Dow tumbles after Fed predicts it will raise rates soon

A big question for many businesses as the economy recovers is where are the workers? One answer: they may be starting their own business. 

 Americans in 2021 are starting businesses are a record rate. As of May, 2.5 million new business applications have been filed for this year alone, not adjusted for seasonal swings, according to the Census Bureau. In just 5 months, that’s already more than half of the businesses formed in 2020 – a banner year for growth. Americans started 4.4 million new businesses in 2020, a stunning 24% jump from the year before and the biggest increase on record. 

Some of these entrepreneurs lost jobs during the pandemic, according to a report by Peterson Institute for International Economics looking at the unprecedented business formation. 

“Higher local unemployment rates predict increases in U.S. entrepreneurship during past downturns,” the report said. “The more limited opportunities in the wage sector may have incentivized entrepreneurship by necessity.” 

Others likely took advantage of the billions in government stimulus for both U.S. households and businesses. Even though no direct legislation directly supported new business formation, a May study looking at data at the state level found that the implementation of relief packages directly boosted start-up formation rates. 

Many Americans starting these businesses also likely saw a niche to fill during the pandemic. According to the Census data, some of the strongest growth has been in sectors like retail, transportation and warehousing, construction, and real estate. 

Treasury Secretary Janet Yellen told lawmakers on Wednesday that the Biden administration is not dismissing the resurgence of inflation as the US economy reopens from the pandemic.

"We're monitoring inflation very carefully and do take it very seriously," Yellen said during a Senate hearing on the Biden budget. "No one wants to return to the bad high inflation days of the '70s."

Yellen was responding to criticism from Republican Senator Chuck Grassley, who said he's very troubled by the Treasury secretary's "nonchalant" approach to inflation.

"As we know from the 1970s, once inflation takes off, getting it back under control can require very painful measures," Grassley said. "The early 1980s proved that."

The Volcker-led Fed was able to tame inflation only by raising interest rates so aggressively that it tanked the US economy.

Yellen stressed that prices should cool off soon.

"The current burst of inflation we're seeing reflects the difficulty of reopening an economy that's been shut down, seeing huge swings in spending patterns and is experiencing bottlenecks," Yellen said.

She added that the Biden administration is taking steps to deal with bottlenecks and defended the president's budget as "fiscally responsible."

US stocks were modestly higher early Wednesday ahead of the Federal Reserve’s monetary policy update.

Investors will focus on whether the central bank will change its tone on inflation after recent reports on key price indexes showed that inflationary pressures are alive and well.

A few minutes into the trading day, only the Nasdaq remains in the green, with the other two indexes having pared their gains.

In this morning's economic data, housing starts and building permits for May fell just short of analyst expectations.

Building permits came in at 1.7 million, about 50,000 below the consensus. Similarly, housing starts stood at 1.6 million, about 60,000 lower than analysts polled by Refinitiv expected.

Stocks are mixed ahead of the Federal Reserve’s monetary policy update.

Wall Street expects the Fed to keep rates near zero, but it will closely examine every word of the Fed's statement at 2 pm ET and Chairman Jerome Powell's press conference at 2:30 pm ET for signs that the Fed is easing its foot off the stimulus gas. Some investors expect the Fed to signal interest rates could rise sooner than expected to help combat inflation.

On Tuesday, all three major indexes finished in the red, just one day after the S&P 500 and the Nasdaq Composite both reached new all-time highs.

Here's where things stand as of 6:45 am ET:

JPMorgan Chase (JPM) is throwing its considerable weight behind efforts to root out racial bias in the appraisal of homes in America.

As part of a new bank-wide commitment to fight housing inequality, JPMorgan is for the first time outlining specific legislation that can fight appraisal bias, backing the study of innovative ways to value homes and promoting efforts to boost sorely needed diversity in the appraisal industry.

Beyond appraisals, America's biggest bank is promising to ease obstacles that make it harder for Black and Latinx households to buy homes, build wealth and access affordable housing.

Read more here.

US officials are seeking a $25 million fine from Air Canada, accusing the airline of failing to provide timely refunds to more than 5,000 passengers during the coronavirus pandemic.

The formal complaint is the first enforcement action that the Department of Transportation has announced against an airline since the pandemic upended the travel industry in the spring of 2020. Air Canada said it would dispute the allegations and believes the DOT argument "has no merit."

Read more here.