Premarket stocks: The Fed is sounding more and more aggressive

Investors are weighing that question after a key central banker who has historically favored a more dovish approach to raising interest rates spoke harshly about the central bank’s need to fight rising prices.

“It is of the utmost importance to reduce inflation,” Federal Reserve Governor Lael Brainard said in a speech on Tuesday.

He said the central bank would move to “rapidly” reduce its nearly $9 trillion balance sheet this year, unwinding the huge bond-buying program launched at the start of the pandemic, while raising rates.

Brainard’s comment “cleared the way” for a huge interest rate hike at the Fed’s next meeting in May, according to Bespoke Investment Group.

That provoked a strong response in financial markets. After Brainard spoke, the benchmark 10-year US Treasury yield hit its highest level in nearly three years, rising to 2.56%. Bond yields are moving at opposite prices, indicating a sell-off.

Stocks also fell. The S&P 500 ended down 1.3%, while the Nasdaq Composite lost 2.3%. Investment-grade corporate bonds posted their biggest one-day drop since March 2020.

David Madden, an analyst at Equiti Capital, said the moves were prompted by “realization” that central banks are backing down to withdraw support from the economy even faster than expected, even though the war in Ukraine has clouded the prospects for growth.

“Not only are they continuing down the road, but they seem to be speeding up their language,” Madden told me.

Market sentiment holds for now. CNN’s Business Fear & Greed index remains in “neutral” territory, after producing an “extreme fear” reading a month ago.

But concerns are clearly mounting that the Fed could be so aggressive in fighting the highest inflation in 40 years that it triggers a recession. Deutsche Bank on Tuesday became the first major bank to predict this would happen.

“We no longer see the Fed achieving a soft landing,” Deutsche Bank economists led by Matthew Luzzetti wrote in the report. “Instead, we anticipate that more aggressive monetary policy tightening will push the economy into a recession.”

The bank, while citing “considerable uncertainty” around its forecast, predicted that the US economy will contract during the last quarter of next year and the first quarter of 2024, although the contraction should be much milder than the last two recessions.

The turmoil could continue on Wednesday as Wall Street pores over the Federal Reserve’s March meeting minutes for clues about its next steps.

JetBlue thinks it can win a fight to buy Spirit Airlines

economical carrier spiritual airlines (SAVE) it’s a hot product right now.
On Tuesday, jet blue (JBLU) made an unsolicited $3.6 billion offer to buy the company. The turn? The offer could derail a proposed deal between Spirit and Frontier Airlines announced earlier this year.

JetBlue’s cash offer is about 33% higher than the value of Frontier’s stock-and-cash offer, reports my CNN Business colleague Chris Isidore.

He has good reason to want to be victorious. If Frontier and Spirit combine, they would overtake JetBlue to become the nation’s fifth-largest airline, competing directly with American, United, Delta and Southwest, which together control more than 80% of the market.

“The combination of the two airlines would position JetBlue as the most compelling domestic low-fare competitor to the dominant Big Four US carriers,” JetBlue said in a statement.

CEO Robin Hayes played on JetBlue’s relative popularity. Frontier and Spirit had the worst customer satisfaction ratings in the industry for 2021, according to the American Customer Satisfaction Index. JetBlue was tied for third best.

“Customers shouldn’t have to choose between a low fare and a great experience, and JetBlue has shown that it’s possible to have both,” Hayes said.

What happens next: Spirit said it is working with its financial and legal advisors to evaluate the proposal. Shares of the airline jumped 22% on Tuesday after the New York Times revealed the offer. JetBlue fell 7%.

Elon Musk is already revolutionizing things on Twitter

That didn’t take long. just one day later Tesla (TSLA) CEO Elon Musk revealed that he had taken a 9% stake in Twitter, making him its largest shareholder, the company announced that he would be joining its board of directors.

With a seat on the board, Musk is poised to have more influence over the company and its direction.

“Excited to share that we are appointing @elonmusk to our board!” Twitter (TWTR) CEO Parag Agrawal said on Tuesday. “Through conversations with Elon over the past few weeks, it became clear to us that he would bring tremendous value.”

Musk responded that he is “looking forward to working with Parag and the Twitter board to make significant improvements to Twitter in the coming months.”

Sign of a shakeup: Musk tweeted a poll to his followers on Monday asking if they wanted Twitter to have an edit button, a longstanding topic of debate on the platform.

On Tuesday night, Twitter said it has been developing a feature for the past year that will allow users to edit their tweets, and that tests will be available “in the coming months.”

Until next time

Tune in to CNN Business’s “Markets Now” digital show, now live at 12 pm ET. Liz Ann Sonders of Charles Schwab offers her advice for navigating volatile markets. Also, Voyager CEO Steve Ehrlich is joining from Bitcoin 2022 in Miami.

Also today:

  • executives of shell (RDSA), PA (PA), Chevron (CLC) and exxonmobile (XOM) testify before members of the House about rising gas prices beginning at 10:30 am ET.
  • Minutes from the latest Fed meeting arrive at 2 pm ET.
Coming tomorrow: Earnings from Conagra (CAG) and constellation markings (STZ).

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