It\u2019s all in the messaging.<\/p>\n
The Federal Reserve paused interest rates Wednesday, but it was overshadowed by projections for rates staying above 5% through the end of next year. The central bank succeeded in shifting the focus from anticipation over the timing of the first rate cuts to realization and acceptance that rates will remain higher for longer.<\/p>\n
Markets reacted as such. Stocks fell, the dollar rose, and the two-year Treasury yield reached a 17-year high.<\/p>\n
In stark contrast, the European Central Bank raised rates last week\u2014but its tone was very different, signaling it may be done with tightening. That effectively undermined the intended impacts of a hike. European stocks rose, while the euro tumbled along with German bond yields. <\/p>\n
At this late stage of the cycle, the forward messaging is arguably becoming more critical than ever, and is certainly seen by markets as being more important than the actual rate decisions.<\/p>\n
Given the role financial conditions play in inflation, delivering a message effectively can be the difference between taming price growth or not.<\/p>\n
For all the central bank messaging, intended or not, investors don\u2019t actually have much more certainty after the latest round of rate decisions. Thursday is rate-setting day for the Bank of England. Its messaging over the past year has been criticized for being unduly dovish\u2014even as it, like the other central banks, has been steadily lifting interest rates.<\/p>\n
For the Fed, higher rates for longer is the broad message but the specifics\u2014even November\u2019s decision\u2014are subject to change. Still, it\u2019s better for markets to enjoy a dovish surprise down the line than suffer a hawkish one.<\/p>\n
\u2014Callum Keown<\/em><\/p>\n *** Join Financial News online editor Justin Cash today at noon when he talks with James Deal, the co-founder and head of U.K. at PrimaryBid, about whether retail investors are the key to London\u2019s IPO battle. As global exchanges continue to fight it out for prized listings, review after review has sought to turbocharge sluggish equity investment. Sign up here.<\/em><\/p>\n Try your hand at this morning\u2019s Barron\u2019s crossword puzzle and sudoku games. For all games, including a digital jigsaw based on the week\u2019s cover story, click here.<\/em><\/p>\n The Federal Reserve\u2019s latest Summary of Economic Projections delivered an optimistic message: Fed officials forecast that interest rates would stay above 5% through the end of next year, while unemployment will be lower and economic growth will be higher than previously expected. <\/p>\n What\u2019s Next:<\/strong> Wednesday\u2019s press conference fueled the expectation that Fed officials are most likely done with raising rates this year. Wednesday evening, markets were pricing in a 28% probability of a November rate hike, significantly lower than the 41% a week before the Fed\u2019s meeting began.<\/p>\n \u2014Megan Cassella<\/em><\/em><\/p>\n \n FedEx What\u2019s Next:<\/strong> UAW President Shawn Fain has said the union will expand its strike to more plants if GM,<\/span> \u2014Janet H. Cho<\/em><\/em><\/p>\n The Writers Guild of America and studios are meeting Thursday to discuss how to end the Hollywood strike, raising hopes of a breakthrough.<\/p>\n What\u2019s Next:<\/strong> Both sides say they want a deal as soon as possible. However, if no agreement is reached, the dispute could last until the end of the year, CNBC said.<\/p>\n \u2014Brian Swint<\/em><\/p>\n The Food and Drug Administration unexpectedly rejected Neffy, a nasal-spray alternative to epinephrine injections for allergic reactions, such as What\u2019s Next:<\/strong> Separately, the Biden administration is making four free Covid-19 tests available for households again, amid concerns about a fall-winter surge of the virus. It is spending $600 million to buy tests from a dozen U.S. manufacturers, and its website covidtests.gov will start taking orders on Monday.<\/p>\n \u2014Josh Nathan-Kazis and Janet H. Cho<\/em><\/em><\/p>\n \n KB Home What\u2019s Next:<\/strong> KB Home forecast full-year 2023 housing revenue of $6.3 billion, which is above its prior guidance, and an average selling price of 481,000. It expects its housing gross profit margin for the full year to be 21.3%, assuming there aren\u2019t any inventory-related issues.<\/p>\n \u2014Liz Moyer<\/em><\/em><\/p>\n***<\/h4>\n
The Dot-Plot Told One Story. Powell\u2019s Words Told Another<\/h2>\n
\n
***<\/h4>\n
FedEx Raises Full-Year Outlook After Beating Expectations<\/h2>\n
\n raised its full-year profit outlook after beating expectations in its fiscal first quarter. While the package delivery company benefited from a strike threat at rival
\n United Parcel Service
\n and the bankruptcy of fellow shipping firm Yellow during the quarter, cost cutting also boosted results.<\/p>\n\n
\n Stellantis
\n as of Wednesday. A Stellantis spokesperson told Barron\u2019s<\/em> that it previously offered a 19.5% increase in wages over five years, or 21% when compounded. The UAW rejected Stellantis\u2019 previous offer.<\/p>\n<\/li>\n<\/ul>\n
\n Ford,<\/span><\/p>\n
\n and Stellantis don\u2019t make \u201cserious progress\u201d by noon Friday. He will update members at a
\n Facebook
\n live event at 10 a.m. Eastern time on Friday.<\/p>\n***<\/h4>\n
Crunch Talks Raise Hopes for End to Hollywood Strike<\/h2>\n
\n
***<\/h4>\n
FDA Unexpectedly Rejects Nasal Spray Allergy Antidote<\/h2>\n
\n Viatris
\n \u2019 EpiPen. Neffy\u2019s maker,
\n ARS Pharmaceuticals,<\/span>
\n said the FDA wants more data on repeat doses of the drug compared with repeat doses of the injected form.<\/p>\n\n
\n Teva Pharmaceutical
\n makes a generic version of EpiPen.<\/p>\n<\/li>\n***<\/h4>\n
KB Home Raises Outlook as Demand Remains Steady<\/h2>\n
\n beat expectations for third-quarter profit and raised its full-year outlook, citing steady demand despite rising mortgage rates. While profit and revenue were lower than last year\u2019s record quarter, CEO Jeffrey Mezger said they see a more profitable year than they previously anticipated.<\/p>\n\n
***<\/h4>\n