Happy Tuesday, readers. Phil Rosen here, writing to you from New York City.
Every time Jerome Powell has something to say, markets hang on his every word (maybe one day people will say the same is true of this newsletter). But in between major policy meetings, markets are almost as equally attuned to the words of other Fed officials.
And two of them just shared conflicting messages.
Quick note: Insider just put together a list of Wall Street's rising stars of equity research. See who made the cut.
If this was forwarded to you, sign up here. Download Insider's app here.
1. St. Louis Fed President James Bullard said that the central bank will need to raise interest rates two more times this year to stamp out inflation.
Bullard, who's always leaned more hawkish on policy, has been a proponent for aggressive rate hikes since last year.
"I think we're going to have to grind higher with the policy rate in order to put enough downward pressure on inflation and to return inflation to target in a timely manner," Bullard said at an event in Florida on Monday.
"I'm thinking two more moves this year — exactly where those would be this year I don't know — but I've often advocated sooner rather than later."
In 10 consecutive rate hikes, policymakers have raised the benchmark rate from near zero to the 5%-5.25% range.
The last three moves have been quarter-point hikes, and the banking turmoil that started in March has led Powell to claim that tighter lending conditions could do some of the Fed's job for it.
But Bullard still wants to keep a foot on the gas.
"As long as the labor market is so good it's a great time to fight inflation," he said. "Get it back to target. Get this problem behind us and not replay the 1970s."
His stance isn't exactly consensus. Minneapolis Fed President Neel Kashkari said Monday that it's tough to know whether to pause rate hikes or keep going in June.
"I think right now it's a close call, either way, versus raising another time in June or skipping," Kashkari said in a CNBC interview. "What's important to me is not signaling that we're done."
Waiting for more information on prices and payrolls could be key, and Powell said last week that they could "afford" to take time to assess the impact of rate hikes.
As of now, fed fund futures are implying about a 74% chance of a pause at the next meeting.
To economists at Pantheon Macroeconomics, any additional hikes bode poorly for the economy. They think it's time for central bankers to recognize that they've already done enough.
"Raising rates further — actually, not cutting rates very soon — will amount to overkill," the experts said Monday.
Given that they've just embarked on the steepest hiking cycle in four decades, the group expects inflation to keep falling whether the Fed hikes or not.
As far as recession risks go, Pantheon maintained that policymakers pushing for a June rate hike are "playing with fire."
Should the Fed hike rates next month? Why or why not? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
2. US stock futures fall early Tuesday, following a debt-ceiling meeting between President Joe Biden and House Speaker Kevin McCarthy. Investors will also be watching for data on the manufacturing and services sectors as well as new home sales, due out this morning. Check out the latest market moves.
3. Earnings on deck: Lowe's Companies, Shell, and Dick's Sporting Goods, all reporting.
4. Buy these 14 "boring" stocks that are set up for strong long-term growth. Two fund managers who are in the top 1% of performers this year broke down the names to add to your portfolio now that lack flashiness but have scale and attractive pricing power. See the list.
5. Just five stocks are worth almost a quarter of the entire S&P 500. Those include Apple, Microsoft, Alphabet, Amazon, and Nvidia. Together they're worth nearly $9 trillion.
6. JPMorgan expects to earn $3 billion more this year after its takeover of First Republic. The deal for the failed bank could boost the firm's net interest income from $81 billion to $84 billion, JPMorgan said Monday. But that outlook's based on several key assumptions.
7. Bank of America just raised its S&P 500 price target from 4,000 to 4,300. That's about 3% upside from current levels, and would imply full-year gains of about 12%. Still, it's possible, according to the firm, that the index could soar as high as 4,600 given that much of the bad economic news is already priced in.
8. A fund manager for institutional clients shared offensive and defensive strategies for building portfolios to last generations. She's expecting a mild recession this year, and said valuations are high currently and don't reflect appropriate risks. Here's what every investor can learn from her approach.
9. Bank of America named 20 stocks set to outperform once the Fed halts rate hikes. All the companies in this batch share three key characteristics that make them attractive bets because of their quality, value, and technical strength. More details here.
10. White House economists warned this month that the S&P 500 could crash 45% if the US defaults on its debt. The debt ceiling talks continue to stagnate, and the so-called X-date is inching closer by the day. The projection also includes estimates for weakening retirement accounts and pullbacks in consumption and investment.
Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com.
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.