Finance

Wall Street pushes out rate-cut expectations, sees risk of no action until 2025

Published

1 year ago

April 18, 2024

Federal Reserve Chair Jerome Powell speaks during a House Financial Services Committee hearing on the “Federal Reserve’s Semi-Annual Monetary Policy Report” on Capitol Hill in Washington, U.S., March 6, 2024.

Bonnie Cash | Reuters

If there was any doubt before, Federal Reserve Chair Jerome Powell has pretty much cemented the likelihood that there won’t be interest rate reductions anytime soon.

Now, Wall Street is wondering if the central bank will cut at all this year.

That’s because Powell on Tuesday said there’s been “a lack of further progress” on lowering inflation back to the Fed’s 2% target, meaning “it’s likely to take longer than expected” to get enough confidence to start easing back on policy.

“They’ve got the economy right where they want it. They now are just focused on inflation numbers. The question is, what’s the bar here?” said Mark Zandi, chief economist at Moody’s Analytics. “My sense is they need two, probably three consecutive months of inflation numbers that are consistent with that 2% target. If that’s the bar, the earliest they can get there is September. I just don’t see rate cuts before that.”

With most readings putting inflation around 3% and not moving appreciably for several months, the Fed finds itself in a tough slog on the last mile toward its goal.

Market pricing for rate cuts has been highly volatile in recent weeks as Wall Street has chased fluctuating Fed rhetoric. As of Wednesday afternoon, traders were pricing in about a 71% probability that the central bank indeed most likely will wait until September, with the implied chance of a July cut at 44%, according to the CME Group’s FedWatch gauge.

As for a second rate cut, there was a tilt toward one in December, but that remains an open question.

“Right now, my base case is two — one in September and one in December, but I could easily see one rate cut, in November,” said Zandi, who thinks the presidential election could factor into the equation for Fed officials who insist they are not swayed by politics.

‘Real risk’ of no cuts until 2025

The uncertainty has spread through the Street. The market-implied odds for no cuts this year stood around 11% on Wednesday, but the possibility can’t be ignored at this point.

For instance, Bank of America economists said there is a “real risk” that the Fed won’t cut until March 2025 “at the earliest,” though for now they’re still going with a December forecast for the one and only cut this year. Markets at the onset of 2024 had been pricing in at least six quarter-percentage point reductions.

“We think policymakers will not feel comfortable starting the cutting cycle in June or even September,” BofA economist Stephen Juneau said in a client note. “In short, this is the reality of a data-dependent Fed. With the inflation data exceeding expectations to start the year, it comes as little surprise that the Fed would push back on any urgency to cut, especially given the strong activity data.”

To be sure, there’s still hope that the inflation data turns lower in the next few months and gives the central bank room to ease.

Citigroup, for example, still expects the Fed to begin easing in June or July and to cut rates several times this year. Powell and his fellow policymakers “will be pleasantly surprised” by inflation data in coming months, wrote Citi economist Andrew Hollenhorst, who added that the Fed “is poised to cut rates on either slower year-on-year core inflation or any signs of weakness in activity data.”

Elsewhere, Goldman Sachs pushed back the month that it expects policy to ease, but only to July from June, as “the broader disinflationary narrative remains intact,” wrote Jan Hatzius, the firm’s chief economist.

Danger looms

If that is true, then “the pause on rate cuts would be lifted and the Fed would move ahead,” wrote Krishna Guha, head of the global policy and central bank strategy team at Evercore ISI. However, Guha also noted the wide breadth of policy possibilities that Powell opened in his remarks Tuesday.

“We think it still leaves the Fed uncomfortably data-point dependent, and highly vulnerable to being skittled from three to two to one cut if near-term inflation data does not cooperate,” he added.

The possibility of a stubborn Fed raises the possibility of a policy mistake. Despite the resilient economy, higher rates for longer could threaten labor market stability, not to mention areas of the finance sector such as regional banks that are susceptible to duration risk posed to fixed income portfolios.

Zandi said the Fed already should have been cutting with inflation well off the boil from its mid-2022 highs, adding that factors related to housing are essentially the only thing standing between the central bank and its 2% inflation goal.

A Fed policy mistake “is the most significant risk to the economy at this point. They’ve already achieved their mandate on full employment. They’ve all but achieved their mandate on inflation,” Zandi said.

“Stuff happens, and I think we need to be humble here regarding the financial system,” he added. “They run the risk they are going to break something. And to what end? If I were on the committee, I would be strongly arguing we should go already.”

Don’t miss these exclusives from CNBC PRO

Finance

Stock and crypto trading site eToro prices IPO at $52 per share

Published

13 hours ago

May 13, 2025

Business Finance News

Omar Marques | Sopa Images | Lightrocket | Getty Images

EToro, a stock brokerage platform that’s been ramping up in crypto, has priced its IPO at $52 a share, as the company prepares to test the market’s appetite for new offerings.

The company had planned to sell shares at $46 to $50 each.

IPOs looked poised for a rebound when President Donald Trump returned to the White House in January after a prolonged drought spurred by rising interest rates and inflationary concerns. CoreWeave’s March debut was a welcome sign for IPO hopefuls such as eToro, online lender Klarna and ticket reseller StubHub.

But tariff uncertainty temporarily stalled those plans. The retail trading platform filed for an initial public offering in March, but shelved plans as rising tariff uncertainty rattled markets. Klarna and StubHub did the same.

EToro’s Nasdaq debut, under ticker symbol ETOR, may indicate whether the public market is ready to take on risk. Digital physical therapy company Hinge Health has started its IPO roadshow, and said in a filing on Tuesday that it plans to raise up to $437 million in its upcoming offering. Also on Tuesday, fintech company Chime filed its prospectus with the SEC.

Founded in 2007 by brothers Yoni and Ronen Assia along with David Ring, eToro competes with the likes of Robinhood and makes money through fees related to trading, including spreads on buy and sell orders, and non-trading activities such as withdrawals and currency conversion.

Net income jumped almost thirteenfold last year to $192.4 million from $15.3 million a year earlier. The company has been ramping up its crypto business, with revenue from cryptoassets more than tripling to over $12 million in 2024. One-quarter of its net trading contribution last year came from crypto, up from 10% the prior year.

This isn’t eToro’s first attempt at going public. In 2022, the company scrapped plans to hit the market through a merger with a special purpose acquisition company (SPAC) during a sharp downturn in equity markets. The deal would have valued the company at more than $10 billion.

CEO Yoni Assia told CNBC early last year that eToro was still aiming for a market debut but “evaluating the right opportunity” as it was building relationships with exchanges, including the Nasdaq.

“We definitely are eyeing the public markets,” he said at the time. “I definitely see us becoming eventually a public company.”

EToro said in its prospectus that BlackRock had expressed interest in buying $100 million in shares at the IPO price. The company said it planned to sell 5 million shares in the offering, with existing investors and executives selling another 5 million.

Underwriters for the deal include Goldman Sachs, Jefferies and UBS.

— CNBC’s Ryan Browne contributed reporting

WATCH: Venture capital firm founder on the Gulf’s next wave of unicorns

Finance

NVDA, BA, COIN, FSLR and more

Published

19 hours ago

May 13, 2025

Business Finance News

Finance

Coinbase jumps 22% after S&P 500 inclusion

Published

19 hours ago

May 13, 2025

Business Finance News

Brian Armstrong, chief executive officer of Coinbase Global Inc., speaks during the Messari Mainnet summit in New York, on Thursday, Sept. 21, 2023.

Michael Nagle | Bloomberg | Getty Images

Coinbase shares soared more than 20% on Tuesday and headed for their sharpest rally since the day after President Donald Trump’s election victory following the crypto exchange’s inclusion in the S&P 500.

S&P Global said in a release late Monday that Coinbase is replacing Discover Financial Services, which is in the process of being acquired by Capital One Financial. The change will take effect before trading on Monday.

Stocks added to the S&P 500 often rise in value because funds that track the benchmark will add it to their portfolios. For Coinbase, it’s the latest sharp move in what’s been a volatile few months since Trump was elected to return to the White House.

Coinbase shares rocketed 31% on Nov. 6, the day after the election, on optimism that the incoming administration would adopt more crypto-friendly policies following a challenging and litigious four years during President Joe Biden’s term in office.

The company and CEO Brian Armstrong were key financial supporters in the 2024 campaign, backing pro-crypto candidates up and down the ticket. Coinbase was one of the top corporate donors, giving more than $75 million to a PAC called Fairshake and its affiliates. Armstrong personally contributed more than $1.3 million to a mix of candidates.

While the start of the Trump term has been mostly favorable to the crypto industry, through deregulation and an executive order to establish a strategic bitcoin reserve, legislation has thus far stalled. That’s due in part to concerns surrounding Trump’s personal efforts to profit from crypto through a meme coin and other family initiatives.

Coinbase has been on a roller coaster as well, plummeting 26% in February and 20% in March as Trump’s tariff announcements roiled markets and pushed investors out of risk. With Tuesday’s rally, the stock is now up about 2% for the year.

Since going public through a direct listing in 2021, Coinbase has become a bigger part of the U.S. financial system, with bitcoin soaring in value and large institutions gaining regulatory approval to create spot bitcoin exchange-traded funds.

Bitcoin spiked last week, topping $100,000 and nearing its record price reached in January. The crypto currency surpassed $104,000 on Tuesday.

To join the S&P 500, a company must have reported a profit in its latest quarter and have cumulative profit over the four most recent quarters.

Coinbase last week reported net income of $65.6 million, or 24 cents a share, down from $1.18 billion, or $4.40 a share a year earlier, after accounting for the fair value of its crypto investments. Revenue rose 24% to $2.03 billion from $1.64 billion a year ago.

The company last week also announced plans to buy Dubai-based Deribit, a major crypto derivatives exchange for $2.9 billion. The deal, which is the largest in the crypto industry to date, will help Coinbase broaden its footprint outside the U.S.

WATCH: Bitcoin surges past $100,000