemployment for a period and we had inflation that was just barely getting to 2%, and i think in that setting, our thinking was we can afford to wait to raise rates until we see actual inflation rather than preemptive because no one had seen what 3.5 % unemployment would look like, with high labor force participation, by the way. no one had seen what it really looked like for an extended period for decades and we didn't know what the inflationary implications were, turned out there was barely 2% inflation and no sense that it was gaining momentum and that kind of thing
so we incorporated that into our framework. this is something completely different. that's a situation where you had a very very high level of employment and low inflation. this is literally the opposite. it has been the opposite where we have very high inflation and we've had it since the labor market was in terrible shape, so this , so far, this inflation has really nothing to do with tightness in the labor market. it does have to do with strong demand and strong demand was supported by the fed. it was supported by congress. i'm not making any judgments on congress, it's not my job, but i will just say, we're coming out of a, what we certainly hope will be a once-in-a-lifetime, certainly historic first really global modern pandemic which looked at the beginning like it might cross a global depression and, you know, so we threw a lot of support at it and what's coming out now is really strong growth, really strong demand, high incomes and all that kind of thing.
people will judge in 25 years whether we overdid it or not but the reality is, we are where we are and we think our policy is the right one for the situation that we're in. >> thank you, let's go to brian chung. reporter: hi, chairman powell. wanted to ask about the bond markets. when you see the 10 year at 146 basis points, do you have any sort of concerns about an environment by which you might be hiking interest rates into, would you prefer the curve be a little bit steeper? what are you gleaning from the bond market actions over the last six weeks? >> so i think the shortened actions are easy to understand, which is, you know, basically very policy-sensitive rates at the shortened and it make sense it's reacting to changes in expectations for policy. i think a lot of things go into the long rates and the place i would start is just look at global sovereign yields around the world. look at jgb, and they're so much
lower. you can get a much-higher yield on u.s. treasuries by buying ust 's and you can hedge the currency risk back into euros and still be way ahead, so in a way, it's not surprising that there's a lot of demand for u.s. sovereigns in a world, you know, at a risk-free world where there's so much, they are yielding so much more than jgb's so that's a big part of it. i also think, you know, there maybe some assessment in there of what the neutral rate is or what the terminal rate is. i don't know about that, but and i would just say that we write down our own estimates of the terminal rate or the neutral rate of interest. those are highly uncertain and we'll make policy based on what we're seeing in the economy rather than based on what a neutral, what a model might say the neutral rate is and we all
have the experience of the last cycle where we all through that cycle are trying to estimate what the neutral rate was and it turned out, i think we learned a lot from seeing what happens. we end up cutting rates three times after raising them to 2- 2.5% so i'm not troubled by where the long bond is. i see that it's low. i mean, we're really focused on broader financial conditions. we're focused on maximum employment and price stability. >> thank you for the last question we'll go to greg rob. reporter: thank you very much. chair powell, i was wondering i wanted to give you the opportunity to talk about something that's been discussed that your pivot towards a tighter policy hawkish policy stance had something to do with the timing of your re-nomination by the president.
thank you. >> sure. i'd be happy to talk about that. so as i mentioned, we got the e ci reading just before the november meeting. we got the labor market report two days after the meeting and then one week after that, i think on the 12th of november we got the cpi reading and it was really the cpi reading in concert with those two and i just came to the view over that weekend that we needed to speed up the taper and we started working on that. that's a full 10 days or so before the president made a decision of re-nominating me so honestly, it had nothing to do with that at all, and i just thought this is what we gotta do my colleagues were out talking about a faster taper, and that doesn't happen by accident. they were out talking about a faster taper before the president made his decision so it's a decision that effectively was more than to the point where people were talking
about it publicly, so that's what happened, and it absolutely had nothing to do with it whatsoever. we're always going to just do what we think is the right thing and i certainly will always just do what i think the right thing is for the economy and for the people that we serve. reporter: just a quick follow-up i guess some people saying that it was the stimulus in march, that that was sort of over, we didn't really need all of that stimulus and that there was talk even then that that be a mistake and it would lead to higher inflation and perhaps you didn't pushback as much as you might have otherwise. >> i didn't pushback at all and the reason i didn't and there was lots of talk about that but not from the fed, because that is not our job. we're not the cbo and we're not elected by anybody, so we take fiscal policy as it arrives at our front door, and we don't comment, you know, we make our own assessments inside the fed but it's really not our role and
i think very important that we stay out of that business no matter whose in the white house, whose in congress. it just is not our job and it's something we avoid pretty much. reporter: thank you. >> thank you, mr. chair, thank you, everyone. liz: well, well. that was a crazy meeting and we will tell you why and exactly what happened here during this last federal reserve news conference of 2021. fed chair jay powell flat out admitting inflation is "running well-above our 2% longer run goal and will likely do so well into next year." folks we've been telling you that for six months, but the markets absolutely taking off specifically around 3:16 p.m. eastern so about 14 minutes ago, when powell insisted, "we, as in the fed, are prepared to use our tools to make sure high inflation does
not become more entrenched" so you can see right here on these intradays and we'll cycle through them, dow jones industrial up 338 points, and you could see where we were before the news conference. just before the news conference which kicked off at 2:30 p.m., the dow was up a modest 30 points, it had been negative earlier in the session, the s&p was up just i'm talking right before the announce am, the nasdaq was losing nine and you could see right now the nasdaq is killing it, up 261 points for a more than 300-point swing from trough-to-peak. you can see from the intraday charts here the bulls kicked up their heels as powell, while conceding, rising prices are hotter than he expected, it was largely positive about u.s. households, and consumer spending power so let's flip it over to the 10 year yield, which was hovering around 1.44% before the official federal reserve announcement, but rates would remain unchanged but tapering would increase from the original
15 billion to 30 billion per month starting in january, you can see right now the 10 year yield standing at 1.46%. it went as high as if my numbers are right, 1.47% moderating just a tiny bit here. one of the most fascinating moments though came when powell was pushed to open a rare window into his thinking and what convinced him and his voting committee to pivot from a very slow and methodic taper, or reduction in stimulus to doubling the pace of the pullback. powell said after labor day, he began to be alarmed by wages speaking and consumer inflation which just hit a near 40 year high in november, when the worrisome data would show speaking inflation and more. that was the trigger listen to what he said. >> high reading and i honestly at that point really decided that i thought we needed to, we needed to look at speeding up the taper, and we went to work on that so that's really what
happened. it was essentially higher inflation and faster, turns out much faster progress in the labor market. really what's happening is the unemployment rate is catching up, seems to be catching up with a lot of the other readings with a tight labor market six-tenths over one cycle so that's really what happened. liz: let's bring in our fed day power team former wells fargo chief economist john silvia and steve ops, cio global equities with 634 billion in assets under management. john i'll give it to you first. powell hit the markets sweet spot look at the dow up 339 points. low of the session the dow had been down 154. what's the most important thing you believe came out of this meeting? >> i think the fact that the inflation numbers continued to be stronger than what the fed had expected. they are going to be raising interest rates. clearly from my side of the fence and i'll leave the equities. i think the challenges that bond
prices are too high, interest rates are way too low, you're going to miss allocation of capital both in the government sovereign sector and the corporate bond sector, and to me, those interest rates have to rise going forward to compensate for inflation and one other thing. there's a lot of commentary about the speed and the level of adjustment. i think in terms of inflation, we're going to have a long adjustment period to inflation and our inflation numbers are higher than what the fed has projected for 2022 and 2023. liz: well they are continuing to push investors into riskier stocks. i don't know if we can pull up the 30 year yield, but he specifically said, john, i don't know if you heard that. he said i know the 30 year yield is low right now i'm looking at the 30 year, hold on, 1.85% for the 30 year. he seemed kind of relaxed about that. are you? >> no, not at all.
i mean, when you look at an investor whose looking at cash or government debt, you're looking at interest rates that are less than the rate of inflation and that's even before taxes, so basically, people are looking at capital losses and the portion of their portfolio that is supposed to be incredibly safe. it certainly is not safe with respect to inflation risk. liz: steve let me bring you into the conversation and the timing is perfect. we are now hitting session highs , dow jones industrials up 362 points. you've gotta tell me as we see equities just take off running, where were you positioning before this meeting and where are you looking now? >> we were overweight equities, liz, as you know, we've got a 4,800 target on the s&p for the end of this year its been out there a long time, we think we'll get there we're 5,300 next year and we think this is bullish. long term investors, our biggest worry has been the fed is so behind the curve and so
oblivious that they're eventually going to wake up and really have to grind the economy into a recession and that be an early end of the cycle so this raises the odds that the cycles going to be extended. we want to be in the cyclicals. we want to be in the stocks that are in the crosshairs of rising rates. i agree with john. the bond market seems to be taking it kind of smoothly here for the moment thinking oh, well we trust the fed, but i mean trust the fed so far hasn't really been a good course of action. they've been way behind the curve here, and i would guess with him, that we're heading for higher rates. it's going to affect the growth stocks a little bit because their valuations are going to compress. we like right now, stocks versus bonds for sure, and within stock s, we're tilting towards the financials, the energy stock s, consumer discretionary names that we think, a lot of these stocks are down 10-20% in the last three months and they're looking at some pretty
good nominal numbers, we think, in the next 12-24 months. >> yeah, i think steve's point is well taken. yes the fed is a little bit late they should have been doing something before, but this is a stich in time. they are doing something, it will prolong the cycle. it is better for the economy, longer term, the fed to take a little bit of steam out of the interest rates and the bonds and provide some returns but i think steve has got it right. it prolongs the economic cycle. it's good for equity investors. liz: can i just let people know that there is some breaking news on apple at the moment. apple is closing three stores and they are basically saying, let me just check this and i don't know if we can pull up an apple chart. we're working on it, but the news is such that apple says that it's closing three stores. the stock is up about 2.5% regardless here. they are confirming the closure
here. i don't see exactly the reason. >> probably omicron. liz: it's probably omicron but apple says all employees will be tested prior to reopening. we do see the stock moving higher on this news and you know , jay powell did reference omicron and i want people to hear what he specifically said about it. this as , folks, everybody knows , we just passed 800,000 deaths here in the united states , when it comes to covid overall. let's listen to what he said and john you can then comment. >> depend, you know, on how much it suppresses demand as opposed to suppressing supply it is not clear how big the effects be on either inflation or growth or hiring, on top of what's already going on which is quite a strong wave of delta that's hitting large parts of the country. liz: you know, you add this apple news into it, you're telling me there's not going to be some sort of renewed impact,
john, from the omicron virus? what are you foreseeing as an economist? >> i would say that the omicron virus does have an impact, certainly not as much as delta. i think we certainly have a lot more people fully vaccinated. a lot more people are cautious with respect to their personal activities, so it will be a slight negative impact but nothing like the delta impact. i think when i looked at some of my recent presentations, the economic groups in philadelphia and las vegas, my emphasis was you still have sustained economic growth. i think the fed is okay on his economic forecast. i still think they are a little bit too low on their inflation forecast. liz: okay gentlemen great to have you. steve and john, and i would just say here that apple shares are up 2.5% but it is due to omicron we have not heard exactly the locations of the three stores that will be closing at the moment but we're keeping you posted, apple of course is a dow component.
not hurting the dow right now folks we're up nearly 400 points at the moment for the blue chips fed chair jay powell demured when asked whether interest rate hikes would happen before the final winding down of the feds $120 billion bond buy ing program. here is what he said. >> since we're two meetings away from completing the taper, assuming things go as expected, i think if we wanted to lift off before then, then what you would stop the taper, potentially sooner, but it's not something i expect to happen but i do not think it be appropriate. liz: well, we are looking now at what's called the fed funds futures, and what they are showing is that there is, at the moment, a 68% chance that we will see a rate hike in may, 87% of a chance in june, and a 92% chance of a rate hike in the month of july. that is a current fed funds
futures picture, and by the way these numbers were way lower before the announcement. when the fed does begin tightening its benchmark overnight lending rate a cascade effect could indirectly be triggered. now, interest rates on things like auto loans, mortgages, credit cards, do tend to track the central banks move on its key rate. let's see how the biggest financiers of things like car loans are moving and we're talking about allied financial, wells fargo, bank of america, pn c. now while auto loan rates are dictated by the exact time of the year, whole bunch of things, the type of vehicle, the borrower's credit score, et cetera, according to bankrate .com, the fed sets the benchmark rate on which auto loan lenders base their rates so we've got mastercard, these are credit card stocks a knock-on secondary effect. not just the car loans. it's credit card stocks as well so let's go" to our floor show traders watching all the movement right now, we've
got scott shellady and teddy weisberg. scott, credit card rates, mortgage rates all affected. what market moves are you seeing in the wake of powell's last news conference of the year. what do you anticipate? >> well i'm a little bit different than the panel. i think that the 10 year yield at least the yield curve is telling me that it's expecting a policy mistake or we're not going to be able to raise rates like everybody thinks we're going to, so watch the fed try to raise rates and i don't think , powell says the economy is doing really really well. i would argue i don't think the last jobs number was very good. we missed it by 60%, look at the two that we just discussed, and the retail sales. yeah, there's an excuse for everybody. maybe we shopped earlier in the year, but still that was a bad miss from expectations, so i say this. that yield and that 10 year, which is affecting everything else that you just said, liz, is slow to sell-off because i think there's folks out there that think he cannot raise rates. liz: but what's the trade? scott, what is the trade then?
>> i agree with you if you if you think he's going to raise rates, banks, credit cards, capital one is one i picked out earlier, those things will become the margin interest, they are going to pick-up just naturally. the big boys, you know, market cap wise, generally speaking are tech they aren't as aggressive in a rising interest rate market they are much more aggressive in the lower ones so they won't do as well so i agree with you banks and credit cards, capital one i had before you started talking about credit cards and i think those obviously are going to be the ones that benefit from it; however, i'm telling you right now, regardless of what stock we talk about right now, i think you get them at allht now. we're coming off the highs of the session but the dow is still up about 314 points we see a very strong move in most of the equity picture here, as we continue to see the s&p charging ahead by 61 points. what do you like here? >> well the problem with better
prices is with wall street is the only business in the world, liz, that when they have a fire sale everybody is scared to death so nobody comes. liz: [laughter] >> but i think the message was pretty clear. the fed is, nobody's better than the fed at dealing with expectations, certainly investors expectations and they're pretty clever but there was a keyword in there about interest rates going up in 2022 and 2023 and the keyword that everybody seems to have forgotten so far is may. may raise rates. you know that's not a guarantee and i don't think the market heard anything that really upset the market and clearly if we're in an environment of higher rates and we've said this , you've gotta go to the financials, whether it's jpmorgan, bank of america, charles schwab or the insurance stocks that benefit from higher rates something like chub, and inflation is clearly the problem at a much bigger problem than
the fed is even now, really admitting that i prefer, you know, somebody mentioned energy but i prefer the commodities, hard and soft commodities, maybe a bg, at which commodity trading firm or ngly which is a pure metals play, but these are the kind of spacs you want to go if we get into an inflationary environment. liz: into? were there. teddy and scott, thank you very much and this is the big question. how long will it take to work inflation through all of this. we want to get breaking news to you right now fox business alert take a look at the stock, shares of cantor fitzgeralds blank check spac, called cf acquisition corp. and we're looking at president biden right now taking a tour of the area that was hit very hard in kentucky from the tornado, which way do you guys want to go here, go to biden? okay, so let's take that shot of biden if we can.
the president is touring the area and he is in essence told everyone in that state, ask , whatever you need, we will get it for you at the moment and he specifically in dawson spring , kentucky, a neighborhood devastated by friday's tornado which ripped 200 miles across six different states. the president is expected to make remarks within the next hour on the federal response, kentucky, of course was the hardest hit by the tornadoes , 74 of the 88 deaths that were caused by the storm occurred in the blue grass state. we're going to keep an eye on the president's visit with some of the victims and let you know when more news is made, but you can see he is continuing to tour i want to get to that rumble story, because this involves a company that we brought to you just last week. cantor fitzgerald's blank check spac called cf acquisition corp. 6 it's jumping about 8.9% on official confirmation that you tube competitor rumble, that
will be its spac partner, its spac target, will partner with former president trump's social media platform truth social. now as part of this partnership, rumble will deliver video and streaming platform services for the former president's social media group. cantor fitzgerald ceo howard lut nick joined us last week to trumpet the service and you may remember he told us groups from the entire political and speech spectrum are welcome to the same hosting offer telling countdown that rumble spac deal is expected to close in the second quarter of 2022. airline executives being quizzed at this hour by the senate committee on commerce, science and transportation about worsening flight disruptions and staffing shortages. the industry notably received 54 billion, you may remember, in taxpayer money, during the height of the pandemic slump american airlines, southwest, delta, and united airlines are
all either flat to slightly lower, and more heartache for peloton investors the stock now hitting a fresh one-year low after morgan stanley, it's off the lows of the session but sorry, jpmorgan wiped the connected fitness company off its top internet stock list and cut its price target to $70 from $190, memo to jpmorgan, peloton is at $38 coming on the heels of last weeks disastrous product place moment where in the reboot of hbo's sex in the city, popular character " biggest died after his 1,000th peloton ride, peloton right now down about 2%. the video game meltdown continues with roblox sliding 9.6% right now after reporting a reduction in daily active users for the month of november. the sell-off follows a 10% dip in video game sales last month. breaking a six-month streak of gains, and speaking of video game world sega a u.s. naval nothing the original 1991 hot
games sonic the hedgehog will be making a comeback this time for tesla arcade. the infotainment service that tesla cars offer. the game will be available on all tesla models the company did not share a release date. tesla has actually turned around it had been lower much of the session, it is now up about 1%, and of course there is separate news, there was a tragic accident in paris involving an off off-duty tesla taxi, one person killed another 20 injured the taxi firm said it had temporarily suspended its fleet of 37 tesla model 3's following the accident. tesla officials say there's no indication at this hour the accident was caused by any technical fault in the car. we were all over the tesla sonic story in my morning market minton tiktok, we've got all of your headlines every morning tune in tomorrow because who knows where these markets may start to look to go in the morning, we will be doing it right there on tiktok at redfox liz. let's get to cryptocurrency. what a turnaround for bitcoin
too. crypto is moving higher at this hour, after languishing in the red much of the session. this after federal reserve chair powell talked about stablecoins kind of a split decision, sort of positive, one little negative about regulation, but during his news conference, he said, " stablecoins, which are the crypto coins that are pegged to the u.s. dollar, he said they can certainly be a useful, efficient consumer-serving part of the financial system if they are properly regulated." charlie gasparino is all over this story. charlie? bitcoin turned around, i thought it was interesting. charlie: you've gotta look at bitcoin, all of the cryptos, look at the meme stocks today. there is a relief rally in amc. liz: we're talking bitcoin and then amc? charlie: it's the same trade. the trade before here, before today, was that if powell comes down real hard on inflation, threatening to raise rates six times as opposed to three times,
you know, and he said it before, keeps using the word may have to do this so there's a little wiggle room here, you could have seen a fall off in all these stocks or even the most speculative stocks, the most speculative investments are meme stocks and the cryptos. they would have fell, dramatically, if he signaled he was going to get very aggressive liz: look at this intraday. charlie: it's pretty interesting so what you have right now since powell is a relief rally both in the memes and in cryptos, so it just means to me that the market is saying thank you, chairman powell, you're not the hawk that we thought you might be and you're not going to raise rates that much. now, here is the $64,000 question or the unknown. we don't know, and i'll tell you , teddy said it again before. suppose inflation is a lot worse than what powell thinks it is right now. he's been behind the curve on this dramatically. liz: i know, we said that for months. charlie: he's been horrible on
this. suppose all his maybes and i don't know, we might not have to , the economy is going so great, suppose it turns out that inflation is twice as much as it is now, or a lot more than wages are not keeping up. does that mean it's not three rate hikes, it's five rate hikes who knows? and i think that's one of the problems with this market. yes, this is a trade. it's today's trade. you trade on a relief that powell is not turning into paul volcker. that's what you did today, but here's the thing. it's not his call ultimately. it's the inflation call and if he screwed this up, if he missed the boat on this , that inflation is a lot higher, man, all these things are going to trade-off. liz: wages, eci, the employment cost index, he referenced that and said yeah we started to notice after labor day wages were going up well yes because
employers had to offer much more money. charlie: they aren't going up as much as inflation. liz: they are not. it's okay, i'm agreeing with you charlie: but you said the last time they were. liz: well they were very close but i will say when you pair the two together and superimpose that over consumer prices, we are starting to see a real hike there. charlie: the question is this , and nobody can answer this. this is a one-day rally by the way during the financial crisis can't tell you how many great one-day rallies we had right before bear stearns blew up when people said oh, it's going to be fine and then boom. bear stearns happens. this happens. what i will tell you is this. we don't know, jerome powell has been horrible, horrendous progno sticator of inflation. is he missing the boat or not being aggressive enough because he missed the boat earlier and do you believe him that he only may have to raise rates dramatically. i'm just telling you. i wouldn't trust this guy. liz: dow jones industrials up 352 points, that's not even, is
that the high? that's not even the high of the session, 387 is the high of the session. charlie: what's the 10 year doing? liz: the 10 year yield was around 1.47 and it moderated to 1.46 or so. charlie: it moved up? liz: yeah because it was at 1.457 at the moment. charlie: not so dramatic. liz: we could say the nasdaq at the moment is just off session highs as well. tech is loving the fact that jay powell, yes, kept rates to a quarter of a percent that makes borrowing cheaper so companies can borrow money and continue to grow but we do have this. the fed decision does put a lump of coal in investors stockings in one regard. our countdown closer says never mind, luxurious names will bring portfolios some holiday cheer. joining us now u.s. global investor ceo and cio frank holmes and raymond james chief economist scott brown. frank, you're a gold guy and
this is the first time i've had you on where you said i like luxury names here specifically the parent of -- >> well at the bottom of covid it was the first u.s. luxury mutual fund, u.s. lux, and its far outperformed the s&p 500, its crushed it so costco does exceptionally well, apple already is a luxury good, auto it can go on with ferrari had an outstanding run, so we continue to see the luxury goods have done a phenomenonal job. liz: yeah, and right now, you do like tesla, as we said, lvmh, the parent of christian dior and then you can get the whole basket of it with u.s. lux. let me get to, you know, the point about the economy and tell me what they're doing at raymond james. what are they saying about what jay powell just d & d . >> well, a lot of people have been talking about the powell
pivot. it is really more of the an evolution, inflation out look has really changed quite dramatically over the last several weeks. you know back in the spring we saw a big spike in inflation. it was very narrow. it was just confined to a few categories, space effects, restart effects. what we're seeing now price increases are broadening outs with categories. that is particularly worrisome for the fed. as you look out to next year you will see some supply chain repair and some of these durable goods prices may start to wane and come down a bit. but services account for much bigger portion of consumer spending. we're seeing rents rising a lot more. by construction, cpi data, that has rents, it is really a lagging indicator. we're already seeing a lot of industry evidence that rents are going a lot more. that is going to be reflected in the cpi. if you look at owners equivalent
rent which is 24% of the cpi, 30% of the core cpi. that was up 5.6% annual rate in last three months. the way it is constructed you will see same increases over the next three months. that is a big portion of the cpi. the inflation numbers will be pretty elevated at least in the near term. we expect some roll back in goods but it is the services one, i think that will be a bigger worry next year. liz: frank, we were showing retail sales. i wanted to bring that up with you, we haven't talked about in this very busy hour, two minutes left to trade. close to session highs. november retail sales looked year-over-year 3.2% but a big miss in the month of november. we saw a jump of .3 of a percent. the expectation was .8 of a percent. does this give you any pause before you go diving into a luxury sector where a purse can cost $7,000? >> no, not at all.
the wealth effect is impacting millenials and also there is a great "wall street journal" story talking about people with the wealth effect spending more money. i think that the pent-up demand is going to continue to grow. the supply line inflation will continue to come into the system. i love shadow statistics. if you use the cpi number that was used for inflation in 1980, you applied it today, inflation is over 12%. my health care insurance for my employees was up 23%. my d and o insurance was up 50%. my housing insurance for my home was up 28%. liz: i know nine nation running only 6%? na. i think inflation is greatly understated. i think the big lagging trade here is gold and gold stocks because they're 70% of them have free cash flow. i think we'll get a big pop in that. liz: we got to run. >> in this last year, some executive chairman of the first
triple mining company on nasdaq. it has had a spectacular run with this inflation scare. liz: all right. guys, we have to wrap it here. 18 seconds before the actual close. we're at a record for the s&p and folks, we are looking at a gain of 391 points for the dow. very close to session highs. after the federal reserve says, rates will remain the same, not a move here. "kudlow" is next. ♪. larry: hello, everyone, welcome to "kudlow." i'm larry kudlow. of course save america, kill the bill. and can we priest get a federal reserve with a backbone? i've got a couple thoughts on today's wussie fed announcement they will kind of going to move faster on tapering bond purchases. there might be three little bitty rate hikes next year. oh, yeah, jay powell told the press conference he was confident inflation would drop to 2% by the end