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Wall Street is on a knife edge until Jay Powell speaks

We’re not the only ones obsessed with Wednesday’s political announcement. Financial markets have been on a knife edge for weeks as they await news from the central bank on the extent of monetary tightening to be expected. Shares have fallen four in the past five weeks.

On Monday, Wall Street swung between slight gains and losses, effectively in a waiting pattern as investors waited for news from Silver Fox himself, Federal Reserve Chairman Jerome Hayden Powell.

Here’s the deal: On Wednesday afternoon, the Fed will announce its next rate move, which will almost certainly be three-quarters of a point, or 75 basis points, for the third time in a row.

But there’s a sizable chance that, given how stubborn inflation is, the Fed will go HAM and raise rates by a full point – something the US central bank never did. On Monday, just 16% of investors were expecting a full point rise, according to CME tool FedWatch.

What happens after that? Guess what.

Wall Street is divided on whether the Fed will maintain an aggressive rate hike in November, or whether inflationary pressures will subside enough to allow the central bank to slow the pace a bit, writes my colleague Paul R. La Monica .

If you raise rates too much, we get a recession. Do not increase them enough, we get an inflation spiral (and also, eventually, a recession). And, as Paul explains, stocks are poised to be volatile in one way or another.

One person who lands solidly in the optimist camp is President Joe Biden. On Sunday, Biden focused on the positive, saying “we’re going to get inflation under control,” in an interview with CBS.

He touted his administration’s labor market gains, with 10 million new jobs created since he took office, and his investments in the semiconductor industry.

A person in the pessimistic camp is, well, me. So here are my two cents:

As I wrote here last week, many of the main drivers of inflation – supply chain lockdowns, war in Ukraine, Covid lockdowns, corporate America’s eagerness to fatten margins beneficiaries – are not the kind of thing the Fed or the White House can simply solve. By dampening demand, the Fed can only control one side of the equation. The president can help grease the wheels of global supply, but he can’t unilaterally move grain out of a war zone, or (better yet) end the war.

I blame FedEx for my grumpy mood.

ICYMI last week, the parcel courier, which serves as something of an economic barometer, issued a rather grim profit warning to investors. The company withdrew its full-year guidance, saying a slowing economy would drop it $500 million from its revenue target.

FedEx CEO Raj Subramaniam told CNBC last week that he believes we are on the verge of entering a global recession, scaring just about everyone on Wall Street and fueling a sharp selloff. FedEx shares plunged 21% on Friday — their biggest one-day drop on record.

The FedEx fiasco could be a harbinger of more bad news to come next month when the third-quarter earnings season begins.

QUOTE OF THE DAY

“If we see prolonged inflation now, it will be a disgrace to this country and it will further reduce trust in institutions.”

— Robert Shiller, a Nobel Prize-winning economist at Yale University, says central banks have no choice but to stay the course when it comes to fighting inflation. In an interview with my colleague Julia Horowitz, Shiller explains why soaring prices can be so difficult to combat and why the Fed might want to go all out with a one percentage point rate hike.

HBD 🎂🎁🥳

Forty years ago today, at 11:44 a.m., the emoji was born as a colon, hyphen and closed parenthesis stitched together. It looked like this 🙂

Long before we had 😍, 😩, and 🧐 (my favorite) and thousands more, we had the analog smiley face known as an emoticon, created by Carnegie Mellon University computer science professor Scott Fahlman .

Fahlman wasn’t trying to revolutionize the way we communicate online; he had had enough of misinterpreted jokes and sarcasm on a school intranet newsletter.

“One person didn’t understand the joke and was responding with anger, hostility, and pretty soon the initial discussion was gone, and everyone was arguing with everyone,” Fahlman told my colleague Jennifer Korn.

Of course, emoticons have become emoji (style note: the plural of emoji is emoji), and our text conversations have added a new layer of meaning. Like, look at this:

Alright, alright 😂

Alright, alright 😔

Alright, alright 🙃

Alright, alright 🙄

…You had the idea.

These days, there are over 3,600 emoji, overseen by the nonprofit Unicode Consortium.

“Having about 3,000 little images that you can include at your fingertips is like having 3,000 more punctuation items,” said Jeremy Burge, founder of Emojipedia. “So while I think we’ve done well without it, I don’t know why you would choose to live in a world where there are no emojis.”

Read Jennifer’s fascinating story about the humble emoji here.

NUMBER OF DAYS: $250,000

Google, one of the premier tech companies of our time, just took a big oopsie by making a $250,000 payout to an engineer. The problem is, this guy had never even worked for Google.

Sam Curry, security engineer at cryptocurrency firm Yuga Labs, tweeted last week that he had been trying to get in touch with someone at Google for more than three weeks. “Is there any way we can get in touch with @Google? It’s okay if you don’t want it back.”

Unfortunately, Google wants it back. The company blamed the mistake on “human error”.

MY TWO CENTS: Not only should Curry be allowed to keep that money, but Google shouldn’t be allowed to take it back. I’m no lawyer, but I believe that’s the correct and just outcome when a trillion dollar corporation with virtually unlimited power to control, like, the entire internet, accidentally drops its small change.

When Citibank notoriously wired $900 million to a group of lenders by mistake in 2020, many companies that received the money refused to return it. And so far, at least, the courts have sided with these companies. (Citi is appealing to try to recover the funds.)

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