The daily business briefing: June 14, 2022

1. Wall Street enters bear market territory

The three main U.S. stock indexes plunged on Monday following a sobering Friday inflation report. The S&P 500 fell about 3.9 percent, crossing into bear-market territory, 20 percent below its January high. The Dow Jones Industrial Average and the Nasdaq Composite also dropped sharply. The Dow closed down 2.8 percent, while the tech-heavy Nasdaq lost 4.7 percent. Investors are bracing for the Federal Reserve to conclude a two-day policy meeting Wednesday with a decision to raise interest rates half a percentage point to rein in rising prices, with some analysts expecting a rare three-quarter-point hike. U.S. stock futures made modest gains early Tuesday.

The Wall Street Journal

2. Fed starts meeting that could end with biggest rate hike since 1994

Federal Reserve policy makers start a two-day meeting on Tuesday that is expected to end with a hefty half-percentage-point interest-rate hike to fight high inflation. The Fed already raised rates by a half-point in May. But after Friday data on consumer prices showed inflation higher than expected in May, hitting its highest pace since 1981, some analysts are now predicting Fed leaders will discuss a three-quarter-point hike, which would be the largest since 1994. Fed Chair Jerome Powell has said the central bank would get more aggressive, if necessary, to bring down inflation, even if it hurts growth.

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The New York Times

3. Bond yield curve inversion provides fresh recession warning sign

The U.S. bond yield curve inverted again on Monday, increasing concerns that the economy is headed toward a recession. Two-year yields rose above those of 10-year Treasurys, the first time that has happened since April. Five-year yields went as high as 17 basis points above 30-year rates, the biggest such gap in more than two decades. Short-term yields typically track expectations of where the Federal Reserve will set overnight interest rates, while long-term yields reflect more distant expectations of economic growth and inflation. The inversion of the yield curve signals that markets are pricing in rising risk that the Federal Reserve's aggressive short-term interest rate hikes, intended to curb high inflation, will hurt growth and tip the economy into a recession.

Bloomberg

4. Bitcoin briefly falls below $21,000 as selloff continues

Bitcoin prices dropped below $21,000 before rebounding modestly on Tuesday as a cryptocurrency selloff intensified. Just after 5 a.m. ET the world's largest cryptocurrency was trading at $22,531.22, down 7 percent, according to Coindesk data. Bitcoin is now near its lowest level since late 2020, and other cryptocurrencies also have fallen sharply as investors sell risky assets in anticipation of a possible recession. Global cryptocurrency market capitalization fell below $1 trillion on Monday for the first time since 2021 after the market lost $200 billion since Saturday. The latest losses came after crypto lender Celsius briefly blocked customers from making withdrawals from its platform due to "extreme market conditions."

CNBC Financial Times

5. Microsoft agrees to stay neutral on unionization at Activision Blizzard

Microsoft and the Communications Workers of America union on Monday announced a labor neutrality agreement under which Microsoft would respect any attempt of workers to unionize at Activision Blizzard. Microsoft is buying the video game maker for $70 billion, and the neutrality deal, The New York Times says, appears to be the first of its kind among tech companies. Once the acquisition is complete, Microsoft agrees to stay neutral if Activision workers try to unionize, which Activision's 7,000 employees could do without petitioning the National Labor Relations Board for an election. "We respect the right of our employees to make informed decisions on their own," Microsoft President Brad Smith told The Washington Post.

The New York Times The Washington Post