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Tag: Banking/Credit

  • Dow falls 160 points Friday, S&P 500 posts worst monthly drop since December

    Dow falls 160 points Friday, S&P 500 posts worst monthly drop since December

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    Stocks closed mostly lower on Friday, with the S&P 500 cementing its biggest drop in a month since December, as a surge in bond yields knocked the wind out of this year’s rally in equities. The Dow Jones Industrial Average
    DJIA,
    -0.47%

    fell about 157 points, or 0.5%, ending near 33,508, according to preliminary FactSet data. The S&P 500 index
    SPX,
    -0.27%

    shed 0.3% and the Nasdaq Composite index
    COMP,
    +0.14%

    gained 0.1%. September was the worst month for the Dow since February, with its 3.5% loss, while the S&P 500 shed 4.9% and the Nasdaq lost 5.8%, marking their worst months since December 2022, according to Dow Jones Market Data. Yearly core inflation edged higher in August, according to Friday’s release of the latest PCE price index. The focus over the weekend will likely be a U.S. government shutdown. Given the negative backdrop for markets, the S&P 500, Dow and Nasdaq all booked declines in the third quarter.

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  • Risk of government shutdown soars as House Republicans leave town in disarray amid hard-right revolt

    Risk of government shutdown soars as House Republicans leave town in disarray amid hard-right revolt

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    WASHINGTON — With House Speaker Kevin McCarthy’s latest funding plan in ruins and lawmakers leaving town for the weekend, there’s no endgame in sight as hard-right Republicans push closer to a federal government shutdown.

    The White House will tell federal agencies on Friday to prepare for a shutdown, according to an official with the Office of Management and Budget who insisted on anonymity to discuss the upcoming instructions.

    That’s a standard seven days out from a federal disruption.

    ‘This is a whole new concept of individuals who just want to burn the whole place down.’


    — Kevin McCarthy on his intraparty Republican critics

    McCarthy, the Republican speaker whose narrow majority and intraparty detractors meant it took 15 votes in January before he secured the gavel, has repeatedly tried to appease his hard-right flank by agreeing to the steep spending cuts they are demanding to keep government open. But, cheered on by Donald Trump, the former Republican president who is the current frontrunner for the party’s 2024 presidential nomination, the right wingers are flexing their outsize influence.

    In a crushing defeat for McCarthy on Thursday, a handful of Republican hardliners blocked a typically popular defense bill from advancing — the second time this week it was set back, an unheard-of loss for a House speaker.

    Even a stopgap bill to keep government funding past the Sept. 30 deadline, called a continuing resolution, or CR, is a nonstarter for some on the right flank who have essentially seized control of the House.

    Read on: How a partial government shutdown would affect you

    “This is a whole new concept of individuals who just want to burn the whole place down,” McCarthy said after Thursday’s vote, acknowledging he was frustrated. “It doesn’t work.”

    The open revolt was further evidence that McCarthy’s strategy of repeatedly giving in to the conservatives — in evidence as early as January when McCarthy is believed to have made undisclosed concessions to secure holdout GOP votes for his long-desired speakership — is seemingly only emboldening them, allowing them to run roughshod over their own House majority. Their far-right bills have almost no chances in the Senate.

    See: Gaetz threatens to oust McCarthy from House speaker post

    Trump urged the hardliners to hold the line against the higher funding levels McCarthy had agreed to with President Joe Biden earlier this year and to end the federal criminal indictments against him.

    “This is also the last chance to defund these political prosecutions against me and other Patriots,” Trump wrote on social media.

    “They failed on the debt limit, but they must not fail now. Use the power of the purse and defend the Country!” the former president wrote.

    The White House and Democrats, along with some Republicans, warn that a shutdown would be devastating for people who rely on their government for everyday services and would undermine America’s standing in the world.

    Rep. Jamie Raskin, a Maryland Democrat, observed Friday on the MSNBC program “Morning Joe” that investigations into, and prosecutions of, Trump are funded by continuing, indefinite appropriations and thus would be unaffected by a federal government shutdown.

    Also see: Government shutdown: Analysts warn of ‘perhaps a long one lasting into the winter’

    Raskin went on to voice a hope that Republicans ultimately would honor the government-funding agreement McCarthy struck in May with the Biden White House — but conceded Democrats are aware operating in a bipartisan fashion could cost McCarthy the speakership.

    “We need the extreme MAGA Republicans to get their act together,” said House Democratic leader Hakeem Jeffries of New York, referring to Trump’s “Make America Great Again” slogan.

    “End the civil war,” Jeffries urged the Republicans. “Get your act together.”

    But one of Trump’s top allies, Rep. Matt Gaetz, a Florida Republican, who is leading the hard-right flank in the current skirmish, said the House Republicans now have almost no choices left but to spend the time it takes to pass each of the 12 spending bills needed to fund the government — typically a laborious process — even if it means going into a shutdown.

    Or they can join with Democrats to pass a CR, putting McCarthy at risk.

    What Gaetz said he, and several others, would not do is vote for a continuing resolution that fails to slash spending. “I’m giving a eulogy for the CR right now,” Gaetz told reporters after a late afternoon meeting Thursday at the Capitol.

    “I represent Florida’s First Congressional District, where, during the shutdown, tens of thousands of people will go without a paycheck, and so I know the impact of a shutdown,” Gaetz said. “So it may get worse before it gets better, and I have little to offer but blood, sweat, toil and tears, but that may be what it takes.”

    A government closure is increasingly likely as time runs out for Congress to act.

    McCarthy’s bid to move ahead with a traditionally popular defense funding bill as a first step toward keeping the government running was shattered, on a vote of 216-212. Five Republicans refused to vote with the increasingly endangered speaker. A sixth Republican voted no on procedural grounds so the bill could be reconsidered.

    Moving forward with the defense bill was supposed to be a way for McCarthy to build goodwill among the GOP House majority as he tries to pass a temporary measure just to keep government running for another month. It, too, had catered to other hard-right priorities, such as slashing spending by 8% from many services and earmarking further funds for security at the U.S.-Mexico border.

    Many on the right flank opposed the deal McCarthy struck with Biden this year over the spending levels and are trying to dismantle it now. They want to see progress on the individual appropriations bills that would fund the various federal departments at the lower levels these lawmakers are demanding.

    From the archives (May 2023): How Joe Biden and Kevin McCarthy got to yes on their debt-ceiling compromise

    The morning test vote on Thursday shattered a McCarthy strategy that had emerged just the night before. Republicans had appeared on track, in a tight roll call, to advancing the measure. Then the Democrats who had not yet voted began rushing into the chamber.

    New York Rep. Alexandria Ocasio-Cortez and fellow Democrats yelled out to hold open the vote. She was a “no.” A few others came in behind her and tipped the tally toward defeat.

    The Democrats oppose the military bill on many fronts, including Republican provisions that would gut diversity programs at the Pentagon.

    As passage appeared doomed, attention turned to the five Republican holdouts to switch their votes.

    GOP leaders spent more than an hour on the floor trying to recruit one of them, Rep. Dan Bishop of North Carolina, to vote “yes.”

    “Every time there’s the slightest relief of the pressure, the movement goes away from completing the work,” Bishop said.

    When asked what it would take to gain his vote, Bishop said, “I think a schedule of appropriations bills over Kevin McCarthy signature would be meaningful to you, to me.”

    Others were dug in, including some who had supported advancing the defense bill just two days ago when it first failed.

    Rep. Marjorie Taylor Greene, a Georgia Republican and a clamorous opponent of more aid for Ukraine in its defense against the unprovoked Russian invasion, said she voted against the defense bill this time because her party’s leadership refused to separate out war money.

    Her stand came as Ukraine’s president, Volodymyr Zelensky, was at the Capitol during a high-profile visit to Washington.

    McCarthy had pledged to keep House lawmakers in session this weekend for as long as it took to finish their work. But they were sent home and told they could be called back on ample notice.

    Many Republicans were starting to speak up more forcefully against their hard-right colleagues.

    Mike Lawler, who represents a swing district in New York carried handily by Joe Biden in 2020, said he would not “be party to a shutdown.”

    “There needs to be a realization that you’re not going to get everything you want,” he said. “Just throwing a temper tantrum and stomping your feet — frankly, not only is it wrong — it’s just pathetic.”

    Lawler had said in an interview with CNN earlier in the week that barreling toward a shutdown was not Republican conservatism but “stupidity.”

    MarketWatch contributed.

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  • Here’s what Germany should be called instead of the ‘sick man of Europe,’ says Deutsche Bank

    Here’s what Germany should be called instead of the ‘sick man of Europe,’ says Deutsche Bank

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    The hurdles facing Germany’s economy in recent years have been plentiful, but the “sick man of Europe,” label is unfair, say Deutsche Bank strategists, who see promise for investors in the region’s biggest economy.

    Contrary to the rest of the eurozone, Germany has only managed to get back to its pre-COVID growth level, yet a title of “sore athlete” is more accurate, say Maximilian Uleer, head of European equity and cross asset strategy and Carolin Raab, European equity and cross asset strategists, in a note to clients that published Friday.

    “Germany has been facing multiple challenges, from rising energy costs, its high manufacturing exposure, to weak demand from its export destinations. Some of the challenges are ‘homemade’ and might persist, while others could start to unwind and soon turn into opportunities,” the pair said.

    Germany’s economy is the worst-performing of the developed world this year, with both the International Monetary Fund and European Union forecasting contractions in growth.

    Read: Germany’s economy struggles with an energy shock that’s exposing longtime flaws

    But the strategists say economic growth is a poor proxy for German equity performance. The German DAX index
    DX:DAX
    is up 18% since the end of 2019. DAX constituents generate just 18% of their revenues domestically, compared to 22% from the U.S. and 15% from China.

    Across the broader HDAX index of 100 members, manufacturing, information technology and financial services are the main contributors to equity performance. That’s as public services, trade, business services and real estate, all of which contributed significantly to GDP over the past four years, are underrepresented in the indexes.

    Germany has also managed to grow its real GDP by 26% over the past 20 years , and keep its debt-to-GDP ratio stable, while the eurozone (including Germany) has seen that debt ratio climb 30% since 2003. The short term has seen lower growth since COVID-19, and rising leverage owing to fiscal support measures to mitigate the pandemic and the war in Ukraine.

    Again, the strategists see a silver lining. “Going forward, in our view, Germany has bigger leeway with regards to its fiscal support capacity, as its absolute debt/GDP ratio remains one of the lowest among the eurozone members,” said Uleer and Raab.


    *Since 2003: Q3 2003-Q2 2023 / since Covid: Q4 2019-Q2 2023. Source: Bloomberg Finance LP, Deutsche Bank Research 09/20/2023

    Among the country’s big hurdles is rising energy costs, with the pair noting that the country’s net-zero goals are laudable, but pose a “substantial challenge” to its energy-intensive industries. Power prices remain substantially higher than three years ago and are double the cost of those in the U.S.

    Also read: Inside Germany’s industrial-sized effort to wean itself off Putin and Russian natural gas

    “This price differential, combined with stronger fiscal support for energy-intensive companies in the U.S. via the Inflation Reduction Act, weigh on the competitiveness of German corporates,” said the strategists.

    As for opportunities, China’s reopening remains a positive for DAX companies, though that country also seems to be making slow progress. Chinese households are sitting on massive savings still waiting to be spent, said the strategists. They advise investors to wait for data that confirms a stabilization of the country’s bumpy property market before they would turn more positive.

    Overall, Deutsche Bank expects inflation to normalize in the coming 12 months and low growth in 2024, but a rebound in 2025.

    Plus: A 1-liter stein of beer at Munich’s famed Oktoberfest will cost nearly $15 this year

    And what’s priced into the DAX already? Even after a gain of 12% this year so far — French
    FR:PX1
    and Greek stocks
    GR:GD
    — are beating Germany by a respective 20% and 30% — the index is still cheap and trading at a 20% discount to its 10-year average on a forward one-year price/earnings basis. Germany can count on stronger U.S. data, even if Europe continues on a weak path.

    “We expect the DAX to hold up in 2024, and do not forecast the index to underperform, despite lower German GDP growth as compared with the rest of the eurozone,” they said.

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  • Medical debt should be fully removed from credit reports, Biden administration says

    Medical debt should be fully removed from credit reports, Biden administration says

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    The Consumer Financial Protection Bureau is taking steps toward removing all medical debt information from Americans’ credit reports, a move meant to help the millions of Americans whose credit scores drop after bills for expenses like unexpected hospital visits go unpaid.

    While the information surrounding most unpaid medical debts has already been removed from credit reports by the three major reporting agencies — Equifax, Experian and TransUnion — the CFPB on Thursday announced plans for a rule- making process that would…

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  • This former Fed insider has 3 big takeaways from Powell’s press conference

    This former Fed insider has 3 big takeaways from Powell’s press conference

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    This former Fed insider has 3 big takeaways from Powell’s press conference

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  • Block’s stock has been a laggard lately. Will management shakeup provide a needed jolt?

    Block’s stock has been a laggard lately. Will management shakeup provide a needed jolt?

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    Block Inc.’s stock has been a sizable laggard this year, and now it’s losing the leader of a critical business — albeit one that hasn’t necessarily lived up to investor expectations lately.

    Alyssa Henry, the head of Block’s
    SQ,
    -2.99%

    Square merchant business, is stepping down after a long tenure with the company, and Jack Dorsey will assume her role while continuing to lead Block on the whole, the company announced in a Monday filing.

    The announcement comes as Block shares have declined 18% so far this year, while the S&P 500
    SPX
    has risen 16%. Other payment-technology stocks, including Shift4 Payments Inc.,
    FOUR,
    -0.54%

    Toast Inc.
    TOST,
    +1.34%

    and even PayPal Holdings Inc.
    PYPL,
    -1.98%

    have logged better year-to-date performances.

    Block’s stock closed at its lowest level since April 7, 2020 on Monday, according to Dow Jones Market Data. It was down about 2% in after-hours trading.

    The stock is also down 82% from its all-time closing high achieved Aug. 5, 2021.

    See also: PayPal’s ‘fresh start’ isn’t enough to help its stock, analyst cautions

    The performance of the Square merchant business, which includes payment processing and other tools for sellers, has been a sore point for investors recently. Wolfe Research analyst Darrin Peller notes that Block’s second-quarter U.S. gross payment volume (GPV) was up 10% from a year earlier, a four-point spread above Visa Inc.’s
    V,
    +1.49%

    domestic growth. Historically, the spread has been in double digits, he said.

    Additionally, while the 12% overall growth in Square’s GPV “continues to imply that Square is a market-share gainer, we note that this growth spread relative to the industry has trended lower and also suggests slightly softer growth trends versus competitors like Clover,” which is part of Fiserv Inc.
    FI,
    +0.12%
    ,
    whose shares are up 20% on the year.

    “While some of Square’s success over the years should be attributed to Alyssa’s execution, the company’s more recent performance remains a concern for investors (and we suspect for management, internally),” Peller wrote.

    He pointed to “mixed” feedback from investors thus far.

    “Bulls argue that this change is positive, indicating that management is taking change seriously,” Peller said. “Further, it’s worth noting that Jack has been more receptive to cost management and other adjustments. Meanwhile, bears are citing that Alyssa was the ‘face’ of Seller and was more receptive to changes in Square’s business model compared to Jack (particularly around outsourced distribution).”

    Block, for its part, said in its filing that Henry “provided significant contributions” to the company during a tenure that spanned more than nine years.

    UBS downgraded Block shares earlier this month, in part due to concerns about the Square business. Analyst Rayna Kumar said she was concerned about a potential slowdown in gross-profit growth owing to a moderation in consumer spending.

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  • Why the Fed’s next decisions on rates could lead to a wave of commercial-debt defaults

    Why the Fed’s next decisions on rates could lead to a wave of commercial-debt defaults

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    Getting staff back to the office is only part of the battle.

    Regional banks that went big lending on office properties also face a ticking time bomb of maturing debt that they helped create, particularly if the Federal Reserve holds its policy rate near the current 22-year high well into next year.

    “The area of greatest concerns for banks is office space,” says Tom Collins, senior partner focused on regional banks and credit unions at consulting firm firm West Monroe. Should rates stay high, “borrowers are going to face a tough decision of whether they refinance or default,” he said.

    The fight to bring more staff back to half-empty office buildings comes as an estimated $1 trillion wall of commercial real-estate loans is set to mature through 2024. While tenants haven’t shied away from signing up to pay top rents at trophy buildings, the same can’t be said for the rows of lower-rung properties lining financial districts in big cities.

    See: Labor Day is just a ‘milestone’ in the marathon to get workers back to the office

    The Fed embarks on a two-day policy meeting on Tuesday, with expectations running high for rates to stay steady, giving more time to study the impact of earlier rate increases.

    The central bank’s rate hikes have further complicated matters for landlords, and fresh debt for office buildings no longer looks cheap nor abundant. Regional banks also have been piling back on lending after Silicon Valley Bank and Signature Bank collapsed in March and as deposits fled for yield elsewhere.

    Related: FDIC kicks off $33 billion sale of seized assets from Signature Bank

    Loan volumes from Wall Street similarly have been anemic. This year it has produced slightly more than $10 billion in “conduit,” or multi-borrower, commercial mortgage-backed securities deals through the end of August, the least since 2008, according to Goldman Sachs. Coupons, a proxy for mortgage rates, have climbed above 7%, the highest since the early 2000s.

    “I don’t think this is a wash out here,” Collins said of the threat of more regional bank failures, but he does anticipate pain for lenders heavily exposed to lower quality class B and C office buildings in urban areas.

    Banks can help mitigate the wall of debt coming due by stepping up the pace of loan modifications to help borrowers keep properties, but Collins said he also anticipates lenders will need to increase loan sales, write downs and mergers or acquisitions.

    “There is no doubt there will be private equity and other investors that will be interested in buying some of these loans, taking them off the balance sheets of banks,” Collins said.

    “The obvious question there is at what discount?” he said, adding, “I think investors will wait until things get more dire to try to get a better deal.”

    Another offset to banks’ office exposure has been the relatively stable performance of hotels, industrial and other property types. But Collins said that if rates stay high and the economy falters, those sectors are likely to face challenges as well.

    The 10-year Treasury yield,
    BX:TMUBMUSD10Y
    a benchmark lending rate for the commercial real estate industry, was near 4.32% on Monday, hovering around a 16-year high ahead of the Fed meeting, while the policy-sensitive 2-year Treasury rate
    BX:TMUBMUSD02Y
    was near 5.06%. Stocks
    SPX

    DJIA
    were edging higher.

    Office distress intensified in August, with the special servicing rate of loans in bond deals hitting 7.72%, compared with a 6.67% rate for all property types, according to Trepp, which tracks the commercial mortgage-backed securities market. A year ago, the rate of problem office loans was 3.18%.

    “If I was an investor, I would be patient around this, because values are only going to come down, I would imagine,” Collins said.

    Check out: Powell could still hammer U.S. stocks on Wednesday even if the Fed doesn’t hike interest rates

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  • Five American captives have flown out of Iran, U.S. officials say

    Five American captives have flown out of Iran, U.S. officials say

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    DUBAI, United Arab Emirates (AP) — Five prisoners sought by the U.S. in a swap with Iran flew out of Tehran on Monday, officials said.

    Flight-tracking data analyzed by the AP showed a Qatar Airways flight take off at Tehran’s Mehrabad International Airport, which has been used for exchanges in the past. Iranian state media soon after said the flight had left Tehran.

    Two people, including a senior Biden administration official, said that the prisoners had left Tehran. They both spoke on condition of anonymity because the exchange was ongoing.

    Context: Iran and U.S. set to exchange prisoners as $6 billion in once-frozen Iranian assets reaches Qatar

    Also see: Iran identifies prisoners it wants freed by U.S. even as President Raisi voices view of unfrozen funds at odds with Washington’s

    In addition to the five freed Americans, two U.S. family members flew out, according to the Biden administration official. of Tehran.

    The cash represents money South Korea owed Iran — but had not yet paid — for oil shipments. U.S. House Democrat Jason Crow said Monday that the Biden administration’s recent negotiations led to a situation in which those funds have more, rather than fewer, strings attached.

    Earlier, officials said that the exchange would take place after nearly $6 billion in once-frozen Iranian assets reached Qatar, a key element of the planned swap.

    Rep. Jason Crow, a Colorado Democrat, observed early Monday on MSNBC that the funds were available to Iran, and that South Korea could unilaterally have transferred them to Tehran, under terms of an arrangement struck by the Trump administration. The Biden administration’s recent negotiations led to a situation, he said, in which those funds have more, rather than fewer, strings attached.

    The U.S. Treasury holds the power to reject any requested fund transfers to Iran, U.S. officials have said, even as Iranian President Ebrahim Raisi claimed last week in an NBC interview that he was free under the deal’s terms to define the term humanitarian as he chose.

    Observers, seeking to reconcile those positions, noted that Raisi likely had a domestic audience in mind and was expressing a view that he knew did not comport with reality.

    Despite the exchange, tensions are almost certain to remain high between the U.S. and Iran, which are locked in various disputes, including over Tehran’s nuclear program.

    Iran says the program is peaceful, but it now enriches uranium closer than ever to weapons-grade levels.

    Iranian Foreign Ministry spokesman Nasser Kanaani was the first to acknowledge the swap would take place Monday. He said the cash sought for the exchange that had been held by South Korea was now in Qatar.

    Kanaani made his comments during a news conference aired on state television, but the feed cut immediately after his remarks.

    “Fortunately Iran’s frozen assets in South Korea were released and God willing today the assets will start to be fully controlled by the government and the nation,” Kanaani said.

    “On the subject of the prisoner swap, it will happen today and five prisoners, citizens of the Islamic Republic, will be released from the prisons in the U.S.,” he added. “Five imprisoned citizens who were in Iran will be given to the U.S. side.”

    He said two of the Iranian prisoners will stay in the U.S.

    Mohammad Reza Farzin, Iran’s Central Bank chief, later came on state television to acknowledge the receipt of over 5.5 billion euros — $5.9 billion — in accounts in Qatar. Months ago, Iran had anticipated getting as much as $7 billion.

    The planned exchange comes ahead of the convening of world leaders at the U.N. General Assembly this week in New York, where Iran’s hard-line President Ebrahim Raisi will speak.

    A Qatar Airways plane landed Monday morning at Mehrabad International Airport in Tehran, according to flight-tracking data analyzed by the AP. Qatar Airways uses Tehran’s Imam Khomeini International Airport for its commercial flights, but previous prisoner releases have taken place at Mehrabad.

    The announcement by Kanaani comes weeks after Iran said that five Iranian-Americans had been transferred from prison to house arrest as part of a confidence-building move. Meanwhile, Seoul allowed the frozen assets, held in South Korean won, to be converted into euros.

    The planned swap has unfolded amid a major American military buildup in the Persian Gulf, with the possibility of U.S. troops boarding and guarding commercial ships in the Strait of Hormuz, through which 20% of all oil shipments pass.

    The deal has also already opened U.S. President Joe Biden to fresh criticism from Republicans and others who say that the administration is helping boost the Iranian economy at a time when Iran poses a growing threat to American troops and Mideast allies. That could have implications in his reelection campaign as well.

    On the U.S. side, Washington has said the planned swap includes Siamak Namazi, who was detained in 2015 and was later sentenced to 10 years in prison on spying charges; Emad Sharghi, a venture capitalist sentenced to 10 years; and Morad Tahbaz, a British-American conservationist of Iranian descent who was arrested in 2018 and also received a 10-year sentence. All of their charges have been widely criticized by their families, activists and the U.S. government.

    U.S. official have so far declined to identify the fourth and fifth prisoner.

    The five prisoners Iran has said it seeks are mostly held over allegedly trying to export banned material to Iran, such as dual use electronics that can be used by a military.

    The cash represents money South Korea owed Iran — but had not yet paid — for oil purchased before the U.S. imposed sanctions on such transactions in 2019.

    The U.S. maintains that, once in Qatar, the money will be held in restricted accounts and will only be able to be used for humanitarian goods, such as medicine and food. Those transactions are currently allowed under American sanctions targeting the Islamic Republic over its advancing nuclear program.

    Iranian government officials have largely concurred with that explanation, though some hard-liners have insisted, without providing evidence, that there would be no restrictions on how Tehran spends the money.

    Iran and the U.S. have a history of prisoner swaps dating back to the 1979 U.S. Embassy takeover and hostage crisis following the Islamic Revolution. Their most recent major exchange happened in 2016, when Iran came to a deal with world powers to restrict its nuclear program in return for an easing of sanctions.

    Four American captives, including Washington Post journalist Jason Rezaian, flew home from Iran at the time, and several Iranians in the U.S. won their freedom. That same day, then-President Barack Obama’s administration airlifted $400 million in cash to Tehran.

    The West accuses Iran of using foreign prisoners — including those with dual nationality — as bargaining chips, an allegation Tehran rejects.

    Negotiations over a major prisoner swap faltered after then-President Donald Trump unilaterally withdrew America from the nuclear deal in 2018. From the following year on, a series of attacks and ship seizures attributed to Iran have raised tensions.

    Meanwhile, Iran’s nuclear program now enriches closer than ever to weapons-grade levels. While the head of the United Nations’ nuclear watchdog has warned that Iran now has enough enriched uranium to produce “several” bombs, months more would likely be needed to build a weapon and potentially miniaturize it to put it on a missile — if Iran decided to pursue one.

    Iran maintains its nuclear program is peaceful, and the U.S. intelligence community has kept its assessment that Iran is not pursuing an atomic bomb.

    Iran has taken steps in recent months to settle some issues with the International Atomic Energy Agency. But the advances in its program have led to fears of a wider regional conflagration as Israel, itself a nuclear power, has said it would not allow Tehran to develop the bomb. Israel bombed both Iraq and Syria to stop their nuclear programs, giving the threat more weight. It also is suspected in carrying out a series of killings targeting Iran’s nuclear scientists.

    Iran also supplies Russia with the bomb-carrying drones Moscow uses to target sites in Ukraine in its war on Kyiv, which remains another major dispute between Tehran and Washington.

    MarketWatch contributed.

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  • Societe Generale Sees Slower Revenue Growth Through 2026

    Societe Generale Sees Slower Revenue Growth Through 2026

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    By Adria Calatayud

    Societe Generale is targeting slower average annual revenue growth between 2022 and 2026 than for the 2021-25 period, and aims to streamline its portfolio and reduce oil-and-gas exposure as part of a new strategy.

    The French bank on Monday outlined its new strategic plan to 2026 that Chief Executive Slawomir Krupa said will strengthen the group with a simplified business portfolio. The bank intends to focus on its core franchises going forward, it said.

    SocGen said it is targeting average annual revenue growth between 0% and 2% over the 2022-26 period. Under its previous targets between 2021 and 2025, the bank aimed to deliver average annual revenue growth of at least 3%.

    The bank said its businesses will grow differently, mainly through increased advisory and growth in self-financed risk-weighted assets, as a result of strict capital discipline.

    The bank aims to achieve a return on tangible equity–a key profitability metric-of between 9% and 10%, a cost-to-income ratio below 60% in 2026 and a common equity tier 1–a measure of financial strength–ratio at 13% in 2026.

    SocGen said it expects to an 80% reduction in its upstream oil-and-gas exposure by 2030 relative to 2019 levels, and that it aims to halve its exposure by 2025. It had previously targeted a 20% reduction by 2025.

    Write to Adria Calatayud at adria.calatayud@dowjones.com

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  • Powell could still hammer U.S. stocks on Wednesday even if the Fed doesn’t hike interest rates

    Powell could still hammer U.S. stocks on Wednesday even if the Fed doesn’t hike interest rates

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    The past six weeks have left investors with more questions than answers about the outlook for U.S. monetary policy and, by extension, financial markets.

    And although the Federal Reserve is expected to leave its policy interest rates on hold Wednesday, Chairman Jerome Powell could still rattle markets as he’s probed for clues about the central bank’s thinking.

    Powell’s statement is expected to hew to what he said at the Jackson Hole, Wyoming, symposium in August and before that, during the central bank’s July press conference, but market analysts say the question-and-answer session with reporters and the updated “dot plot” of policy makers projections for interest rates could potentially furnish market-moving news.

    See: U.S. economy is trending in the Fed’s direction, so expect Powell to tread carefully next week

    “Just because this meeting isn’t widely considered to be ‘in play’ doesn’t mean it is insignificant,” said Steve Sosnick, chief strategist at Interactive Brokers, during a phone interview with MarketWatch.

    “The fact is, the Vix is relatively low. That indicates a very sanguine, if not complacent market. And a complacent market can sometimes be more susceptible to a negative shock.”

    The Cboe Volatility Index
    VIX,
    better known as “the Vix” or Wall Street’s “fear gauge,” finished below 14 on Friday, even as the Nasdaq Composite
    COMP
    and S&P 500
    SPX
    logged back-to-back weekly losses. Markets have seesawed recently as inflation has reaccelerated while the U.S. labor market and broader economy have slowed.

    What will investors be looking for, exactly? Presently, investors expect the Fed could start cutting interest rates again by the middle of next year. Anything that could disabuse them of this notion could undercut U.S. stocks while boosting Treasury yields and the U.S. dollar, analysts said.

    Liz Ann Sonders, chief market strategist at Schwab, said clues could potentially surface during the Q&A at the post-meeting press conference, which often has more of an impact on markets than Powell’s statement.

    “It is that 45 minutes to an hour that tends to be more market moving,” Sonders said during a phone interview with MarketWatch. “It is what they say about higher for longer and expectations around rate cuts in 2024, and whether Powell pushes back against that.”

    Since the beginning of August, more data has emerged to suggest that the U.S. economy might finally be starting to respond to the pressure from the Federal Reserve’s most aggressive campaign of interest-rate hikes since the 1980s. Corporate and personal bankruptcies have climbed.

    See: Bankruptcies spiked in August — the post-COVID rebound ‘is becoming a reality’

    There have also been indications that the torrid postpandemic labor market might be starting to cool. The Labor Department’s monthly jobs report showed fewer than 200,000 jobs were created in August, while figures from the prior two months were also revised lower, and the unemployment rate ticked higher to 3.8%.

    At the same time, consumer-price inflation has accelerated for two months in a row. Some on Wall Street have started to worry about stagflation, and financial markets are now pricing in about even odds that the Fed will leave interest rates on hold.

    A report earlier this week showed consumer prices rose 3.7% over the 12 months through August, while the rise for the month was 0.6%, the biggest increase in 14 months.

    Adding to the complicated picture, the resumption of student loan payments in October has revived concerns about the consumer despite relatively robust retail-sales data released earlier this week, while an auto worker strike involving all of the “Big Three” U.S. carmakers and the threat of a government shutdown are also sowing fears about a hit to the economy.

    “The triple threat from the resumption of student loan payments, a government shutdown and a strike by auto union workers could significantly weigh on GDP growth in Q4,” said EY Chief Economist Gregory Daco in emailed commentary.

    Powell could be asked to weigh in on any or all of these. He also could be asked to directly address investors’ expectations for the timing of the Fed’s initial rate cut of the cycle. Expectations for a policy pivot already proved premature last summer, which caused a brief but powerful bear-market rally to fizzle.

    A repeat of this could again create problems for stocks, Sosnick said.

    “Let’s see if the Fed agrees with the market’s assumptions about rate cuts,” he added.

    Traders expect the central bank to keep interest rates on hold Wednesday, with market-based odds seeing a pause as a virtual certainty, according to the CME’s FedWatch tool, which measures expectations based on trading in Fed funds futures. Expectations for another hike later this year are roughly split.

    See also: 4 things to watch for at next week’s Fed policy meeting

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  • SVB Capital closes in on deal to be bought out of bankruptcy: report

    SVB Capital closes in on deal to be bought out of bankruptcy: report

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    The former parent company of Silicon Valley Bank is nearing a deal to sell its VC and credit-investment arm out of bankruptcy, according to a Wall Street Journal report Friday, citing people familiar with the matter. SVB Financial Group
    SIVPQ,
    -4.62%

    is in talks with two bidders for SVB Capital: Anthony Scaramucci’s SkyBridge Capital and Atlas Merchant Capital, and private-equity firm Vector Capital. A court decision on a winner is expected in the next few weeks in a deal that could fetch between $250 million and $500 million. Silicon Valley Bank failed in March and was taken over by regulators, cascading into a banking crisis that later took down Signature Bank and First Republic.

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  • Paid off your mortgage? Be careful — you’re at risk of title theft.

    Paid off your mortgage? Be careful — you’re at risk of title theft.

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    Homeowners may be thrilled when they finally pay off their mortgage, but the accomplishment comes with risks. 

    Retirement Tip of the Week: Be vigilant in protecting your identity and assets, and be aware of how you could fall victim to various scams or theft associated with your home.

    With title theft, thieves transfer a house deed from the rightful owner to another person’s name by using the owner’s personal information. Title theft could also take the form of using equity in a home, such as by opening a home equity line of credit, known as a HELOC, according to Quicken Loans. When a house is unoccupied, thieves could go so far as to sell or rent out the property. 

    Title theft isn’t particularly common, but it does happen, and it’s another reason people should protect their identity and other sensitive information. Older Americans could be at higher risk, especially if they have a lot of equity in their home. About 11,500 people reported losing more than $350 million to real-estate scams in 2021, although that figure includes fraud pertaining to real-estate advertisements and rental agreements, according to the FBI

    Homeowners should keep on top of their documents and may even want to occasionally confirm their information with their county deeds office, the FBI said. Any mail from a mortgage lender should be checked to make sure it doesn’t pertain to your specific property.

    If you are a victim of title theft, open an identity-theft case with the Federal Trade Commission, alert creditors about the fraud and look over your title insurance, which protects homeowners’ rights and which mortgage companies often require home buyers to have, Quicken Loans said

    There are companies that offer title-protection services, although critics say it’s not the same as title insurance and only alerts a homeowner of a problem after it has occurred. 

    “Do you need this service to protect your home from property thieves? The answer is no,” the Maryland Attorney General’s office said in a consumer alert about title-protection services. “Title fraud is very rare, and hardly ever successful. If someone ever tries to transfer your deed without your permission or knowledge, like these title lock companies suggest could happen, the transfer is fraudulent and void from the outset.” 

    Instead, homeowners should monitor their identity and keep an eye on their credit scores, the office said.

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  • Household income rose in just 5 states last year. Is your state one of them?

    Household income rose in just 5 states last year. Is your state one of them?

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    American workers are feeling the pinch.

    The median annual household income in the U.S. was $74,755 in 2022, a 0.8% decline from the previous year after adjusting for inflation, according to the latest data from the Census Bureau.

    The decline in income is “disappointing,” said Sharon Parrott, president of the Center on Budget and Policy Priorities,…

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  • Stocks are trapped in a trading range. Something’s got to give.

    Stocks are trapped in a trading range. Something’s got to give.

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    The U.S. stock market, as measured by the S&P 500 Index SPX, is trapped in a trading range, and volatility seems to be damping down considerably. The significant edges of the trading range are support at 4330 and resistance at 4540. Both of those levels were touched in the latter half of August. A breakout from this range should give the market some strong directional momentum. 

    Since Labor Day, prices have hunkered down into an even narrower range. Typically, the latter half of September through the early part of October…

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  • When will inflation cool to the Fed’s 2% target? By late next year, says JP Morgan strategist.

    When will inflation cool to the Fed’s 2% target? By late next year, says JP Morgan strategist.

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    Inflation is likely to fall below the Federal Reserve’s 2% annual target by late next year, according to David Kelly, chief global strategist at JP Morgan Asset Management.

    Consumer prices rose again in August to reach a 3.7% yearly rate, based on Wednesday’s release of the monthly consumer-price index. That marked its biggest jump in 14 months and a higher reading than the recent 3% low set in June (see chart) as the toll of the Fed’s rate hikes kicked in.

    U.S. consumer prices rose in August, after touching a recent low of 3% yearly in June, as energy prices shot up.


    AllianceBernstein

    The catalyst for increased price pressures in August was a roughly 30% surge in energy prices
    CL00,
    +1.32%

    this quarter, according to Eric Winograd, director of developed market economic research at AllianceBernstein.

    West Texas Intermediate Crude, the U.S. benchmark, settled at $88.52 a barrel on Wednesday, as traders focused on supply concerns following decisions by Saudi Arabia and Russia to cut crude supplies through year-end. WTI was trading at a low for the year below $65 a barrel in May.

    “I don’t think that today’s upside surprise is sufficient to trigger a rate hike next week and I continue to expect the Fed to stay on hold,” Winograd said, in emailed commentary. “But with inflation sticky and growth resilient, the committee is likely to maintain a clear tightening bias—the dot plot may even continue to reflect expectations of an additional hike later this year.”

    Federal Reserve officials increased the central bank’s policy rate to a 5.25%-5.5% range in July, the highest in 22 years.

    Higher gasoline prices, however, also could act as a counterweight to inflation, according to JP Morgan’s Kelly. “Indeed, to the extent that higher gasoline prices cool other consumer spending, the recent energy price surge could contribute to slower growth and lower inflation entering 2024,” Kelly wrote in a Wednesday client note. 

    “We still believe that, barring some further shock, year-over-year headline consumption deflator inflation will be below the Fed’s 2% target by the fourth quarter of 2024.”

    Kelly isn’t expecting the Fed to raise rates again in this cycle.

    U.S. stocks ended mixed Wednesday following the CPI update, with the Dow Jones Industrial Average
    DJIA
    down 0.2%, the S&P 500 index
    SPX
    up 0.1% and the Nasdaq Composite Index
    COMP
    up 0.3%, according to FactSet.

    But with oil prices well off their lows for 2023, Winograd said further progress on cooling headline inflation is unlikely this year, even though he expects core inflation to gradually decelerate, a process that will “keep the Fed on high alert.”

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  • Nasdaq ends 1% down, leading stocks lower as tech shares slump

    Nasdaq ends 1% down, leading stocks lower as tech shares slump

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    U.S. stocks closed lower on Tuesday, with the Nasdaq Composite leading the way down, as Apple’s unveiling of its new iPhone and watch failed to boost appetite for equities. The Dow Jones Industrial Average
    DJIA,
    -0.05%

    shed about 16 points, or about 0.1%, to end near 34,647, while the S&P 500 index
    SPX,
    -0.57%

    closed 0.6% lower and the Nasdaq Composite Index
    COMP,
    -1.04%

    slumped 1%, according to preliminary FactSet data. That was the biggest daily percentage drop in about a week for the Nasdaq. Shares of Apple Inc.
    AAPL,
    -1.71%

    were a focus Tuesday as it rolled out a lineup of new consumer products, including its iPhone Pro Max, which will now start at $1,199 instead of $1,099, while its Pro model’s price stays the same. Investors also remain focused on the inflation data, including the release on Wednesday of the consumer-price index for August, before the U.S. stock market’s open. Apple shares fell 1.9% on Tuesday. Climbing bond yields can pressure high-growth stocks as borrowing costs rise. The benchmark 10-year Treasury yield
    TMUBMUSD10Y,
    4.297%

    edged down 2.4 basis points to 4.263% Tuesday, but was still near its highest level of the year.

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  • Watch this ‘canary in the coal mine’ for signs of trouble in markets, Neuberger Berman CIO says

    Watch this ‘canary in the coal mine’ for signs of trouble in markets, Neuberger Berman CIO says

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    Neuberger Berman, an asset manager with eight decades under its belt, is on the lookout for cracks in credit markets from the Federal Reserve’s rate-hiking campaign.

    Erik Knutzen, chief investment officer of multi asset, worries that several factors could be a tipping point for the economy, from an economic slowdown in China to U.S. consumers finally becoming exhausted by higher rates.

    Yet Knutzen expects the high-yield, or junk bond, market to serve as the “canary in the coal mine” for broader market volatility, acting as “perhaps the most visible threat, and therefore one we think could be priced in sooner than later.”

    The Bloomberg U.S. High Yield Bond Index has returned 6.4% through the end of August, producing one of the year’s highest gains in fixed income, helped along by a “resilient U.S. economy coupled with still-available financial liquidity,” according to the Wells Fargo Investment Institute.

    But Knutzen worries that as the high-yield maturity wall draws closer, “the first policy rate cuts get priced further and further out, raising the threat of expensive refinancings.”

    The 10-year Treasury yield’s
    BX: TMUBMUSD10Y
    climb to a multidecade high in August of almost 4.4% left many major U.S. corporations in early September hesitant to borrow beyond 10 years.

    Starting next year, some $700 billion of high-yield bonds are set to mature through the end of 2027, with a big slice of the refinancing need coming from companies with riskier credit ratings below the top BB ratings bracket.

    The junk-bond maturity wall.


    Bloomberg, Wells Fargo Investment Institute, Moody’s Investors Service

    The two big U.S. exchange-traded funds linked to junk bonds are the SPDR Bloomberg High Yield Bond ETF
    JNK
    and the iShares iBoxx $ High Yield Corporate Bond ETF
    HYG,
    both up 1.8% and 1.5% on the year through Monday, respectively, while offering dividend yields of more than 5.8%, according to FactSet.

    Of note, fixed-income strategists at the Wells Fargo Investment Institute also said they see risks emerging in junk bonds for companies rated B and below, particularly with spread in the sector trading less than 400 basis points above the risk-free Treasury rate since July. Spreads are the premium that investors are paid on bonds to help compensate for default risks.

    Top corporate executives appear hopeful that the Federal Reserve will cut rates sooner than later. Fed Chairman Jerome Powell said in Jackson Hole, Wyo., in August that the central bank is prepared to keep its policy rate restrictive for a while to get inflation down to its 2% target.

    To that end, Neuberger Berman, which has roughly $443 billion in managed assets, sees several sources of volatility lurking through year’s end, and has a “defensive inclination” in equity and credit, favoring high-quality companies with plenty of free cash flow, high cash balances and less expensive long-term debt.

    U.S. stocks booked gains on Monday after a week of losses, with the S&P 500 index
    SPX
    and Nasdaq Composite Index
    COMP
    scoring their best daily percentage gains in about two weeks. The Dow Jones Industrial Average
    DJIA
    advanced 0.3%.

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  • Canopy Growth stock soars on heavy volume again, amid cannabis investor optimism over possible favorable legislation

    Canopy Growth stock soars on heavy volume again, amid cannabis investor optimism over possible favorable legislation

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    Shares of Canopy Growth Corp.
    CGC,
    +22.61%

    shot up 21.7% toward a near four-month high in very active afternoon trading, putting them on track for the fifth double-digit percentage gain in seven sessions. The stock has rocketed 130% over the past seven session. Trading volume was 107.7 million shares as of Friday afternoon, to mark the fourth 100+-million-share volume day in the past six sessions, while the average volume over the past 30 days was about 36.3 million shares. The stock’s surge comes as Senate Banking Committee chair Sherrod Brown said Wednesday that there is “an agreement imminent” on the SAFE Banking Act, according to a Politico report, which could make it easier for the financial industry to work with cannabis companies. Among other cannabis stocks, shares of Tilray Brands Inc.
    TLRY,
    +2.03%

    gained 2.4%, of Cronos Group Inc. climbed 6.0% and of Aurora Cannabis Inc.
    ACB,
    +14.75%

    jumped 12.5%. The AdvisorShares Pure US Cannabis ETF
    MSOS,
    +3.88%

    rose 7.5% on volume of 13.9 million shares, compared with the full-day average of about 5.6 million shares, while the S&P 500
    SPX,
    +0.14%

    slipped 0.1%. The cannabis ETF has soared 77% over the past seven sessions.

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  • Stock market’s 2023 run may hit roadblock after August’s energy-led boost to U.S. CPI

    Stock market’s 2023 run may hit roadblock after August’s energy-led boost to U.S. CPI

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    August was a hot month and it wasn’t just about the weather. Financial markets are now bracing for what’s likely to be a rebound in headline U.S. inflation next week, fueled by higher energy prices.

    Barclays
    BARC,
    +0.18%
    ,
    BofA Securities
    BAC,
    +0.62%
    ,
    and TD Securities expect August’s consumer price index to reflect a 0.6% monthly rise, up from the 0.2% monthly readings seen in July and in June. In addition, they put the annual CPI inflation rate at 3.6% or 3.7% for last month, which compares with the 3.2% and 3% figures reported respectively for the prior two months.

    While Federal Reserve policy makers and analysts are loath to read too much into one report, August’s CPI has the potential to disrupt expectations that getting back to the central bank’s 2% target will be easy. Inflation has instead been nudging back up since June, with the likely rebound in August being regarded as primarily driven by the energy sector. What now remains to be seen is how much longer energy prices will remain elevated and whether they’ll begin to feed into narrower measures of inflation that matter most to the Fed.

    Read: Stock-market investors just got reminded that the inflation fight isn’t over

    “We’re going to see a spike in gas prices and other commodity prices driven by supply cuts, which means headline CPI goes back up,” said Alex Pelle, a U.S. economist for Mizuho Securities in New York. Via phone on Friday, Pelle said that prospects for a hotter August CPI report have already been factored in by financial markets, with all three major U.S. stock indexes heading for weekly losses.

    How investors react to next Wednesday’s data will likely come down to whether the rebound in headline figures is seen as “a one-off” or something that gets repeated, and “what that means for the bottoming off of inflation,” Pelle said. “The equity market is going to have some trouble in the fourth quarter after a pretty impressive first half. Earnings expectations are still pretty high, but the macro-driven backdrop is challenging.”

    Rising energy prices in August have already spilled into the month of September, with gasoline reaching the highest seasonal level in more than a decade this week. Voluntary production cuts by Saudi Arabia and Russia are a major contributing factor curtailing the supply of crude oil into year-end, and Goldman Sachs has warned that oil could climb above $100 a barrel.

    In financial markets, there’s one group of traders which is telegraphing that the final mile of the road toward 2% inflation won’t be smooth.

    Traders of derivatives-like instruments known as fixings anticipate that the next five CPI reports, including August’s, will produce annual headline inflation rates above 3%. Though policy makers care more about core readings that strip out volatile food and energy prices, they’re aware of how much headline figures can impact the public’s expectations.


    Source: Bloomberg. The maturity column reflects the month and year of upcoming CPI reports. The forwards column reflects the year-ago period from which the year-over-year rate is based.

    At BofA Securities, U.S. economist Stephen Juneau said August’s CPI won’t necessarily change his firm’s view that inflation is likely to move lower next year and fall back to the Fed’s target without the need for a recession. BofA Securities expects just one more Fed rate hike in November and will maintain that view if August’s CPI report comes in as he expects, Juneau said via phone.

    After stripping out volatile food and energy items, BofA Securities, along with Barclays and TD Securities, expects August’s core CPI readings to come in at 0.2% month-over-month — matching June and July’s levels — and to fall to 4.3% on an annual basis.

    Based on core measures, August’s report wouldn’t “change the narrative all that much: Everything points to a moderation in price growth,” Pelle said. “There’s a reason why food and energy are typically excluded,” and “we don’t want to put too much stock into one month.”

    As of Friday afternoon, all three major U.S. stock indexes were headed higher, with the S&P 500 attempting to snap a three-day losing streak. Dow industrials
    DJIA,
    the S&P 500
    SPX
    and Nasdaq Composite
    COMP
    were respectively on track for weekly losses of 0.7%, 1.2%, and 1.7%. They’re still up for the year by more than 4%, 16% and 31%.

    Meanwhile, Treasury yields turned were little changed on Friday as fed funds futures traders priced in a 93% chance of no action by the Fed at its next policy meeting in less than two weeks, and a more-than-50% likelihood of the same for November and December — which would leave the Fed’s main policy rate target between 5.25%-5.5%.

    “There is a risk that investors are too complacent about the inflation report,” said Brian Jacobsen, chief economist at Annex Wealth Management in Elm Grove, Wis. “We might not get to 2% inflation as quickly as many hope.”

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  • U.S. economy seen growing at about a 2.2% annual rate in the July-September quarter, according to real-time New York Fed estimate

    U.S. economy seen growing at about a 2.2% annual rate in the July-September quarter, according to real-time New York Fed estimate

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    The U.S. economy could expand at about a 2.2% annual rate in the current quarter, according to a revamped real-time estimate from the New York Federal Reserve released Friday.

    According to the weekly New York Fed’s Staff Nowcast, the economy has been on an upward trend since late July.

    The regional Fed bank had discontinued the real-time estimate during the pandemic. The New York Fed said the series will now be available weekly.

    The New York Fed’s estimate is much lower than the Atlanta Fed’s GDPNow model, which shows growth could expand at a 5.6% annual rate in the current quarter.

    Economists say the strength of the economy will be critical going forward in deciding whether the Federal Reserve needs to continue to raise its policy interest rate to cool inflation.

    The Fed has been expecting the economy to slow in the second half of the year. Fed officials forecast only 1% growth for 2023. In the first six months of the year, U.S. gross domestic product is averaging about a 2% growth rate.

    If the economy reaccelerates, it is likely that inflation will also move higher. Fed officials had been hoping that slower economic growth would continue push down inflation.

    Faster growth means “you are probably going to get some inflation numbers that aren’t going to be as good as people were anticipating,” said James Bullard, the former president of St. Louis Fed president and now dean of Purdue’s business school.

    “There is some risk that the Fed will have to go a little bit higher” even than the one more interest rate hike that the central bankers have penciled in this year, he said, in a recent CNBC interview.

    The first official government estimate of third-quarter growth won’t be released until Oct. 26.

    The picture of the health of the economy painted by U.S. GDP statistics can change quickly.

    The growth estimates for the first half of the year could be revised at the end of September when the Commerce Department releases benchmark updates to GDP data.

    The sharp revisions are one of the reasons why the Fed typically pays more attention to the unemployment rate and the inflation data.

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