Top Story
Fed Raises Rates But Powellâs Comments Spark Rally, ADP Jobs Report Falls Short of Expectations
• US stocks rose Wednesday as investors may have been relieved to see the Fed take a less hawkish stance, even though the central bank raised rates by half a percentage point. The increased borrowing costs will have a ripple effect throughout the economy as a whole.
• Federal Reserve Chair Jerome Powell spoke after the FOMC released its policy statement, which also mentioned plans to begin offloading assets from the central bankâs balance sheet, possibly starting next month. Powell believes the economy has the ability to withstand higher rates, saying a âsoftishâ landing was possible. Typically rate hikes come with associated risks to the labor market and the economy as a whole.
• US employers added 247,000 jobs in April according to payroll processing firm ADP, which came in sharply lower than expectations. By comparison, the economy added 479,000 private jobs in March. ADPâs report showed a notable divide in the hiring practices of large and small businesses, as employment at smaller companies actually fell by 120,000.
What to Be on the Lookout for Today
• Weekly jobless claims will be published. The most recent report showed 5,000 fewer Americans filed for unemployment benefits, with the total number checking in at 180,000. Initial claims remain at their lowest level in decades while existing claims also hit a 52-year low.
• Crocs (CROX) will share its first-quarter earnings. Market watchers have praised the casual shoemaker for making the brand hip and relevant with Gen Z consumers. The companyâs management has also done an effective job of trimming its operations.
What Rising Interest Rates Means For Student Loan Borrowers
The recent low-interest environment has made student loan refinancing a money-saving move. When loan holders refinanced, they were often able to secure a lower interest rate than the rate on their federal loans. (For example, the federal student loan rate for undergraduate Direct Subsidized loans was 6.8% from July 2006 through June 2008, while refinancing rates were sub-3% as recently as last year.)
A series of expected increases from an inflation-fighting Federal Reserve means that the interest rates on student loan refinancing are rising â and possibly rising fast. Since getting the lowest possible interest rate is the goal for refinancing, it may not pay to delay any longer.
If you have federal student loans, you know that the current interest rate is 0% and is scheduled to stay that way through Aug. 31. No doubt, thatâs a rate that canât be beat.
However, if you are waiting for the payment pause to end before refinancing your federal student loans, you may find yourself looking at much higher interest rates by fall. Depending on what your current interest rate is and how much you have borrowed, you could see bigger savings by not waiting.
Not sure about refinancing now when your federal loan payments are on pause? If you refinance your federal loans with SoFi, you will get 0% interest through Aug. 15, and no payments until Oct. 1. Whatâs more, SoFiâs student loan refinancing rates are competitive â and there are no origination fees or pre-payment penalties. View your rate and see if student loan refinancing makes sense for your financial plan.
A Few Headlines That Should Be on Your Radar
The Fed may have left some investors breathing a sigh of relief yesterday, as the widely anticipated rate hike was accompanied by less-hawkish comments from the central bankâs chairman. Still, the half-percentage point hike means higher borrowing costs, which affects the entire economy. The central bank hopes this tighter monetary policy will reduce demand, which would ultimately cause prices to stabilize or possibly fall. Read more >> SoFiâs Head of Investment Strategy breaks down the Fedâs May statement, and explains why she is hopeful that getting two more hikes behind us can be the beginning of a better second half. Make no mistake: we are still in the hard part, and a graceful landing is not certain. Read more >> Ride hailing companies failed to thrive during the pandemic. Now, as both drivers and passengers emerge from their homes, soaring fuel prices pose a new threat to the bottom lines of Uber (UBER) and Lyft (LYFT). As drivers for these companies witness their net pay shrink amid rising gas prices, ride hailing companies may need to provide incentives or see their driving pool shrink. Uber claims the material cost increases are largely behind them, while Lyftâs outlook may be less rosy. Read more >> There are opportunities in some areas of the financial markets for investors looking beyond COVID-19. Hereâs a look at five popular investment trends for 2022. Putting hard-earned dollars into any investment â whether itâs trendy or traditional â can be daunting. Investors should be aware that, while momentum can feed investment fads for long periods, some market trends can become vulnerable because of frothy valuations and turn on a dime. Read more >>Not-So-Breaking News
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Elon Musk has plans to take Twitter (TWTR) public again in perhaps as soon as three years. Meanwhile, he is seeking new investment partners to help finance his $44 billion acquisition of the social media platform.
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Moderna (MRNA) trounced analyst expectations on the top and bottom lines on vaccine revenue that was more than three times that of the prior year. The American pharmaceutical giant left its full-year outlook unchanged.
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CVS (CVS) beat estimates on the top and bottom lines, benefiting from increased demand for prescriptions and seasonal illness medications, as well as higher prices. It revised upward its 2022 earnings projections.
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Ford (F) announced US sales were down 10.5% in April, reflecting declining revenue from trucks. Year-to-date share prices have slid about 30% for the automaker.
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The New York Times (NYT) reported lower-than-expected results on the top and bottom lines, citing costs to acquire subscription-based sports news website, The Athletic. The company also said it has seen revenue from both advertising and digital subscriptions increase.
Financial Planner Tip of the Day
âPayment history makes a bigger impact on a personâs credit score than anything else. A borrowerâs credit score summarizes their health and strength as a borrower, and payment history makes up 35% of that score. So the most important rule of credit is this: Donât miss payments. Timely payments are crucial, and making at least the minimum payment on a revolving credit line can make a positive impact on a personâs credit score.â
Brian Walsh, CFPÂŽ at SoFi