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No rate cuts in 2024?

Federal Reserve Chair Jerome H. Powell takes his seat to testify before a U.S. Senate Banking, Housing, and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress” on Capitol Hill in Washington, U.S., March 7, 2023. 

Kevin Lamarque | Reuters

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today 

Stocks retreat
Wall Street retreated Monday despite a
rally in tech stocks tied to the artificial intelligence boom. The blue-chip Dow lost about 97 points, while the S&P 500 fell 0.12%. The Nasdaq Composite dropped 0.41%. Bitcoin briefly topped $68,000 and inched closer to its 2021 all-time high.

China sets GDP target
China set an economic growth target of “around 5%” for 2024. The goals for GDP and other economic indicators were published as part of the opening of the National People’s Congress annual meeting. This comes as China’s rebound from the pandemic remained sluggish in the face of growth headwinds from an ailing real estate sector.

Apple’s new MacBook
Apple will roll out new versions of its MacBook Air laptops with its latest M3 chip. The tech giant said the new laptops offer sharper 1080p webcams, support for faster Wi-Fi networks and up to 18 hours of battery life. The announcement showed Apple is stepping up its marketing around artificial intelligence.

Gold sets new record
Gold rose above $2,100 to the highest level ever as traders bet the Federal Reserve will start cutting interest rates in the second half of the year. When rates fall, gold prices typically rise as investors seek a safe haven alternative to bonds which become less attractive as their yields decline.

[PRO] Skip EV stocks  
While electric vehicle stocks like Tesla are investors’ favorite, Freddie Lait, chief investment officer at Latitude Investment Management, told CNBC’s Pro Talks, he isn’t too bullish on the sector. The fund manager instead has his sights on what he calls “bigger integrated covers,” and picked Ferrari as “a phenomenal business.”


The bottom line

No interest rate cuts in 2024?

That would seem pretty far-fetched for many market watchers. But not for Torsten Slok, chief economist at Apollo Global Management.  

“The reality is that the US economy is simply not slowing down, and the Fed pivot has provided a strong tailwind to growth since December,” he argued in a note last week.

“As a result, the Fed will not cut rates this year, and rates are going to stay higher for longer,” Slok added.

Investors initially went into 2024 expecting six cuts but now anticipate only three given the Fed’s recent cautious tone on lowering rates too soon.

Slok listed ten reasons why he sees the Fed holding off. Besides the strong economy, “underlying measures of trend inflation are moving higher,” he noted.

“The bottom line is that the Fed will spend most of 2024 fighting inflation,” wrote Slok.  “As a result, yield levels in fixed income will stay high.”

Whether he is right or wrong, there is no doubt how the Fed proceeds with interest rates will remain the top focus for investors ahead of the March policy meeting. 

Fed Chair Jerome Powell is also set to testify on monetary policy before the House of Representatives on Wednesday and the Senate on Thursday. He is widely expected to stick to the same talking points on rate cuts.

But his comments face further scrutiny after January’s hot consumer and wholesale prices gave investors’ a jolt that the road back to the central bank’s inflation goal will be bumpy.

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