Happy Friday eve. Wall Street's fear-gauge is on the move, and today we're breaking down exactly what that means, and how investors are reacting to hawkish signals from policymakers.
Let's get started.
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1. The Fed needs to hurt investors if it wants to beat inflation. That's according to former Fed President Bill Dudley, who wrote in an op-ed that the central bank needs to "inflict more losses" if it wants to rein in soaring prices.
Dudley believes the Fed must tighten financial conditions, and the only way to do so effectively is to aggressively hike interest rates.
Investors already likely feel whiplashed by the Fed's moves, given that last year's expectations for interest rate hikes was at zero. That expectation has ballooned to 8 rate hikes by 2023.
Wednesday's release of Fed minutes revealed more anxiety about inflation, as well as policymakers' plans to shrink bond holdings more aggressively, by $95 billion a month beginning likely in May. Markets were already pricing in expectations for a 50 basis-point hike and Fed officials have signaled more than one of that size may be warranted.
The Cboe volatility index — also known as the stock market's fear gauge — soared 17% to its highest level since March 21. The renewed nervousness followed hawkish remarks from Fed Governor Lael Brainard and Fed President Mary Daly, who are both typically dovish voices.
"The [Federal Open Market] Committee is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted," Brainard said Tuesday.
In other news:
2. US futures have recouped some of Wednesday's losses. But the specter of an aggressive Fed is looming large over the markets, keeping the dollar buoyant and investors nervous. Take a look at what's going on here.
3. On the docket: Atai Life Sciences, Air China Limited, and Expensify, all reporting.
4. The top-ranked fund manager is using a mix of timely market calls and high-earning stocks to stay ahead of his competitors. James Abate's fund has been the best in the world over the last year, and he told Insider four keys to beating the market today and any day.
5. Putin ally China rejected new Russian oil deals despite steep discounts. Reuters reported that state refiners in China will honor existing Russian oil contracts, but won't move to sign any more. Here's what you want to know.
6. Deutsche Bank forecasted that the US will tumble into a recession in 2023. The Fed interest rate hikes will hit the economy hard, but it's necessary to tame inflation, analysts said. The bank also broke down why the inverted bond yield curve means there's trouble ahead.
7. Warren Buffett's protégé echoed the billionaire investor's warnings about rampant greed and blind speculation in her second annual letter. "While both speculating and gambling can produce great payoffs and a sea of endorphins, heartbreak is almost sure to eventually follow," wrote Kanbrick cofounder Tracy Britt Cool. Her mentor's impact is on full display in the letter.
8. UBS laid out the three hurdles the economy must clear in order to avoid recession. Plus, the world's largest wealth manager explained why fears of a housing bubble are overblown. In any case, UBS recommended these six things you should invest in amid the uncertainty.
9. The co-founder of a crypto trading platform that lets users copy the trades of top investors explained his outlook. Abdul Gadit thinks bitcoin could reach another all-time high in the coming months — then broke down which four altcoins he's betting strongly on.
10. Elon Musk's Twitter moves drove the biggest two-day push by retail traders into the social media platform ever, according to a research firm. The Tesla chief's stock splash this week had everyday investors piling into Twitter. Tesla's stock price also often moves in reaction to Musk's Twitter activity.
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Curated by Phil Rosen in New York. (Feedback or tips? Email [email protected] or tweet @philrosenn.)