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Tag: Federal Reserve System

  • Stock market today: Wall Street falls from its records as oil prices tumble and tech stocks drop

    Stock market today: Wall Street falls from its records as oil prices tumble and tech stocks drop

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    NEW YORK (AP) — Wall Street pulled back from its records on Tuesday after the price of crude oil tumbled and technology stocks faltered.

    The S&P 500 fell 0.8%, a day after setting an all-time high for the 46th time this year. The Dow Jones Industrial Average dropped 324 points, or 0.8%, and the Nasdaq composite sank 1%.

    Exxon Mobil dropped 3%, and energy stocks fell to some of Wall Street’s sharpest losses after oil prices tumbled more than 4%. A barrel of Brent crude, the international standard, has fallen back below $75 from more than $80 last week.

    Crude prices have been weakening as China’s flagging economic growth raises concerns about demand for oil. At the same time, worries have receded about Israel possibly attacking Iranian oil facilities as part of its retaliation against Iran’s missile attack early this month. Iran is a major producer of crude, and a strike could upend its exports to China and elsewhere.

    Markets are off to a mixed start. More from AP’s Seth Sutel.

    Nvidia was the heaviest weight on the S&P 500 and fell 4.5%. It’s a cooldown for the chip company, whose stock is still up 166.2% for the year so far on euphoria about the profits created by the boom around artificial-intelligence technology.

    Stocks for companies across the chip industry fell after Dutch supplier ASML reported its latest quarterly results. CEO Christophe Fouquet said AI continues to offer strong upside potential, but “other market segments are taking longer to recover,” and ASML’s stock trading in the United States fell 16.3%.

    Also dragging on the U.S. stock market was UnitedHealth Group. The insurer dropped 8.1% despite reporting better results for the latest quarter than analysts expected. It lowered the top end of its forecasted range for profit over the full year.

    Helping to keep the S&P 500 and Dow close to their records set on Monday were gains for several financial companies following better-than-expected profit reports for the summer.

    Charles Schwab jumped 6.1%. More customers opened brokerage accounts at the company, helping to bring its total client assets to a record $9.92 trillion. Bank of America added 0.5%, and CEO Brian Moynihan said his company benefited from higher average loans and fees for investment banking and asset management.

    Walgreens Boots Alliance was another winner, up 15.8%, after topping analysts’ forecasts. The drugstore chain also said it will close about 1,200 locations over the next three years as it tries to turn around its struggling U.S. business.

    Chipmaker Wolfspeed jumped 21.3% to trim its loss for the year to 68.3% after the Biden-Harris administration announced plans to provide up to $750 million in direct funding to the company. The money will support its new silicon carbide factory in North Carolina that makes the wafers used in advanced computer chips.

    In the bond market, trading of Treasurys resumed after a holiday on Monday, and yields sank following a weaker-than-expected report on manufacturing in New York state.

    The yield on the 10-year Treasury fell to 4.03% from 4.10% late Friday. Manufacturing has been one of the areas of the U.S. economy hurt most by high interest rates caused by the Federal Reserve in its efforts to slow the economy enough to stamp out high inflation.

    Now, though, the Fed has begun cutting interest rates as it’s widened its focus to include keeping the economy humming instead of just fighting high inflation. It looks set to continue cutting rates through next year, which would ease the brakes further off the economy.

    Recent reports showing the U.S. economy remains stronger than expected have raised optimism that the Fed can pull off a perfect landing where it gets inflation down to 2% without causing a recession that many had thought would be necessary.

    Because of expectations for continued growth for the U.S. economy, as well as the boost that lower rates can give to corporate profits and prices for stocks, strategists at UBS raised their forecast for how high the S&P 500 could go this year and next.

    Led by Jonathan Golub, they’re calling for the S&P 500 to rise to 5,850 by the end of the year, up from their prior forecast of 5,600.

    The S&P 500 finished Tuesday at 5,815.26 after falling 44.59 points. The Dow dropped 324.80 to 42,740.42, and the Nasdaq composite sank 187.10 to 18,315.59.

    In stock markets abroad, Chinese stocks fell sharply as doubts continue about whether the government will offer enough fiscal stimulus to prop up the world’s second-largest economy.

    Stocks in Shanghai fell 2.5%, and Hong Kong’s Hang Seng index dropped 3.7%.

    Indexes were mixed elsewhere in Asia and in Europe.

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    AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

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  • Fed’s favored inflation gauge shows cooling price pressures, clearing way for more rate cuts

    Fed’s favored inflation gauge shows cooling price pressures, clearing way for more rate cuts

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    WASHINGTON (AP) — The Federal Reserve’s preferred inflation measure on Friday provided the latest sign that price pressures are easing, a trend that is expected to fuel further Fed interest rate cuts this year and next.

    Prices rose just 0.1% from July to August, the Commerce Department said, down from the previous month’s 0.2% increase. Compared with a year earlier, inflation fell to 2.2%, down from 2.5% in July and barely above the Fed’s 2% inflation target.

    The cooling of inflation might be eroding former President Donald Trump’s polling advantage on the economy. In a survey last week by The Associated Press-NORC Center for Public Affairs Research, respondents were nearly equally split on whether Trump or Vice President Kamala Harris would do a better job on the economy. That is a significant shift from when President Joe Biden was still in the race, when about six in 10 Americans disapproved of his handling of the economy. The shift suggests that Harris could be shedding some of Biden’s baggage on the economy as sentiment among consumers begins to brighten.

    Grocery costs barely rose last month, according to Friday’s report, and energy costs dropped 0.8%, led by cheaper gasoline.

    Excluding volatile food and energy costs, so-called core prices rose just 0.1% from July to August, also down from the previous month’s 0.2% increase. It was the fourth straight time that monthly price increases have fallen below an annual rate of 2%, the Fed’s target. Compared with 12 months earlier, core prices rose 2.7% in August, slightly higher than in July.

    “Sticky inflation is yesterday’s problem,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said in a research note.

    With inflation having tumbled from its 2022 peak to barely above the Fed’s 2% target, the central bank last week cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates. The policymakers also signaled that they expect to reduce their key rate by an additional half-point in November and in December. And they envision four more rate cuts in 2025 and two in 2026.

    The ongoing decline in inflation makes it even more likely that the Fed will cut its key benchmark rate further in the coming months.

    On Thursday, Tom Barkin, president of the Federal Reserve Bank of Richmond, expressed support for a cautious approach to rate cuts. In an interview with The Associated Press, he said he favors reducing the Fed’s key rate “somewhat.” But Barkin said he wants to ensure that inflation keeps cooling before cutting the benchmark rate to a level that would no longer restrain the economy.

    Friday’s report also showed that Americans’ incomes and spending ticked up only slightly last month, with both rising just 0.2%. Still, those tepid increases coincide with upward revisions this week for income and spending figures from last year. Those revisions showed that consumers were in better financial shape, on average, than had been previously reported.

    Americans also saved more of their incomes in recent months, according to the revisions, leaving the savings rate at 4.8% in September, after previous figures had shown it falling below 3%.

    The government reported Thursday that the economy expanded at a healthy 3% annual pace in the April-June quarter. And it said economic growth was higher than it had previously estimated for most of the 2018-through-2023 period.

    The Fed tends to favor the inflation gauge that the government issued Friday — the personal consumption expenditures price index — over the better-known consumer price index. The PCE index tries to account for changes in how people shop when inflation jumps. It can capture, for example, when consumers switch from pricier national brands to cheaper store brands.

    In general, the PCE index tends to show a lower inflation rate than CPI. In part, that’s because rents, which have been high, carry double the weight in the CPI that they do in the index released Friday.

    Recent reports suggest that the economy is still expanding at a healthy pace. On Thursday, the government confirmed its previous estimate that the U.S. economy grew at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment.

    Several individual barometers of the economy have been reassuring as well. Last week, the number of Americans applying for unemployment benefits fell to its lowest level in four months.

    And last month, Americans increased their spending at retailers, 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, too. 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.

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  • The Federal Reserve just cut interest rates by a half point. Here’s what that means for your wallet

    The Federal Reserve just cut interest rates by a half point. Here’s what that means for your wallet

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    People shop at a grocery store on August 14, 2024 in New York City. 

    Spencer Platt | Getty Images

    The Federal Reserve announced Wednesday it will lower its benchmark rate by a half percentage point, or 50 basis points, paving the way for relief from the high borrowing costs that have hit consumers particularly hard. 

    The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

    Wednesday’s cut sets the federal funds rate at a range of 4.75%-5%.

    A series of interest rate hikes starting in March 2022 took the central bank’s benchmark to its highest in more than 22 years, which caused most consumer borrowing costs to skyrocket — and put many households under pressure.

    Now, with inflation backing down, “there are reasons to be optimistic,” said Greg McBride, chief financial analyst at Bankrate.com.

    However, “one rate cut isn’t a panacea for borrowers grappling with high financing costs and has a minimal impact on the overall household budget,” he said. “What will be more significant is the cumulative effect of a series of interest rate cuts over time.”

    More from Personal Finance:
    The ‘vibecession’ is ending as the economy nails a soft landing
    ‘Recession pop’ is in: How music hits on economic trends
    More Americans are struggling even as inflation cools

    “There are always winners and losers when there is a change in interest rates,” said Stephen Foerster, professor of finance at Ivey Business School in London, Ontario. “In general, lower rates favor borrowers and hurt lenders and savers.”

    “It really depends on whether you are a borrower or saver or whether you currently have locked-in borrowing or savings rates,” he said.

    From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could affect your finances in the months ahead.

    Credit cards

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.

    Going forward, annual percentage rates will start to come down, but even then, they will only ease off extremely high levels. With only a few cuts on deck for 2024, APRs would still be around 19% in the months ahead, according to McBride.

    “Interest rates took the elevator going up, but they’ll be taking the stairs coming down,” he said.

    That makes paying down high-cost credit card debt a top priority since “interest rates won’t fall fast enough to bail you out of a tight situation,” McBride said. “Zero percent balance transfer offers remain a great way to turbocharge your credit card debt repayment efforts.”

    Mortgage rates

    Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power in the last two years, partly because of inflation and the Fed’s policy moves.

    But rates are already significantly lower than where they were just a few months ago. Now, the average rate for a 30-year, fixed-rate mortgage is around 6.3%, according to Bankrate.

    Jacob Channel, senior economist at LendingTree, expects mortgage rates will stay somewhere in the 6% to 6.5% range over the coming weeks, with a chance that they’ll even dip below 6%. But it’s unlikely they will return to their pandemic-era lows, he said.

    “Though they are falling, mortgage rates nonetheless remain relatively high compared to where they stood through most of the last decade,” he said. “What’s more, home prices remain at or near record highs in many areas.” Despite the Fed’s move, “there are a lot of people who won’t be able to buy until the market becomes cheaper,” Channel said.

    Auto loans

    Even though auto loans are fixed, higher vehicle prices and high borrowing costs have stretched car buyers “to their financial limits,” according to Jessica Caldwell, Edmunds’ head of insights.

    The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — likely bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.

    “Many Americans have been holding off on making vehicle purchases in the hopes that prices and interest rates would come down, or that incentives would make a return,” Caldwell said. “A Fed rate cut wouldn’t necessarily drive all those consumers back into showrooms right away, but it would certainly help nudge holdout car buyers back into more of a spending mood.”

    Student loans

    Federal student loan rates are also fixed, so most borrowers won’t be immediately affected by a rate cut. However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates, which means once the Fed starts cutting interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz. 

    Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.

    Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

    Savings rates

    While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

    As a result of Fed rate hikes, top-yielding online savings account rates have made significant moves and are now paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.

    If you haven’t opened a high-yield savings account or locked in a certificate of deposit yet, you’ve likely already missed the rate peak, according to Matt Schulz, LendingTree’s credit analyst. However, “yields aren’t going to fall off a cliff immediately after the Fed cuts rates,” he said.

    Although those rates have likely maxed out, it is still worth your time to make either of those moves now before rates fall even further, he advised.

    One-year CDs are now averaging 1.78% but top-yielding CD rates pay more than 5%, according to Bankrate, as good as or better than a high-yield savings account.

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  • Don’t expect ‘immediate relief’ from the Federal Reserve’s first rate cut in years, economist says. Here’s why

    Don’t expect ‘immediate relief’ from the Federal Reserve’s first rate cut in years, economist says. Here’s why

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    Recent signs of cooling inflation are paving the way for the Federal Reserve to cut rates when it meets next week, which is welcome news for Americans struggling to keep up with the elevated cost of living and sky-high interest charges.

    “Consumers should feel good about [an interest rate reduction] but it’s not going to deliver sizable immediate relief,” said Brett House, economics professor at Columbia Business School.

    Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels in more than 40 years. The central bank responded with a series of interest rate hikes that took its benchmark rate to the highest level in decades.

    The spike in interest rates caused most consumer borrowing costs to skyrocket, putting many households under pressure.

    More from Personal Finance:
    The ‘vibecession’ is ending as the economy nails a soft landing
    ‘Recession pop’ is in: How music hits on economic trends
    More Americans are struggling even as inflation cools

    “The cumulative progress on inflation — evidenced by the CPI now at 2.5% after having peaked at 9% in mid-2022 — has given the Federal Reserve the green light to begin cutting interest rates at next week’s meeting,” said Greg McBride, chief financial analyst at Bankrate.com, referring to the consumer price index, a broad measure of goods and services costs across the U.S. economy.

    However, the impact from the first rate cut, expected to be a quarter percentage point, “is very minimal,” McBride said.

    “What borrowers can be optimistic about is that we will see a series of rate cuts that cumulatively will have a meaningful impact on borrowing costs, but it will take time,” he said. “One rate cut is not going to be a panacea.”

    Markets are pricing in a 100% probability that the Fed will start lowering rates when it meets Sept. 17-18, with the potential for more aggressive moves later in the year, according to the CME Group’s FedWatch measure.

    That could bring the Fed’s benchmark federal funds rate from its current range, 5.25% to 5.50%, to below 4% by the end of 2025, according to some experts.

    The federal funds rate, which the U.S. central bank sets, is the rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

    Rates for everything from credit cards to car loans to mortgages will be affected once the Fed starts trimming its benchmark. Here’s a breakdown of what to expect:

    Credit cards

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. In the wake of the rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.

    For those paying 20% interest — or more — on a revolving balance, annual percentage rates will start to come down when the Fed cuts rates. But even then they will only ease off extremely high levels, according to McBride.

    “The Fed has to do a lot of rate cutting just to get to 19%, and that’s still significantly higher than where we were just three years ago,” McBride said.

    The best move for those with credit card debt is to switch to a 0% balance transfer credit card and aggressively pay down the balance, he said. “Rates won’t fall fast enough to bail you out.”

    Mortgage rates

    While 15- and 30-year mortgage rates are fixed and mostly tied to Treasury yields and the economy, they are partly influenced by the Fed’s policy. Home loan rates have already started to fall, largely due to the prospect of a Fed-induced economic slowdown.

    As of Sept. 11, the average rate for a 30-year, fixed-rate mortgage was around 6.3%, nearly a full percentage point drop from where rates stood in May, according to the Mortgage Bankers Association.

    But even though mortgage rates are falling, home prices remain at or near record highs in many areas, according to Jacob Channel, senior economist at LendingTree.

    “This cut isn’t going to totally reshape the economy, and it’s not going to make doing things like buying a house or paying off debt orders of magnitude easier,” he said.

    Auto loans

    “Auto loan rates will head lower, too, but you shouldn’t expect the blocking and tackling around car shopping to change anytime soon,” said Matt Schulz, chief credit analyst at LendingTree. 

    The average rate on a five-year new car loan is now around 7.7%, according to Bankrate.

    While anyone planning to finance a new car could benefit from lower rates to come, the Fed’s next move will not have any material effect on what you get, said Bankrate’s McBride. “Nobody is upgrading from a compact to an SUV on a quarter-point rate cut.” The quarter percentage point difference on a $35,000 loan is about $4 a month, he said.

    Consumers would benefit more from improving their credit scores, which could pave the way to even better loan terms, McBride said.

    Student loans

    Federal student loan rates are also fixed, so most borrowers won’t be immediately affected by a rate cut. However, if you have a private loan, those loans may be fixed or have a variable rate tied to the T-bill or other rates, which means once the Fed starts cutting interest rates, the rates on those private student loans will come down as well.

    Eventually, borrowers with existing variable-rate private student loans may also be able to refinance into a less expensive fixed-rate loan, according to higher education expert Mark Kantrowitz. 

    However, refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, he said, “such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.” Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

    Savings rates

    While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

    As a result of the Fed’s string of rate hikes in recent years, top-yielding online savings account rates have made significant moves and are now paying well over 5%, with no minimum deposit, according to Bankrate’s McBride.

    With rate cuts on the horizon, those “deposit rates will come down,” he said. “But the important thing is, what is your return relative to inflation — and that is the good news. You are still earning a return that’s ahead of inflation, as long as you have your money in the right place.”

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  • We should be concerned about U.S. banks and a capital adequacy of 9% is ‘dramatically low’: IDC

    We should be concerned about U.S. banks and a capital adequacy of 9% is ‘dramatically low’: IDC

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    Cyrus Daruwala of IDC Financial Insights says the arguments used by institutions that are pushing against the Bank for International Settlements’ Basel III capital requirements framework could amount to “funny money”.

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    Wed, Sep 11 202411:57 PM EDT

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  • ETFs are on pace to break record annual inflows, but this wild card could change it all

    ETFs are on pace to break record annual inflows, but this wild card could change it all

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    Exchange-traded fund inflows have already topped monthly records in 2024, and managers think inflows could see an impact from the money market fund boom before year-end.

    “With that $6 trillion plus parked in money market funds, I do think that is really the biggest wild card for the remainder of the year,” Nate Geraci, president of The ETF Store, told CNBC’s “ETF Edge” this week. “Whether it be flows into REIT ETFs or just the broader ETF market, that’s going to be a real potential catalyst here to watch.”

    Total assets in money market funds set a new high of $6.24 trillion this past week, according to the Investment Company Institute. Assets have hit peak levels this year as investors wait for a Federal Reserve rate cut.

    “If that yield comes down, the return on money market funds should come down as well,” said State Street Global Advisors’ Matt Bartolini in the same interview. “So as rates fall, we should expect to see some of that capital that has been on the sidelines in cash when cash was sort of cool again, start to go back into the marketplace.”

    Bartolini, the firm’s head of SPDR Americas Research, sees that money moving into stocks, other higher-yielding areas of the fixed income marketplace and parts of the ETF market.

    “I think one of the areas that I think is probably going to pick up a little bit more is around gold ETFs,” Bartolini added. “They’ve had about 2.2 billion of inflows the last three months, really strong close last year. So I think the future is still bright for the overall industry.”

    Meanwhile, Geraci expects large, megacap ETFs to benefit. He also thinks the transition could be promising for ETF inflow levels as they approach 2021 records of $909 billion.

    “Assuming stocks don’t experience a massive pullback, I think investors will continue to allocate here, and ETF inflows can break that record,” he said.

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  • Applications for US jobless benefits fall to 2-month low as layoffs remain at healthy levels

    Applications for US jobless benefits fall to 2-month low as layoffs remain at healthy levels

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    The number of Americans filing for unemployment benefits fell to its lowest level in two months last week, signaling that layoffs remain relatively low despite other signs of labor market cooling.

    Jobless claims fell by 5,000 to 227,000 for the week of Aug. 31, the Labor Department reported Thursday. That’s the fewest since the week of July 6, when 223,000 Americans filed claims. It’s also less than the 230,000 new filings that analysts were expecting.

    The four-week average of claims, which evens out some of the week-to-week volatility, fell by 1,750 to 230,000. That’s the lowest four-week average since early June.

    Weekly filings for unemployment benefits, considered a proxy for layoffs, remain low by historic standards, though they are up from earlier this year.

    During the first four months of 2024, claims averaged a historically low 213,000 a week. But they started rising in May. They hit 250,000 in late July, adding to evidence that high interest rates were finally cooling a red-hot U.S. job market.

    Employers added just 114,000 jobs in July, well below the January-June monthly average of nearly 218,000. The unemployment rate rose for the fourth straight month in July, though it remains relatively low at 4.3%.

    Economists polled by FactSet expect Friday’s August jobs report to show that the U.S. added 160,000 jobs, up from 114,000 in July, and that the unemployment rate dipped to 4.2% from 4.3%. The report’s strength, or weakness, will likely influence the Federal Reserve’s plans for how much to cut its benchmark interest rate.

    Last month, the Labor Department reported that the U.S. economy added 818,000 fewer jobs from April 2023 through March this year than were originally reported. The revised total supports evidence that the job market has been steadily slowing and reinforces the Fed’s plan to start cutting interest rates later this month.

    The Fed, in an attempt to stifle inflation that hit a four-decade high just over two years ago, raised its benchmark interest rate 11 times in 2022 and 2023. That pushed it to a 23-year high, where it has stayed for more than a year.

    Inflation has retreated steadily, approaching the Fed’s 2% target and leading Chair Jerome Powell to declare recently that it was largely under control.

    Traders are forecasting the Fed will cut its benchmark rate by a full percentage point by the end of 2024, which would require it to cut the rate by more than the traditional quarter of a percentage point at one of its meetings in the next few months.

    Thursday’s report also showed that the total number of Americans collecting jobless benefits declined by 22,000 to 1.84 million for the week of Aug. 24.

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  • Stock market today: Most of Wall Street slips as S&P 500 stays on track for worst week since April

    Stock market today: Most of Wall Street slips as S&P 500 stays on track for worst week since April

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    NEW YORK (AP) — Most U.S. stocks fell Thursday following a mixed round of data on the economy, keeping them on track for their worst week since April.

    The S&P 500 slipped 0.3% for a third straight drop, and the Dow Jones Industrial Average lost 219 points, or 0.5%. The Nasdaq composite held up better than the rest of the market and added 0.3% thanks to gains for Tesla and a handful of other Big Tech stocks.

    Treasury yields also slipped a bit in the bond market following the mixed economic reports. One suggested U.S. companies slowed their hiring last month, falling well short of economists’ forecasts for an acceleration. Another report, though, said fewer U.S. workers filed for unemployment benefits last week than expected. That’s an indication layoffs remain low.

    A report released later in the morning offered more optimism, saying growth for businesses in the finance, health care and other services industries was stronger last month than economists expected.

    “Generally, business is good,” one respondent said in the survey compiled by the Institute for Supply Management. “However, there are concerns of slowing foot traffic at restaurants and other venues where our products are sold.”

    Stocks have struggled this week after another dud of a report on U.S. manufacturing reignited worries about the slowing U.S. economy and how much it could hurt corporate profits. That has raised the stakes for a highly anticipated report scheduled for Friday.

    That’s when the U.S. government will say how many jobs U.S. employers added last month, and economists are expecting an acceleration of hiring. The job market’s performance could dictate how big of a cut to interest rates the Federal Reserve will deliver at its next meeting later this month.

    After keeping its main interest rate at a two-decade high to stifle inflation, the Federal Reserve has hinted it’s about to begin cutting rates in order to protect the job market and keep the overall economy from sliding into a recession. The question on Wall Street is if that ends up being too little, too late.

    In the bond market, the yield on the 10-year Treasury eased to 3.73% from 3.76% late Wednesday. It’s down from 4.70% in April, which is a significant move for the bond market.

    Perhaps more importantly for investors, the 10-year yield is flirting with the end of a more than two-year stretch where it was lower than the two-year Treasury yield. That’s an unusual occurrence called an “inverted yield curve.” Usually, longer-term yields are higher than shorter-term yields.

    Many investors see an inverted yield curve as a warning of a coming recession, and the inversion since the summer of 2022 has been a key talking point for market pessimists. Often, an inverted yield curve flips back to normal ahead of a recession as traders cement their expectations for coming cuts to interest rates by the Fed. But the 2020 pandemic created a recession and resulting recovery that have often defied predictions and conventional wisdoms.

    The two-year Treasury yield was sitting at 3.74%, just above the 10-year yield.

    On Wall Street, Old Dominion Freight Line fell to one of the sharpest losses in the S&P 500 after reporting discouraging revenue trends for August. It cited “softness in the domestic economy,” along with lower fuel surcharge revenue for the weakness. The freight company’s stock fell 4.9%.

    Verizon’s stock slipped 0.4% after it announced it’s buying Frontier Communications in a $20 billion deal to strengthen its fiber network. Frontier Communications, which soared nearly 38% the day before, gave back 9.5%.

    On the winning end of Wall Street was Tesla. It rose 4.9% after laying out a roadmap for upcoming artificial-intelligence developments, including the possibility of full self-driving in Europe and China.

    JetBlue Airways flew 7.2% higher after raising its forecast for revenue in the summer. It said it’s seeing better performance in the Latin America region particularly and that it picked up business when technology outages in July forced rivals to cancel flights.

    All told, the S&P 500 dipped 16.66 points to 5,503.41. The Dow dropped 219.22 to 40,755.75, and the Nasdaq composite rose 43.36 to 17,127.66.

    In stock markets abroad, indexes were mixed across Asia and Europe.

    Japan’s Nikkei 225 fell 1.1% after strong data on growth in wages there raised expectations for another hike to interest rates.

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    AP Writers Matt Ott and Zimo Zhong contributed.

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  • SoFi CEO: Consumer activity and sentiment are ‘trending okay’

    SoFi CEO: Consumer activity and sentiment are ‘trending okay’

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    Anthony Noto, SoFi CEO, joins ‘Money Movers’ to discuss the current state of the consumer, red flags from the consumer, and how Americans feel about their retirement accounts.

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  • Wolfe Research’s Chris Senyek explains why investors should be ‘overweight’ financials

    Wolfe Research’s Chris Senyek explains why investors should be ‘overweight’ financials

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    Sandy Pomeroy, Neuberger Berman senior portfolio manager, and Chris Senyek, Wolfe Research chief investment strategist, join ‘Squawk on the Street’ to discuss expectations for rate cuts this year, why investors should be overweight financials, and much more.

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  • Financial markets around the world stabilize after recent rout. Here’s what to know

    Financial markets around the world stabilize after recent rout. Here’s what to know

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    Markets on Wall Street and in Asia are stabilizing Tuesday following a mini-panic caused by an assortment of factors that stretched from late last week through Monday.

    The S&P 500 and Nasdaq each rose 1.3% in morning trading and were on track to break a brutal three-day losing streak. The S&P 500 had tumbled more than 6% after several weaker-than-expected reports raised concerns that the Federal Reserve had pumped the brakes too much on the U.S. economy through high interest rates.

    The Dow Jones Industrial Average was up 0.7%.

    Elsewhere, Japan’s Nikkei 225 jumped 10.2% Tuesday, following its 12.4% sell-off the day before, which was its worst since 1987. Stocks in Tokyo rebounded as the value of the Japanese yen stabilized a bit against the U.S. dollar following several days of sharp gains.

    A rate hike last week by the Bank of Japan contributed to the turmoil by upending trades where investors had borrowed Japanese yen at low cost and invested it elsewhere around the world. The resulting exits from those investments may have helped accelerate the declines in global markets.

    Starting Thursday, investors grew worried about a slowing U.S. economy. They pointed fingers at the Fed for waiting too long to cut rates and sold shares of technology companies that had ridden a frenzy around artificial intelligence to lofty stock market valuations.

    Calmer voices that claimed the sell-off was a good thing because stock prices had risen too high seemed to prevail Tuesday. Some of Tuesday’s gainers were those same technology companies investors had fled from. Chipmaker Nvidia was up 3.8% Tuesday morning, following a drop of 6.4% on Monday.

    For individual investors, experts say it’s not time for rash decisions, but a moment to make sure their investments are properly diversified.

    Here’s a look at the reasons for the turbulence in markets:

    Inflation and central banks

    Starting in 2022, the Fed rapidly raised interest rates to combat a spike in inflation. It’s maintained its key rate at 5.4% for about a year. As part of its inflation fight, the Fed also aimed to cool down a red-hot labor market.

    Investors thought the Fed and other central banks were on track, even though inflation remained somewhat above their targets — in the Fed’s case, 2%. The European Central Bank and the Bank of England cut rates once and the Fed signaled it was prepared to start cutting rates in September.

    Anxiety over the U.S. economy

    Despite some signs of cooling, the U.S. economy kept chugging along even with higher rates, outpacing Europe and Asia. Then came last week’s economic reports.

    Weak readings on the job market, manufacturing and construction sparked worries about a U.S. economic slowdown and criticism that the Federal Reserve waited too long to cut rates.

    Traders in the U.S. are now betting the Federal Reserve will lower rates by half a percentage point in September instead of the usual quarter point. Some were calling for an emergency rate cut.

    Big Tech

    A handful of Big Tech stocks drove the market’s double-digit gains into July. But their momentum turned last month on worries investors had taken their prices too high and expectations for their profit gains had grown too difficult to meet — a notion that gained credence when the group’s latest earnings reports were mostly underwhelming.

    Apple fell more than 5% Monday after Warren Buffett’s Berkshire Hathaway disclosed that it had slashed its ownership stake in the iPhone maker. Nvidia lost more than $420 billion in market value Thursday through Monday. Overall, the tech sector of the S&P 500 was the biggest drag on the market Monday.

    Japan’s rollercoaster

    The Nikkei suffered its worst two-day decline ever, dropping 18.2% on Friday and Monday combined. One catalyst for the outsized move has been an interest rate hike by the Bank of Japan last week.

    The BoJ’s rate increase affected what are known as carry trades. That’s when investors borrow money from a country with low interest rates and a relatively weak currency, like Japan, and invest those funds in places that will yield a high return. The higher interest rates caused the Japanese yen to strengthen, likely forcing investors to sell stocks to repay those loans.

    Stocks in Tokyo rebounded as the value of the Japanese yen stabilized against the U.S. dollar.

    What should investors do?

    The prevailing wisdom is: Hold steady.

    Experts and analysts encourage taking a long view, especially for investors concerned about retirement savings,.

    “More often than not, panic selling on a red day is generally a great way to lose more money than you save,” said Jacob Channel, senior economist for LendingTree, who reminds investors that markets have recovered from worse sell-offs than the current one.

    Bitcoin claws back some losses

    Bitcoin was back up to $56,490 Monday morning after the price of the world’s largest cryptocurrency fell to just above $54,000 during Monday’s rout. That’s still down from nearly $68,000 one week ago, per data from CoinMarketCap.

    While bitcoin did serve as a safe haven of sorts during the worst of the pandemic, it mostly acts like any another risky asset that investors steer clear from during market downturns.

    Sell-offs are normal

    Greg McBride, financial analyst for Bankrate, points out that a 10% pullback in markets happens on average once every 12 months.

    Quincy Krosby, chief global strategist for LPL Financial, says investors should try to wait out the current wave of turbulence.

    “Pockets of volatility are expected to continue as August and September give way to a calmer seasonal period; however, it’s important to remember pockets of opportunity are always on the other side of the storm,” she said.

    __

    Cora Lewis and Wyatte Grantham-Philips in New York contributed to this report.

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  • The Federal Reserve sets the stage for a rate cut — here’s what that means for your money

    The Federal Reserve sets the stage for a rate cut — here’s what that means for your money

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    Customer shopping for school supplies with employee restocking shelves, Target store, Queens, New York.

    Lindsey Nicholson | UCG | Universal Images Group | Getty Images

    Now, as the central bank sets the stage to lower interest rates for the first time in years when it meets again in September, consumers may see their borrowing costs start come down as well — some are already.

    The federal funds rate, which the U.S. central bank sets, is the rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

    “The first cut will not make a meaningful difference to people’s pocketbooks but it will be the beginning of a series of rate cuts at the end the of this year and into next year that will,” House said.

    That could bring the the Fed’s benchmark fed funds rate from the current range of 5.25% to 5.50% to below 4% by the end of next year, according to some experts.

    From credit cards and mortgage rates to auto loans and student debt, here’s a look at where those monthly interest expenses stand as we move closer to that initial interest rate cut.

    Credit cards

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. In the wake of the rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — nearing an all-time high.

    At the same time, with households struggling to keep up with the high cost of living, credit card balances are also higher and more cardholders are carrying debt from month to month or falling behind on payments.

    A recent report from the Philadelphia Federal Reserve showed credit card delinquencies at an all-time high, according to data going back to 2012. Revolving debt balances also reached a new high even as banks reported tightening credit standards and declining new card originations.

    For those paying 20% interest — or more — on a revolving balance, annual percentage rates will start to come down when the Fed cuts rates. But even then they will only ease off extremely high levels, offering little in the way of relief, according to Greg McBride, chief financial analyst at Bankrate.com.

    “Rates are not going to fall fast enough to bail you out of a bad situation,” McBride said.

    The best move for those with credit card debt is to take matters into their own hands, advised Matt Schulz, chief credit analyst at LendingTree.

    “They can do that by getting a 0% balance transfer credit card or a low-interest personal loan or by calling their card issuer and requesting a lower interest rate on a card,” he said. “That works more often that you might think.”

    Mortgage rates

    While 15- and 30-year mortgage rates are fixed and mostly tied to Treasury yields and the economy, they are partly influenced by the Fed’s policy. Home loan rates have already started to fall, largely due to the prospect of a Fed-induced economic slowdown.

    The average rate for a 30-year, fixed-rate mortgage is now just below 7%, according to Bankrate.

    “If we continue to get good news on things like inflation, [mortgage rates] could continue trending downward,” said Jacob Channel, senior economist at LendingTree. “We shouldn’t expect any gargantuan drops in the immediate future, but we might see rates trending back to their 2024 lows over the coming weeks and months,” he said.

    “If all goes really well, we could even end the year with the average rate on a 30-year, fixed mortgage closer to 6% than 6.5% or 7%.”

    At first glance, that might not seem significant, Channel added, but “in mortgage land,” a nearly 50 basis-point drop “is nothing to scoff at.”

    Auto loans

    Auto loans are fixed. However, payments have been getting bigger because the interest rates on new loans are higher, along with rising car prices, resulting in less affordable monthly payments.

    The average rate on a five-year new car loan is now just shy of 8%, according to Bankrate.

    However, here, “the financing is one variable, and it’s frankly one of the smaller variables,” McBride said. For example, a quarter percentage point reduction in rates on a $35,000, five-year loan is $4 a month, he calculated.

    Consumers would benefit more from improving their credit scores, which could pave the way to even better loan terms, McBride said.

    Student loans

    Federal student loan rates are also fixed, so most borrowers aren’t immediately affected by the Fed’s moves. But undergraduate students who took out direct federal student loans for the 2023-24 academic year are paying 5.50%, up from 4.99% in 2022-23 — and the interest rate on federal direct undergraduate loans for the 2024-2025 academic year is 6.53%, the highest rate in at least a decade.

    Private student loans tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means those borrowers are already paying more in interest. How much more, however, varies with the benchmark.

    Savings rates

    While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

    As a result, top-yielding online savings account rates have made significant moves and are now paying as much as 5.5% — well above the rate of inflation, which is a rare win for anyone building up a cash cushion, according to Bankrate’s McBride.

    But those rates will fall once the Fed lowers its benchmark, he added. “If you’ve been considering a certificate of deposit, now is the time to lock it in,” McBride said. “Those yields will not get better, so there is no advantage to waiting.”

    Currently, a top-yielding one-year CD pays more than 5.3%, as good as a high-yield savings account.

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  • Federal Reserve is edging closer to cutting rates. The question will soon be, how fast?

    Federal Reserve is edging closer to cutting rates. The question will soon be, how fast?

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    WASHINGTON (AP) — Two years after launching an aggressive fight against inflation and one year after leaving its benchmark interest rate at a near-quarter-century high, the Federal Reserve is expected to signal this week that it will likely reduce borrowing costs as soon as September.

    A rate reduction this fall — the first since the pandemic — would amount to a momentous shift and a potential boost to the economy. Fed rate cuts, over time, typically lower borrowing costs for such things as mortgages, auto loans and credit cards.

    A single cut in the Fed’s key rate, now at roughly 5.3%, wouldn’t by itself make much difference to the economy. Financial markets widely expect it. Some borrowing costs have already dropped slightly in anticipation of the move. As a result, the main question for the central bank will be: How fast and how far will the policymakers ultimately cut rates?

    It’s a question of keen interest to both major presidential candidates, too. Any signal that the Fed will rapidly cut rates could boost the economy and potentially lift Vice President Kamala Harris’ election prospects. Former President Donald Trump has argued that the Fed shouldn’t cut rates until its next meeting, in November, which will come two days after the election.

    Futures markets have priced in a 64% likelihood that the Fed will cut rates three times this year, in September, November and December, according to CME FedWatch. As recently as last month, Fed officials had collectively forecast just one rate reduction in 2024 and four in 2025 and 2026, suggesting that they lean toward a more measured pace of cutting rates about once a quarter.

    How the economy fares in the coming months will likely determine how quickly the Fed acts. Should growth remain solid and employers keep hiring, the Fed would prefer to take its time and cut rates slowly as inflation continues to decline.

    “They want to be very gradual in how they pull back,” said Gennadiy Goldberg, head of US rates strategy at TD Securities. “But if the labor market actually looks like it’s slowing down,” Goldberg suggested, Fed officials might conclude that “they should be moving a little bit quicker than they otherwise would.”

    There are signs that the labor market is cooling, as the Fed has intended. Job growth has averaged a decent but unspectacular 177,000 a month for the past three months, down from a red-hot three-month average of 275,000 a year ago.

    It’s not yet clear whether that cooling reflects a return of the economy to a more sustainable, less inflationary, post-pandemic period of growth or whether the cooling will continue until the economy slides into a recession.

    “That’s the million-dollar question at this point,” Goldberg said.

    Chair Jerome Powell and other Fed officials have underscored that they’re paying nearly as much attention to the threat posed by a hiring slowdown as they are to inflation pressures. That shift in the Fed’s emphasis toward ensuring that the job market doesn’t weaken too much has likely boosted market expectations for a rate cut.

    “Elevated inflation is not the only risk we face,” Powell said in congressional testimony earlier this month, after the most recent jobs report showed the unemployment rate ticking up for a third straight month to a still-low 4.1%. Yet Powell also characterized the job market and growth at that time as “strong.”

    And on Thursday the government reported that the economy grew at a healthy 2.8% annual rate in the April-June quarter, though that figure followed a tepid 1.4% expansion in the first three months of the year.

    “The economy looks pretty solid at the moment,” said William English, an economist at the Yale School of Management and a former senior Fed staffer. “I don’t think there are real signs now that something bad is going to happen.”

    English, like many other observers, thinks Powell will provide a clearer picture of future rate moves at his annual speech in August during the Fed’s monetary policy conference in Jackson Hole, Wyoming. This week, though, the Fed may change the statement it issues after each meeting in ways that could hint that a rate cut is coming soon.

    For example, the statement it released after its June meeting had read, “In recent months, there has been modest further progress toward the (Fed’s) 2% inflation objective.” When it issues its new statement on Wednesday, the Fed could drop “modest” or alter it in some other way to underscore that additional progress on inflation has been achieved.

    In June, the Fed’s policymakers had forecast that year-over-year inflation would average 2.8% in the final three months of this year. On Friday, the government said that inflation has already fallen below that level, to 2.5% in June, according to the Fed’s preferred measure.

    If inflation remains below the Fed’s year-end target, that could justify cutting borrowing rates more than the single reduction the policymakers forecast in June.

    Still, even as price pressures cool, annual inflation may not fall much more this year — and could even rise a bit by the end of 2024. That’s because monthly inflation readings fell to very low levels in the second half of last year. So even low monthly figures in the coming months might not pull down year-over-year inflation.

    Fed officials, though, are expected to focus much more on the three-month and six-month annualized inflation averages in the coming months. The three-month average of the Fed’s preferred inflation gauge, excluding the volatile food and energy categories, fell to just 2.3% in June.

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  • This week: Federal Reserve meeting, Boeing earnings, Labor Department issues July jobs report

    This week: Federal Reserve meeting, Boeing earnings, Labor Department issues July jobs report

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    FED MEETS

    On Wednesday, the Federal Reserve wraps ups its two-day policy meeting.

    Few expect the U.S. central bank to lower interest rates this time around, with most experts forecasting a cut in September. The Fed began ratcheting up rates in March of 2022 in the midst of the four-decade high inflation that took root as the economy rebounded from the brief but sharp pandemic recession. Data suggest that inflation has receded in recent months and is closing in on the Fed’s 2% target.

    BOEING BLUES

    Embattled jet maker Boeing reports its second-quarter earnings Wednesday.

    Virginia-based Boeing has been mired in investigations and lawsuits since two of its Max 747s crashed in 2018 and 2019, killing 346 people. Last week, the Justice Department submitted a detailed plea agreement with Boeing in which the aerospace giant will plead guilty to a fraud charge for misleading U.S. regulators who approved the 737 Max jetliner before the crashes.

    EYE ON JOBS

    The government serves up its July jobs report on Friday.

    America’s employers delivered another healthy month of hiring in June, highlighting the economy’s ability to withstand high interest rates. Last month’s job growth marked a pullback from May and analysts expect another dip in hiring in July. The Federal Reserve is paying close attention to the cooling labor market as it gathers data relevant to its interest rate policy decisions.

    Nonfarm payrolls, monthly change, seasonally adjusted:

    Feb.: 236,000

    March: 310,000

    April: 108,000

    May: 218,000

    June: 206,000

    July (est.): 180,000

    Source: FactSet

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  • Small stocks are about to take over? Wall Street has heard that before.

    Small stocks are about to take over? Wall Street has heard that before.

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    NEW YORK (AP) — Suddenly, smaller stocks seem to be making bigger noise on Wall Street.

    After getting trounced by their larger rivals for years, some of the smallest stocks on Wall Street have shown much more life recently. Hopes for coming cuts to interest rates have pushed investors to look at smaller stocks through a different lens.

    Smaller companies, which often carry heavy debt burdens, can feel more relief from lower borrowing costs than huge multinationals. Plus, critics said the Big Tech stocks that had been carrying the market for years were looking expensive after their meteoric rises.

    The small stocks in the Russell 2000 index leaped a stunning 11.5% over five days, beginning on July 11. The surge looked even more eye-popping when compared with the tepid gain of 1.6% for the big stocks in the S&P 500 over the same span. Investors pumped $9.9 billion into funds focused on small U.S. stocks last week, the largest amount since 2007, according to strategists at Deutsche Bank.

    They were all encouraging signals to analysts, who say a market with many stocks rising is healthier than one dependent on just a handful of stars.

    If this all sounds familiar, it should. Hope for a broadening out of the market has sprung up periodically on Wall Street, including late last year. Each time, it ended up fizzling, and Big Tech resumed its dominance.

    Of course, this time looks different in some ways. Some of the boost for small stocks may have come from rising expectations for a Republican sweep in November’s elections, following President Joe Biden’s disastrous debate performance last month. That pushed up U.S. stocks seen as benefiting from a White House that could be hostile to international trade, among other things.

    Traders are also thinking cuts to interest rates are much more imminent than before, with expectations recently running at 95% confidence that the Fed will make a move as soon as September, according to data from CME Group

    But some professional investors still aren’t fully convinced yet.

    “Fade the chase in small caps, which is likely unsustainable,” according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

    She points to how 60% of the companies in the small-cap index struggle with profitability, in part because private-equity firms have already taken many money-making ones out of the stock market. Smaller stocks also tend to be more dependent on spending by consumers than larger companies, and consumers at the lower end of the income spectrum are already showing the strain of still-high prices.

    Cuts to interest rates do look more likely after Federal Reserve officials talked about the danger of keeping rates too high for too long. But the Fed may not pull rates down as quickly or as deeply as it has in past cycles if inflation stays higher for longer, as some investors suspect.

    Small stocks, which have struggled through five quarters of shrinking earnings due to higher rates, also are less likely to get a boost in profits delivered by the artificial-intelligence wave sweeping the economy, according to strategists at BlackRock Investment Institute.

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  • Asset classes like public real estate and bonds could snap back ‘really quickly,’ says investment advisor

    Asset classes like public real estate and bonds could snap back ‘really quickly,’ says investment advisor

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    Jimmy Lee of The Wealth Consulting Group discusses how investors should position themselves ahead of investment flows broadening, and says that geopolitics, not domestic politics, remains the top risk in his mind.

    02:53

    Tue, Jul 2 20242:34 AM EDT

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  • CNBC Daily Open: U.S. seeks Boeing guilty plea

    CNBC Daily Open: U.S. seeks Boeing guilty plea

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    The Dow Jones Industrial Average rose about 3.8% in the first six months of the year, lagging way behind the Nasdaq, up 18.1%, and the S&P 500, which jumped 14.5% — as investors plowed into artificial intelligence-related stocks.

    Brendan Mcdermid | Reuters

    This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Dow lags tech rally 
    The     Dow Jones Industrial Average rose about 3.8% in the first six months of the year, lagging way behind the Nasdaq, up 18.1%, and the S&P 500, which jumped 14.5% — as investors plowed into artificial intelligence-related stocks. On Friday, the S&P 500 and Nasdaq hit record highs before pulling back. The yield on the 10-year Treasury rose as investors digested the latest inflation data. U.S. oil prices rose for the third straight week amid fears of a war between Israel and the Iran-backed militia Hezbollah.

    Boeing ‘guilty plea’ 
    U.S. prosecutors plan to seek a guilty plea from Boeing over a charge related to two fatal 737 Max crashes in 2018 and 2019, attorneys for the victims’ family members said. The Justice Department is reviewing whether Boeing violated a 2021 settlement that shielded the company from federal charges. Boeing agreed then to pay a $2.5 billion penalty for a conspiracy charge tied to the crashes. The DOJ revisited the agreement after a door panel blew out of a new 737 Max 9 in January, sparking a new safety crisis.

    Under fire
    Nike CEO John Donahoe faces growing discontent as the company’s stock plummeted 20% on Friday, its worst day since 1980, after forecasting a significant decline in sales. As Wall Street digested the dismal outlook from the world’s largest sportswear company, at least six investment banks downgraded Nike’s stock. Analysts at Morgan Stanley and Stifel took it a step further, specifically calling the company’s management into question.

    Bitcoin windfall
    Mt. Gox, a bankrupt Japanese bitcoin exchange, is set to repay creditors nearly $9 billion worth of Bitcoin following a 2011 hack. The court-appointed trustee overseeing the exchange’s bankruptcy proceedings said distributions to the firm’s roughly 20,000 creditors would begin this month. The payout is likely to be a windfall for those who waited a decade, with Bitcoin’s value surging from around $600 in 2014 to over $60,000 today. One claimant, Gregory Greene, could potentially receive $2.5 million for his $25,000 investment.

    Inflation cooling
    A key inflation measure, watched closely by the Federal Reserve, slowed to its lowest annual rate in over three years in May, with the core personal consumption expenditures price index rising 2.6% from a year ago. “This is just additional news that monetary policy is working, inflation is gradually cooling,” San Francisco Fed President Mary Daly told CNBC’s Andrew Ross Sorkin during a “Squawk Box” interview. “That’s a relief for businesses and households who have been struggling with persistently high inflation. It’s good news for how policy is working.”

    [PRO] Rally will broaden
    The tech sector has driven market performance in 2024, with the S&P 500 tech group up 28% and Nvidia soaring 149%, while small-caps have lagged. Oppenheimer’s chief market strategist John Stoltzfus believes the rally will broaden. CNBC’s Lisa Kailai Han looks at the reasons behind his call. 

    The bottom line

    The New York Times editorial board has lost faith in President Joe Biden, calling for him to step aside. Iranians will need another go at electing a new president, French voters cast their votes in the first round of snap elections that saw big gains for Marie Le Pen's far-right party and Brits will go to the polls on Thursday.

    It's a busy political environment for markets to navigate. Wall Street has shown remarkable resilience thanks to the AI-powered rally in the first half of the year, which has seen the Nasdaq soar 18% so far. Nvidia is up almost 150%. There could be more to come; Bank of America believes Nvidia and Apple could still deliver "superior returns."

    While one of the biggest bulls on the Street expects the rally to broaden away from the megacaps, Wall Street wasn't feeling any love for Nike's CEO. The company had its worst day of trading since its IPO in December 1980, losing $28 billion in market cap on Friday after slashing its sales forecasts.

    John Donahoe was brought in from eBay to transform the athletic apparel giant's digital channels. The company ditched its retail partners, became too dependent on its aging sneaker ranges and lost ground to new contenders Hoka and On. It'll certainly make an interesting case study for MBA programs for all the wrong reasons. As Wall Street questioned Donahoe's position, he still had the approval of its founder.

    Friday also saw the Fed's favored inflation measure come in line with expectations, raising the prospect of interest rate cuts later this year.

    "I really think the Fed should tee up a cut at the July 31 meeting, confirm it at Jackson Hole in August and do it in September," Wharton finance professor Jeremy Siegel told CNBC's "Squawk on the Street." He added that one or maybe one-and-a-half rate cuts have already been priced in.

    "I actually think there will be more because there might be a little bit more softness in the economy and better inflation numbers, both of those feeding better rates," he continued. Siegel also said it is "hard to say" where the bull market's trajectory currently stands.

    In a four-day trading week — markets are closed for the July 4 Independence Day holiday — the big economic number to watch is the June jobless data on Friday. CNBC's Sarah Min has more on what to expect.

     — CNBC's Lisa Kailai Han, Yun Li, Jeff Cox, Leslie Josephs, Gabrielle Fonrouge, Hakyung Kim, Brian Evans, Spencer Kimball, Ryan Browne and MacKenzie Sigalos contributed to this report.

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  • The Federal Reserve holds interest rates steady — here’s what that means for your money

    The Federal Reserve holds interest rates steady — here’s what that means for your money

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    The Federal Reserve announced Wednesday that it will leave interest rates unchanged. Fresh inflation data issued earlier in the day showed that consumer prices are gradually moderating though remain above the central bank’s target.

    The Fed’s benchmark fed funds rate has now stood within the range of 5.25% to 5.50% since last July.

    The central bank projected it would cut interest rates once in 2024, down from an estimate of three in March.

    For consumers already strained by the high cost of living, there is an added toll from persistently high borrowing costs.

    “It’s not enough that the rate of inflation has come down,” said Greg McBride, chief financial analyst at Bankrate.com. “Prices haven’t, and that is what is really stressing household balances.”

    More from Personal Finance:
    Average 401(k) savings rates recently hit a record
    Here’s what’s wrong with TikTok’s viral money hacks
    What to do if you think you’re underpaid

    Inflation has been a persistent problem since the Covid-19 pandemic when price increases soared to their highest levels since the early 1980s. The Fed responded with a series of interest rate hikes that took its benchmark rate to the highest level in decades.

    The federal funds rate, which is set by the U.S. central bank, is the rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

    The spike in interest rates caused most consumer borrowing costs to skyrocket, and now, more Americans are falling behind on their payments.

    From credit cards and mortgage rates to auto loans and student debt, here’s a look at where those monthly interest expenses stand.

    Credit cards

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. In the wake of the rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — nearing an all-time high.

    “Consumers need to understand that the cavalry isn’t coming anytime soon, so the best thing you can do is take things into your own hands when it comes to lowering credit card interest rates,” said Matt Schulz, chief credit analyst at LendingTree.

    Try calling your card issuer to ask for a lower rate, consolidating and paying off high-interest credit cards with a lower-interest personal loan or switching to an interest-free balance transfer credit card, Schulz advised.

    Mortgage rates

    Although 15- and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.

    The average rate for a 30-year, fixed-rate mortgage is just above 7%, up from 4.4% when the Fed started raising rates in March 2022 and 3.27% at the end of 2021, according to Bankrate.

    “Going forward, mortgage rates will likely continue to fluctuate and it’s impossible to say for certain where they’ll end up,” noted Jacob Channel, senior economist at LendingTree. “That said, there’s a good chance that we’re going to need to get used to rates above 7% again, at least until we start getting better economic news.”

    Auto loans

    Even though auto loans are fixed, payments are getting bigger because car prices have been rising along with the interest rates on new loans, resulting in less affordable monthly payments. 

    The average rate on a five-year new car loan is now more than 7%, up from 4% in March 2022, and that’s not likely to change, according to Ivan Drury, Edmunds’ director of insights.

    “Until we hit summer selldown months in the latter half of the third quarter, we should expect rates to remain relatively static during the foreseeable future,” Drury said.

    However, competition between lenders and more incentives in the market lately have started to take some of the edge off the cost of buying a car, he added.

    Student loans

    Federal student loan rates are also fixed, so most borrowers aren’t immediately affected by the Fed’s moves. But undergraduate students who took out direct federal student loans for the 2023-24 academic year are paying 5.50%, up from 4.99% in 2022-23 — and the interest rate on federal direct undergraduate loans for the 2024-2025 academic year will be 6.53%, the highest rate in at least a decade.

    Private student loans tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means those borrowers are already paying more in interest. How much more, however, varies with the benchmark.

    Savings rates

    While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

    As a result, top-yielding online savings account rates have made significant moves and are now paying more than 5% — above the rate of inflation, which is a rare win for anyone building up a cash cushion, according to Bankrate’s McBride.

    “Savers are sitting back and enjoying the best environment they’ve seen in more than 15 years,” McBride said.

    Currently, top-yielding one-year certificates of deposit pay over 5.3%, as good as a high-yield savings account.

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  • The Federal Reserve holds interest rates steady, offers no relief from high borrowing costs — what that means for your money

    The Federal Reserve holds interest rates steady, offers no relief from high borrowing costs — what that means for your money

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    The Federal Reserve announced Wednesday it will leave interest rates unchanged as inflation continues to prove stickier than expected.

    However, the move also dashes hopes that the Fed will be able to start cutting rates soon and relieve consumers from sky-high borrowing costs.

    The market is now pricing in one rate cut later in the year, according to the CME’s FedWatch measure of futures market pricing. It started 2024 expecting at least six reductions, which was “completely fantasy land,” said Greg McBride, chief financial analyst at Bankrate.com.

    That change in rate-cut expectations leaves many households in a bind, he said. “Certainly from a budgetary standpoint, not only is inflation still high but that is on top of the cumulative increase in prices over the last three years.”

    “Prioritizing debt repayment, especially of high-cost credit card debt, remains paramount as interest rates promise to remain high for some time,” McBride said.

    More from Personal Finance:
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    Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels since the early 1980s. The Fed responded with a series of interest rate hikes that took its benchmark rate to its highest level in more than 22 years.

    The federal funds rate, which is set by the U.S. central bank, is the rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

    The spike in interest rates caused most consumer borrowing costs to skyrocket, putting many households under pressure.

    Increasing inflation has also been bad news for wage growth, as real average hourly earnings rose just 0.6% over the past year, according to the Labor Department’s Bureau of Labor Statistics.

    Even with possible rate cuts on the horizon, consumers won’t see their borrowing costs come down significantly, according to Columbia Business School economics professor Brett House.

    “Once the Fed does cut rates, that could cascade through reductions in other rates but there is nothing that necessarily guarantees that,” he said.

    From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at where those rates could go in the second half of 2024.

    Credit cards

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. In the wake of the rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — an all-time high.

    Annual percentage rates will start to come down when the central bank reduces rates, but even then they will only ease off extremely high levels. With only a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Matt Schulz, chief credit analyst at LendingTree.

    “If Americans want lower interest rates, they’re going to have to do it themselves,” he said. Try calling your card issuer to ask for a lower rate, consolidating and paying off high-interest credit cards with a lower-interest personal loan or switching to an interest-free balance transfer credit card, Schulz advised.

    Mortgage rates

    Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.

    The average rate for a 30-year, fixed-rate mortgage is just above 7.3%, up from 4.4% when the Fed started raising rates in March 2022 and 3.27% at the end of 2021, according to Bankrate.

    “Going forward, mortgage rates will likely continue to fluctuate and it’s impossible to say for certain where they’ll end up,” noted Jacob Channel, senior economist at LendingTree. “That said, there’s a good chance that we’re going to need to get used to rates above 7% again, at least until we start getting better economic news.”

    Auto loans

    Even though auto loans are fixed, payments are getting bigger because car prices have been rising along with the interest rates on new loans, resulting in less affordable monthly payments. 

    The average rate on a five-year new car loan is now more than 7%, up from 4% in March 2022, according to Edmunds. However, competition between lenders and more incentives in the market lately have started to take some of the edge off the cost of buying a car, said Ivan Drury, Edmunds’ director of insights.

    “Any reduction in rates will be especially welcome as there is an increasingly higher share of consumers with older trade-ins that have sat out the market madness waiting for an automotive landscape that looks more like the last time they bought a vehicle six or seven years ago,” Drury said.

    Student loans

    Federal student loan rates are also fixed, so most borrowers aren’t immediately affected. But undergraduate students who took out direct federal student loans for the 2023-24 academic year are now paying 5.50%, up from 4.99% in 2022-23 — and any loans disbursed after July 1 will likely be even higher. Interest rates for the upcoming school year will be based on an auction of 10-Year Treasury notes later this month.

    Private student loans tend to have a variable rate tied to the prime, Treasury bill or another rate index, which means those borrowers are already paying more in interest. How much more, however, varies with the benchmark.

    For those struggling with existing debt, there are ways federal borrowers can reduce their burden, including income-based plans with $0 monthly payments and economic hardship and unemployment deferments. 

    Private loan borrowers have fewer options for relief — although some could consider refinancing once rates start to come down, and those with better credit may already qualify for a lower rate.

    Savings rates

    While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

    As a result, top-yielding online savings account rates have made significant moves and are now paying more than 5.5% — above the rate of inflation, which is a rare win for anyone building up a cash cushion, McBride said.

    “The mantra of higher-for-longer interest rates is music to the ears of savers who will continue to enjoy inflation-beating returns on safe-haven savings accounts, money markets and CDs for the foreseeable future,” he said.

    Currently, top-yielding certificates of deposit pay over 5.5%, as good as or better than a high-yield savings account.

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  • Why hundreds of U.S. banks may be at risk of failure

    Why hundreds of U.S. banks may be at risk of failure

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    Hundreds of small and regional banks across the U.S. are feeling stressed.

    “You could see some banks either fail or at least, you know, dip below their minimum capital requirements,” Christopher Wolfe, managing director and head of North American banks at Fitch Ratings, told CNBC.

    Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates.

    The majority of those banks are smaller lenders with less than $10 billion in assets.

    “Most of these banks aren’t insolvent or even close to insolvent. They’re just stressed,” Brian Graham, co-founder and partner at Klaros Group, told CNBC. “That means there’ll be fewer bank failures. But it doesn’t mean that communities and customers don’t get hurt by that stress.”

    Graham noted that communities would likely be affected in ways that are more subtle than closures or failures, but by the banks choosing not to invest in such things as new branches, technological innovations or new staff.

    For individuals, the consequences of small bank failures are more indirect.

    “Directly, it’s no consequence if they’re below the insured deposit limits, which are quite high now [at] $250,000,” Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corp., told CNBC.

    If a failing bank is insured by the FDIC, all depositors will be paid “up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category.”

    Watch the video to learn more about the risk of commercial real estate, the role of interest rates on unrealized losses and what it may take to relieve stress on banks — from regulation to mergers and acquisitions.

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