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Happy Groundhog Day.

The head of the International Monetary Fund said the Federal Reserve and other major central banks face more risks by easing monetary policy too early rather than too late, but stressed that the Fed shouldn’t hesitate to cut interest rates. “Central banks need to be guided by data, not by exuberant expectations of markets,” IMF’s Kristalina Georgieva said. On Wall Street, economists at Goldman Sachs, Bank of America, and Barclays — among the last holdouts for the Fed to start lowering its benchmark rate as soon as March — have pushed back their forecasts for cuts and are now shifting their expectations to a second-quarter move.

Goldman’s warning | While the S&P 500 rallied overnight, Goldman Sachs warned that US equities “could go down a lot.” The firm’s tactical specialist Scott Rubner added the “pain trade is now lower,” pointing to elevated leverage levels, stretched positioning in futures, and a drop in liquidity. “We have all-time high problems for the US equity market and the bar is simply too high in February,” Rubner wrote. Goldman’s caution comes amid a slump in regional bank shares, with the KBW Regional Banking Index sliding for a third-straight day following New York Community Bancorp’s earnings shock.

Up & coming | Friday brings the monthly US employment report, this year’s first real check on the country’s labor picture. Investors will be closely watching this data after Fed Chair Jerome Powell’s remarks this week that the job market is “strong.” Overall, US data continues to support the soft-landing narrative, with jobless claims slowly climbing and manufacturing PMI remaining strong. There is also the University of Michigan consumer sentiment and factory orders to look out for.

Federal Reserve Chair Jerome Powell noted that interest rates are ‘well into restrictive territory.’ Photo: Jim Lo Scalzo | EPA/Shutterstock

Fed shouldn't take too long to conclude inflation is beaten

After the inflation surge of the past two years, you can't blame the Federal Reserve for taking its time to declare victory. On Wednesday, Chair Jerome Powell acknowledged inflation by some measures is down to its 2% target. He nonetheless set a relatively high bar to cutting interest rates in response. "It's a highly consequential decision to start the process," he told reporters Wednesday. Even with a small cut now, real rates would be highly restrictive. (The Wall Street Journal | Feb 1)

Fed keeps rates steady and inches closer to cutting in future

The Federal Reserve held interest rates steady for a fourth straight meeting and signaled an openness to cutting them, though Fed Chair Jerome Powell threw cold water on investors’ hopes that reductions would begin in March. The central bank’s policy-making Federal Open Market Committee showed it is in no rush to reduce rates, noting in a statement Wednesday that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.” (Bloomberg Economics - Central Banks | Jan 31)

US Treasury raises auction sizes through April, but no further increases seen in next few quarters

The US Treasury Department said on Wednesday it plans to continue gradually raising coupon auction sizes through April, but beyond that, it does not expect further increases for at least the next several quarters, given the current projected borrowing needs. In a statement, the Treasury announced total quarterly refunding of $121 billion to refund approximately $105.1 billion of privately held notes maturing on Feb. 15. (Reuters | Jan 31)

SEC's SPAC rules set to limit rosy projections that fueled mania

At the height of the SPAC boom, liberated startups capitalized on the ability to tout lofty goals about the years ahead without much of a risk of legal fallout. Now, the US Securities and Exchange Commission’s new rules tightening SPACs’ disclosure requirements are set to clamp down on such forecasts when they come into force as soon as later this year. In hindsight, some companies that merged with blank-check vehicles during the pandemic-era boom may wish they hadn’t talked up their fortunes so optimistically. (Bloomberg Markets | Jan 30)

SEC postpones vote on dealer registration rule for hedge funds

The Securities and Exchange Commission has delayed a vote on final rules that would require many hedge funds and proprietary trading firms to register as dealers. A vote on the measure is now scheduled for Feb. 6 rather than Jan. 31. The agency first proposed the regulations in March 2022, saying high-frequency trading firms that make up a significant portion of daily transactions in the US Treasuries market should be regulated as dealers. (Bloomberg Markets | Jan 30)

Flow chart of Volt Typhoon Simulated Attack. Illustration: txOne Networks

FBI shuts down China’s ‘Volt Typhoon’ hackers targeting US infrastructure

The FBI shut down a major China-backed hacking group that attacked hundreds of routers and had been working to compromise US cyber infrastructure, FBI Director Christopher Wray announced Wednesday at a House committee hearing. The group, code-named “Volt Typhoon,” hacked into hundreds of office and home office routers to allow the Chinese government to access their data, Wray told the House Select Committee on the Chinese Communist Party. He said the routers were outdated, which made them “easy targets.”

— CNBC

Navigating quantum-resistant cybersecurity: unveiling the essential steps ahead

Cryptography is the foundational discipline on which all data protection is built. Over the past two decades, the core technologies underlining cryptography standards have remained relatively constant, but 2023 has been a transformational year, especially in the field of post-quantum cryptography (PQC). An emerging technology widely recognized as the leading defense against the imminent cybersecurity threat posed by quantum computers, this year, PQC has skyrocketed out of the confines of academic research into practical, real-world implementation.

— Forbes

CISA warns of patched iPhone kernel bug now exploited in attacks

CISA warned on Wednesday that a patched kernel security flaw affecting Apple iPhones, Macs, TVs, and watches is now being actively exploited in attacks. Tracked as CVE-2022-48618 and discovered by Apple's security researchers, the bug was only disclosed on January 9th in an update to a security advisory published in December 2022. The company has yet to reveal if the vulnerability was also silently patched more than two years ago when the advisory was first issued.

— Bleeping Computer

Chasing shadows: In just a few months, millions of Americans will travel into the solar eclipse’s ‘path of totality.’ Illustration: Vito Ansaldi | WSJ

A total solar eclipse is coming April 8. How to plan our trip before it's too late.

Millions will travel to witness the total solar eclipse this spring; the next one visible from the contiguous US won’t occur until 2044. Seasoned eclipse-chasers have been planning their spring trips for years. But with a little last-minute hustling, the rest of us can still catch the astronomical event.

— The Wall Street Journal

'Dry January' is over: Some wine tips for the rest of the year

Climate change challenged winemakers in 2023, the hottest year in history, and will continue to do so for the foreseeable future. But there’s other big news in the wine world for 2024. And there are six major trends you may want to watch. 

— Bloomberg Pursuits

A famed analyst's final forecast is the fall of the US economy

Over his 54 years as a financial analyst, Richard X. Bove perfected the art of grabbing attention. Last week, a few hours after completing a spot on Bloomberg television, the 83-year-old announced his retirement. “The dollar is finished as the world’s reserve currency,” Mr. Bove said matter-of-factly, as he did when he predicted that China would overtake the US economy. No other analysts will say the same because they are, as he put it, “monks praying to money,” unwilling to speak out on the mainstream financial system that employs them.

— The New York Times