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Tag: economic indicators

  • German economy shrank by 0.3% in second quarter in worse showing than initially thought

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    BERLIN — The German economy shrank by 0.3% in the second quarter compared with the previous three-month period, official data showed Friday, a significantly worse showing than was initially reported as tensions with the U.S. over tariffs simmered.

    In a preliminary report at the end of July, the Federal Statistical Office said gross domestic product contracted by 0.1% in April-June compared with the first quarter for Europe’s biggest economy. That contributed to a lackluster showing for the 20-nation eurozone.

    Full data showed output in manufacturing and the construction industry was worse than expected in June and household spending for the quarter also was revised downward, the office said Friday. The decline followed growth of 0.3% in the first quarter.

    The German economy has shrunk for the past two years. Chancellor Friedrich Merz’s administration has made revitalizing it a top priority since taking office May 6.

    It has launched a program to encourage investment and set up a 500 billion-euro ($582 billion) fund to pour money into Germany’s creaking infrastructure over the next 12 years. It is promising to cut red tape and speed up the country’s lagging digitization.

    A group of dozens of companies last month pledged to invest at least 631 billion euros ($731.7 billion) in Germany over the next three years, a figure that included some previously planned investments but was designed to send a signal of confidence in the economy.

    ING economist Carsten Brzeski said “after the surge in economic activity resulting from the U.S. front-loading of German exports in the first quarter, the economy experienced a reversal of the front-loading effect, and the first full-blown impact of U.S. tariffs (implemented in the second quarter) took effect.”

    It could “take until next year before a more substantial recovery starts to unfold,” he said.

    A European Union-U.S. trade deal was reached last month but remains a work in progress.

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  • US stocks rally to records on hopes for cuts to interest rates

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    NEW YORK (AP) — The U.S. stock market rallied to records on Tuesday after data suggested inflation across the country was a touch better last month than economists expected.

    The S&P 500 rose 1.1% to top its all-time high set two weeks ago. The Dow Jones Industrial Average climbed 483 points, or 1.1%, and the Nasdaq composite jumped 1.4% to set its own record.

    Stocks got a lift from hopes that the better-than-expected inflation report will give the Federal Reserve leeway to cut interest rates at its next meeting in September.

    Lower rates would give a boost to investment prices and to the economy by making it cheaper for U.S. households and businesses to borrow to buy houses, cars or equipment. President Donald Trump has angrily been calling for cuts to help the economy, often insulting the Fed’s chair personally while doing so.

    AP AUDIO: Wall Street rises toward records on hopes for lower interest rates

    AP business correspondent Seth Sutel reports markets are leaning higher.

    But the Fed has been hesitant because of the possibility that Trump’s tariffs could make inflation much worse. Lowering rates would give inflation more fuel, potentially adding oxygen to a growing fire. That’s why Fed officials have said they wanted to see more data come in about inflation before moving.

    Tuesday’s report said U.S. consumers paid prices for groceries, gasoline and other costs of living that were overall 2.7% higher in July than a year earlier. That’s the same inflation rate as June’s, and it was below the 2.8% that economists expected.

    The report pushed traders on Wall Street to increase bets that the Fed will cut interest rates for the first time this year in September. They’re betting on a 94% chance of that, up from nearly 86% a day earlier, according to data from CME Group.

    The Fed will receive one more report on inflation, as well as one more on the U.S. job market, before its next meeting, which ends Sept. 17. The most recent jobs report was a stunner, coming in much weaker than economists expected.

    Some economists warn that more twists and turns in upcoming data could make the Fed’s upcoming decisions not so easy. Its twin goals are to get inflation to 2% while keeping the job market healthy. Helping one with interest rates, though, often means hurting the other.

    Even Tuesday’s better-than-expected inflation report had some discouraging undertones. An underlying measure of inflation, which economists say does a better job of predicting where inflation may be heading, hit its highest point since early this year, noted Gary Schlossberg, market strategist at Wells Fargo Investment Institute. That helped cause some up-and-down swings for Treasury yields in the bond market.

    “Eventually, tariffs can show up in varying degrees in consumer prices, but these one-off price increases don’t happen all at once,” said Brian Jacobsen, chief economist at Annex Wealth Management. “That will confound the Fed and economic commentators for months to come.”

    Other central banks around the world have been lowering interest rates, and Australia’s on Tuesday cut for the third time this year.

    On Wall Street, Intel’s stock rose 5.6% after Trump said its CEO has an “amazing story,” less than a week after he had demanded Lip-Bu Tan’s resignation.

    Circle Internet Group, the company behind the popular USDC cryptocurrency that tracks the U.S. dollar, climbed 1.3% despite reporting a larger loss for the latest quarter than analysts expected. It said its total revenue and reserve income grew 53% in its first quarter as a publicly traded company, which topped forecasts.

    On the losing side of Wall Street was Celanese, which sank 13.1% even though the chemical company delivered a better profit than expected. It said that customers in most of its markets continue to be challenged, and CEO Scott Richardson said that “the demand environment does not seem to be improving.”

    Cardinal Health dropped 7.2% despite likewise reporting a stronger profit for the latest quarter than analysts expected. Its revenue fell short of forecasts, and analysts said the market’s expectations were particularly high for the company after its stock had already soared 33.3% for the year coming into the day.

    Critics say the broad U.S. stock market is looking expensive after its surge from a bottom in April. That’s putting pressure on companies to deliver continued growth in profit.

    All told, the S&P 500 rose 72.31 points to 6,445.76. The Dow Jones Industrial Average climbed 483.52 to 44,458.61, and the Nasdaq composite jumped 296.50 to 21,681.90.

    In stock markets abroad, indexes edged up in China after Trump signed an executive order late Monday that delayed hefty tariffs on the world’s second-largest economy by 90 days. The move was widely expected, and the hope is that it will clear the way for a possible deal to avert a dangerous trade war between the United States and China.

    Japan’s Nikkei 225 jumped 2.1%, and South Korea’s Kospi fell 0.5% for two of the world’s bigger moves.

    In the bond market, the yield on the 10-year Treasury rose to 4.28% from 4.27% late Monday.

    The yield on the two-year Treasury, which more closely tracks expectations for the Fed, fell to 3.73% from 3.76%.

    ___

    AP Business Writers Yuri Kageyama and Matt Ott contributed.

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  • US economy grew at a solid 3% rate last quarter, government says in final estimate

    US economy grew at a solid 3% rate last quarter, government says in final estimate

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    WASHINGTON — The American economy expanded at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment, the government said Thursday, leaving its previous estimate unchanged.

    The Commerce Department reported that the nation’s gross domestic product — the nation’s total output of goods and services — picked up sharply in the second quarter from the tepid 1.6% annual rate in the first three months of the year.

    Consumer spending, the primary driver of the economy, grew last quarter at a 2.8% pace, down slightly from the 2.9% rate the government had previously estimated. Business investment was also solid: It increased at a vigorous 8.3% annual pace last quarter, led by a 9.8% rise in investment in equipment.

    The third and final GDP estimate for the April-June quarter included figures showing that inflation continues to ease, to just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3.4% in the first quarter of the year. Excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.8% pace, down from 3.7% from January through March.

    The U.S. economy, the world’s biggest, displayed remarkable resilience in the face of the 11 interest rate hikes the Fed carried out in 2022 and 2023 to fight the worst bout of inflation in four decades. Since peaking at 9.1% in mid-2022, annual inflation as measured by the consumer price index has tumbled to 2.5%.

    Despite the surge in borrowing rates, the economy kept growing and employers kept hiring. Still, the job market has shown signs of weakness in recent months. From June through August, America’s employers added an average of just 116,000 jobs a month, the lowest three-month average since mid-2020, when the COVID pandemic had paralyzed the economy. The unemployment rate has ticked up from a half-century low 3.4% last year to 4.2%, still relatively low.

    Last week, responding to the steady drop in inflation and growing evidence of a more sluggish job market, the Fed cut its benchmark interest rate by an unusually large half-point. The rate cut, the Fed’s first in more than four years, reflected its new focus on shoring up the job market now that inflation has largely been tamed.

    “The economy is in pretty good shape,’’ Bill Adams, chief economist at Comerica Bank, wrote in a commentary.

    “After a big rate cut in September and considerable further cuts expected by early 2025, interest-rate-sensitive sectors like housing, manufacturing, auto sales, and retailing of other big-ticket consumer goods should pick up over the next year. Lower rates will fuel a recovery of job growth and likely stabilize the unemployment rate around its current level in 2025.’’

    Several barometers of the economy still look healthy. Americans last month increased their spending at retailers, for example, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates. The nation’s industrial production rebounded. The pace of single-family-home construction rose sharply from the pace a year earlier.

    And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.

    A category within GDP that measures the economy’s underlying strength rose at a solid 2.7% annual rate, though that was down from 2.9% in the first quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.

    Though the Fed now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.

    On Thursday, the Commerce Department also issued revisions to previous GDP estimates. From 2018 through 2023, growth was mostly higher — an average annual rate of 2.3%, up from a previously reported 2.1% — largely because of upward revisions to consumer spending. The revisions showed that GDP grew 2.9% last year, up from the 2.5% previously reported.

    Thursday’s report was the government’s third and final estimate of GDP growth for the April-June quarter. It will release its initial estimate of July-September GDP growth on Oct. 30. A forecasting tool from the Federal Reserve Bank of Atlanta projects that the economy will have expanded at a 2.9% annual pace from July through September.

    ___

    This story has been corrected to show that PCE inflation rose at a 3.4% annual rate in the first quarter, not 3%.

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  • Buy the September dip in stocks as the market heads into the best 3-month stretch of the year, strategist says

    Buy the September dip in stocks as the market heads into the best 3-month stretch of the year, strategist says

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    Malte Mueller/Getty Images

    • Nasdaq 100 and S&P 500 declines in September present a buying opportunity, says Ned Davis Research.

    • Weak seasonality data and excessive pessimism readings suggest a strong 4th quarter rally is ahead, NDR said.

    • NDR sees no signs of a sharp bear market, with positive earnings revisions and economic indicators.

    A 6% decline in the Nasdaq 100 and 4% decline in the S&P 500 since the start of September represents an attractive buying opportunity for investors, according to Ned Davis Research.

    The research firm said in a note on Friday that the weakness in stocks so far this month is more than typical, given weak seasonality data — but it’s also a big opportunity given the market is heading for its best three-month stretch of the year.

    “With the September weakness relieving the optimism and sending sentiment indicators to excessive pessimism readings, equities would be likely to launch a persistent ascent similar to the first quarter advance, supported by fourth quarter seasonal tendencies,” NDR strategist Tim Hayes said.

    He added: “Whereas a comparison of three-month declines shows that August – October has been the weakest, October – December has been the strongest.”

    Hayes finds it encouraging that, based on internal NDR readings, the stock market, economy, and corporate earnings are showing no signs of being vulnerable to a sharp bear market decline akin to what happened in 2022.

    Analyst earnings revisions continue to trend higher, historically a leading indicator for corporate earnings.

    A chart showing rising earnings revisionsA chart showing rising earnings revisions

    Ned Davis Research

    “As with revisions, economic performance is a leading indicator of earnings growth, currently supporting the earnings outlook. While the recession probability has risen from its lows of May and June, it hasn’t risen out of its bullish mode for equities,” Hayes explained.

    Altogether, that means the current stock market decline is more likely to be a garden variety correction that ultimately proves to be healthy for the sustainability of the ongoing bull rally that began in October 2022.

    “The current choppiness will prove to be just that, not the sign of a new bear market. It should lead to a buying opportunity within the continuing bull market, ahead of renewed rallying in the fourth quarter,” Hayes said.

    Read the original article on Business Insider

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  • Credit card borrowers are starting to show greater strength, new data indicates

    Credit card borrowers are starting to show greater strength, new data indicates

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    After struggling for the last two years, credit card borrowers appear to be turning the corner. 

    Late payments on credit cards aren’t rising much and are even declining at some major card companies, according to recent data. And while cardholders’ balances are continuing to rise, their growing incomes mean they’re better able to keep up with payments.

    There are plenty of ways for things to go wrong. Interest rates on credit cards are at their highest levels in decades. Inflation continues to take a bite out of consumers’ wallets. Younger borrowers and those with lower credit scores are struggling more. And the economy could always falter, even if Friday’s job report is a sign of health.

    But at the very least, the credit card industry is no longer showing widespread deterioration, reducing the risk that banks will absorb big losses by charging off loans from troubled borrowers.

    “There’s reason to be cautiously optimistic,” said Susan Fahy, chief digital officer at the credit-scoring company VantageScore.

    As of April 2024, some 1.35% of credit card balances had late payments of at least 30 days, according to VantageScore’s CreditGauge tracker. That figure has dropped in recent months, bucking the general trend of increases that started in 2021.

    Credit card metrics were unusually healthy in 2020 and 2021, as home-bound cardholders spent less and paid down their credit cards with their savings and stimulus funds. Later, as delinquencies started ticking up again, industry executives described the worsening they were seeing as “normalization.”

    If late payments persist, banks eventually charge off loans from seriously delinquent borrowers. Charge-off rates have gone a little past normal, but not by too much. Banks charged off some 4.4% of credit card loans in the first quarter, a bit more than they did before the pandemic but still far less than their 2009 level of 10.5%.

    Consumers are “managing” through today’s inflationary environment without showing big signs of wobbling, according to Brian Wenzel, chief financial officer at the credit card issuer Synchrony Financial. The average consumer is “pulling the economy forward,” Wenzel said Monday in remarks at an industry conference, even if Americans are shopping for cheaper products or pulling back on travel.

    “We see general stability in their delinquency stages,” Wenzel said, adding that his company’s charge-offs peaked in April.

    In April, 1.35% of credit card balances had payments that were at least 30 days late, reflecting a recent improvement in borrowers’ payment behavior, according to VantageScore data.

    Patrick T. Fallon/Bloomberg

    Synchrony’s charge-off rate fell to 6.5% of its loans in May, down from 6.7% in April, according to monthly data the company released Monday. The company expects its charge-offs to be lower in the second half of the year, partly because fewer customers are running late on their payments. Delinquencies at Synchrony fell for the third month in a row.

    Other credit card executives have also been optimistic in recent months.

    “The U.S. consumer remains a source of strength in the economy,” Capital One Financial CEO Richard Fairbank told analysts in April, chalking that up partly to a job market that “remains strikingly resilient.”

    Delinquencies were still rising at some major banks, including JPMorgan Chase and Bank of America, at the end of the first quarter. New data will be released next month as the industry reports second-quarter earnings.

    But there are ample signs of an “inflection in delinquencies across the consumer credit space,” Jefferies analyst John Hecht wrote in a note to clients this month, pointing to improvements in credit cards, auto loans and personal loans.

    “Broad data supports the notion that the credit cycle is turning,” Hecht wrote, a factor that may drive up credit card companies’ stock prices as investors gain confidence that the environment is improving.

    Even if the economy takes a negative turn, lenders have set aside enough reserves to cover loan losses under a “moderately worse employment situation,” Hecht wrote.

    Mark Narron, a Fitch Ratings analyst who covers banks, said that some deterioration may still occur in the coming months as metrics continue to find their post-pandemic normal. That’s particularly the case among lenders who took on riskier borrowers when conditions were healthier.

    Younger credit card borrowers and those with lower incomes have seen their delinquencies rise at a sharper rate, economists at the Federal Reserve Bank of New York have noted. Borrowers who are maxing out their cards have also been far more likely to fall behind on their payments, the New York Fed economists wrote in a blog post last month.

    To see significant improvements, either the number of maxed-out borrowers must decline or their delinquency rates must fall, according to the New York Fed economists.

    “So far, the data show neither of these trends moving in the right direction,” they wrote. “If these trends continue and other factors influencing delinquencies remain the same, credit card delinquencies are likely to continue to rise.”

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    Polo Rocha

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  • Argentina reports its first single-digit inflation in 6 months as markets swoon and costs hit home

    Argentina reports its first single-digit inflation in 6 months as markets swoon and costs hit home

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    BUENOS AIRES, Argentina — Argentina’s monthly inflation rate eased sharply to a single-digit rate in April for the first time in half a year, data released Tuesday showed, a closely watched indicator that bolsters President Javier Milei’s severe austerity program aimed at fixing the country’s troubled economy.

    Prices rose at a rate of 8.8% last month, the Argentine government statistics agency reported, down from a monthly rate of 11% in March and well below a peak of 25% last December, when Milei became president with a mission to combat Argentina’s dizzying inflation, among the highest in the world.

    Although praised by the International Monetary Fund and cheered by market watchers, Milei’s cost-cutting campaign and deregulation have in the short term been squeezing families whose money has plummeted in value while the cost of nearly everything has skyrocketed. Annual inflation is at 289.4%

    “People are in pain,” said 23-year-old Augustin Perez, a supermarket worker in the suburbs of Buenos Aires who said his rent had soared by 90% since Milei deregulated the real estate market and his electricity bill had nearly tripled since the government slashed subsidies. “They say things are getting better, but how? I don’t understand.”

    Milei’s social media feed in recent weeks has become a stream of good economic news: Argentine bonds posting some of the best gains among emerging markets, officials celebrating its first quarterly surplus since 2008 and the IMF announcing Monday it would release another $800 million loan — a symbolic vote of confidence in Milei’s overhaul.

    “The important thing is to score goals now,” Milei said at an event at the presidential palace Tuesday. “We are beating inflation.”

    Even so, some experts warn that falling inflation isn’t necessarily an economic victory — rather the symptom of a painful recession. The IMF expects Argentina’s gross domestic product to shrink by 2.8% this year.

    “You’ve had a massive collapse in private spending, which explains why consumption has dropped dramatically and why inflation is also falling,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics who studies emerging markets. “People are worse off than they were before. That leads them to spend less.”

    Signs of an economic slowdown are everywhere in Buenos Aires — the lines snaking outside discounted markets, the empty seats in the city’s typically booming restaurants, the growing strikes and protests.

    At an open-air market in the Liniers neighborhood, Lidia Pacheco is drawn to a garbage dump near the vegetable section. The 45-year-old mother of four rummages through the pungent pile to salvage the tomatoes with the least mold.

    “This place saves me,” Pacheco said. Sky-high prices have forced her to change her diet and habits to the point of giving up yerba mate, Argentina’s ubiquitous national drink brewed from bitter leaves. “Whatever I earn from selling clothes goes to eating,” she said.

    Retail sales in the first quarter of 2024 fell nearly 20% compared to the year before, a clip comparable to that of the 2020 pandemic lockdowns. The consumption of beef in Argentina — once a hallowed staple — dropped to its lowest level in three decades this quarter, the government reported, prompting panicked editorials about the fate of Argentina’s national psyche.

    “Now I buy pork and chicken instead,” said Leonardo Buono, 51-year-old hospital worker. “It’s an intense shock, this economic adjustment.”

    Milei, a self-proclaimed “anarcho-capitalist” and former TV personality, warned everyone his policies would hurt at first.

    He campaigned brandishing a chainsaw to symbolize all the cutting he would do to Argentina’s bloated state, a dramatic change from successive left-leaning Peronist governments that ran vast budget deficits financed by printing money.

    Promising the pain would pay off, he slashed spending on everything from construction and cultural centers to education and energy subsidies, from soup kitchens and social programs to pensions and public companies. He has also devalued the Argentine peso by 54%, helping close the chasm between the peso’s official and black-market exchange rates but also fueling inflation.

    Prices in shops and restaurants doubled in the first three months of 2024, the government statistics agency reported, reaching levels comparable to the U.S. and Europe.

    But Argentine wages have remained stagnant or declined, with the monthly minimum wage for regulated workers just $264 as of this month, with workers in the informal economy often paid less. Today that sum can buy a few nice meals at Don Julio, a famous Buenos Aires steakhouse. Some 60% of the country’s 46 million people now live in poverty, a 20-year high, according to a study in January by Argentina’s Catholic University.

    Despite rising discontent among many Argentines, the president’s approval ratings have remained high, around 50%, according to a survey this month by Argentine consulting firm Circuitos — possibly a result of Milei’s success blaming his predecessors for the crisis.

    “It’s not his fault, it’s the Peronists who ruined the country, and Milei is trying to do his best,” said Rainer Silva, a Venezuelan taxi driver who fled his own country’s economic collapse for Argentina five years ago. “He’s like Trump, everyone’s against him.”

    Argentina’s powerful trade unions and leftist political parties have pushed back against Milei with weekly street protests, but haven’t managed to galvanize a broad swath of society. That could change — a massive protest against budget cuts to public universities visibly hit a nerve, drawing hundreds of thousands of people and rattling the government.

    ___

    Associated Press writer Almudena Calatrava contributed to this report.

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  • Key is downbeat on U.S. economy, upbeat on its own outlook

    Key is downbeat on U.S. economy, upbeat on its own outlook

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    KeyCorp’s optimistic forecast for 2024 represented a marked change from last year, when its focus was largely on balance-sheet restructuring and expense control.

    Kim Raff/Bloomberg

    KeyCorp Chairman and CEO Chris Gorman said the $187.5 billion-asset company is “clearly playing offense,” despite his view that the country is likely to fall into a recession.

    High interest rates and market volatility have left a number of companies in a wait-and-see mode, Gorman said Thursday on a conference call with analysts.

    “I am not seeing a lot of people making significant investments in property, plants and equipment, and I’m not seeing people make significant investments in inventory, in technology and in people,” said Gorman, who has led the Cleveland-based Key since May 2020. “Rates clearly have an impact [and] uncertainty as to the path and direction of the economy is also a factor.”

    Against that cautious economic outlook, Key reported an outsize $101 million provision for loan losses, even after reporting only $81 million in charge-offs — 29 basis points of average loans — for the quarter ending March 31. Key also reiterated its full-year guidance, which envisions net charge-offs ranging from 30 to 40 basis points of average loans.

    The $20 million reserve build “was completely proactive,” Gorman said on the conference call. “I am of the mindset that we are in [a] higher-for-longer” interest rate environment. “As a consequence, we have been stressing all of our portfolio.”

    “My view is we probably will have a recession,” Gorman added.

    Gormon’s comments match the tone set by JPMorgan Chase CEO Jamie Dimon, who said last week that chances of a tougher economy “are higher than other people think.”

    Gorman’s prognosis for Key itself is considerably more optimistic than his macro outlook.

    The company reported first-quarter net income of $183 million, driven by net interest income totaling $886 million. While the net interest income figure represents a 20% year-over-year decline, Key expects spread revenue to grow throughout the remainder of 2024, and to eclipse $1 billion in the final quarter of the year, beating the fourth quarter 2023 result by about 10%.

    “We continue to confirm our ability” to reach that target, Chief Financial Officer Clark Khayat said on the conference call. “This first quarter of 2024 reflects the low point for net interest income.”

    Net interest income, which is generally a bank’s largest revenue source, is calculated by subtracting funding costs from overall interest income.

    Key’s forecast for 2024 represents a marked change from last year, when its focus was largely on balance-sheet restructuring and expense control. Gorman called 2023 a “reset” year for Key. Its 2024 outlook, by contrast, was well received by analysts.

    “It looks like the story’s favorable drivers for the remainder of the year and beyond all remain intact,” Piper Sandler analyst Scott Siefers wrote in a research note.

    Investor response on Thursday was muted. Key’s share price rose 3% by midday, though it yielded those gains as the day progressed. Shares closed down by 0.4% at $14.38.

    Noninterest income was probably the brightest spot in Key’s quarterly report. At $647 million, it was up 6% year over year, driven by strong results in investment banking, wealth management and mortgages. Investment banking generated $170 million of revenue during the quarter ending March 31, with Gorman projecting as much as $650 million for all of 2024. “There’s no reason we can’t get back to that level of growth,” he said.

    “I am encouraged by the strong, broad-based results we saw in our capital markets business,” Gorman said.

    Key’s asset quality remains solid, despite upticks in net charge-offs and nonperforming assets, Gorman said. The company performed what he termed a “deep dive” on loans likely to be impacted the most in a higher-for-longer interest rate scenario, covering more than 80% of commercial non-investment grade credits.

    The review determined that more than 90% of Key’s criticized commercial loans remain current in payments. It “confirmed our view that there would be low loss content in these loans,” Gorman said.

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    John Reosti

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  • Dow Jones Industrial Average Fast Facts | CNN

    Dow Jones Industrial Average Fast Facts | CNN

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    CNN
     — 

    Here’s a look at the Dow Jones Industrial Average.

    The Dow Jones Industrial Average is a stock index comprised of 30 “blue-chip” US stocks. It is meant to be a way to measure the strength or weakness of the entire US stock market.

    The Dow began in 1896 with 12 industrial stocks.

    Dow Jones & Co was founded by journalists Charles Dow and Edward Jones.

    Current Dow stocks

    Record high close – February 23, 2024, the Dow closes at 39,131.53 points.

    Biggest one-day point gain – March 24, 2020, the Dow gains 2,112.98 points.

    Biggest one-day percentage gain – March 15, 1933, the Dow closes up 15.34%.

    Biggest one-day point loss – March 16, 2020, the Dow closes down 2,997.1 points.

    Biggest one-day percentage loss – October 19, 1987, the Dow closes down 22.61%.

    1882 – Dow, Jones & Co. is created.

    1884 – Charles Dow creates the Dow Averages, the precursor to the DJIA.

    May 26, 1896 – The first index, made up of 12 industrial companies, is published and the Dow opens at 40.94 points.

    January 12, 1906 – The Dow closes at 100.25, the first close above 100.

    October 24, 1929 – The Stock Market crash of 1929 begins which leads to the Great Depression of the 1930s. It takes 25 years for the Dow to regain its September 1929 high of 381 points.

    1930 – Dow Jones becomes incorporated and the comma in the name is dropped.

    March 12, 1956 – The Dow closes at 500.24, the first close above 500.

    November 14, 1972 – The Dow closes at 1,003.16, the first close above 1,000.

    October 19, 1987 – The Dow closes down 508 points, at the time the biggest one-day drop ever in the Dow’s history.

    November 21, 1995 – The Dow closes at 5,023.55, the first close above 5,000.

    March 29, 1999 – The Dow closes at 10,006,78, the first close above 10,000.

    September 17, 2001 – Stock markets reopen after the 9/11 terror attacks.

    September 21, 2001 – After the first full week of trading post 9/11, the Dow falls more than 1,300 points, or about 14%.

    October 19, 2006 – The Dow closes at 12,011.73, the first close above 12,000.

    April 25, 2007 – The Dow closes at 13,089.89, the first close above 13,000.

    July 19, 2007 – The Dow closes at 14,000.41, the first close above 14,000.

    September 29, 2008 – Worst single-day point drop in history at the time, plunging 777.68 points – the same day the US House rejects the $700 billion financial bailout package.

    October 6-10, 2008 – Worst weekly point and percentage decline finishing at 8,451.19, or down 1,874.19 points and 18.15% for the week.

    February 21, 2012 – The Dow crosses the 13,000 level for the first time since May of 2008.

    February 1, 2013 – The Dow closes above 14,000 for the first time since October of 2007.

    May 7, 2013 – The Dow closes above 15,000 for the first time.

    November 21, 2013 – The Dow closes above 16,000 for the first time, at 16,009.99.

    July 3, 2014 – The Dow closes at 17,068.26, the first close above 17,000.

    December 23, 2014 – The Dow closes at 18,024.17, the first close above 18,000.

    August 26, 2015 – The Dow closes with a 619-point gain, the biggest daily point gain since 2008.

    January 7, 2016 – The Dow drops 5% in its first four days of the year, the worst four-day percentage loss to start a year on record.

    November 22, 2016 – The Dow closes at 19,023.87, the first close above 19,000.

    January 25, 2017 – The Dow hits the 20,000 milestone for the first time in history.

    March 1, 2017 – The Dow closes at 21,115.55, the first close over 21,000 in history.

    August 2, 2017 – The Dow closes above 22,000 for the first time, at 22,016.24.

    October 18, 2017 – The Dow closes above 23,000 for the first time, at 23,157.60.

    November 30, 2017 – The Dow closes above 24,000 for the first time, at 24,272.35.

    January 4, 2018 – The Dow closes at 25,075.13, the first close above 25,000.

    January 17, 2018 – The Dow closes at 26,115.65, the first time it has closed above 26,000.

    July 11, 2019 – The Dow closes at 27,088.08, the first time it has closed above 27,000.

    November 15, 2019 – The Dow closes above 28,000 for the first time, at 28,004.89.

    January 15, 2020 – The Dow closes above 29,000 for the first time, at 29,030.22.

    March 16, 2020 – The Dow records its worst one-day point drop in history, 2,997.1 points, and its worst performance on a percentage basis since October 19, 1987, also known as “Black Monday.”

    March 24, 2020 – The Dow closes with a 2,112.98-point gain, to become the biggest one-day point gain in history.

    November 24, 2020 – The Dow closes above 30,000 for the first time, at 30,046.24.

    January 7, 2021 – The Dow closes at 31,041.13, the first close above 31,000.

    March 10, 2021 – The Dow closes at 32,297.02, the first close above 32,000.

    March 17, 2021 – The Dow closes above 33,000 for the first time, at 33,015.37.

    April 15, 2021 – The Dow closes above 34,000 for the first time, at 34,035.99.

    July 23, 2021 – The Dow closes above 35,000 for the first time, at 35,061.55.

    November 2, 2021 – The Dow closes at 36,052.63, the first close above 36,000.

    December 13, 2023 – The Dow closes above 37,000 for the first time, at 37,090.24.

    January 22, 2024 – The Dow closes at 38,001.81, the first close above 38,000.

    February 22, 2024 – The Dow closes at 39,069.11, the first close above 39,000.

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  • Nigeria’s currency has fallen to a record low as inflation surges. How did things get so bad?

    Nigeria’s currency has fallen to a record low as inflation surges. How did things get so bad?

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    ABUJA, Nigeria — Nigerians are facing one of the West African nation’s worst economic crises in years triggered by surging inflation, the result of monetary policies that have pushed the currency to an all-time low against the dollar. The situation has provoked anger and protests across the country.

    The latest government statistics released Thursday showed the inflation rate in January rose to 29.9%, its highest since 1996, mainly driven by food and non-alcoholic beverages. Nigeria‘s currency, the naira, further plummeted to 1,524 to $1 on Friday, reflecting a 230% loss of value in the last year.

    “My family is now living one day at a time (and) trusting God,” said trader Idris Ahmed, whose sales at a clothing store in Nigeria’s capital of Abuja have declined from an average of $46 daily to $16.

    The plummeting currency worsens an already bad situation, further eroding incomes and savings. It squeezes millions of Nigerians already struggling with hardship due to government reforms including the removal of gas subsidies that resulted in gas prices tripling.

    With a population of more than 210 million people, Nigeria is not just Africa’s most populous country but also the continent’s largest economy. Its gross domestic product is driven mainly by services such as information technology and banking, followed by manufacturing and processing businesses and then agriculture.

    The challenge is that the economy is far from sufficient for Nigeria’s booming population, relying heavily on imports to meet the daily needs of its citizens from cars to cutlery. So it is easily affected by external shocks such as the parallel foreign exchange market that determines the price of goods and services.

    Nigeria’s economy is heavily dependent on crude oil, its largest foreign exchange earner. When crude prices plunged in 2014, authorities used its scarce foreign reserves to try to stabilize the naira amid multiple exchange rates. The government also shut down the land borders to encourage local production and limited access to the dollar for importers of certain items.

    The measures, however, further destabilized the naira by facilitating a booming parallel market for the dollar. Crude oil sales that boost foreign exchange earnings have also dropped because of chronic theft and pipeline vandalism.

    Shortly after taking the reins of power in May last year, President Bola Tinubu took bold steps to fix the ailing economy and attract investors. He announced the end of costly decadeslong gas subsidies, which the government said were no longer sustainable. Meanwhile, the country’s multiple exchange rates were unified to allow market forces to determine the rate of the local naira against the dollar, which in effect devalued the currency.

    Analysts say there were no adequate measures to contain the shocks that were bound to come as a result of reforms including the provision of a subsidized transportation system and an immediate increase in wages.

    So the more than 200% increase in gas prices caused by the end of the gas subsidy started to have a knock-on effect on everything else, especially because locals rely heavily on gas-powered generators to light their households and run their businesses.

    Under the previous leadership of the Central Bank of Nigeria, policymakers tightly controlled the rate of the naira against the dollar, thereby forcing individuals and businesses in need of dollars to head to the black market, where the currency was trading at a much lower rate.

    There was also a huge backlog of accumulated foreign exchange demand on the official market — estimated to be $7 billion — due in part to limited dollar flows as foreign investments into Nigeria and the country’s sale of crude oil have declined.

    Authorities said a unified exchange rate would mean easier access to the dollar, thereby encouraging foreign investors and stabilizing the naira. But that has yet to happen because inflows have been poor. Instead, the naira has further weakened as it continues to depreciate against the dollar.

    CBN Gov. Olayemi Cardoso has said the bank has cleared $2.5 billion of the foreign exchange backlog out of the $7 billion that had been outstanding. The bank, however, found that $2.4 billion of that backlog were false claims that it would not clear, Cardoso said, leaving a balance of about $2.2 billion, which he said will be cleared “soon.”

    Tinubu, meanwhile, has directed the release of food items such as cereals from government reserves among other palliatives to help cushion the effect of the hardship. The government has also said it plans to set up a commodity board to help regulate the soaring prices of goods and services.

    On Thursday, the Nigerian leader met with state governors to deliberate on the economic crisis, part of which he blamed on the large-scale hoarding of food in some warehouses.

    “We must ensure that speculators, hoarders and rent seekers are not allowed to sabotage our efforts in ensuring the wide availability of food to all Nigerians,” Tinubu said.

    By Friday morning, local media were reporting that stores were being sealed for hoarding and charging unfair prices.

    The situation is at its worst in conflict zones in northern Nigeria, where farming communities are no longer able to cultivate what they eat as they are forced to flee violence. Pockets of protests have broken out in past weeks but security forces have been quick to impede them, even making arrests in some cases.

    In the economic hub of Lagos and other major cities, there are fewer cars and more legs on the roads as commuters are forced to trek to work. The prices of everything from food to household items increase daily.

    “Even to eat now is a problem,” said Ahmed in Abuja. “But what can we do?”

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  • Nigeria’s currency has fallen to a record low as inflation surges. How did things get so bad?

    Nigeria’s currency has fallen to a record low as inflation surges. How did things get so bad?

    [ad_1]

    ABUJA, Nigeria — Nigerians are facing one of the West African nation’s worst economic crises in years triggered by surging inflation, the result of monetary policies that have pushed the currency to an all-time low against the dollar. The situation has provoked anger and protests across the country.

    The latest government statistics released Thursday showed the inflation rate in January rose to 29.9%, its highest since 1996, mainly driven by food and non-alcoholic beverages. Nigeria‘s currency, the naira, further plummeted to 1,524 to $1 on Friday, reflecting a 230% loss of value in the last year.

    “My family is now living one day at a time (and) trusting God,” said trader Idris Ahmed, whose sales at a clothing store in Nigeria’s capital of Abuja have declined from an average of $46 daily to $16.

    The plummeting currency worsens an already bad situation, further eroding incomes and savings. It squeezes millions of Nigerians already struggling with hardship due to government reforms including the removal of gas subsidies that resulted in gas prices tripling.

    With a population of more than 210 million people, Nigeria is not just Africa’s most populous country but also the continent’s largest economy. Its gross domestic product is driven mainly by services such as information technology and banking, followed by manufacturing and processing businesses and then agriculture.

    The challenge is that the economy is far from sufficient for Nigeria’s booming population, relying heavily on imports to meet the daily needs of its citizens from cars to cutlery. So it is easily affected by external shocks such as the parallel foreign exchange market that determines the price of goods and services.

    Nigeria’s economy is heavily dependent on crude oil, its largest foreign exchange earner. When crude prices plunged in 2014, authorities used its scarce foreign reserves to try to stabilize the naira amid multiple exchange rates. The government also shut down the land borders to encourage local production and limited access to the dollar for importers of certain items.

    The measures, however, further destabilized the naira by facilitating a booming parallel market for the dollar. Crude oil sales that boost foreign exchange earnings have also dropped because of chronic theft and pipeline vandalism.

    Shortly after taking the reins of power in May last year, President Bola Tinubu took bold steps to fix the ailing economy and attract investors. He announced the end of costly decadeslong gas subsidies, which the government said were no longer sustainable. Meanwhile, the country’s multiple exchange rates were unified to allow market forces to determine the rate of the local naira against the dollar, which in effect devalued the currency.

    Analysts say there were no adequate measures to contain the shocks that were bound to come as a result of reforms including the provision of a subsidized transportation system and an immediate increase in wages.

    So the more than 200% increase in gas prices caused by the end of the gas subsidy started to have a knock-on effect on everything else, especially because locals rely heavily on gas-powered generators to light their households and run their businesses.

    Under the previous leadership of the Central Bank of Nigeria, policymakers tightly controlled the rate of the naira against the dollar, thereby forcing individuals and businesses in need of dollars to head to the black market, where the currency was trading at a much lower rate.

    There was also a huge backlog of accumulated foreign exchange demand on the official market — estimated to be $7 billion — due in part to limited dollar flows as foreign investments into Nigeria and the country’s sale of crude oil have declined.

    Authorities said a unified exchange rate would mean easier access to the dollar, thereby encouraging foreign investors and stabilizing the naira. But that has yet to happen because inflows have been poor. Instead, the naira has further weakened as it continues to depreciate against the dollar.

    CBN Gov. Olayemi Cardoso has said the bank has cleared $2.5 billion of the foreign exchange backlog out of the $7 billion that had been outstanding. The bank, however, found that $2.4 billion of that backlog were false claims that it would not clear, Cardoso said, leaving a balance of about $2.2 billion, which he said will be cleared “soon.”

    Tinubu, meanwhile, has directed the release of food items such as cereals from government reserves among other palliatives to help cushion the effect of the hardship. The government has also said it plans to set up a commodity board to help regulate the soaring prices of goods and services.

    On Thursday, the Nigerian leader met with state governors to deliberate on the economic crisis, part of which he blamed on the large-scale hoarding of food in some warehouses.

    “We must ensure that speculators, hoarders and rent seekers are not allowed to sabotage our efforts in ensuring the wide availability of food to all Nigerians,” Tinubu said.

    By Friday morning, local media were reporting that stores were being sealed for hoarding and charging unfair prices.

    The situation is at its worst in conflict zones in northern Nigeria, where farming communities are no longer able to cultivate what they eat as they are forced to flee violence. Pockets of protests have broken out in past weeks but security forces have been quick to impede them, even making arrests in some cases.

    In the economic hub of Lagos and other major cities, there are fewer cars and more legs on the roads as commuters are forced to trek to work. The prices of everything from food to household items increase daily.

    “Even to eat now is a problem,” said Ahmed in Abuja. “But what can we do?”

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  • Home prices jumped by most in almost a year in November: Closely watched barometer

    Home prices jumped by most in almost a year in November: Closely watched barometer

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    LOS ANGELES — A closely watched housing market barometer shows U.S. home prices in November posted their biggest annual gain in more than a year.

    S&P Dow Jones Indices’ CoreLogic Case-Shiller national home price index rose 5.1% over the 12 months ended in November. That’s the index’s fifth straight annual gain and the biggest since December 2022, according to data released this week.

    The jump “is pretty strong, given where mortgage rates have been and the impact on affordability,” said Selma Hepp, chief economist at CoreLogic.

    U.S. home prices are now up 45% since March 2020, the early days of the pandemic.

    A tight supply of homes for sale nationally has kept upward pressure on home prices despite a severe housing market slump deepened by a sharp runup in mortgage rates last fall.

    The average rate on a 30-year mortgage rate reached 7.79% in late October, according to mortgage buyer Freddie Mac. Since then, home loan borrowing costs have been mostly easing, though they remain well above the rock-bottom levels seen just three years ago.

    Elevated mortgage rates and a dearth of available homes have kept the U.S. housing market mired in a slump the past two years. Sales of previously occupied U.S. homes sank to a nearly 30-year low last year, tumbling 18.7% from 2022.

    While annual home price gains remain solid, the month-to-month changes in the latest index paint a less definitive picture of home price trends.

    Consider, the November reading was down 0.2% from October, marking the first monthly decline in the home price index since January 2023.

    “Surging mortgage rates in late 2023 started to impact prices in November, which declined from the month before,” Hepp said. “That suggests pivoting of annual gains over the next few months.”

    CoreLogic forecasts that U.S. home prices will rise by an average of 3% this year.

    A version of the index that tracks the value of homes in 20 major U.S. metropolitan areas showed that home prices in November increased in all but one of the metros in the index: Portland, Oregon.

    Among the biggest gainers: Detroit, where the index surged to an annual gain of 8.2%, and San Diego, where the index registered an 8% annual gain.

    Many economists are projecting that mortgage rates will head lower in 2024, though forecasts generally have the average rate on a 30-year home loan hovering around 6% by the end of the year.

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  • Somalia secures $4.5 billion debt relief deal with international creditors

    Somalia secures $4.5 billion debt relief deal with international creditors

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    WASHINGTON — Somalia on Wednesday secured a $4.5 billion debt relief deal from its international creditors, the International Monetary Fund and World Bank said, which will allow the nation to develop economically and take on new projects.

    The deal comes as part of a debt forgiveness program —called the Heavily Indebted Poor Countries initiative— overseen by both organizations. As a result of its participation in the program, Somalia’s external debt will fall from 64 percent of GDP in 2018 to less than 6 percent of GDP by the end of 2023, the IMF and World Bank say in a joint news release.

    Somalia’s national debt currently exceeds $5 billion, according to official figures.

    “Somalia’s debt relief process has been nearly a decade of cross governmental efforts spanning three political administrations. This is a testament to our national commitment and prioritization of this crucial and enabling agenda,” said Somalia’s President, H.E. Hassan Sheikh Mohamud in a statement.

    U.S. Treasury said it intends to cancel 100 percent of Somalia’s remaining claims and “urges Somalia’s other bilateral creditors to be equally generous and to move expeditiously.”

    The deal is “a significant milestone in Somalia’s path to continued recovery and meaningful reform to promote greater stability and economic opportunities for the Somali people,” U.S. Treasury Secretary Janet Yellen said.

    Ali Yasin Sheikh, deputy governor of Somalia’s central bank, told The Associated Press Wednesday that debt relief under the Heavily Indebted Poor Countries initiative comes as a relief for his country, which is eager to secure new funding for public projects.

    In addition, he said, now it will be easier for Somalia to attract new investors.

    “Debt forgiveness will lead to a change in the world’s perception of the country’s economic stability, he said. ”Somalia will be able to access global funds and investments from all over the world, as it is open to international financial markets.”

    He warned, however, that “it is crucial to ensure that measures are put in place to prevent Somalia from slipping back” into high debt again.

    Somalia remains one of the world’s poorest countries, beset mostly by security challenges stemming from years of unrest.

    The Horn of Africa country is trying to achieve political stability with transitions such as the one that ushered in Hassan Sheikh Mohamud in 2022, despite setbacks including an ongoing insurgency by al-Shabab. The extremist group, which opposes the federal government, still controls large parts of rural Somalia. Al-Shabab regularly carries out deadly attacks in Mogadishu, the capital, and elsewhere in the country.

    Somalia also is vulnerable to climate-related shocks, with some parts of the country nearing famine conditions, according to the World Bank. At the same time, heavy rains in parts of Somalia recently have triggered destructive flooding.

    Debt relief will free up revenue, including from meager but expanding domestic sources, to invest in key public infrastructure, said Mohamed Mohamud Adde, an independent political analyst and academic based in Mogadishu.

    “It is crucial for the Somali government to have its debts cleared, since the government is not able to raise taxes from the public and cannot borrow money from international institutions due to these debts,” he said. “The old infrastructure of Somalia has been eroded by time and civil war. Thus, building new roads is essential for the country’s development. This would create jobs and facilitate people’s ability to trade with each other. ”

    ___

    Faruk contributed from Mogadishu.

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  • US new home sales surged in September | CNN Business

    US new home sales surged in September | CNN Business

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    Washington, DC
    CNN
     — 

    New home sales in the United States surged higher in September from the month before, even as mortgage rates remained over 7%, making financing a home costlier and pushing people out of the market.

    Sales of newly constructed homes jumped 12.3% in September to a seasonally adjusted annual rate of 759,000, from a revised rate of 676,000 in August, according to a joint report from the US Department of Housing and Urban Development and the Census Bureau. Sales were up 33.9% from a year ago.

    This represents the fastest pace of sales since February 2022 and easily exceeds analysts’ expectations of a sales pace of 680,000.

    Sales of existing homes have been trending down since February and are down 20% year to date in September from a year ago. There is an ongoing inventory and affordability crunch that has homeowners with mortgage rates of 3% or 4% reluctant to sell and buy another home at a much higher rate. In August, rates topped 7% and have lingered there as the Federal Reserve continues to address inflation.

    The average rate for a 30-year, fixed-rate mortgage was 7.63% last week, according to Freddie Mac, and there are indications it could continue to climb.

    “With one more Fed interest rate hike expected for the year, interest rates are not anticipated to drop any time soon,” said Kelly Mangold of RCLCO Real Estate Consulting.

    New construction has been an appealing alternative, attracting determined buyers frustrated by the historically low supply of existing homes. Still, affordability concerns remain.

    “The constraints in the housing market have created a significant amount of pent-up demand, as more and more households are living in homes they may have outgrown and are deciding to buy despite current market conditions,” said Mangold.

    According to the report, new home sales activity increased the most in the south, “a region that continues to outperform due to availability of land, population and job growth, and a relatively lower cost of living,” said Mangold.

    While new home sales are a much smaller share of the overall sales market than existing home sales, the inventory picture is rosier for new construction homes.

    The seasonally adjusted estimate of new homes for sale at the end of September was 435,000. This represents a supply of 6.9 months at the current sales pace.

    By comparison, there were 1.13 million existing homes for sale at the end of September, or the equivalent of 3.4 months’ supply at the current monthly sales pace.

    Typically, the ratio of existing homes to new homes has been closer to 5 to 1, but lately it has been closer to 2 to 1, according to the National Association of Realtors.

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  • Union Pacific railroad’s quarterly profit falls 19% as volumes slow and costs remain high

    Union Pacific railroad’s quarterly profit falls 19% as volumes slow and costs remain high

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    OMAHA, Neb. — Union Pacific’s third-quarter profit fell 19% as the railroad hauled fewer shipments and costs remained high, but the average speed of its trains improved 5% as new CEO Jim Vena began to tweak the operations.

    The Omaha, Nebraska, railroad earned $1.53 billion, or $2.51 per share, during the quarter, That’s down from $1.9 billion, or $3.05 per share. But it tops the per-share earnings of $2.42 that Wall Street was expecting, according to a survey of analysts by FactSet Research.

    The number of shipments Union Pacific delivered slipped 3% in the quarter, and while costs improved about 4% they remained elevated at $3.76 billion.

    The railroad’s revenue slipped 10% to $5.9 billion because of the lower volume and the lag between when fuel prices increase and when Union Pacific’s fuel surcharge kicks in.

    “We faced many challenges in the quarter, including continued inflationary pressures and a drop in carloads,” said Vena, who took the job in August. But the average speed of the railroad’s trains increased to 200 daily miles per car. and other productivity measures also improved during the quarter.

    Train speed has continued to improve this month to about 210 daily miles per car today, but Vena said he wants to see that keep getting better to reach the 220s that Union Pacific used to deliver before the pandemic.

    “We are aligning the team around our strategy focused on being the best in safety, service, and operational excellence as we drive growth to the railroad,” he said.

    Vena said one of his initial moves is to try to push decision making lower down in the operation and eliminate layers of bureaucracy, so it can react more quickly. More cuts are likely but major changes aren’t expected because the railroad already overhauled its operations several years ago.

    Vena said he still sees room to improve productivity but he won’t be able to make the same kind of drastic changes he made when he was Union Pacific’s chief operations officer in 2019 and 2020 because the railroad is already more efficient than it was back then.

    The railroad will try to use attrition instead of layoffs to reduce the size of its workforce to get more efficient and match current volumes, Vena said.

    Edward Jones analyst Jeff Windau said he’ll be looking for improvement in all aspects of the railroad’s operations as a result of Vena’s focus on productivity and efficiency, but he expects the changes to be largely incremental.

    The railroad said it still expects total volume may decline slightly this year because of the weak consumer demand. So shipments likely won’t exceed the current forecast for flat industrial production.

    Shares of Union Pacific gained more than 3% Thursday to trade for $213.16 around midday.

    Union Pacific is one of the nation’s largest railroads and operates more than 30,000 miles of track in 23 western states. Safety has been a key concern for the industry this year ever since a Norfolk Southern train derailed in eastern Ohio in February. UP and the other major railroads are working to improve safety although they already have a record of being the safest way to transport cargo over land.

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  • Inflation in UK unchanged at 6.7% in September, still way more than Bank of England’s target of 2%

    Inflation in UK unchanged at 6.7% in September, still way more than Bank of England’s target of 2%

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    Inflation in the U.K. held steady at 6.7% in September as easing food and drink price rises were offset by higher fuel costs for motorists

    ByThe Associated Press

    October 18, 2023, 3:09 AM

    FILE – A man walks past the Bank of England, at the financial district in London, on May 11, 2023. Homeowners across the U.K. are hoping that the Bank of England will decide to avoid raising interest rates for the first time in nearly two years. Following news that inflation fell unexpectedly in August to its lowest level since Russia invaded Ukraine, expectations have grown that the central bank will opt Thursday, Sept. 21, 2023, to keep its main interest rate unchanged. (AP Photo/Frank Augstein)

    The Associated Press

    LONDON — Inflation in the U.K. held steady at 6.7% in September as easing food and drink price rises were offset by higher petrol and diesel prices for motorists, official figures showed Wednesday.

    The flat reading reported by the Office for National Statistics was unexpected. Most economists had predicted another fall.

    It means that the U.K.’s inflation rate remains more than three times higher than the Bank of England’s target rate of 2%. The bank, though, is not expected to raise interest rates at its next policy meeting, opting instead to keep its main borrowing rate unchanged at the 15-year high of 5.25%.

    The flat reading will raise concerns, certainly among homeowners, that rates will stay higher for longer.

    Last month, the bank brought an end to nearly two years of interest rate rises as inflation fell from multi-decade highs above 11%.

    Most economists expect a sizeable decline in inflation next month.

    “Progress on falling inflation has stalled, for one month at least,” said James Smith, research director at the Resolution Foundation think tank. “It should fall sharply next month to below 5%, as energy prices fall for most people.”

    The U.K. has the highest inflation rate among the Group of Seven leading industrial economies — and by quite a margin. Some economists attribute that to Britain’s departure from the European Union, which has created worker shortages in some sectors, raising costs to business, and led to frictions in trade.

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  • The IMF sees greater chance of a ‘soft landing’ for the global economy | CNN Business

    The IMF sees greater chance of a ‘soft landing’ for the global economy | CNN Business

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    London
    CNN
     — 

    The International Monetary Fund (IMF) sees better odds that central banks will manage to tame inflation without tipping the global economy into recession, but it warned Tuesday that growth remained weak and patchy.

    The agency said it expected the world’s economy to expand by 3% this year, in line with its July forecast, as stronger-than-expected growth in the United States offset downgrades to the outlook for China and Europe. It shaved its forecast for growth in 2024 by 0.1 percentage point to 2.9%.

    Echoing comments made in July, the IMF highlighted the global economy’s resilience to the twin shocks of the pandemic and the Ukraine war while warning in its World Economic Outlook that risks remained “tilted to the downside.”

    “Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled,” IMF chief economist Pierre-Olivier Gourinchas wrote in a blog post. “The global economy is limping along,” he added.

    The IMF’s projections for growth and inflation are “increasingly consistent with a ‘soft landing’ scenario… especially in the United States,” Gourinchas continued.

    But he cautioned that growth “remains slow and uneven,” with weaker recoveries now expected in much of Europe and China compared with predictions just three months ago.

    The 20 countries using the euro are expected to grow collectively by 0.7% this year and 1.2% next year, a downgrade of 0.2 percentage points and 0.3 percentage points respectively from July.

    The IMF now expects China to grow 5% this year and 4.2% in 2024, down from 5.2% and 4.5% previously.

    “China’s property sector crisis could deepen, with global spillovers, particularly for commodity exporters,” it said in its report

    By contrast, the United States is expected to grow more strongly this year and next than expected in July. The IMF upgraded its growth forecasts for the US economy to 2.1% in 2023 and 1.5% in 2024 — an improvement of 0.3 percentage points and 0.5 percentage points respectively.

    “The strongest recovery among major economies has been in the United States,” the IMF said.

    The agency expects that inflation will continue to fall — bolstering the case for a “soft landing” in major economies — but it does not expect it to return to levels targeted by central banks until 2025 in most cases.

    The IMF revised its forecasts for global inflation to 6.9% this year and 5.8% next year — an increase of 0.1 percentage point and 0.6 percentage points respectively.

    Commodity prices pose a “serious risk” to the inflation outlook and could become more volatile amid climate and geopolitical shocks, Gourinchas wrote.

    “Food prices remain elevated and could be further disrupted by an escalation of the war in Ukraine, inflicting greater hardship on many low-income countries,” he added.

    Oil prices surged Monday on concerns that the latest conflict between Israel and Hamas could cause wider instability in the oil-producing Middle East. Brent crude prices were already elevated following supply cuts by major producers Saudi Arabia and Russia.

    High oil and natural gas prices, leading to skyrocketing energy costs, helped drive inflation to multi-decade highs in many economies in 2022. The latest jump in oil prices could cause a fresh bout of broader price rises.

    Bond investors are already on edge. They dumped government bonds last week in the expectation that the world’s major central banks would keep interest rates “higher for longer” to bring inflation down to their targets.

    The IMF also pointed to concerns that high inflation could become a self-fulfilling prophecy. If households and businesses expect prices to go on rising, that could cause them to set higher prices for their goods and services, or demand higher wages.

    “Expectations that future inflation will rise could feed into current inflation rates, keeping them high,” the IMF noted.

    It added that the “expectations channel is critical to whether central banks can achieve the elusive ‘soft landing’ of bringing the inflation rate down to target without a recession.”

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  • Pressure to fill House speaker vacancy builds amid crisis in Israel | CNN Politics

    Pressure to fill House speaker vacancy builds amid crisis in Israel | CNN Politics

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    CNN
     — 

    The House speakership drama enters a new week under increased urgency as Israel declared war Sunday following unprecedented surprise attacks by Hamas.

    Kevin McCarthy’s unprecedented ouster as speaker leaves the House iin uncharted legal territory regarding what it can do under acting Speaker Patrick McHenry. When Congress reconvenes Monday, lawmakers will be under pressure to elect a new speaker swiftly amid the crisis in Israel, which has prompted calls from within the Republican Party to speed up their timeline given the national security implications of keeping the role vacant.

    As the Biden administration looks to provide additional assistance to Israel, officials were unsure Saturday about what could be accomplished without a sitting speaker. While McHenry is serving as speaker pro tempore, he has little power outside of recessing, adjourning or recognizing speaker nominations, and it’s unclear whether he can participate in intelligence briefings on the crisis in Israel.

    Democratic House Minority Leader Hakeem Jeffries said Sunday that he had conversations with the White House and the National Security Council on Saturday, but he has not yet met with the Gang of Eight – which typically includes the top leaders and heads of the intelligence committees in both parties and both chambers.

    “I do anticipate that we’ll have the opportunity to have a secure briefing at some point next week,” Jeffries told CNN’s Dana Bash on “State of the Union.”

    Jeffries said it is his understanding that the Biden administration can make some decisions regarding aid to Israel without waiting for Congress and urged the administration to do so, adding that he expects “it will provide whatever assistance it can.”

    House Foreign Affairs Chairman Mike McCaul told Bash Sunday that there is currently $3.3 billion in foreign military financing already appropriated that the president can use.

    The Texas Republican also called McCarthy’s ouster “dangerous.”

    “I look at the world and all of the threats that are out there and what kind of message are we sending to adversaries when we can’t govern, when we are dysfunctional, when we don’t even have a speaker of the House?” McCaul said on “State of the Union.”

    McCarthy on Saturday slammed his Republican colleagues for removing him from office last week, and stressed the impact of a speakerless House on national security. “Why would you ever remove a speaker during a term to raise doubt around the world?” McCarthy asked in a Fox News interview.

    McCarthy announced shortly after his ouster that he would not seek the speakership again, making room for House Majority Leader Steve Scalise of Louisiana and Ohio Rep. Jim Jordan to launch their bids for the seat. Former President Donald Trump has thrown his support behind Jordan. Oklahoma Rep. Kevin Hern announced Saturday that he had decided not to run, saying “I believe a three-man race for Speaker will create even more division and make it harder to elect a Speaker.”

    House Republicans are scheduled to hold a candidate forum on Tuesday and an internal election on Wednesday. But it’s unclear when the floor vote will happen, and the timeline is contingent on whether moderate GOP lawmakers can rally around Scalise or Jordan, who are among the hardliners of the party.

    “We have to get a speaker elected this week so we can get things on the floor like replenishing the Iron Dome,” McCaul told Bash on Sunday – referring to Israel’s rocket defense system, which was developed with help from the United States. He added that the House should look to pass a resolution condemning Hamas “by unanimous consent whether or not we have a speaker in place because I think we cannot wait. We have to get that message out as soon as possible.”

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  • Why you should care about the global rout in government bonds | CNN Business

    Why you should care about the global rout in government bonds | CNN Business

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    London
    CNN
     — 

    A slump in government bonds around the world has pushed up the cost of some nations’ debt to levels not seen in more than a decade. That’s bad news for governments in the red but also for the wallets of millions of mortgage borrowers, stock investors and businesses.

    The sell-off has been fueled by expectations among investors that the world’s major central banks will keep interest rates “higher for longer” to bring inflation down to their targets.

    It works like this: Governments looking to raise cash for public services and investments issue bonds. A bond provides a way to borrow money from investors for a set length of time, with the obligation to make regular interest payments.

    When official interest rates rise, so do investors’ expectations for returns on bonds, known as yields. This creates an incentive for investors to sell the bonds they currently hold and buy newly issued ones that offer higher interest payments. Selling bonds reduces prices. So, in short, when yields rise, bond prices fall.

    And yields have most definitely been rising: The yield on 30-year US government bonds, also known as Treasuries, hit 5% on Tuesday for the first time since 2007. In the United Kingdom, the yield on 30-year bonds also reached 5% this week, the highest level in more than two decades.

    Yields on German long-dated bonds are back to levels last seen on the eve of the eurozone debt crisis in 2011. Yields on Italy’s 10-year bonds hit 5% on Wednesday, the highest level since 2012, when that crisis was in full swing.

    Here’s why you should care.

    The yields on local government bonds are usually used by banks to price mortgages.

    The disastrous “mini” budget unveiled by former UK Prime Minister Liz Truss in September last year provided a stark illustration of that relationship. Her plan to borrow tens of billions of pounds to fund tax cuts spooked bond investors who feared that the country’s finances were on an unsustainable path.

    The resulting sell-off in UK government bonds — called “gilts” — caused yields to shoot up, taking mortgage costs higher with them.

    The average interest on a two-year fixed-rate mortgage soared to 6.47% at the start of November 2022, according to data from product comparison website Moneyfacts, the highest level since the depths of the global financial crisis in August 2008.

    Early morning sun illuminates streets of residential terraced houses, on September 17, 2023 in Bath, England. Soaring interest rates and falling prices has meant the end of the UK's 13-year housing market boom potentially leading to a wider house price crash.

    That meant hundreds of pounds more a month in mortgage payments. Before higher mortgage rates kicked in, some panicked homeowners rushed to refinance their fixed-rate loans earlier than planned, accepting a financial penalty for doing so.

    Mortgage rates had been falling back since the drama last fall but are now back to 6.47%, this month’s data from Moneyfacts shows.

    In the United States, mortgage rates tend to track the yield on 10-year Treasuries, and that yield has risen 0.27 percentage points since late September.

    On Thursday, government-backed mortgage provider Freddie Mac announced that the average interest on a 30-year fixed-rate mortgage had hit 7.31% in the week ending September 28 — its highest level since 2000.

    “Higher mortgage rates create a standoff between potential buyers, who face some of the highest borrowing rates since 2000, and sellers, who may already enjoy a low fixed-rate mortgage and thus are less incentivized to sell,” Andrew Sheets, global head of corporate credit research at Morgan Stanley, told CNN.

    Surging government bond yields are probably coming for your stock portfolios too.

    Shares typically lose value when the yields on government debt rise, as investors can now get high returns — and a steady income — from less risky assets.

    Take the yield on 10-year Treasuries: at 4.78%, it is more than twice as high as the average yearly dividend paid out by the companies making up the S&P 500 index (SPX).

    “The higher the gilt yield goes, the less inclined, or obliged, investors will feel to take risk and pay up for other asset classes, such as shares,” Russ Mould, investment director at AJ Bell, told CNN.

    Stock indexes have tumbled on both sides of the Atlantic in recent weeks. The S&P 500 and the tech-heavy Nasdaq Composite (NDX) have shed 4% and 2.3% respectively since the Federal Reserve said late last month that it could hike rates once more this year and expected to make fewer rate cuts in 2024.

    The STOXX Europe 600 has sunk 4.5% and London’s FTSE 100 4.3% in that time.

    “Income is back,” analysts at BlackRock, the world’s biggest asset manager, wrote in a note Monday, recommending investments in short-dates US Treasuries.

    Stocks have also taken a hit in recent weeks as rising oil prices, an ailing Chinese economy and the prospect of another government shutdown in the United Stated have unnerved investors.

    High official interest rates in America and Europe have also raised the cost of borrowing for businesses.

    “Higher interest rates make borrowing less attractive, and we’ve already seen a sharp slowing of bank lending that we think is consistent with this idea,” said Sheets at Morgan Stanley.

    “It’s important to note that slower credit growth, which generally means a cooler economy, is precisely what the Federal Reserve is trying to achieve through its large recent rate hikes,” he added.

    Higher yields also mean that the government must pay more to service its debt — with less money available to spend elsewhere.

    The US government is currently sitting on a $33 trillion debt pile and is expected to incur more than $1 trillion in average annual interest costs over the next decade.

    In March, when gilt yields were much lower than now, the UK’s public spending watchdog said it expected the annual interest paid on the government’s pile of debt to peak at £115 billion ($140 billion) this year. That’s almost three times as much as the UK government plans to spend in 2023 on a key benefit for children and people with disabilities.

    Rising bond yields mean that “for any given level of borrowing, more must be spent on debt interest, leaving less scope to finance other priorities,” the Office for Budget Responsibility said in its March forecast.

    Higher gilt yields give politicians “less wiggle room to ease [the] cost-of-living pain through tax cuts or public sector pay offers,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, wrote in a note Wednesday.

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  • US mortgage rates climb to 7.31%, hitting their highest level in nearly 23 years | CNN Business

    US mortgage rates climb to 7.31%, hitting their highest level in nearly 23 years | CNN Business

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    Washington, DC
    CNN
     — 

    US mortgage rates surged to their highest level in nearly 23 years this week as inflation pressures persisted.

    The 30-year fixed-rate mortgage averaged 7.31% in the week ending September 28, up from 7.19% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 6.70%.

    “The 30-year fixed-rate mortgage has hit the highest level since the year 2000,” said Sam Khater, Freddie Mac’s chief economist, in a statement. “However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances.”

    The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.

    Mortgage rates have spiked during the Federal Reserve’s historic inflation-curbing campaign — and while a good deal of progress has been made since June 2022, when inflation hit 9.1%, Fed officials say there is still a ways to go.

    The Fed’s preferred inflation measure, the core Personal Consumption Expenditures index, is currently 4.2%, which is more than double the Fed’s target of 2%. Economists expect it to drop to 3.9% when the latest reading is released on Friday.

    This week’s mortgage rate surge followed last week’s small move higher, as investors settled in for “higher-for-longer” interest rates after last week’s Fed policy meeting, said Danielle Hale, chief economist at Realtor.com.

    Hale said the takeaway from the meeting was that the upward adjustments from the Fed haven’t ended.

    “Revised economic projections show that another rate hike this year is definitely on the table, and the expected policy rate in 2024 and 2025 was also higher than previously forecast,” she said. “Market participants are still playing catchup.”

    While the Fed does not set the interest rates that borrowers pay on mortgages directly, its actions influence them.

    Mortgage rates tend to track the yield on 10-year US Treasuries, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

    The yield on 10-year Treasuries rose from 4.3% on September 20 to 4.6% as of September 27.

    Mortgage applications continued to drop last week, according to the Mortgage Bankers Association, as mortgage rates went higher.

    “Rates over 7% and low for-sale inventory continue to create affordability challenges for prospective buyers,” said Bob Broeksmit, MBA president and CEO. “Until rates start to come back down, we anticipate housing market activity will remain slow.”

    Markets are experiencing an extraordinarily low number of homes for sale as homeowners stay put with ultra-low mortgage rates that are several percentage points lower than the current rate.

    There has been a small uptick in newly listed homes coming to market over the past few weeks, according to Realtor.com, which is seasonally atypical, said Hale.

    The first week in October tends to be an ideal week to buy a home, she said, since home prices tend to fall relative to summer highs, and fewer buyers contend for homes. Yet housing inventory remains higher than a typical week, Hale said.

    But, she added, mortgage rates will continue to be a wild card, which could make it impossible for some buyers to get in the market now.

    Even as demand is dropping, with so few homeowners selling, the market is pushing up prices as those few buyers who remain tussle over the handful of available houses, Hale said.

    This combination of higher prices and higher mortgage rates contrasts with easing rents over the past few months. This may cause would-be first-time buyers to wait for home prices and mortgage rates to stabilize and rent instead.

    “Buying a starter home is more expensive than renting in all but three major US markets [Realtor.com] studied,” said Hale, “which explains why buyer demand is likely to remain relatively low.”

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  • US government estimates economy grew last quarter at a 2.1% rate, unchanged from previous projection

    US government estimates economy grew last quarter at a 2.1% rate, unchanged from previous projection

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    WASHINGTON — The U.S. economy grew at a 2.1% annual pace from April through June, extending its sturdy performance in the face of higher interest rates, the government said Thursday, leaving its previous estimate unchanged.

    The second-quarter expansion of the nation’s gross domestic product — its total output of goods and services — marked a modest deceleration from the economy’s 2.2% annual growth from January through March.

    Consumer spending, business investment and state and local government outlays drove the second-quarter economic expansion.

    The economy and job market have shown surprising resilience even though the Federal Reserve has dramatically raised interest rates to combat inflation, which last year hit a four-decade high. The Fed has raised its benchmark rate 11 times since mid-March 2022, leading to concerns that ever-higher borrowing rates will trigger a recession.

    Still, those higher rates have taken a toll. Consumer spending rose at an annual rate of just 0.8% from April through June, down sharply from the government’s previous estimate of 1.7% and the weakest figure since the first quarter of 2022.

    But business investment excluding housing, a closely watched barometer, rose at a 7.4% annual pace, the fastest rate in more than a year. And state and local government spending and investment jumped 4.7%, the biggest such quarterly gain since 2019.

    So far, though, inflation has eased without causing much economic pain, leading to hope the central bank can pull off a so-called soft landing — slowing the economy enough to conquer high inflation without causing a painful recession.

    Growth is believed to be accelerating in the current July-September quarter, fueled by still-free-spending consumers. Many Americans, for example, flocked to theaters for the hit summer movies “Barbie” and “Oppenheimer” and splurged on Taylor Swift and Beyonce tickets. Business investment is also thought to have remained solid.

    Economists have estimated that the economy expanded at a roughly 3.2% annual rate in the third quarter, which would be the fastest quarterly growth in a year. Even more optimistic estimates have projected that growth from July through September exceeded a 4% annual rate, according to the Federal Reserve Bank of Atlanta.

    Even so, the acceleration in growth isn’t likely to endure. The economy is expected to weaken in the final three months of the year. Hiring and income growth are slowing. And economists think the savings that many Americans amassed during the pandemic from federal stimulus checks will have evaporated by next quarter.

    The economy also faces an array of obstacles that are expected to hobble growth. They include surging oil prices, the resumption of student loan payments, the effects of the United Auto Workers strike, the loss of pandemic-era child care aid and a likely government shutdown beginning this weekend.

    The combined effects of those factors will hamper Americans’ ability to spend and likely weaken the economy.

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