Fed raises rates by a quarter point

Coinbase, a publicly traded US crypto exchange, said it received a notice from the Securities and Exchange Commission warning of potential violations.

The SEC "Wells notice" is typically a precursor to enforcement action against a company. The notice from the securities watchdog didn't detail what assets were under scrutiny or what the possible violations consist of.

"Although we don’t take this development lightly, we are very confident in the way we run our business – the same business we presented to the SEC in order for us to become a public company in 2021," the company said in a statement. "If necessary, we welcome the opportunity for Coinbase and the broader crypto community to get clarity in court."

The company said its platform and services would continue to operate as usual.

The development is the latest move by an increasingly aggressive regulatory body to rein in crypto in the wake of multiple bankruptcies and scandals in the digital asset space last year. Calls for greater regulatory clarity and scrutiny have escalated since November, when crypto exchange FTX collapsed and set off an investor panic.

Senator Elizabeth Warren, a longtime critic of the Fed Chair Jerome Powell, spoke out against the central bank's latest rate hike.

"When the Fed uses language like we're trying to cool the economy or slow down the economy, the translation behind that is, 'we're trying to increase unemployment," Warren told CNN's Jake Tapper.

Asked whether she had ever advised President Biden to fire Powell, Warren declined to answers specifically but reiterated that she believes Powell shouldn't have been reconfirmed. "I think he's doing a really terrible job."

"What he's trying to do is get 2 million people laid off," she said, suggesting the Fed appears to be angling the economy toward a recession. "That's the direction he's trying to push this. I think he is a dangerous man to have in this job."

Earlier Wednesday, CNN reported exclusively that Warren, Senator Bernie Sanders and 10 other lawmakers are cranking up the pressure on the Federal Reserve following the collapse of Silicon Valley Bank.

The combined weighting of Apple and Microsoft in the S&P 500 has reached its highest level on record, at 13.3%, in part driven by turmoil in the banking sector that sent investors rushing to seek refuge for their cash. 

The two tech companies' combined weighting in the S&P 500 has grown over the past decade, powered by an industry-wide run that helped establish tech names as market leaders.

Apple and Microsoft's combined weighting was just 4.5% in 2009, according to data from Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

The rest of the famed FAANG crew — Facebook-parent Meta, Amazon, Netflix and Google-parent Alphabet — haven't fared as well.

While Amazon and Alphabet are among the companies with the largest market values in the S&P 500, their weightings still trail behind Apple's and Microsoft's.

Calling the rapid collapse of Silicon Valley Bank a "new phenomenon," US Treasury Secretary Janet Yellen said the circumstances that led to it could very well happen again.

"The Silicon Valley Bank situation showed an overwhelmingly rapid run on a bank. We've never seen deposits flee at this rate," Yellen said Wednesday during a Senate hearing on Financial Services and General Government.

"May depositors were tech firms that work with venture capitalists that also bank. It's essentially shouting fire in a movie theater," she said.

"Now in the world that we live in, although this was a small community and a disproportionate share of Silicon Valley bank deposits, this kind of thing may more readily happen."

Yellen said SVB's plight could mean that stress tests on banks and some of the assumptions that go into modeling the pace at which deposits might flee banks might need to be "updated and rethought."

"This is a new phenomenon. We haven't seen this before."

Stocks fell sharply on Wednesday after the Federal Reserve reaffirmed its dedication to tamping down inflation.

Markets had been fickle all day, before settling in the red as investors digested the central bank's quarter-point rate hike and looked for clues about the state of the banking sector meltdown. 

Investors were heartened by the Fed's strong hints that its aggressive pace of interest rate hikes would come to an end soon. Still, the central bank also warned that rate cuts aren't coming this year.

“The Fed just hiked rates two weeks after the biggest bank failures since 2008. If they aren't blinking now, there shouldn't be any doubt about their commitment to tame inflation," said Scott Duba, CIO at Prime Capital Investment Advisors.

A decline in regional bank stocks weighed markets down. The SPDR S&P Regional Banking ETF, which tracks small and midsized bank stocks, fell about 2.4%.

Investors continued to search for safer places to keep their cash. Gold futures rose, as did US oil benchmark West Texas Intermediate.

Wall Street is also watching for the Bank of England's own interest rate decision, due Thursday.

Treasury yields fell after jumping earlier in the day.

The Dow fell about 532 points, or 1.6%.

The S&P 500 slipped about 1.7%.

The Nasdaq Composite declined 1.6%.

Stocks fell Wednesday after Federal Reserve Chairman Jerome Powell warned of tight financial conditions.

The Dow declined about 0.7%. The S&P 500 fell about 0.5%. The Nasdaq Composite slipped about 0.3%.

Markets initially rose after the central bank announced it would raise rates by the expected quarter point, but wavered after Powell said it's unlikely the Fed will cut rates this year.

Powell largely declined to make projections about the banking turmoil but said the Fed needs to "strengthen supervision and regulation" of the financial sector.

The Fed is fighting inflation by slowing down the economy, and that means unemployment will rise.

By the Fed's own prediction, the unemployment rate will rise to 4.5% by the end of the year, up from 3.6% last month. That could translate to more than 1 million more Americans out of work by the end of 2023.

Fed Chair Jerome Powell said that's an uncertain but acceptable outcome: "We have to bring inflation down to 2%," he said in response to a question by CNN's Nicole Goodkind. "There are real costs to bring it down to 2%. But the costs of failing are much higher."

"If the central bank doesn't get inflation back in place ... you can have a long series of years where inflation is high and volatile. And it's hard to invest capital. It's hard for an economy to perform well. And we're looking to avoid that," Powell said.

In response to the collapse of two banks and nearly two weeks of banking turmoil, Fed Chair Jerome Powell said that "it's clear we do need to strengthen supervision and regulation," noting the central bank would doing an internal review.

"At a basic level, Silicon Valley Bank management failed badly," Powell said. "We now know that supervisors saw these risks and intervened ... My only interest is that we identify what went wrong here."

But Powell said the Fed wouldn't jump to conclusions, saying it would be "inappropriate for me at this stage to offer my views on what the answers might be."

What happened to the Fed sticking to its guns and fighting inflation at all costs? Well, the problems in the banking sector may be doing the Fed's work for it, negating the need for more rate hikes, Fed Chair Jerome Powell said Wednesday.

That's because banks may stop lending money to some borrowers, prevent some businesses from getting loans and issue fewer mortgages. That would slow the economy and potentially lead to layoffs and a housing market slowdown.

The Fed, in its fight against inflation, has been trying to do exactly that: Slow the economy. So rate hikes may not be necessary anymore to beat back rising prices. On the other hand, it may not have the desired effect. Powell said the Fed is watching closely.