Pre-market stocks: Interest rates will continue to rise. How high will they go?

A version of this story appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to the audio version of the newsletter by clicking on the same link.

New York
CNN business

What will the Federal Reserve do at its meeting in December? Analysts can speculate all they want, but Fed officials They said they will use hard economic data to make the next decision.

That means key housing, jobs and inflation reports are likely to have major market impacts as investors speculate on what the future holds for interest rates.

What’s happening: Nobody can move markets like Federal Reserve Chairman Jerome Powell – with few words on Wednesday he dashed investors’ hopes for an interest rate pivot and sent stocks plunging. “We’ve got a ways to go,” Powell said of the Fed’s current mountain regime, which is intended to combat persistent inflation. “It’s too early, I think, to think or talk about pausing.”

But Powell added an important caveat. Fed the pace of those painful walks could begin to slow as early as December. “Our decisions will depend on all incoming data and the implications for economic activity and inflation expectations,” Powell said on Wednesday.

So what will the Fed look at today and between itself next policy decision on december 14th?

Labor market: The Fed’s biggest concern is the tight US labor market, and Friday’s jobs report is unlikely to calm nerves.

The government reports that the economy added another 200,000 jobs in October, down from last month, but still a very strong number as demand for jobs continues to outstrip supply.

This means more inflation. Companies have to pay higher wages to attract workers and can charge more for their goods and services. The Fed will closely monitor hourly wage growth in the report. In September wages increased by 5% compared to a year ago.

A potential uptick: Another jobs report is expected in December ahead of the Fed meeting. If both reports show a downward trajectory in employment, that could be enough to reassure Fed officials, even though the unemployment rate remains historically low.

Inflation data: New data from the two main indices measuring the pace of inflation are expected ahead of the Federal Reserve’s next meeting.

The Consumer Price Index (CPI) will be released on November 10th, which tracks the changes in the prices of a fixed set of goods and services in October.

Core CPI prices, which exclude oil and food, rose 0.6% month-on-month in September, matching August’s pace and above expectations for a 0.4% rise, not a good sign for the Fed. And analysts expect to see another big increase of 0.5% in October

The Fed will be able to see data from October on its favorite measure of inflation, Personal Consumption Expenditure (PCE), on December 1st.

PCE reflects changes in the prices of goods and services purchased by U.S. consumers. The Fed believes the measure is more accurate than the CPI because it captures a wider range of purchases by a wider range of buyers.

Core PCE rose an annualized 5.1% in September, higher than August’s 4.9% rate but below the consensus estimate of 5.2%, per Refinitiv.

Housing: The housing market has been heavily impacted by the Fed’s efforts to fight inflation, and is one of the first areas of the economy to show signs of cooling.

30-year fixed-rate mortgages averaged 6.95% last week, up from 3.09% just a year ago, and higher borrowing costs are causing a drop in demand.

“The housing market was very hot in the couple of years after the pandemic because demand was up and rates were low,” Powell said Wednesday. “We understand that that’s really where the big impact of our policies is.”

New and existing October home sales numbers on November 18th and 23rd will show the ongoing impact of that policy ahead of the next meeting.

The US economy remains strong in the face of rising interest rates, but things are softening much faster across the pond.

The UK will face tough economic times and rising interest rates until next year, officials warned this week.

The Bank of England raised interest rates by three quarters of a percentage point on Thursday, the biggest hike in 33 years, as it tries to tackle rising inflation.

But the bank also issued a stern warning. He said economic output is already shrinking and he expects a The recession will continue into the first half of 2024 as “high energy prices and materially tighter financial conditions weigh on spending.”

The two-year recession would be longer than the one following the 2008 global financial crisis, although the Bank of England said the decline in GDP by 2024 would be relatively small.

The central bank also does not believe that inflation will begin to decline until next year. Policymakers have warned that it will demand further interest rate hikes in the coming months.

Elon Musk has been busy at Twitter headquarters. In addition to tweeting and deleting a conspiracy theory, he has talked about implementing some big changes to his $44 billion acquisition. Here’s what’s happened so far:

Layoffs begin: Elon Musk began laying off employees at Twitter on Friday morning, according to a memo sent to employees. An email sent out Thursday evening informed employees that they would receive a notice before noon on Friday, informing them of their employment status.

The email added that to “ensure the security of employees and Twitter’s systems,” the company’s offices “will be temporarily closed and access to the badge will be suspended.”

Twitter had about 7,500 employees before Musk took over.

Several Twitter employees have already filed a complaint saying the layoffs violate the Employee Adjustment and Retraining Notification Act.

The WARN Act requires any company with more than 100 employees to give 60 days’ written notice if it plans to cut 50 or more jobs at a “single site of employment.”

Strengthening: Less than a week after Musk bought Twitter, the company’s C-suite appears to have been almost completely purged through a mix of layoffs and resignations.

Twitter’s board of directors was also disbanded last week, according to a securities filing.

The company’s filing says all of Twitter’s previous board members, including recently ousted CEO Parag Agrawal and chairman Bret Taylor, are no longer directors “under the terms of the merger agreement.” That makes Musk, according to the filing, “Twitter’s sole director.”

Cashing Blue Check Checks: Musk said on Tuesday that he planned to charge $8 a month for Twitter’s subscription service, dubbed “Twitter Blue,” with a promise to let anyone pay to receive the coveted blue checkmark to verify their account. That’s a drastic haircut from its original plan to charge users $19.99 a month to get or maintain a verified account.

in one the tweet, the world’s richest man used the ad to describe his assessment of “Twitter’s current system of lords and peasants with or without a blue checkmark.” He added: “Power to the people! Blue $8 a month.”

Advertisers have hit pause: Elon Musk wrote an open letter to advertisers just hours before the Twitter acquisition was finalized, explaining that he did not want the platform to become a “free-for-all hellscape.” But that attempt to appease the advertising industry, which makes up the majority of Twitter’s business, isn’t working.

General Mills ( GIS ), Mondelez International ( MDLZ ), Pfizer ( PFE ) and Audi ( AUDVF ) join the growing list of companies pausing Twitter advertising in the wake of Musk’s acquisition.