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Money Monday: The Fed and FOMC, Rates and Housing, Market News for the Week

You can listen to this Money Monday Podcast on YouTube and Spotify.

Today is Monday, June 10th, 2024 and here’s what you need to know for the week ahead.

Over the weekend, the crypto market experienced a significant downturn. Bitcoin saw a decrease of 3%, and many major altcoins were down by 10% or more.

In corporate news, Oracle is scheduled to release its earnings report tomorrow. Additionally, Dayforce and Dicks Sporting Goods will report their earnings this Wednesday.

The industrial services sector faced a challenging end to last week. On Friday, nine out of the top ten industry stocks ended in the red, indicating a widespread sector decline.

In a positive move for the financial technology sector, Robinhood’s stock surged by 6.5% following the announcement of its acquisition of the crypto exchange Bitstamp in a deal valued at $200 million. This acquisition is seen as a strategic expansion for Robinhood into the cryptocurrency market.

Spirit Airlines’ CEO has made it clear that the company is not considering Chapter 11 bankruptcy. Instead, they are feeling encouraged by the post-JetBlue plan. This statement aims to reassure investors and stakeholders about the airline’s future.

Turning to the labor market, the U.S. added a much-better-than-expected 272,000 jobs in May. Despite this positive job growth, the unemployment rate edged up to 4% as of Friday. This mixed signal adds complexity to the fed’s economic outlook. Jerome Powell is looking for a slowed labor market to decrease demand, and with it inflation, to hit his 2 to 3% inflation goal.

The Federal Reserve’s meeting on Wednesday is another critical event this week. They will discuss the possibility of rate cuts during their FOMC meeting. Moreover, the May Consumer Price Index report is set to be released on Wednesday morning, just ahead of the FOMC meeting. This report is likely to impact the markets significantly, so we should expect some volatility.

When the Federal Reserve cuts interest rates, it generally leads to lower mortgage rates. This can make borrowing cheaper for homebuyers, potentially boosting demand for housing. Lower mortgage rates can also make refinancing existing mortgages more attractive, allowing homeowners to reduce their monthly payments or access home equity.

For the housing market, lower interest rates can lead to increased activity. Homebuyers might be more motivated to purchase properties due to the lower cost of financing. This can drive up home prices, especially in competitive markets. However, it’s important to note that while lower rates can make homes more affordable on a monthly basis, the overall prices of homes may rise due to increased demand, which could offset some of the benefits.

Moreover, lower interest rates can stimulate the construction of new homes as developers find it cheaper to finance their projects. This can help increase the supply of homes, which is particularly beneficial in areas with housing shortages.

On the flip side, if rates are cut too aggressively, it might signal economic distress, which can create uncertainty and potentially dampen consumer confidence. Thus, while lower rates can be beneficial for the housing market, they are just one piece of a broader economic puzzle.

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