The 'Halftime' Investment Committee debates the Fed rate decision
The Investment Committee debate what today's FOMC meeting will mean for stocks and the market. CNBC's Steve Liesman joins 'Halftime Report' with the latest on what to expect from Federal Reserve Chairman Jerome Powell.
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Yahoo
an hour ago
- Yahoo
Stock Market's Path Depends on Fed's View of What We Don't Know
(Bloomberg) -- For investors and traders trying to game out where the US economy, the stock market or interest rates are headed in the second half of 2025, good luck. There's simply too much uncertainty to be sure of anything right now. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Take it from Federal Reserve Chair Jerome Powell, who used variations of the word 'uncertain' nearly 20 times in his post-meeting press conference on Wednesday. Wall Street pros were looking to Powell and the Fed for clues about what's next in a world beset by risks — from escalating war in the Middle East to rising trade tensions between the US and China. But the answer they got was a resounding 'we don't know,' with the central bank remaining in wait-and-see mode before deciding whether it can safely start to lower interest rates. 'If anything, the Fed's read-and-react stance showed just how clueless everyone is right now,' said Scott Ladner, chief investment officer at Horizon Investments. 'As an investor, you cannot trade this, you cannot get ahead of it.' The S&P 500 Index is within 3% of a record high, but it's been holding tight in a narrow range lately. There have been just two sessions this month with moves of more than 1%, and the benchmark has barely budged over the past two weeks. It's been a surprisingly stagnant period considering oil has soared and the dollar has plunged on the global developments. Headline Swings The problem for equity traders appears to be a lack of clarity as sentiment changes from one headline to the next. You could see it in the stock market action late this week. On Thursday, which was a market holiday in the US, futures contracts on the S&P 500 sank more than 1% in the morning following reports that US officials were preparing for a possible strike on Iran in the coming days. Then, President Donald Trump signaled that he wanted to give diplomacy a chance, which halted the decline. And Friday morning Fed Governor Christopher Waller said he could see interest-rate cuts starting as soon as July, which sent S&P futures jumping into the beginning of the regular session. But those gains turned out to be short-lived as Iran and Israel traded missile attacks and news hit that the Trump administration is ready to crack down on semiconductor plants in China. After all the back-and-forth, the index closed down 0.2% on the day. 'The S&P 500 is not breaking out one way or another because we've got crosswinds,' Ladner said. Fed officials left interest rates unchanged this week, with the majority of voting members seeing at least two more quarter-point cuts this year. Those views are essentially guesses, however, because the pace of inflation in the coming months and the resilience of the labor market remain unknown in the face of mounting risks. 'No one holds these rate paths with a lot of conviction,' Powell said at his press conference. 'We expect a meaningful amount of inflation in the coming months, and we have to take that into account.' And Wall Street is positioning accordingly. A gauge of equity positioning fell this week, led by discretionary investors who went from slightly below neutral to more notably underweight, data compiled by Deutsche Bank AG strategists including Parag Thatte show. With that cut, aggregate equity positioning now sits in the middle of the bottom-half of its usual band, the data show. The mood among Wall Street prognosticators is equally mixed. Swaps traders are pricing in a roughly 62% chance the Fed will lower rates in September, but there isn't a lot of conviction backing those positions. Michael Feroli, chief US economist at JPMorgan Securities wrote in a note to clients Wednesday that he foresees one cut this year, at the Fed's December meeting. UBS's senior US economist Brian Rose said that while the bank's base case still calls for 100 basis points of cuts starting in September, he sees risks skewed toward a later start to easing. And Bank of America economists led by Aditya Bhave wrote in a note on Wednesday that they aren't expecting any rate reductions this year. Uncharted Territory 'The Fed too is facing an uncharted territory,' said Bill Sterling, global strategist at GW&K Investment Management in Boston. 'We haven't had tariff hikes this large in modern history, and there isn't an easy model they can go to.' The S&P 500 is up 1.5% for the year after a stunning rebound from the brink of a bear market in April, when Trump unveiled his sweeping global tariffs. The gauge soared 19% from April 8, just before Trump paused the bulk of his levies, through the end of May on hopes that the trade war wouldn't turn out to be as bad as feared. But since then, the S&P has been pretty much stagnant, taking a few steps forward and a few steps back as each new headline rolls in. 'Long-term investors will be wise not to make abrupt shifts in portfolio allocations due to news headlines,' Sterling said. The challenge for investors is that the same dynamics that powered the S&P 500 to gains of more than 20% in 2023 and 2024 — the emergence of artificial intelligence, strong corporate fundamentals, and a resilient consumer — remain intact. But what's holding back optimism is everything else, the uncertainty around policy, geopolitics, slowing growth and creeping signs of stress at the bottom end of consumer spending. At their meeting this week, Fed officials downgraded their estimates for economic growth this year and lifted their forecasts for unemployment and inflation. Economic data hasn't offered much help either, with indications heading in divergent directions. A slew of figures pointed to early signs of the economy slowing down. US factory activity contracted in May for a third consecutive month. Industrial production declined in May for the second time in three months. A gauge of imports fell to a 16-year low. Job growth moderated. And May retail sales fell by the most since the start of the year. But that flies in the face of the latest reading in the consumer price index, a key inflation gauge, which showed US prices in May rose by less than forecast for the fourth month in a row, suggesting consumers have yet to feel the pinch of tariffs. Of course, those numbers can change quickly if higher levies set in and inflation jumps. All of which makes a hard road even tougher for traders trying to figure out how to position for the second half of 2025. 'The Fed has laid out its reaction function,' said Kevin Brocks of 22V Research. 'But investors will have to wait and see what the impact of tariffs on inflation actually is.' Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P. 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Yahoo
an hour ago
- Yahoo
Stock Market's Path Depends on Fed's View of What We Don't Know
(Bloomberg) -- For investors and traders trying to game out where the US economy, the stock market or interest rates are headed in the second half of 2025, good luck. There's simply too much uncertainty to be sure of anything right now. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Take it from Federal Reserve Chair Jerome Powell, who used variations of the word 'uncertain' nearly 20 times in his post-meeting press conference on Wednesday. Wall Street pros were looking to Powell and the Fed for clues about what's next in a world beset by risks — from escalating war in the Middle East to rising trade tensions between the US and China. But the answer they got was a resounding 'we don't know,' with the central bank remaining in wait-and-see mode before deciding whether it can safely start to lower interest rates. 'If anything, the Fed's read-and-react stance showed just how clueless everyone is right now,' said Scott Ladner, chief investment officer at Horizon Investments. 'As an investor, you cannot trade this, you cannot get ahead of it.' The S&P 500 Index is within 3% of a record high, but it's been holding tight in a narrow range lately. There have been just two sessions this month with moves of more than 1%, and the benchmark has barely budged over the past two weeks. It's been a surprisingly stagnant period considering oil has soared and the dollar has plunged on the global developments. Headline Swings The problem for equity traders appears to be a lack of clarity as sentiment changes from one headline to the next. You could see it in the stock market action late this week. On Thursday, which was a market holiday in the US, futures contracts on the S&P 500 sank more than 1% in the morning following reports that US officials were preparing for a possible strike on Iran in the coming days. Then, President Donald Trump signaled that he wanted to give diplomacy a chance, which halted the decline. And Friday morning Fed Governor Christopher Waller said he could see interest-rate cuts starting as soon as July, which sent S&P futures jumping into the beginning of the regular session. But those gains turned out to be short-lived as Iran and Israel traded missile attacks and news hit that the Trump administration is ready to crack down on semiconductor plants in China. After all the back-and-forth, the index closed down 0.2% on the day. 'The S&P 500 is not breaking out one way or another because we've got crosswinds,' Ladner said. Fed officials left interest rates unchanged this week, with the majority of voting members seeing at least two more quarter-point cuts this year. Those views are essentially guesses, however, because the pace of inflation in the coming months and the resilience of the labor market remain unknown in the face of mounting risks. 'No one holds these rate paths with a lot of conviction,' Powell said at his press conference. 'We expect a meaningful amount of inflation in the coming months, and we have to take that into account.' And Wall Street is positioning accordingly. A gauge of equity positioning fell this week, led by discretionary investors who went from slightly below neutral to more notably underweight, data compiled by Deutsche Bank AG strategists including Parag Thatte show. With that cut, aggregate equity positioning now sits in the middle of the bottom-half of its usual band, the data show. The mood among Wall Street prognosticators is equally mixed. Swaps traders are pricing in a roughly 62% chance the Fed will lower rates in September, but there isn't a lot of conviction backing those positions. Michael Feroli, chief US economist at JPMorgan Securities wrote in a note to clients Wednesday that he foresees one cut this year, at the Fed's December meeting. UBS's senior US economist Brian Rose said that while the bank's base case still calls for 100 basis points of cuts starting in September, he sees risks skewed toward a later start to easing. And Bank of America economists led by Aditya Bhave wrote in a note on Wednesday that they aren't expecting any rate reductions this year. Uncharted Territory 'The Fed too is facing an uncharted territory,' said Bill Sterling, global strategist at GW&K Investment Management in Boston. 'We haven't had tariff hikes this large in modern history, and there isn't an easy model they can go to.' The S&P 500 is up 1.5% for the year after a stunning rebound from the brink of a bear market in April, when Trump unveiled his sweeping global tariffs. The gauge soared 19% from April 8, just before Trump paused the bulk of his levies, through the end of May on hopes that the trade war wouldn't turn out to be as bad as feared. But since then, the S&P has been pretty much stagnant, taking a few steps forward and a few steps back as each new headline rolls in. 'Long-term investors will be wise not to make abrupt shifts in portfolio allocations due to news headlines,' Sterling said. The challenge for investors is that the same dynamics that powered the S&P 500 to gains of more than 20% in 2023 and 2024 — the emergence of artificial intelligence, strong corporate fundamentals, and a resilient consumer — remain intact. But what's holding back optimism is everything else, the uncertainty around policy, geopolitics, slowing growth and creeping signs of stress at the bottom end of consumer spending. At their meeting this week, Fed officials downgraded their estimates for economic growth this year and lifted their forecasts for unemployment and inflation. Economic data hasn't offered much help either, with indications heading in divergent directions. A slew of figures pointed to early signs of the economy slowing down. US factory activity contracted in May for a third consecutive month. Industrial production declined in May for the second time in three months. A gauge of imports fell to a 16-year low. Job growth moderated. And May retail sales fell by the most since the start of the year. But that flies in the face of the latest reading in the consumer price index, a key inflation gauge, which showed US prices in May rose by less than forecast for the fourth month in a row, suggesting consumers have yet to feel the pinch of tariffs. Of course, those numbers can change quickly if higher levies set in and inflation jumps. All of which makes a hard road even tougher for traders trying to figure out how to position for the second half of 2025. 'The Fed has laid out its reaction function,' said Kevin Brocks of 22V Research. 'But investors will have to wait and see what the impact of tariffs on inflation actually is.' Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P.
CNBC
3 hours ago
- CNBC
Easy returns cause big trouble for Amazon sellers, but return rates show signs of slowing
Returns on Amazon are free and easy for shoppers, but they're risky and expensive for the small businesses that sell a majority of the goods on the world's biggest e-commerce site. Returns have driven some sellers to exit the popular Fulfillment by Amazon program, while others told CNBC they'd like to leave the platform altogether. At the heart of the problem is a big rise in returns fraud, which has led to customers mistakenly receiving used products when they ordered something new. In two particularly egregious examples involving baby products described to CNBC, Amazon sent customers used diapers and a chiller with someone else's rotten breastmilk inside. "I really don't think that consumers understand how many small businesses are on Amazon and how their return habits affect small businesses and families like mine," said Rachelle Baron, owner of Beau and Belle Littles, which sells reusable swim diapers on Amazon. Baron said her business tanked after a return incident with Amazon. The e-commerce platform shipped soiled swim diapers to customers after the used baby products had been returned to Amazon, Baron said. "There was actually two diapers that were sent out that were poopy," she said. In 2024, nearly 14% of all U.S. retail returns were fraudulent, up from 5% in 2018, according to a report by the National Retail Federation. In total, the report found that returns cost retailers $890 billion in 2024. Amazon started charging sellers in its fulfillment program (FBA) a new fee in June 2024 for items that exceed certain return rate thresholds. Sellers who sign up for FBA rely on Amazon for logistics, including shipping, packing and returns. In September, a couple months after the fee went into effect, e-commerce group Helium 10 saw return rates for U.S. Amazon sellers drop nearly 5%. "It's forcing the seller to have higher quality listings and higher quality products," said Helium 10 General Manager Zoe Lu. Amazon has also started adding a warning label to some "frequently returned items," which could be contributing to the dip. However, the new fee may also be leading to rising prices. One survey by e-commerce analysis company SmartScout found that 65% of sellers said they raised prices in 2024 directly because of Amazon fee changes. Other sellers told CNBC returns fraud is the reason they've raised prices. In total, CNBC talked to seven Amazon sellers to find out how they're handling the rising cost of returns. "We're running at about just over 1% net profit on Amazon, totally due to fraud and return abuse," said Lorie Corlett, who sells Sterling Spectrum protective cases for hot wheels. She said her return rate is 4% on Amazon and only 1% on other marketplaces like Walmart. "It's really Amazon that's accountable at the end of the day. People would stop doing it if Amazon held them accountable." Amazon told CNBC it has no tolerance for fraudulent returns and that it takes action against some scammers. Those measures include denying refunds and requiring customer identity verification. Mike Jelliff sells professional music gear through his GeekStands brand on Amazon and eight other marketplaces. He said his return rate on Amazon is three times higher than the average he sees elsewhere. "On eBay, we're allowed to block specific customers out," Jelliff said. "But on Amazon, that customer is still allowed to repurchase from us." Jelliff showed CNBC the system of about 40 cameras he's installed in his Tyler, Texas, warehouse to track every outgoing item, incoming return and unboxing. He uses the images when filing appeals with Amazon, including when customers request refunds claiming they never receive an item. He keeps a blacklist of repeat offenders who commit this kind of fraud and those who return used and damaged items, which become a total loss for him. Amazon has made some improvements to its returns process, said Jelliff, who doesn't rely on FBA. This includes Amazon allowing small businesses to make multiple appeals when fighting a fraudulent return. Amazon has also let Jelliff opt-out of automatic return labels for items above $100 starting in 2023, and his return rate has been dropping since. Figuring out which returns are fraudulent and which are ready for re-sale is labor-intensive and item specific, experts said. That creates plenty of room for error. "Because it's such a large operation, things are missed," said Lu of Helium 10. "I think they're probably missed on the margins, but these stories are very impactful because it is such a reckoning for the brand." Ceres Chill founder Lisa Myers, who once relied on Amazon to handle returns for her business as part of FBA, has one of these stories. In 2023, Amazon sent one of Ceres Chill's products to a customer with someone else's rotten breastmilk inside, said Myers, adding that the customer wrote a review saying, "she will never forget that smell." "To have something, and I don't mean to be dramatic, but dangerous, somebody else's bodily fluids in your kitchen rotting in something that you had intended to use for your child is unacceptable," Myers said. "That's the moment I broke down crying and just sat down and thought, I have no idea how this could have happened." Myers said she left FBA after the incident, leaving behind benefits like having her products labeled with Amazon's Prime badge. "It hurts our business to not participate in Fulfilled by Amazon," Myers said. "It's just we're not willing to, we will never put profit over the safety and, frankly, mental health of our customers." Instead, Myers outsources all her returns to baby resell specialist Goodbuy Gear, which is on track to re-sell 200,000 returned baby products this year. Kristin Langenfeld started GoodBuy Gear when she was a new mom struggling to find a good quality, used jogging stroller. "We've spent the last nine years building out a database that has all of the products and the variations, the common issues, the recalls," Langenfeld said. "For some of these, there's 40 points that we inspect on the item itself, and it's really complicated." Langenfeld showed CNBC the process at her warehouse in Malvern, Pennsylvania, where each item is inspected for about 15 minutes and is typically handled by at least four employees. The resource intensive process is paying off. She says 33 new sellers signed up in 2024, three times more than the previous year. And with business growing 50% year-over-year, she's upgrading to a bigger warehouse in Columbus, Ohio. She was inspired to handle returns after visiting a major retailer's returns warehouse five years ago. "Taped on the floor were signs that said 'incinerate,' 'destroy,'" she said. Returns generated an estimated 29 million metric tons of carbon emissions in 2024, and 9.8 billion pounds of returns ended up in landfills, according to reverse logistics software provider Optoro. Amazon has faced criticism for destroying millions of pounds of unused products. In 2022, Amazon told CNBC it was "working towards a goal of zero product disposal," but wouldn't give a timeline for that ambition. Three years later, that goal is still in the works, with Amazon telling CNBC in a statement, "The vast majority of returns are resold as new or used, returned to selling partners, liquidated, or donated." In 2020, Amazon added two new options for sellers to re-home returns. "Grade and Resell" allows all U.S. FBA sellers to have Amazon rate the return and mark it as "used" before re-selling it. FBA Liquidation allows sellers to recoup some losses by offloading palettes of goods for re-sale on the secondary market through liquidation partners like Liquidity Services. There's also an FBA Donations program that's been around since 2019, allowing sellers to automatically offer eligible overstock and returns to charity groups through the non-profit Good360. Amazon told CNBC these seller programs give a second life to more than 300 million items a year. For shoppers wanting to keep returns from incineration or landfills, Amazon also has options. Amazon Resale has used and open-box goods, Amazon Renewed sells refurbished items and Amazon Outlet sells overstock. Daily deal site Woot!, bought by Amazon for $110 million in 2010, also sells scratched and dented items. Customers can also trade in certain electronics, like Amazon devices, phones and tablets, for Amazon gift cards or send them to the company's certified recycler. "I hope the change that we're able to make as a country is that we stop making crap," Langenfeld said. "We should make high quality products that are meant for resale."
