Good day. Investors anxious about potential interest-rate increases by the Federal Reserve sold stocks and bonds across the board on Tuesday, while interest-rate futures markets indicated investors are betting on four to five rate increases this year, up from three to four Friday. Some analysts are even bracing for a 50 basis point rate increase in March, a move that would help impress upon markets that the Fed is serious about trying to rein in the surge in inflation, according to a former top staffer at the central bank. Meanwhile in another sign of inflationary pressures, crude prices rose to their highest level since the 2014 shale-induced oil crash, gathering momentum with geopolitical tensions threatening to knock supply.

Now on to today's news and analysis.

Top News

Stocks End Lower as Bond Yields Hit Two-Year High

U.S. stock indexes fell Tuesday and bond yields hit two-year highs as investors fretted over whether the Federal Reserve will raise interest rates more quickly and aggressively than expected.

All three indexes fell, with the S&P 500 sliding 1.8% and the Dow Jones Industrial Average shedding 1.5%. The Nasdaq Composite retreated 2.6%.

Meanwhile, the yield on the benchmark 10-year Treasury note ticked up to 1.866% -- its highest level in two years -- from 1.771% Friday.

With Rate Increases Looming, Investors Dump Shares of Money-Losing Companies

Oil Prices Hit Seven-Year High on Rising Geopolitical Tensions

Among the factors driving an oil-price rally are concerns that tensions in the Middle East and Europe will spill into energy markets by denting supplies from major crude producers, including Russia and the United Arab Emirates.

Oil Demand to Exceed Pre-Covid Levels in 2022, IEA Says

U.S. Economy

As Employers Scramble to Fill Jobs, Workers Relish Feeling of Power

The U.S. clocked 4.5 million worker resignations in November, the highest quit rate on record, and as the economy continues to rebound, workers are feeling empowered to seek new opportunities, knowing that they are more in demand than ever.

Bitcoin Sags in 2022 Under Weight of Stock Selloff and Fed Policy

The Federal Reserve is casting a shadow over cryptocurrencies. Like stocks, cryptocurrencies have extended a selloff to start the year because of expectations that the central bank will raise interest rates as early as March.

How to Navigate Rising Food Prices as Inflation Surges

Sticker shock is becoming a regular feature of many consumers' grocery store trips. Given it is unlikely to dissipate anytime soon, consumers should evaluate changes to their shopping habits, writes the Journal's J.J. McCorvey.

Key Developments Around the World

U.K. Inflation Hits 30-Year High, Prompting Expectations of Rates Rise

Consumer prices in the U.K. rose at the fastest annual rate in nearly three decades last month, strengthening the case for further increases in the Bank of England's key interest rate as the country emerges from the Omicron wave.

German Benchmark Bond Yield Positive for First Time Since 2019

Europe's most closely watched government bond yield turned positive for the first time since 2019, part of a broad readjustment by investors to rising inflation and the global economic rebound from the pandemic.

Debt Crisis in Sri Lanka Stokes Controversy Over Chinese Lending

A deepening debt crisis has left Sri Lanka struggling to pay for imports and has stoked political controversy over Chinese lending to the South Asian nation as part of Beijing's global Belt and Road infrastructure program.

Violent Crime, Rising Costs Put South African Mining in a Deep Hole

South Africa's $24 billion mining sector, which has provided the raw material for nearly half the gold bullion and gold jewelry ever produced, is waning under pressure from violent crime, growing costs and regulatory uncertainty, as well as tapped-out mines.

Financial Regulation Roundup

Some Lawmakers Push to Ban Stock Trading by Colleagues

Federal judges and central bank officials have faced stepped-up scrutiny over stock trades, due to concerns about possible conflicts of interest or access to nonpublic information. Now, the spotlight is turning to Congress.

Crypto.com Platform Halts Withdrawals After Suspicious Activity

Singapore-based online platform crypto.com suspended customer withdrawals for about 14 hours on Monday, after reports of unauthorized activity in the accounts of some users, the company said.

Big Tech and Foes Spar Over Bill to Curb Power of Internet Platforms

Big technology companies and their critics are ramping up lobbying efforts in Congress this week as a key Senate panel takes up legislation that seeks to blunt the market power of dominant tech platforms.

China Notifies Firms of Tougher Investment Rules for Big Tech

Forward Guidance

Wednesday (all times ET)

8:30 a.m.: U.S. Commerce Department releases December housing starts

9:15 a.m.: Bank of England's Bailey and Cunliffe testify on financial stability report

Wednesday

4 a.m.: Norges Bank policy rate decision

6 a.m.: Central bank of Turkey interest rate decision

7:30 a.m.: European Central Bank releases minutes of Dec. 15 and 16 governing council monetary policy meeting

10 a.m.: National Association of Realtors releases U.S. existing home sales report of December

6:50 p.m.: Bank of Japan releases Dec. 16-17 meeting minutes

Research

Former Fed Staffer: Real Possibility of 50 Basis Point Rate Increase

Speculation about the potential for a 50 basis point rate rise is rumbling through markets as the Federal Reserve makes a hawkish shift aimed at restraining high inflation. In a note Tuesday, Bill Nelson, a former top Fed staffer now at the Bank Policy Institute industry group, wrote that the central bank "needs to prepare the public for the possibility that they will tighten by 50 basis points in March." He added that such a big increase may be necessary because the Fed is behind the curve in getting inflation under control, and it could have some value in reshaping market expectations toward a monetary policy stance that is serious about lowering inflation. Even as Fed officials have broadly moved toward expecting a March rate rise and the prospect of a series of rate increases after that, none have offered clear support for a big opening rate salvo.

-- Michael S. Derby

Commentary

A Politicized Fed Endangers the Economy

The more improvisational and discretionary the Fed's conduct of monetary policy, the more difficult it is to withstand political pressures, so the central bank should move to a more systematic, predictable and transparent policy framework, Jeb Hensarling writes.

Mr. Hensarling served as a U.S. representative from Texas (2003-19) and chairman of the House Financial Services Committee (2013-19).

Basis Points

Factory activity in New York state leveled off in January from the previous month as demand for goods declined, according to data from a survey compiled by the Federal Reserve Bank of New York. Its Empire State Manufacturing Survey's general business conditions index fell to minus 0.7 in January from 31.9 in December, missing the 25.5 consensus estimate from economists polled by The Wall Street Journal. Readings above zero suggest regional manufacturing is expanding. (Dow Jones Newswires)

U.S. homebuilder confidence fell in January following four months of gains as growing inflation concerns and supply-chain disruptions outweighed solid consumer demand, according to the National Association of Home Builders. Its housing-market index, which gauges the single-family housing market, fell to 83 from 84 in December. A number above 50 indicates more builders view conditions as good than poor. (DJN)

Puerto Rico received court approval to leave bankruptcy through the largest restructuring of U.S. municipal debt ever, ending years of conflict with creditors as the U.S. territory confronts other stubborn economic problems.

An early indicator of global trade flows developed by the Journal points to a 0.76% decline in November from the previous month, adjusted for the seasonal ups and downs of exports of goods between countries, indicating the movement of goods across borders was leveling out as 2021 drew to a close. (DJN)

Housing starts in Canada dropped 22% in December from November, Canada Mortgage and Housing Corp. said. (DJN)

Malaysia's central bank is expected to maintain its overnight policy rate at 1.75% at its upcoming monetary policy committee meeting, according to all 11 economists polled by the Journal. Bank Negara Malaysia is is due to announce its policy decision tomorrow. (DJN)

Economic expectations in Germany have rebounded, lifting the ZEW economic research institute's index of economic expectations from 29.9 in December to 51.7 this month. Economists polled by the Journal had forecast a level of 32.5. (DJN)

(END) Dow Jones Newswires

January 19, 2022 13:58 ET (18:58 GMT)