Surging inflation sets up high-stakes fight in Washington

This means pressure is growing for either the White House or the Fed to change course to prevent inflation from damaging the recovery and hurting households. Right now, between them, they’re still planning to pour more than $2 trillion into the economy.

As Biden debates whether to reappoint Powell, a Republican nominated by former President Donald Trump, the Fed is taking much of the heat.

Glenn Hubbard, the former top economic adviser to President George W. Bush, thinks the Fed risks losing control of inflation if it doesn’t pivot soon.

“It doesn’t add up,” Hubbard told CNN Business. “You don’t have to pour gasoline on a fire.”

Jason Furman, a Harvard economist who advised President Barack Obama, also believes the duty to act lies with the Fed.

“By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” Manchin tweeted Wednesday. “From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.”

Big picture: It’s not just inflation that matters, but how Americans feel about the future. If people think prices are going even higher, the situation could quickly spiral out of control, as they demand higher wages that in turn lead to more price hikes.

We’re not there yet. But as elevated inflation lingers, calls for the Fed or the White House to take their foot off the gas are growing. The question is, will either blink?

Elon Musk just sold $5 billion in Tesla stock

According to filings with US securities regulators, Musk exercised options he received as part of his pay package on Monday. He then sold nearly half of them, raising about $1.1 billion in cash to pay taxes relating to the transaction.

Musk sold more Tesla stock on Tuesday and Wednesday, according to additional filings. At an average price of some $1,071 per share, those sales were worth about $3.8 billion.

Back up: Musk, the world’s richest man, has a huge batch of options to exercise by August 2022. But purchasing those shares will result in a monster tax bill. That means he’ll need to sell some stock to cover those costs.

Over the weekend, Musk asked his Twitter followers whether he should sell a chunk of his shares, noting that “much is made lately of unrealized gains being a means of tax avoidance.” Some 58% of respondents said yes.

But as my colleague Chris Isidore has reported, the stunt may be tied to Musk’s looming tax burden, not his position on policy.

Per corporate filings, the motivation for Monday’s sale was “solely to satisfy [Musk’s] tax withholding obligations related to the exercise of stock options.” The other submissions did not disclose a particular reason for those sales.

Investor insight: Musk’s buying and selling may seem like inside baseball. But based on the size of his stake, it’s contributing to significant gyrations in the company’s stock. Shares fell 16% on Monday and Tuesday before bouncing 4% on Wednesday. They’re up another 2.7% in premarket trading Thursday.

Rivian is worth more than Ford

The Wall Street debut of Tesla rival Rivian was always going to be a buzzy moment. The numbers from the first day of trading were still shocking.

And enthusiasm didn’t wane once the stock hit the Nasdaq.

Remember: Rivian only started producing and delivering vehicles in September. The fact that it’s now worth more than so many legacy automakers, which are also investing billions in electric vehicles, is a sign of just how wild the situation has gotten on Wall Street, as flush investors look for fresh places to park their cash. The hype surrounding Tesla, which is now worth more than $1 trillion, is also helping.

“Investors are drawing a clear line between Rivian and Tesla,” said Asad Hussain, senior mobility analyst at PitchBook.

Shares are up another 5% in premarket trading Thursday.

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