Wall Street Today | Powell Faces Tricky Task of Explaining Rate Pause in Congress

Federal Reserve Chair Jerome Powell will have an opportunity this week to clarify what many found a confusing message on the path of interest rates, with the added task of assuring Democrats and Republicans the economy is on track.

Powell will need to reassure Republicans the Fed is not backing down from its campaign to contain price pressures, while pointing Democrats to the resilience of the economy as officials prepare to raise rates further this year.

One of Wall Street’s most bearish strategists isn’t giving in to the bullish about-turn in equities, saying investors may be in for “a rude awakening.”

Morgan Stanley’s Michael Wilson, whose outlook for a market slump in 2023 has yet to materialize, said fading fiscal support, lower liquidity and falling inflation will weigh on the US equity rally in the second half of the year.

He’s also concerned that stocks are “as stretched as they can get” in a narrow performance that’s been driven by excess liquidity from March’s banking deposit bailouts.

Money-market funds are placing less cash in a Federal Reserve borrowing program, a sign that efforts to replenish government coffers after the debt-ceiling fight haven’t disrupted markets.

Reverse repo fell below $2 trillion for the first time since June 2022, after peaking above $2.5 trillion at the end of last year.

US housing starts unexpectedly surged in May by the most since 2016 and applications to build increased, suggesting residential construction is on track to help fuel economic growth.

Beginning home construction jumped 21.7% to a 1.63 million annualized rate, the fastest pace in more than a year, according to government data released Tuesday. The pace exceeded all projections in a Bloomberg survey of economists. Single-family homebuilding rose 18.5% to an 11-month high.

Another domino has fallen in the battle over North American electric-vehicle charging standards.

FedEx reported adjusted fiscal fourth-quarter earnings per share of $4.94 from sales of $21.9 billion. Wall Street was looking for EPS of $4.85 from sales of $22.5 billion.

The retailer said in court papers it will run a separate sale process for Buy Buy Baby — considered the crown jewel of its assets — as it moves forward with the auction of its Bed Bath & Beyond chain.