Stocks rebound, crypto tumbles ahead of today’s big Fed announcement

This is the web version of Bull Sheet, a no-nonsense daily newsletter on what’s happening in the markets. Sign up to get it delivered free to your inbox.

Good morning.

It’s Fed day, and stocks—somewhat uncharacteristically—are actually moving ahead of Fed Chair Jerome Powell’s afternoon press conference. The European equities markets are gaining for a second straight day—so much for those China exposure fears—and U.S. futures have been gaining throughout the morning.

If there’s weakness, it’s in crypto land.

Did you see this? At one point during Monday’s crypto sell-off, a leading Wall Street data provider flashed a sell-price of $5,402 for Bitcoin—a 90% discount! Don’t hyperventilate. It was all in error, but it’s in line with the extreme volatility this week.

Let’s check in on the global markets.

Markets update


  • The markets in mainland China are back in business today as the two-day autumn holiday wraps up. The Shanghai Composite is up 0.4% in afternoon trading, after a rough open. The Hang Seng is closed, meaning no price action on Evergrande today.
  • China’s PBOC is at it again. The central bank on Wednesday poured more short-term liquidity into the economy on Wednesday, bringing the tally to 90 billion yuan ($14 billion), according to Deutsche Bank. That move seemed to calm investor jitters.


  • The European bourses were jumping again at the open, with the Stoxx Europe 600 up more than 0.7%. Banks, energy and auto stocks were the big gainers out of the gates.
  • European stocks, even those with exposure to China, are holding their own this week. If the benchmark Stoxx 600 keeps today’s gain it will once again be in the green on the week.
  • Shares in British gambling firm Entain popped 18% yesterday (it’s up a further 6% this morning) after receiving a $22.4 billion takeover offer from DraftKings.


  • U.S. futures are climbing as I type. Remember: I said the same thing this time yesterday. Following Tuesday’s mid-afternoon slide, the Dow and S&P 500 closed in negative territory.
  • Yields on the 10-year Treasury note climbed to 1.333% this morning ahead of today’s big Fed decision and press conference, up about two basis points in the past 24 hours.
  • Shares in Zoom Video Communications fell nearly 1% on Tuesday (and are lower again pre-market) after the Wall Street Journal reported the U.S. Justice Department is probing its proposed $15 billion acquisition of customer-service software specialist Five9 on national security grounds.


  • Gold is flat, trading around $1,780/ounce.
  • The dollar too is trading sideways.
  • Crude is up with Brent trading above $75/barrel.
  • Crypto is still under pressure, with Bitcoin trading below $43,000. Ethereum’s Ether is having a tough week, too, down 4% to trade below $3,000.


Fed: Up or down?

It’s time to talk tapering and dot-plots.

Later today, Fed Chief Jerome Powell will address the markets at the close of the two-day FOMC meeting. The timing couldn’t be better. Investors are looking for a distraction—any distraction—from China and the teetering Chinese property developer Evergrande.

For the better part of the past decade, the Fed has played Santa Claus, delighting equity bulls with a monetary policy that has effectively helped super-charge returns on stocks. But the combination of soaring inflation and a tight labor market is forcing the central bank to rethink its purchases of bonds and mortgage-backed securities—that’s called “tapering”—and whether to tighten credit conditions (that would be the dot-plots).

So what can we expect?

Let’s start with Deutsche Bank. They are part of the pack in forecasting that tapering won’t be declared until the next FOMC meeting, in November. As for interest rates, they see the first three increases happening in 2023, and another three the following year.

Goldman Sachs concurs that we’ll see a November tapering announcement. “The pace of tapering is an open question,” however, Goldman writes in a recent research note. They figure the full unwinding of the central bank buying spree will occur at a brisk pace, meaning monthly injections will dwindle from $120 billion per month to zero by mid-2022. Goldman’s dot-plot forecast, meanwhile, is very similar to Deutsche Bank’s—i.e., they’re to begin in 2023, and not before.

That Wall Street is so unified in its forecasts is by design. The Fed wants no surprises. That explains in part why stocks, Treasury yields and the FX market are—with the exception of Monday’s Evergrande shock—trading in such a tight range these days. The daily ups and downs are mere blips.

Still, the Fed’s lower-for-longer policy has had a massively volatile impact on another market: the housing market. It’s been buying $40 billion in mortgage-backed securities every month, and that’s put the lid on borrowing costs, creating a massive distortion.

As Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence, says, “home prices and rent prices are more expensive now than at any other time in U.S. history. The Fed should have long since stepped back from its involvement in the housing market, even if that required increasing its purchases of Treasury securities to placate nervous market participants.”

Stay tuned.


Bernhard Warner

As always, you can write to or reply to this email with suggestions and feedback.

Correction: In yesterday’s Bull Sheet, the link to Cornerstone Wealth was incorrect. Here’s the right one.

Today's read

3 things to know about Brilliant Earth’s IPOFortune

Evergrande’s struggling electric vehicle unit is a warning to other property developersFortune

Brandemic marketing 101: What to do when a game about viruses goes, ahem, viralFortune

Flying Taxis’ Best Ride Is to the Helicopter MarketWall Street Journal

Bull Sheet readers, we have a special offer for you: 50% off your subscription to Fortune. Just click here, and use the promo code: BULLSHEET . . . Thank you for supporting our journalism.

Market candy

Quote of the day

This price gain has far exceeded income growth and eroded affordability.

That's Frank Nothart, chief economist of CoreLogic, a research firm that tracks the U.S. real estate market. And, yes, he's talking about the white-hot market for house prices, up 23% since the onset of the COVID pandemic. But, homebuyers, there may be some good news on the horizon, Fortune's Lance Lambert explains.

Our mission to make business better is fueled by readers like you. To enjoy unlimited access to our journalism, subscribe today.

Read More

CEO DailyCFO DailyBroadsheetData SheetTerm Sheet