Stocks took a pause on Friday. After this week’s rally, most investors would count that as a win. The Dow Jones Industrial Average slipped 305 points, or 0.8%, while the broader S&P 500 edged down 0.1%. The Nasdaq added 0.2%. All three major indexes hit new records this week. Worries about the Federal Reserve appeared to go the wayside even before the central bank’s policy announcement on Wednesday, with investors reaching the acceptance phase of their grief over the fact that the Fed still needs to wait a bit before cutting rates. Then on Wednesday neither the Fed’s policy statement, nor its new projections or Chairman Jerome Powell’s press conference seemed hawkish. So long as forthcoming inflation data behaves, a June rate cut appears to be in the cards. The rally in stocks picked up steam. Other potential hurdles to the rally got cleared as well, including the Justice Department suing Apple on Thursday. Apple shares rebounded slightly on Friday after falling 4% on Thursday. Heard’s Dan Gallagher is cautious, saying there is little clarity on Apple's path ahead. Here’s what else Heard on the Street was watching: Live Markets Snapshot Crude oil, Bitcoin USD and gold continuous contract data refresh every time you open this email. Other data are as of market close.
The New Normal for Mortgage Rates Will Be Higher Than Many Hope
Interest rates are likely to come down later this year, with the Federal Reserve on track to start cutting rates. But mortgage rates might not follow as quickly. That is because mortgages, and mortgage-backed bonds, just aren’t as in demand in financial markets as they were in the years before the Fed began to start to tighten in 2022. And they might not be for a while. Read More
Apple’s Business Model Getting Hit From All Sides Now By Dan Gallagher
Apple didn’t need any more trouble, but trouble has had a way of finding the iconic tech giant lately. The Justice Department sued Apple on Thursday, accusing the company of monopolistic behavior over the way it runs its iPhone business. The U.S. lawsuit comes as European authorities are cracking down on key aspects of Apple’s App Store business, and as Apple is losing share in the Chinese market due to growing competition and reports of government disfavor there. Apple is also facing near-term challenges such as another weak iPhone cycle. Read More
In Brief
Asian economies that fared relatively well during the pandemic have struggled to maintain steam while the U.S. has emerged as an unexpected winner. Immigration is part of the answer why, write Nathaniel Taplin and Megha Mandavia.
Today's Markets News
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What's Coming Up
McCormick, Carnival and Walgreens Boots Alliance are among the handful of companies reporting next week. The Commerce Department will report February new home sales, durable goods orders and personal income, spending and its measure of inflation, while a number of Fed officials will be giving speeches.
You Heard It Here First
In January, the Heard's Justin Lahart and Telis Demos wrote that for the Fed, slowing down the pace of quantitative tightening wouldn’t signal that the central bank was about to stop shrinking its balance sheet, but rather a move that would ultimately allow it to shrink that balance sheet even more. Fed Chair Jerome Powell made the same point at his press conference on Wednesday. “So it’s sort of ironic that by going slower you can get farther, but that’s the idea,” he said. “The idea is that with a smoother transition you won’t—you’ll run much less risk of kind of liquidity problems which can grow into shocks and which can cause you to stop the process prematurely.” “Ultimately, slowing the pace that the balance sheet is shrinking might make it easier for banks and market participants to adjust to continuing quantitative tightening. This lowers the risk of hiccups and could allow the Fed to eventually bring the balance sheet to a lower level.” — Justin Lahart and Telis Demos
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