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  • As Nvidia prepares to post results, these three Europe chip names are tipped for gains, JPMorgan says

    As Nvidia prepares to post results, these three Europe chip names are tipped for gains, JPMorgan says

    As Nvidia prepares to publish its much-anticipated full-year results this Wednesday, analysts at JPMorgan say VAT Group, ASML Holding, and ASM International all offer the strongest prospects for investors seeking to cash in on an upturn in the market for microchips. 

    JPMorgan analysts led by Sandeep Deshpande explained that while the slump in the microchip market is now showing signs of improvement, certain segments of the market — including those that supply chips to the auto and industrial sectors — are improving more slowly than others.

    The market for memory chips is, meanwhile, giving off signals of a bumper recovery, with inventory levels for the microchips used in computer storage devices currently sitting at lower than average seasonal levels, they said in a note to clients that published Monday. 

    As such, those Europe-based semiconductor companies least exposed to the autos and industrial sectors, which have the highest exposure to the market for memory chips, are set to see the biggest benefits in the near term, said Deshpande and the team.

    Swiss company VAT Group
    VACN,
    +0.37%
    makes vacuum valves used in chip manufacturing, while Dutch firms ASML Holding
    ASML,
    -0.10%

    ASML,
    -1.73%
    and ASM International
    ASM,
    -2.13%
    both make the lithography machines used to manufacture semiconductors. 

    Shares in all three European companies are up significantly over the previous 12 months — VAT has gained 51%, ASML 43% and ASM 81%.

    Notably, all three European companies are all focused on making the equipment used to manufacture the advanced microchips used in electronic products, including smartphones and personal computers. In JPMorgan’s view, this puts them in an advantageous position to benefit from any recovery. 

    At the same time, those companies most exposed to the auto and tech industries, including German firm Infineon Technologies AG
    IFX,
    -0.96%
    and Swiss firm STMicroelectronics
    STM,
    -0.29%    ,
    are set to continue trading at subdued levels — despite already being cheap — as the market remains challenging, they caution.

    Deshpande and the team noted that inventory levels for the chips used in the auto and industrial sectors currently sit at rates 38.7% higher than three-year seasonal averages in the fourth-quarter of 2023, marking a deterioration on the 31.1% rate in the third quarter of 2023.

    In contrast, inventory levels for memory chips improved significantly in the final three months of 2023, having fallen from rates 19% above seasonal averages in the third quarter to rates 1.7% below normal seasonal levels at the end of the fourth quarter of last year.

    For reference, ASML Holding, which was previously split off from ASM International in 1984 through a joint venture with Philips
    PHIA,
    -0.32%    ,
    is currently the world’s sole manufacturer of the extreme ultraviolet lithography machines used to make the advanced chips used in the AI industry. 

    ASM International continues to design the wafer processing machines used to make microchips. VAT Group produces vacuum valves that are needed to manufacture high tech chips in sterile environments to ensure they are not exposed to outside particles.  

    Nvidia
    NVDA,
    -0.06%    ,
    the world’s largest chip designer, will on Wednesday announce quarterly results, which investors are expected to pore over, seeking vital clues on the health of the global chip market amid much excitement around a possible AI driven boom. 

    Read: Nvidia’s earnings report could kill the momentum driving U.S. stocks higher, regardless of how it turns out.

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  • Are Cheerios and Quaker Oats safe to eat? Experts weigh in on new pesticide concerns. 

    Are Cheerios and Quaker Oats safe to eat? Experts weigh in on new pesticide concerns. 

    Should you pass on that morning bowl of cereal or oatmeal?

    That’s what some people may be asking in light of a study released this week by the Environmental Working Group, a Washington, D.C.-based nonprofit focused on agricultural and chemical-safety laws in the U.S. The study looked at the prevalence of a pesticide called chlormequat in oat-based food products, including cereals like Cheerios and Quaker Oats. 

    The EWG said it found detectable levels of the chemical in 92% of nonorganic oat-based foods purchased in May 2023.

    “Studies in laboratory animals show that chlormequat can cause harm to the normal growth and development of the fetus and damage the reproductive system,” Olga Naidenko, vice president at the EWG, told MarketWatch. Those risks, the EWG report noted, can include reduced fertility. 

    It has not been proven that the substance affects humans in the same way the studies cited by the EWG found it does lab animals, and there are other studies that have found chlormequat had no effect on reproduction in pigs or mice, or any impact on fertilization rates in mice.

    The EWG is still advocating that concerned consumers buy organic oat products as an alternative, however. 

    “Certified organic oats are, by law, grown without synthetic pesticides,” Naidenko said. 

    Representatives for General Mills
    GIS,
    +1.28%    ,
    the company that makes Cheerios, and PepsiCo
    PEP,
    -0.92%    ,
    which owns Quaker Oats, didn’t immediately respond to a request for comment. 

    “‘Any family raising kids or thinking about starting a family should do whatever they can do to avoid chlormequat. It’s not a safe product.’”


    — Charles Benbrook, a scientific consultant who focuses on pesticides

    The EWG’s recommendation to go organic was echoed by experts that MarketWatch contacted. 

    Charles Benbrook, a scientific consultant based in Washington state who focuses on pesticides, said he’s an oatmeal eater who chooses organic oatmeal “when I can get it.”

    Regarding chlormequat, Benbrook said, “It’s not a safe product.”

    “Any family raising kids or thinking about starting a family should do whatever they can do to avoid chlormequat,” he said.

    Melissa Furlong, an assistant professor of environmental health sciences at the University of Arizona, said it’s important to note that chlormequat is not the only pesticide that is found in oat-based cereals. There’s still much we need to learn about the health effects the substance might have on humans, she added.

    “That’s not to say it isn’t the worst [pesticide]. We don’t really know,” Furlong said. 

    Chlormequat has not been approved for use on food crops grown in the U.S., according to the EWG, but it can be found in oats and oat products from other countries. Under the Trump administration, the Environmental Protection Agency started allowing imports of such products into the U.S., the EWG noted, which is why chlormequat can be found in some cereals sold in this country.

    The EPA is considering approving chlormequat for use on crops grown in the U.S., according to the agency’s website. In a call for public comment on its proposed decision, the agency said, “Based on EPA’s human health risk assessment, there are no dietary, residential, or aggregate (i.e., combined dietary and residential exposures) risks of concern.”

    The EPA didn’t respond immediately to a request for comment.

    For her part, Furlong said that while she usually buys organic oat products, she isn’t rigid about it — and she might still buy the occasional box of Cheerios.

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  • Trump is backed further into a financial corner after losing control of his company

    Trump is backed further into a financial corner after losing control of his company

    With Donald Trump’s legal liabilities growing and a presidential campaign to run, losing control of his company couldn’t have come at a worse time.

    After a New York judge ordered the Trump Organization to pay $364 million in penalties and barred the former president from any role in running a business in New York state for three years, Trump now finds himself backed further into a financial corner with fewer options for how to maneuver.

    “It will have such an enormous impact on the operation of his business,” said Randy Zelin, a professor of law at Cornell University and a veteran criminal defense attorney with experience in complex financial matters. “But it will also provide a strong basis for an appeal.”  

    New York Attorney General Letitia James had asked New York State Supreme Court Justice Arthur Engoron to levy a $370 million financial penalty against the Trump Organization and also to ban Trump and his children Ivanka, Donald Jr. and Eric Trump from running any company in the state of New York, where his real-estate empire has long been based.

    Engoron’s ruling barred Donald Trump Jr. and Eric Trump from being involved in running any business in the state for two years. The judge also ordered that former U.S. District Court Judge Barbara Jones, who has been serving as an independent monitor of the Trump Organization since 2022, continue in that role with expanded powers for the next three years. The ruling also ordered that an independent compliance officer be appointed within 30 days.

    “The Trump Organization shall be required to obtain prior approval — not, as things are now, subsequent review — from Judge Jones before submitting any financial disclosure to a third party, so that such disclosure may be reviewed beforehand for material misrepresentations,” the ruling read. 

    The outcome of the civil trial sat solely in Engoron’s hands, and in September, he issued a summary judgment essentially ruling in favor of James’s arguments that the Trump Organization had engaged in fraud for years by repeatedly misstating the value of assets to lenders and insurance companies. 

    The judgment is the latest in a string of legal and financial blows that the former president has faced and that have already had an impact on his presidential campaign.

    Trump has incurred $76 million in legal costs over the past two years stemming from the wide array of criminal and civil prosecutions he faces. More than $27 million of the money raised in the last six months of 2023 to support his presidential campaign has instead been used to cover his legal costs, according to campaign-finance filings.

    A report by Bloomberg earlier this week suggested that Trump may face a cash crunch caused by his ballooning legal costs as early as this summer, just as the presidential race will be heating up.

    Last month, a federal jury ordered Trump to pay $83.3 million in damages for defaming the writer E. Jean Carroll, whom he had attacked online after she had accused him of raping her in a department-store dressing room in the 1990s. He had earlier been hit with a $5 million verdict in a state case on similar charges.

    Trump has vowed to appeal the verdicts and denied raping Carroll, but in order to appeal, he will be required to put up bonds for the full award amounts. That means he would need to either get a bank to back him or to pledge collateral — like a real estate asset — to secure the bond.

    But without full control of his real-estate empire, Trump will likely find it harder to line up financing or use his assets as freely as before. 

    Under the terms of Engoron’s ruling, Trump will no longer be able to make any moves involving assets held by the Trump Organization without the approval of the court-appointed monitor.

    Even pledging his assets as collateral for the bond that he would be required to post in order to file an appeal would be complicated by the imposition of a monitor. 

     “When you lose control of your company, you lose control of who is going to be paid and how much they will be paid. All the money will, first and foremost, be used to operate the business, and how much goes to Trump and his children becomes a secondary concern,” Zelin said.

    Add to that the mounting legal costs for multiple criminal cases being brought against him — on charges related to Jan. 6 as well as charges of mishandling classified documents, election fraud, racketeering and illegally paying hush money to women who claimed they’d had affairs with him — and Trump finds himself in a worsening financial bind.

    So far, the former president has managed to cover many of his legal costs through donations from his political supporters, but that means that money won’t be available to fund his campaign for president. At the end of the year, President Joe Biden’s re-election campaign had about $46 million cash on hand, while Trump’s campaign had $33 million, Federal Election Commission filings show. Some $50 million held by Trump’s political action committees has already been used to cover his legal bills. 

    Regarding the properties held by the Trump Organization, while Trump has been able to refinance many of the loans underlying his bigger real-estate holdings, pushing their maturity dates back several years, he still has a stake in some high-profile buildings that have debt coming due in the next few years.

    With the court-appointed monitor part of the equation, it might now be more difficult for Trump to secure new debt in order to refinance those buildings, and that could even technically trigger defaults, depending on how the loan covenants were written.

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  • Import prices climb 0.8% in January, up 0.7% minus fuel

    Import prices climb 0.8% in January, up 0.7% minus fuel

    Story developing. Stay tuned for updates here.

    …

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  • Eurozone Industrial Production Unexpectedly Expands Amid Signs Recovery for Sector

    Eurozone Industrial Production Unexpectedly Expands Amid Signs Recovery for Sector

    By Ed Frankl

    Eurozone manufacturing is showing signs of life again after industrial production jumped unexpectedly in December, further signaling that the recent slump in manufacturing in the bloc may be coming to a close.

    Total production rose on 2.6% on month in December, according to figures published Wednesday by European Union statistics…

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  • Home buyers thought mortgage rates were finally going to go down. Why hasn’t it happened yet?

    Home buyers thought mortgage rates were finally going to go down. Why hasn’t it happened yet?


    Why are mortgage rates still so high?

    After a year of mortgage rates near 8%, home buyers are eager for good news. Some forecasters have buoyed their hopes, estimating that the rate on the 30-year mortgage will drop to 6% or lower this year. 

    But rates have not fallen by much thus far. The 30-year rate is currently averaging 6.64%, according to Freddie Mac. That’s despite the fact that the U.S. Federal Reserve hasn’t raised its benchmark interest rate since July 2023 and signaled in December that it would cut that rate in 2024. Meanwhile, economists in the real-estate sector have been anticipating a drop in mortgage rates since last fall.

    “Homebuyers may be feeling like the lower mortgage rates they’ve been promised in 2024 are not materializing,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. In a recent survey of Americans’ feelings about the housing market, 36% of respondents said they expect mortgage rates to fall in the next 12 months.

    While the Fed doesn’t set mortgage rates, it can influence them, just as it influences the overall U.S. economy through monetary policy. But even though the central bank has hit the brakes on tightening monetary policy, with the economy giving off mixed signals of strength and weakness, the timing of anticipated cuts to the benchmark rate remains unclear.

    That in turn creates uncertainty about when mortgage rates will drop enough to “unfreeze” the housing market. Home buyers are probably going to have to wait until the Fed acts definitively before they see those lower rates.

    The effect of a strong economy

    The strength of the U.S. economy is one reason mortgage rates have not yet fallen much, economists say. The job market is still hot, and inflation remains higher than the Fed’s goal, which is why the latest read on inflation, out Feb. 13, will be so closely watched. The fact that rates haven’t fallen this year is “a result of uncertainty about the economy and the timing of the Fed’s rate cuts,” Sturtevant said.

    “The strong job market is good news for the spring buying season, as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, told MarketWatch.

    Another reason mortgage rates are still high is that lenders are trying to protect themselves against lower rates in the future, Cris deRitis, deputy chief economist at Moody’s Analytics, told MarketWatch. If rates fall, lenders run the risk that a borrower will pay off a loan early by refinancing. That would limit how much in interest that lender could expect to make.

    “In an odd sort of way, then, the expectation that mortgage rates will be lower in the future can lead lenders to increase rates today to compensate for the prepayment risk,” deRitis said. 

    Lower rates, more competition among buyers

    So when can prospective buyers expect mortgage rates to fall significantly? 

    “Homebuyers should expect mortgage rates to move lower as we head through 2024,” Sturtevant said. While Fannie Mae expects rates to fall below 6% by the end of the year, other economists, like Fratantoni, expect the 30-year rate to finish the last quarter of 2024 at 6.1%.

    But even if rates do fall, that won’t necessarily mean buyers will be better able to afford a home, because a drop in rates could heat up competition for homes even as it boosts buyers’ purchasing power.

    “There is still very low inventory in the market, and buyers need to act quickly when they find the right home for them,” Sturtevant said.

    For the many homeowners who currently have a mortgage rate below 4%, rates stuck in the 6% range may be leading them to put off plans to sell their home and buy a new one.

    But it’s worth noting that since 2000, rates on 30-year mortgages have ranged from a high of about 8.62% to a low of 2.81%, averaging about 5% over that span. And compared with the historical average of the 1970s, which was 7.7%, the current rates in the 6% rage are not that high, deRitis noted.



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  • Amazon’s stock just racked up its highest close in more than two years

    Amazon’s stock just racked up its highest close in more than two years


    Amazon.com Inc. shares continued their charge higher Friday, securing their highest close in more than two years.

    The e-commerce giant’s stock advanced 2.7% in Friday’s session to finish the day at $174.45. That was the best ending level since Dec. 9, 2021, when Amazon’s stock
    AMZN,
    +2.71%
    closed at $147.17, according to Dow Jones Market Data.

    Don’t miss: Is Meta now a value stock?

    Amazon briefly surpassed Alphabet Inc.
    GOOG,
    +2.04%

    GOOGL,
    +2.12%
    as the third most valuable U.S. company by market capitalization last week, though it’s since fallen back to the No. 4 spot. Still, the recent momentum for Amazon shares has been enough to help the company hold down a place in the top four even as Nvidia Corp.
    NVDA,
    +3.58%
    nips at its heels.

    Alphabet finished Friday’s session with a $1.86 trillion market cap, while Amazon’s was $1.81 trillion and Nvidia’s was $1.78 trillion.

    Wall Street had a mixed reaction to earnings from big technology companies this quarter, but Amazon’s results were among those that were well received.

    See also: Amazon says the ‘magic words.’ They spurred a $130 billion market-cap boost.

    “Overall the overhangs which kept a lid on AMZN shares — e-commerce deceleration in 2021, e-commerce deceleration and margin compression in 2022 and AWS deceleration in 2023 — will have dissipated throughout 2024,” UBS analyst Stephen Ju wrote in a note to clients following those results.

    The company has been a huge driver of earnings growth for the S&P 500 consumer discretionary sector, as its quarterly earnings per share grew to $1 in the latest quarter from 3 cents a year before. The consumer discretionary sector is now expected to post 33% growth in EPS for the fourth quarter, according to FactSet, but without Amazon, that would swing to a decline of about 1%.



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  • Barclays to buy retail banking arm of supermarket chain Tesco for £600 million

    Barclays to buy retail banking arm of supermarket chain Tesco for £600 million


    Tesco on Friday said it was selling the retailing banking business of Tesco Bank to Barclays for £600 million initially, and then another £100 million after the settlement of certain regulatory capital amounts and after transaction costs.

    The U.K. supermarket chain said it will use majority of a combined £1 billion, which also includes a special dividend previously announced from Tesco Bank, for a share buyback.

    It will retain insurance, ATMs, travel money and gift cards, that on a proforma basis account for roughly £80 million to £100 million in operating profit, and said the deal is mildly accretive to earnings per share.

    Barclays said it’s acquiring credit cards, unsecured personal loans, deposits and the operating infrastructure that includes £8.3 billion of unsecured lending balances with a credit quality consistent with its existing U.K. portfolios. The business it’s buying had an adjusted operating profit of approximately £85 million in the 12 months ended February 2023.

    Barclays also will enter into an exclusive strategic partnership with Tesco for an initial period of 10 years to market and distribute credit cards, unsecured personal loans and deposits using the Tesco brand, paying £50 million per year.

    Tesco
    TSCO,
    +0.89%
    shares have dropped 3% this year while Barclays
    BARC,
    -1.02%
    shares have declined by 7%.



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  • British American Tobacco Swings to Pretax Loss on U.S. Cigarette Write-Down — Update

    British American Tobacco Swings to Pretax Loss on U.S. Cigarette Write-Down — Update


    By Joe Hoppe

    British American Tobacco said it swung to a pretax loss, driven by a previously reported write-down of its U.S. cigarette brands, but backed forecasts for growth in 2024.
    

    

    The FTSE 100 cigarette maker–which houses the Kent, Dunhill and Lucky Strike brands–said pretax loss for 2023 was 17.06 billion pounds ($21.54 billion) compared with a profit of GBP9.32 billion a year prior. It said the swing was largely driven by an impairment of GBP27.6 billion. Of the impairment, GBP27.3 billion relates to pressure on some of its traditional cigarette brands in the U.S., as it shifts focus to smokeless products, it said.
    

    BAT said in early December that its performance in the U.S. had been hindered by smokers switching to cheaper, nonpremium brands and a rise in illegal disposable vapes. The brands being written down included Newport, Pall Mall, Camel and Natural American Spirit, a company spokesperson said at the time.
    

    Adjusted profit from operations edged up to GBP12.465 billion from GBP12.41 billion in 2022. Despite the growth, it skirted under a company-provided consensus forecast of an adjusted operating profit of GBP12.595 billion.
    

    New categories revenue rose to GBP3.35 billion from GBP2.89 billion, missing a forecast of GBP3.46 billion, according to company-provided consensus.
    

    Revenue was GBP27.28 billion compared with GBP27.66 billion, dragged by the sale of its businesses in Russia and Belarus, foreign-exchange pressures and lower cigarette volumes, and partially offset by the increased new categories revenue. Revenue was forecast at GBP27.60 billion, according to consensus provided by the company.
    

    BAT said global tobacco industry volume is expected to decline around 3% in 2024, and it backed prior guidance for low single digit organic revenue and adjusted operating profit growth for the year.
    

    The company said it will invest this year to strengthen its U.S. business, accelerate innovation and enhance its capabilities, which it said would weight its performance toward the second half.
    

    “Thereafter, we will progressively build to deliver 3-5% organic revenue, and mid-single digit adjusted organic profit from operations growth by 2026 on a constant currency basis. We are committed to continuing to reward shareholders with strong cash returns throughout this period,” Chief Executive Tadeu Marroco said.
    

    The board declared a dividend of 235.52 pence a share, up from 230.9 pence.
    

    Write to Joe Hoppe at joseph.hoppe@wsj.com
    

    

    


    

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  • 
		
		
    
			
    Mattel announces cost cuts after fourth-quarter results miss expectations
    
			
    Mattel announces cost cuts after fourth-quarter results miss expectations
    
			
     
    

    

    

    Toy maker Mattel Inc. on Wednesday reported fourth-quarter results that missed expectations, with the company saying it plans to cut costs this year while continuing to buy back stock.
    

    The cost cuts would follow layoffs by rival Hasbro Inc.
    
        HAS,
    
        +1.34%
    
       amid a slowdown in demand for toys. They also come as other companies over the past several weeks have announced layoffs and plans to tighten up expenses, as investors seek out bigger profit margins. 
    

    

    Shares of Mattel
    
        MAT,
    
        +1.57%
    
       were up 1.5% after hours.
    

    “Looking ahead, we are launching a new cost-savings program focused on profitable growth and expect to improve profitability and continue share repurchases in 2024,” Mattel Chief Financial Officer Anthony DiSilvestro said in the company’s earnings release. 
    

    Mattel — known for its Barbie and Hot Wheels toys and, increasingly, its efforts to turn them into content — reported fourth-quarter net income of $147.3 million, or 42 cents a share. That compares with net income of $16.1 million, or 4 cents a share, in the same quarter in 2022. 
    

    Adjusted for things like severance, product recalls and changes to deferred tax assets, Mattel earned 29 cents a share. Sales rose 16% to $1.62 billion. 
    

    Analysts polled by FactSet expected Mattel to report adjusted earnings per share of 31 cents, on revenue of $1.65 billion. 
    

    “Execution on our toy strategy was strong and we made meaningful progress in entertainment across film, television, digital and publishing,” Chief Executive Ynon Kreiz said in the company’s earnings release. 
    

    “We ended 2023 with the strongest balance sheet we have had in years, putting us in an excellent position to execute our strategy to grow Mattel’s IP-driven toy business and expand our entertainment offering,” he continued.
    

    Mattel reported earnings after the key holiday-shopping season, and as analysts try to gauge the sales impact from the success of the “Barbie” movie released last summer. Mattel executives have said they want to make more films based on some of its other popular toys, and turn “Barbie” into a film franchise. 
    

    However, toy demand has been cooler recently, thanks to two years of inflation-fueled higher prices for goods and necessities. Retailers have taken a cautious approach toward stocking their shelves, after getting caught two years ago with too many toys and electronics that people didn’t want.
    

    The Wall Street Journal reported this month that activist investor Barington Capital had taken a stake in Mattel, adding that Barington believed the company should consider “pursuing strategic alternatives” for its Fisher-Price and American Girl businesses.
    

    Bank of America analysts on Tuesday said Mattel and Hasbro were among the companies that were “most at risk of direct impact” from shipping disruptions in the Red Sea. Yemen-based Houthi fighters opposed to Israel’s war in Gaza have attacked ships in the area, forcing lengthy detours and driving up shipping costs. Mattel, the analysts noted, got around 24% of its total sales from the Europe, Middle East and Africa regions in 2022.
    

    During a conference in December, Kreiz said he believed in the long-term growth of the toy industry. But he said that after a jump in growth between 2019 and the pandemic, 2023 would likely be tamer. 
    

    “We believe 2023 will be back to normal in terms of shopping patterns and consumer behavior,” he said. “And also even inventory at the retail level and at our level is now reverting back to historical norms.”
    

    

    


    

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  • 
		
		
    
			
    Alibaba’s stock gains after earnings as company boosts buyback program
    
			
    Alibaba’s stock gains after earnings as company boosts buyback program
    
			
     
    

    

    

    Alibaba Group Holding Ltd.
    
        BABA,
    
        +4.82%
    
       fell short on adjusted earnings for its latest quarter but still was seeing its stock gain premarket Wednesday as the Chinese e-commerce player boosted its buyback authorization by $25 billion. The company reported fiscal third-quarter net income of 10.7 billion renminbi ($1.5 billion), or 5.65 renminbi per American depositary share, down from 46.8 billion renminbi, or 17.91 renminbi per ADS, in the year-earlier period. On an adjusted basis, Alibaba earned 18.97 renminbi per share, down from 19.26 renminbi a share a year before, while analysts were modeling 19.12 renminbi. Revenue rose to 260.3 billion renminbi from 247.8 billion renminbi and matched the FactSet consensus view. Cloud revenue increased 3% from a year before, while revenue from the Taobao and Tmall e-commerce platforms was up 2%. Alibaba called out strong growth in order volume and the number of transacting buyers but noted that average order value fell. 
    

    


    

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  • 
		
		
    
			
    Disney, Fox and Warner Bros. team up to launch new sports streaming service
    
			
    Disney, Fox and Warner Bros. team up to launch new sports streaming service
    
			
     
    

    

    

    Walt Disney Co.’s ESPN, Fox Corp. and Warner Bros. Discovery Inc. are teaming to create a joint sports streaming service. 
    

    The as-yet unnamed service, which could be available as early as the fall and offer a sort of Hulu model for sports, comes amid an explosion in sports-streaming rights and audiences. 
    

    

    The service would essentially be a skinny bundle of the companies’ linear channels, including ESPN, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, ABC, Fox, FS1, FS2, BTN, TNT, TBS, truTV, as well as the ESPN+ streaming service.
    

    “The launch of this new streaming sports service is a significant moment for Disney
    
        DIS,
    
        +2.73%
    
       and ESPN, a major win for sports fans, and an important step forward for the media business,” Disney Chief Executive Bob Iger said in a statement late Tuesday. “This means the full suite of ESPN channels will be available to consumers alongside the sports programming of other industry leaders as part of a differentiated sports-centric service.”
    

    Added Warner Bros.
    
        WBD,
    
        
    
       CEO David Zaslav: “This new sports service exemplifies our ability as an industry to drive innovation and provide consumers with more choice, enjoyment and value and we’re thrilled to deliver it to sports fans.”
    

    Each company will own one-third of the platform, according to Disney, in a deal reminiscent of the original Hulu, which started off as a joint venture between ABC, Fox and NBCUniversal.
    

    The service will have a new brand with an independent management team, and will be available to bundle with Disney+, Hulu and Max subscriptions.
    

    “We’re pumped,” Fox
    
        FOX,
    
        +0.55%
    
       CEO Lachlan Murdoch said. “We believe the service will provide passionate fans outside of the traditional bundle an array of amazing sports content all in one place.”
    

    More details, including pricing, will be announced later.
    

    Prominently missing from the deal are Comcast Corp.
    
        CMCSA,
    
        -1.00%    ,
    
       which owns NBCUniversal and its sports lineup that includes NFL football and the Olympics, and Paramount Global
    
        PARA,
    
        -0.21%    ,
    
       which owns CBS — which carries the NFL and college football, among other sports.
    

    The new service will showcase thousands of high-profile sporting events and include all four major sports leagues — the NFL, NBA, MLB and NHL — as well as college football and basketball, golf, tennis, cycling, soccer and UFC.
    

    Shares of Disney were down 1% in extended trading Tuesday, while Fox shares jumped 6% and WBD gained 3%.
    

    Mike Murphy contributed to this report.
    

    

    


    

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  • 
		
		
    
			
    German Manufacturing Orders Unexpectedly Soar on Aircraft Purchases
    
			
    German Manufacturing Orders Unexpectedly Soar on Aircraft Purchases
    
			
     
    

    

    

    By Ed Frankl
    

    German manufacturing orders jumped unexpectedly in December, driven by bumper aircraft purchases, although excluding larger orders they still fell, reflecting a difficult environment for the sector.
    

    Orders were 8.9% higher than the previous month, German statistics office Destatis said Tuesday, flipping expectations that they would fall 0.5%, according to a consensus of economists polled by The Wall Street Journal.
    

    

    It reverses many of the losses of previous months, including a 4% decline in October and a 11% dive in July, which were at the time seen as indicative of a manufacturing slump in Germany. On year, orders in December were 2.7% higher than the same month in 2022.
    

    However, the intake was swayed by large-scale orders, in particular of aircraft, likely swelled by Airbus orders, according to Destatis. The airline manufacturer received 807 orders in the month.
    

    For aircraft, ships and trains, incoming orders were more than twice as high in December as November. Metal products and electrical equipment orders also rose by double-digit percentages.
    

    However, in the country’s key car industry, orders fell 15%, while they also dipped in mechanical engineering and in the chemical industry, according to the data. Excluding major purchases, orders fell by 2.2% on month.
    

    Symbolizing Germany’s still-stuttering manufacturing base, orders were 5.9% lower in the whole of 2023 compared with 2022, Destatis said, amid a global slump in demand and tight financing conditions.
    

    Write to Ed Frankl at edward.frankl@wsj.com
    

    

    


    

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  • 
		
		
    
			
    Small businesses are paying 100%+ of profits to Uncle Sam after tax-law change
    
			
    Small businesses are paying 100%+ of profits to Uncle Sam after tax-law change
    
			
     
    

    

    

    Small businesses in sectors like software and manufacturing are panicking over the expiration of a critical tax deduction that they say could lead to mass layoffs and business closures, unless Congress acts quickly to amend the law. 
    

    “This is a life-and-death scenario for small software companies,” Michelle Hansen, co-founder of the geocoding company Geocodio, told MarketWatch. 
    

    

    The tax change that Hansen and other software executives are taking issue with was signed into law by President Trump in 2017, as part of a larger tax overhaul that slashed the top corporate tax rate from 35% to 21%.  
    

    But in order to satisfy Senate budget rules and pass the law with only Republican votes, the bill could not increase the budget deficit over a 10-year window. 
    

    So lawmakers included a provision that, beginning in 2022, drastically reduced how much research-and-development spending a business could deduct from their annual revenue to determine taxable income.
    

    The change penalizes certain industries like software and information technology — where engineer salaries are often classified as R&D expenses — as well as manufacturing and pharmaceuticals
    
        IHE.
       
    

    IntervalZero CEO Jeff Hibbard, whose Massachusetts-based company designs and sells software for installation on precision machines like semiconductor manufacturers, told MarketWatch that he has had to tap into company savings for the past several years in order to avoid laying off engineers. 
    

    He said that his firm brings in about $9 million in revenue annually with expenses of $8 million — but 60% of those expenses come in the form of engineer salaries, which can only be deducted from taxable income over a five-year period because the IRS treats it as R&D. 
    

    He said that after taxes consumed all his profits in 2022, he had to pay an additional $800,000 to Uncle Sam, and an additional $600,000 for the 2023 tax year. 
    

    “We’ve had to do a hiring freeze and postpone projects” in a cutthroat industry where technology progresses rapidly, Hibbard said. “We’ve been in existence for 15 years. For the first 14, we always hired additional people. Now we have a hiring and salary freeze.” 
    

    The House of Representatives voted last week 357-70 to restore full expensing for R&D as part of a $79 billion tax package that boosted the child tax credit and extended other business tax breaks. 
    

    The bill now heads to the Senate, which already has its hands full debating immigration and national-security issues, and analysts say election-year politics could thwart its passage in 2024. 
    

    Henrietta Treyz, director of economic-policy research at Veda Partners, gave just a 10% chance of the bill passing the Senate in a recent note to clients. 
    

    “This year’s effort to pass a tax package has been more robust than the effort we saw in 2022 and 2023,” she wrote. Treyz added, however, that “the competing need to pass border reform and Ukraine/Israel aid, and general dysfunction in Washington keep us pessimistic that we’ll see a bipartisan economic-stimulus package come out of Congress this year.”
    

     On top of Republicans not wanting to give President Joe Biden a victory that would provide tax relief for businesses and families, Senate Republicans could decide to drag their feet on the bill in the hope that they’ll retake the chamber next year and can play a bigger role in the process, according to Owen Tedford, policy analyst at Beacon Policy Advisors. 
    

    “The critical member to watch is Senator Mike Crapo [of Idaho], the top Republican on the Senate Finance Committee,” Tedford wrote. “Crapo has not outright opposed the bill but has raised policy concerns and has expressed a desire to have a chance to amend it.” 
    

    Political considerations may be dictating the bill’s fate in Washington — but some business owners fear they don’t have the wherewithal to wait until next year for the problem to be fixed. 
    

    Benjamin Bengfort, co-founder and CEO of Iowa-based software firm Rotational Labs, told MarketWatch that he had to lay off workers last year after his 2022 tax bill rose by 438%. 
    

    He noted that even demand for his products has taken a hit because of the change in the law, because his services can count as an R&D expense for his customers, too. 
    

    “So it is [between] a rock and a hard place for us, no matter how you look at it,” Bengfort said. “This is an existential threat for software engineering companies.”
    

    Andrew Keshner contributed.
    

    

    


    

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  • 
		
		
    
			
    McDonald’s misses revenue target as it cites impact from Middle East war
    
			
    McDonald’s misses revenue target as it cites impact from Middle East war
    
			
     
    

    

    

    McDonald’s Corp.’s stock fell 1.3% in premarket trading on Monday after the fast-food giant missed Wall Street analysts’ estimates for revenue and same-store sales, while citing an impact from war in the Middle East.
    

    The global fast-food giant said it expects “macro challenges” to persist in 2024.
    

    McDonald’s
    
        MCD,
    
        -0.35%
    
       said its fourth-quarter net income rose by 7% to $2.04 billion, or $2.80 a share, from $1.9 billion, or $2.59 a share, in the year-ago quarter. 
    

    

    McDonald’s said the latest quarter’s results included 15 cents a share in one-time charges. 
    

    Breaking those charges out, McDonald’s would have earned $1.95 a share.  Analysts expected McDonalds to earn $1.83 a share, according to FactSet data. 
    

    Revenue rose 8% to $6.41 billion, short of the FactSet consensus estimate of $6.45 billion.
    

    Fourth-quarter global comparable-store sales increased by 3.4%, including a 4.3% rise in the U.S.. Analysts expected same-store sales growth of 4.7%.
    

    McDonald’s said its comparable sales fell in the Middle East as a reflection of war in the region since Oct. 7.
    

    All other same-stores sales rose in international developmental licensed markets. 
    

    Total international developmental licensed markets same-store sales rose by 0.7%, well below the result in the previous quarter, which saw a 10.5% increase.
    

    Looking back at the balance of 2023, McDonald’s said its net income rose by 37% to $8.47 billion.
    

    Revenue jumped by 10% in 2023 to $25.49 billion.
    

    Free cash flow for 2023 increased to $7.25 billion from $5.49 billion.
    

    Before Monday’s moves, McDonald’s stock was up by 10.9% in the past year.
    

    

    


    

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  • 
		
		
    
			
    Stock investors fear ‘no-landing’ economy could spell trouble. What’s next?.
    
			
    Stock investors fear ‘no-landing’ economy could spell trouble. What’s next?.
    
			
     
    

    

    

    While the U.S. stock market has been pricing in a “soft-landing” scenario for the economy, a blowout January jobs report, relatively strong corporate earnings, and Federal Reserve Jerome Powell’s comments during the past week could point to the possibility of “no landing,” where the economy is resilient while inflation stays on target.  
    

    Such a scenario could still be positive for U.S. stocks, as long as inflation remains steady, according to Richard Flax, chief investment officer at Moneyfarm. However, if inflation reaccelerates, the Fed may be hesitant to cut its policy interest rate much, which could spell trouble, Flax said in a call. 
    

    

    What the past week tells us
    

    Investors have just gone through the busiest week so far this year for economic data and corporate earnings reports, with stocks ending at or near their record highs.
    

    The Dow Jones Industrial Average
    
        DJIA
    
       finished the week with its nineth record close of 2024, according to Dow Jones Market Data. The S&P 500 index
    
        SPX
    
       scored its seventh record close this year on Friday, while the Nasdaq Composite
    
        COMP
    
       is about 2.7% lower from its peak. 
    

    The Fed kept its policy interest rate unchanged in the range of 5.25% to 5.5% at its Wednesday meeting, as expected. However, in the subsequent press conference, Fed Chair Jerome Powell threw cold water on market expectations that the central bank may start cutting its key interest rate in March, and underscored that they want “greater confidence” in disinflation. 
    

    Roger Ferguson, former Fed vice chairman, said Powell introduced “a new kind of risk, the risk of no landing.” 
    

    In that scenario, inflation will stop falling, while the economy is strong, Ferguson said in an interview with CNBC on Thursday. However, Ferguson said he doesn’t think it is the likely outcome.   
    

    Traders were pricing in a 20.5% likelihood on Friday that the Fed will cut its interest rates in its March meeting, according to the CME FedWatch tool and that’s down from over 46% chance a week ago. The likelihood that the Fed will kick off its rate cutting program in May stood at 58.6% on Friday.  
    

    The stronger-than-expected January jobs data released on Friday further eliminates the chance of a rate cut in March, said Flax. 
    

    The U.S. economy added a whopping 353,000 new jobs in January while economists polled by The Wall Street Journal had forecast a 185,000 increase in new jobs. Hourly wages rose a sharp 0.6% in January, the biggest increase in almost two years.
    

    The past week has also been heavy with earnings reports, as several tech giants including Microsoft
    
        MSFT,
    
        +1.84%    ,
    
       Apple
    
        AAPL,
    
        -0.54%    ,
    
       Meta
    
        META,
    
        +20.32%    ,
    
       and Amazon
    
        AMZN,
    
        +7.87%
    
       reported their financial results for the fourth quarter of 2023. 
    

    Among the 220 S&P 500 companies that have reported their earnings so far, 68% have beaten estimates, with their earnings exceeding the expectation by a median of 7%, analysts at Fundstrat wrote in a Friday note.  
    

    While the reported earnings by big tech companies have been “okay,” the guidance was not, said José Torres, senior economist at Interactive Brokers.
    

    What has been driving the tech stocks’ rally since last year was mostly the prospect of sales from artificial intelligence products, but tech companies are not able to monetize the trend yet, Torres said in a phone interview. 
    

    Adding to the headwinds is a comeback of concerns around regional banks. 
    

    On Thursday, New York Community Bancorp Inc.’s stock triggered the steepest drop in regional-bank stocks since the collapse of Silicon Valley Bank in March 2023. New York Community Bancorp on Wednesday posted a surprise loss and signaled challenges in the commercial real estate sector with troubled loans.
    

    Meanwhile, the Fed’s bank term funding program, which was launched in March last year to bolster the capacity of the banking system, will expire on March 11. 
    

    If the Fed could start cutting its key interest rate in March, it would be “sort of like the ambulance that was going to pick regional banks up and save them,” said Torres. “Now the ambulance is coming in May at the earliest, I think that we’re in a particularly risky period from now to May,” Torres said. 
    

    What should investors do 
    

    Investors should go risk-off before May, according to Torres. “Last year, goods and commodities helped a lot on the disinflationary front. This year for disinflation to continue, we’re going to need services to start contributing to that. Then we’re going to need to see an increase in the unemployment rate,” Torres said. 
    

    He said he prefers U.S. Treasurys with a tenor of four years or shorter, as the long-dated ones may be susceptible to risks around the fiscal deficit and government borrowing. For stocks, he prefers the healthcare, utilities, consumer staples and energy sectors, he said. 
    

    Keith Buchanan, senior portfolio manager at Globalt Investments, is more optimistic. The slowdown in inflation and the relatively strong economic data and earnings “don’t really paint a picture for a risk-off scenario,” he said. “The setup for risk assets still leans towards the bullish expectation,” Buchanan added. 
    

    In the week ahead, investors will be watching the ISM services sector data on Monday, the U.S. trade deficit on Wednesday and weekly initial jobless benefit claims numbers on Thursday. Several Fed officials will speak as well, potentially providing more clues on the possible trajectory of rate cuts.  
    

    

    


    

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  • 
		
		
    
			
    Mark Zuckerberg could pay millions to the IRS on Meta dividends. He still might be getting ‘a major break’.
    
			
    Mark Zuckerberg could pay millions to the IRS on Meta dividends. He still might be getting ‘a major break’.
    
			
     
    

    

    

    Mark Zuckerberg delighted Meta shareholders and Wall Street this week with news of the social media giant’s first-ever dividend.
    

    The IRS may also be happy, now that it’s staring at millions in taxes on the Meta stock dividends bound for Zuckerberg’s portfolio.
    

    Zuckerberg, the CEO of Meta Platforms Inc.
    
        META,
    
        +20.32%    ,
    
       is poised to make $700 million in dividends yearly. He owns nearly 350 million shares, according to FactSet, and the company will start paying a quarterly dividend of 50 cents a share.
    

    

    That would yield nearly $167 million in federal taxes yearly, after a qualified-dividend tax of 20% and another 3.8% tax on the investment returns of rich households, two accounting experts said.
    

    California income taxes of 13.3% on the dividends could cost Zuckerberg another $93.1 million, said Andrew Belnap, an accounting professor at the University of Texas at Austin’s McCombs School of Business.
    

    All in, that’s a combined $259.7 million in federal and state taxes annually on the Meta dividends, Belnap estimated.
    

    For context, U.S. taxpayers reported over $285 billion in qualified-dividend income to the IRS though mid-November 2023, according to agency statistics. Nearly 30 million tax returns reported qualified dividends through that time. 
    

    Meta said it plans a quarterly cash dividend going forward, with the first such payment in March.
    

    Meta shares soared 20.5% on Friday, ending with a record-high close of $474.99. The Dow Jones Industrial Average
    
        DJIA,
    
       S&P 500
    
        SPX
    
       and Nasdaq Composite
    
        COMP
    
       all closed higher Friday.
    

    ‘Zuck is getting a major break’
    

    Meta announced the dividend payment in its earnings results Thursday, on the same week that Americans began filing their income taxes.
    

    A look at Zuckerberg’s dividends and their tax implications offer a peek at the debate about the varying ways wages and wealth are taxed.
    

    “Zuck is getting a major break,” said Andrew Schmidt, an accounting professor at North Carolina State University’s Poole School of Management who also crunched the numbers for MarketWatch.
    

    Approximately $167 million “seems like a high tax bill,” he said. But if Zuckerberg received the $700 million as a straight salary, Schmidt estimated he’d be looking at a roughly $259 million tax bill on the wages after they were taxed at the top marginal rate of 37%.
    

    Federal income tax brackets run from 10% to 37%.
    

    Meanwhile, the IRS taxes qualified dividends and capital gains at 0%, 15% and 20%, depending on income and household status. The net investment income tax adds another 3.8% for individuals making at least $200,000 or married couples worth $250,000.
    

    For federal and state taxes on the Meta dividends, Zuckerberg would face a combined rate of 37.1%, Belnap noted. “His tax rate on this is actually fairly high,” he said.
    

    The gap in tax rates on income derived from wages and investments “has been a big criticism with U.S. tax policy,” Schmidt said, especially as lawmakers look for ways to come up with more tax revenue. 
    

    Regular retail investors enjoy the same preferential rates on capital gains and dividends as the top 1% of taxpayers, Schmidt added. The issue is that those dividends and stock profits are a smaller part of their income while salaries, taxed at higher rates, are a bigger proportion.   
    

    Belnap noted that California’s state tax rules don’t provide special treatment to dividends.
    

    Read also: Where Trump, Biden and Haley stand on capital gains, the child tax credit and other key tax questions
    

    Zuckerberg received a $1 base salary in 2022, a figure that hasn’t changed in several years. He is now worth $142 billion, according to the Bloomberg Billionaires Index, making him the fifth-richest person in the world. 
    

    Meta did not immediately respond to a request for comment.
    

    Taxes on the Meta dividends will not be something Zuckerberg, or any Meta shareholders big or small, need to deal with until next year’s tax season, Belnap and Schmidt observed.
    

    But as taxpayers amass their 1099-DIV forms on dividend income, IRS figures show that it’s mostly upper-echelon taxpayers reaping the rewards on the preferential rates for qualified dividends.
    

    Households worth at least $1 million accounted for 40% of the approximate $285.3 billion in qualified dividends reported through mid-November, according to agency figures.
    

    For less affluent investors, “it’s usually a nice supplement, but I’d say very few people are living off dividends,” Belnap said.
    

    

    


    

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  • 
		
		
    
			
    Amazon is worth more than Alphabet for the first time in 16 months
    
			
    Amazon is worth more than Alphabet for the first time in 16 months
    
			
     
    

    

    

    Earnings season is causing a reshuffling among the ranks of the largest U.S. companies. 
    

    Amazon.com Inc.
    
        AMZN,
    
        +7.87%
    
       overtook Alphabet Inc.
    
        GOOG,
    
        +0.58%
    

            GOOGL,
    
        +0.86%
    
       and become the third-largest U.S. public company upon Friday’s close, after its results were well received by Wall Street and Alphabet’s earlier in the week got panned. 
    

    

    Amazon edged out Alphabet only barely, with a closing market cap of $1.785 trillion compared with $1.777 trillion for Alphabet, according to Dow Jones Market Data.  
    

    Read: Amazon says the ‘magic words.’ They could spur a $110 billion market-cap boost.
    

    The e-commerce giant hadn’t been valued above the Google parent company since Sept. 30, 2022, according to Dow Jones Market Data. That was also the last time Amazon was the third-largest by market cap. 
    

    

              
    

    

    
      
    

    

    Wall Street found plenty to like in Amazon’s latest report, including drastic improvement in operating income, upbeat commentary on the cloud and momentum within the retail business. Meanwhile, Alphabet’s earnings were met with a chillier reception as the company talked up heavy spending plans linked to its artificial-intelligence ambitions. 
    

    The very top of the market-cap ranks has changed up as well lately, though admittedly with less of a tie to earnings. Microsoft Corp.’s
    
        MSFT,
    
        +1.84%
    
       closing valuation surpassed Apple Inc.’s
    
        AAPL,
    
        -0.54%
    
       on Jan. 12 for the first time since November 2021. While the two traded around the top spot in January, Microsoft has been sitting there since Jan. 25. 
    

    Don’t miss: Microsoft earnings may have offered a big bullish clue about cloud growth
    

    Microsoft also rests alone in the $3 trillion club, with Apple, the only other U.S. company to ever claim membership, having fallen out of it.
    

    See also: Apple just did something unusual. Can it help the stock amid growth woes?
    

    

    


    

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  • 
		
		
    
			
    Meta’s stock is the most overbought in 11 years, but that could be a good thing
    
			
    Meta’s stock is the most overbought in 11 years, but that could be a good thing
    
			
     
    

    

    

    There’s a common belief that “overbought” is a technical condition for a stock, but in practice it seems to be more of an ability.
    

    Meta Platforms Inc.’s stock
    
        META,
    
        +20.32%
    
       soared so much Friday after a blowout earnings report, that some technical readings have reached levels not seen in 11 years.
    

    

    The stock rocketed 20.9% to close at a record $474.99, to book the third-biggest gain since going public in May 2012. The only bigger rallies were 23.3% on Feb. 2, 2023 and 29.6% on July 25, 2013, which were also after earnings reports.
    

    The stock’s Relative Strength Index, which is a momentum indicator that measures the magnitudes of recent gains and losses, climbed to 86.48. That’s the highest level seen since it closed at a record 89.39 on July 30, 2013.
    

    But that shouldn’t scare off Meta bulls.
    

    Many chart watchers believe RSI readings above 70 are signs of “overbought” conditions, which suggests bulls need a breather after running faster and farther than they are used to.
    

    There are also many who believe the ability to become overbought is a sign of underlying strength, since a stock tends to be trending higher when RSI hurdles 70. (Read Constance Brown’s “Technical Analysis for the Trading Professional.”)
    

    For example, the record RSI reading came three days after the record stock-price rally of 29.6% on July 25, 2013. Even though RSI closed at what was then a record of 88.27 after a record price gain on the 25th, the stock continued to rally and become even more overbought.
    

    It was that spike that snapped the stock out of the year-long doldrum that followed the initial public offering, and flipped the long-term narrative on the stock to bullish. (Read “Facebook’s ‘breakaway gap’ is a bullish game changer,” from The Wall Street Journal.)
    

    

              
    

    

    
          
    
            FactSet, MarketWatch
    
          
    
  
    

    

    And while the record RSI readings in July 2013 did lead to a minor short-term pullback, it didn’t stop the stock from embarking on a long-term uptrend, in which RSI made multiple forays above 70.
    

    

              
    

    

    
        
      
    
          
    
            FactSet, MarketWatch
    
          
    
  
    

    

    And the last time RSI closed above 85 was Feb. 2, 2023, when it closed at 86.07, also after a blowout earnings report.
    

    And similar to 10 years earlier, that historically high overbought reading helped launch another long-term rally.
    

    

              
    

    

    
        
      
    
          
    
            FactSet, MarketWatch
    
          
    
  
    

    

    So yes, Meta’s stock is now facing historically high overbought conditions. But as many chart watchers like to say, overbought doesn’t mean over.
    

    One thing to consider, however, is that the two prior times RSI spiked above 85 were while the long-term fates of the stock were still in question — the stocks were working on short-term bounces following long-term downtrends.
    

    

              
    

    

    
        
      
    
          
    
            FactSet, MarketWatch
    
          
    
  
    

    

    But Friday’s blast off happened just days after the stock closed at a record high. There was no resistance to hurdle, so rather than a bullish “breakaway gap,” Friday’s jump could be considered more a bullish leap of faith.
    

    Also read: 
    

    Meta’s killer stock rally could add $200 billion in market cap — a historic haul.
    

    Nvidia’s stock could rise above $600 — despite signs it’s already overbought.
    

    

    


    

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  • 
		
		
    
			
    Trump says Powell is being ‘political’ with interest rates
    
			
    Trump says Powell is being ‘political’ with interest rates
    
			
     
    

    

    

    Former President Donald Trump on Friday criticized Federal Reserve Chair Jerome Powell and said he’s playing politics with interest-rate policy.
    

    “It looks to me like he’s trying to lower interest rates for the sake of maybe getting people elected,” Trump said, in an interview on the Fox Business Network.
    

    

    “I think he’s political,” added Trump, the likely 2024 Republican nominee for president.
    

    Asked if he would reappoint Powell to a third four-year term, Trump replied “no.”
    

    Trump said he has a couple of choices in mind to replace Powell, but wouldn’t say who.
    

    Trump said he thinks lowering interest rates would lead to massive inflation. The conflict in the Middle East is likely to lead to “big inflation” from a spike in oil prices, he added.
    

    

              
    

    

    
        “Trump said he thinks lowering interest rates would lead to massive inflation. The conflict in the Middle East is likely to lead to “big inflation” from a spike in oil prices, he added.”
      
    

    

    

    Powell “is not going to be able to do anything,” Trump said.
    

    On Wednesday, Powell said he wasn’t giving a potential third term any thought. Powell’s current term expires in early 2026.
    

    Speculation on a third term “is not something I’m focused on,” Powell said.
    

    “We’re focused on doing our jobs. This year is going to be a highly consequential year for the Fed and monetary policy. We’re, all of us, very buckled down, focused on doing our jobs,” Powell said.
    

    Analysts say that the Fed will be criticized by both parties in the election year.
    

    On Sunday, Powell will appear on the CBS News program “60 Minutes” and will likely face more questions about the election.
    

    Earlier this week, top Democrats on the Senate Banking Committee urged the Fed to cut rates quickly, saying they were too high and hurting the housing market.
    

    “Keeping interest rates high will be detrimental to American workers and their families and do little to bring down prices or promote moderate economic growth,” said Sen. Sherrod Brown, a Democrat from Ohio, and the chairman of the Banking Committee, in a letter to Powell prior to Wednesday’s Fed meeting.
    

    At the meeting on Wednesday, the Fed kept its benchmark interest rate unchanged in a range of 5.25%-5.5%. 
    

    Asked about the letter from the Democrats on Wednesday, Powell said Congress has given the Fed the job of stable prices. High inflation hurts people at the lower end of the income spectrum, he added.
    

    “It’s what society has asked us to do is to get inflation down. The tools we use to do it are interest rates,” he said.
    

    The Fed has penciled in three rate cuts for 2024. Powell said that a cut at the Fed’s next meeting in March was unlikely. He said the Fed wants to see more good inflation reports so it can have greater confidence that inflation is coming down to the 2% target.
    

    

    


    

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