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  • Biden’s quiet campaign season brings him back to familiar territory in Pennsylvania | CNN Politics

    Biden’s quiet campaign season brings him back to familiar territory in Pennsylvania | CNN Politics

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    CNN
     — 

    When President Joe Biden visited Pennsylvania on Thursday, he touted infrastructure investments that helped rebuild a collapsed bridge and raised campaign cash away from cameras with the state’s Democratic Senate candidate.

    Where he didn’t appear was a campaign rally stage.

    Three weeks before November’s elections, Biden’s visit to Pittsburgh and Philadelphia neatly demonstrated a political strategy focused on promoting his agenda and talking with donors rather than headlining stump speeches alongside vulnerable Democrats.

    He has been a frequent visitor to Pennsylvania, where Democratic Lt. Gov. John Fetterman holds a narrow lead in his race against Republican Dr. Mehmet Oz in the US Senate race. Trading his trademark sweatshirt and basketball shorts for a dark suit and tie, Fetterman greeted Biden at the airport alongside his wife.

    “You’re gonna win!” Biden said as he shook the candidate’s hand.

    Biden has visited the commonwealth nine times this year, including Thursday’s visit, and 18 times since he became president.

    “I’m a proud Delawarean, but Pennsylvania’s my native state. It’s in my heart. I can’t tell you how much it means to me to be part of rebuilding this beautiful state,” Biden said. “My Grandfather Finnegan from Scranton would really be proud of me now.”

    Still, despite the fondness, Biden’s visit was relatively low-key for a presidential stop weeks ahead of a critical midterm contest. He did not hold a rollicking campaign rally, opting for a smaller profile event with several dozen officials and workers from the bridge project.

    Biden’s approach borne out of political reality: While many of Biden’s accomplishments have been well-received by voters – and, in some cases, embraced by Republicans who voted against them – Biden himself remains unpopular and some Democrats continue to keep their distance as the midterm contests grow near.

    Departing the White House on Thursday, Biden bristled when asked why more Democrats weren’t joining him for political events.

    “That’s not true,” Biden said. “There have been 15. Count, kid, count.”

    Later, as he and Fetterman dropped by a Primanti Bros. sandwich shop near Pittsburgh, he told reporters he’d been requested to visit Nevada and Georgia, two states with tight Senate races.

    “We’re trying to work it out now,” he said. “I don’t know where I’m going. I’ve got about 16, 18 requests around the country.”

    Over the past weeks, Biden has worked to expand his list of achievements using executive power, including pardoning low-level marijuana offenders, canceling some student loan debt, reducing the cost of hearing aids and declaring a World War II training site a national monument.

    This week alone, he promised to sign a bill enshrining abortion rights into law if Democrats gain seats, outlined billions of dollars to invest in domestic battery manufacturing and released another 15 million barrels of oil from the nation’s strategic reserves as he works to bring down gas prices.

    Biden denied the oil announcement was politically motivated.

    “I’ve been doing this for how long now? It’s not politically motivated at all,” he said. “It’s motivated to make sure that I continue to push on what I’ve been pushing on.”

    Yet the timing of the release nonetheless came as Biden’s party looks with growing concern at the prospect of losing its congressional majorities next year, and the White House searches for steps to appeal to Americans.

    In Pittsburgh, the President spoke at the Fern Hollow Bridge, a four-lane steel span that collapsed into a snowy ravine in January. Biden happened to be visiting the city that day to speak about infrastructure, and the presidential motorcade made a detour to view the damage.

    “A complete catastrophe was avoided but it never should have come to this,” Biden said on Thursday. The President noted how quickly the bridge was bring rebuilt and said that while it wasn’t funded by his bipartisan infrastructure law, it was completely funded by the federal government.

    Biden said that “God willing” the bridge will be completely open in December, telling the audience: “I’m coming back to walk over this sucker.”

    Biden was joined by a slew of top Pennsylvania elected officials, most notably Fetterman, who is locked in one of the most closely watched midterm contests. Biden is also scheduled to join Fetterman later on Thursday for a fundraiser in Philadelphia.

    While the bridge’s reconstruction wasn’t directly funded by the bipartisan infrastructure law, a White House official said funding from the law allowed Pennsylvania’s Transportation Department “to move funds quickly to support this project, without having to slow down or interfere with other projects in the pipeline.”

    The rebuilding was funded through $25.3 million in federal funding appropriated to Pennsylvania in Fiscal Year 2021, the White House official said.

    The law allocated $40 billion toward bridge projects over five years. Since last October, repairs or replacements have begun on more than 2,400 bridges through funding from the infrastructure law, according to the White House.

    That measure has emerged as a central talking point for Biden during this year’s midterms. Candidates who might think twice about holding a political rally with Biden have seemed eager to appear alongside him at official events heralding improvements on rail lines, airport terminals or bridges. The President has hammered Republicans who voted against the bill but have nonetheless taken credit for projects made possible by the $1.2 trillion law.

    In planning Biden’s recent travel, including political events and official White House duties, his advisers have taken into account the sensitive political reality that some Democratic candidates in tough races would prefer he not visit their district or state in the final stretch to the midterms.

    But one Democratic official familiar with the White House’s thinking said an important overarching dynamic is that even the candidates who would rather not appear alongside Biden are still eager to run on his legislative accomplishments, describing it as a “halfsies” situation.

    “There are some campaigns that don’t want him to physically campaign in his state,” the official said. “But – people are running on his agenda.”

    Given the string of legislative victories that Biden’s party scored in the first half of the Biden administration – including the bipartisan infrastructure bill – even the events that are technically billed official White House business are effectively no different from political events these days, that official noted.

    “Every event is political now,” they said.

    Biden remains eager to visit key battlegrounds, according to his aides. Earlier this year, he voiced some frustration that more Democrats weren’t lining up to use him on the campaign trail.

    Now, Biden has settled into a midterm push that has him traveling mostly to states he won in 2020 while avoiding certain marquee races where his presence could be a drag on Democratic candidates.

    Other Democrats appear more welcome. Former President Barack Obama will hold campaign rallies for Democrats in Atlanta, Detroit and Milwaukee in the days before the elections. Sen. Bernie Sanders, the independent Vermont democratic socialist, will visit battleground states on a tour targeted to younger voters.

    The White House is working closely with the Senate and House campaign committees and will send the President where he could be helpful, aides said, and will avoid traveling to areas where nationalizing the race would be seen as a detriment to candidates.

    The logistics of presidential travel also complicate some travel, aides said, because campaigns must help foot the expensive costs of Air Force One.

    Still, at similar stages in their terms, Obama and former President Donald Trump were engaging in more traditional campaign-style events for candidates ahead of midterm elections, despite questions about dragging down candidates.

    Both saw their party lose unified control of Congress in their first midterm elections, a historical precedent Biden hopes to break – even as he avoids big political events.

    The White House has defended Biden’s travel plans, insisting he is traveling “nonstop” and intends to visit states “where he is needed” in the run-up to the vote.

    Still, in the weeks ahead of the midterms, Biden continues to spend most weekends at his homes in Delaware, including last weekend in Wilmington and this weekend in Rehoboth Beach.

    On Friday, he’ll stop at Delaware State University to tout his efforts at student debt forgiveness, before heading to his beach house. This week, the debt relief program Biden announced earlier this year went online, with millions applying to have some or all of their loans forgiven.

    In one of his previous trips to campaign in Pennsylvania, on Labor Day, Biden appeared before a small crowd with Fetterman at a union picnic in Pittsburgh. When the two men emerged from the union hall together, Fetterman raised his arms and pumped his fists.

    But when Fetterman spoke ahead of Biden, he used the opportunity to lambast his Republican opponent for owning multiple homes – without mentioning the President at all.

    During a 15-minute private meeting beforehand, Fetterman pushed Biden to begin the process of rescheduling marijuana, one of his top issues.

    A few weeks later, the White House said Biden would issue pardons for federal simple marijuana possession offenses and task members of his administration to “expeditiously” review how marijuana is scheduled under federal law, the first step toward potentially easing a federal classification that currently places marijuana in the same category as heroin and LSD.

    Biden himself has only mentioned the decision in passing. But Fetterman hailed the move and was quick to cite his conversation with Biden after the White House made the announcement.

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  • Tech earnings are coming and they probably won’t be pretty | CNN Business

    Tech earnings are coming and they probably won’t be pretty | CNN Business

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    New York
    CNN Business
     — 

    After months of layoffs, hiring freezes and other cost-cutting measures, big tech companies are set to provide the most detailed look yet at just how bad things have gotten for their businesses amid fears of a looming recession.

    Snapchat’s parent company, which tanked much of the tech sector in May with a warning about a worsening economy, is set to report third-quarter earnings on Thursday. Apple

    (AAPL)    , Amazon

    (AMZN)    , Facebook

    (FB)    -parent Meta, Microsoft

    (MSFT)    , Twitter

    (TWTR)     and Google-parent Alphabet

    (GOOGL)     will each report earnings results the following week.

    “People probably should be bracing themselves for these results,” said Scott Kessler, technology global sector lead at research firm Third Bridge Group.

    For years, the giants of Silicon Valley seemed almost immune to swings in the global economy. Even amid a pandemic, a trade war and other geopolitical uncertainty, the biggest names in tech only seemed to grow bigger and richer. But like other sectors in recent months, they have faced a variety of new challenges.

    Rampant inflation is eating away at consumers’ paychecks and reducing their ability to spend freely on tech products and services. Increased costs and recession fears have cut down on demand for online advertising and enterprise tech services. And other macroeconomic issues such as continued supply chain snarls and higher interest rates are stunting growth, analysts say.

    To make matters worse, tech companies must also confront the growing strength of the US dollar, which is currently trading at its highest level in two decades. That can mean sales made overseas are not worth as much, according to Angelo Zino, senior industry analyst at CFRA Research. A stronger US dollar may also make hardware products from companies like Apple less affordable for foreign consumers, which, as Zino points out, is problematic given “most of these companies are generating more than half their revenue outside the United States.”

    In a striking shift, most of the big tech companies are now expected to report slowing profit and revenue growth, or even year-over-year declines, for the three months ending in September, according to analyst estimates.

    Amazon

    (AMZN)    , which is projected to be in the best shape, is expected to post essentially flat sales from the year prior. Meta’s revenue is projected to fall 5% year-over-year, marking the company’s second consecutive quarterly revenue decline. Net income at Meta, Amazon

    (AMZN)    , Google and Snap is also expected to be down from the year prior.

    These dour projections come after many tech businesses were already showing signs of weakness in the prior quarter. Meta in July posted its first year-over-year quarterly revenue decline since going public in 2012 in large part due to decreased demand in the online advertising market that fuels its core business. Twitter

    (TWTR)    , Snap, Google, Apple and Microsoft all also reported that shrinking ad budgets had taken some toll on their June quarter earnings.

    “We compare investor negative sentiment on tech today to what we have seen only 2 other times in our decades of covering tech stocks: 2008 and 2001,” Wedbush analyst Dan Ives said in a note to investors this week, referring to two prior recessionary periods.

    Many of the issues currently weighing on tech companies are unlikely to let up anytime soon, which is why industry watchers will be paying close attention to the guidance these companies offer for the rest of 2022.

    “More than anything, people really want a good understanding about what to expect” from the final three months of this year, which has “historically been the most important quarter for these companies,” Kessler said. Investors will likely want to know, for example, whether the online ad market has begun to stabilize ahead of the crucial holiday season.

    Negative results or future outlook could lead to increased pressure on tech firms to focus on their core businesses and cut back on big bets that aren’t expected to quickly product returns. Some of that is already underway.

    In recent weeks, Google announced it would shut down its gaming service Stadia, Amazon said it would stop testing a home delivery robot and Meta shut down its newsletter product, Bulletin.

    Meta may be in a uniquely difficult position. Last October, Facebook rebranded as Meta and ramped up investments to build a future version of the internet called the metaverse, which isn’t expected to be fully realized for years, if ever. But the Wall Street Journal reported last month the company was quietly reducing staff — and some analysts expect more cuts to come.

    “I do think you’ll see them announce cost cuts. I think they’ll reduce the workforce,” Zino said. “Meta is really boxed in a corner here. Their core business is in an environment where they’re not going to see much growth at all … and they don’t have any major revenue center outside of advertising.”

    What a difference a year makes.

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  • The Fed isn’t about to back down from its inflation fight | CNN Business

    The Fed isn’t about to back down from its inflation fight | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    London
    CNN Business
     — 

    Twelve days from now, the Federal Reserve will meet again, and expectations for the central bank’s next moves are firming up. The consensus among investors: Persistently hot inflation means the Fed will need to continue with its string of aggressive interest rate hikes, which is unprecedented in the modern era.

    What’s happening: Markets see a 99% probability that rates will rise by another three-quarters of a percentage point, reaching a range of 3.75% to 4%.

    A hike of that magnitude is now “a given,” Quincy Krosby, chief global strategist for LPL Financial, told clients on Wednesday. “Concern is now focused on December, and whether the Fed is prepared to transition to smaller rate hikes.”

    That’s up from a 60% probability one month ago. So what changed?

    Inflation, mainly. The US Consumer Price Index rose 8.2% in the year to September after rising 8.3% annually in August. While CPI peaked at 9.1% in June, that reading was still uncomfortably elevated and higher than economists had expected.

    The 6.6% annual uptick in shelter costs was of particular concern. It takes longer for housing expenses to come back down than some other categories, since renters tend to sign leases for 12-month periods. The monthly rise in core services costs (excluding energy) was the largest gain in three decades.

    The data underscored the need for the Federal Reserve to stay tough — while a strong jobs report for September will deliver confidence the central bank can do so without causing undue harm to the US economy.

    Fed officials have said as much. In an interview with Reuters on Friday, St. Louis Fed President James Bullard said inflation had become “pernicious,” which means that “frontloading” larger rate hikes is logical.

    The market impact: The S&P 500 kicked off the week with a 3.8% rally before dropping 0.7% on Wednesday. It’s still plodding along in a bear market, about 23% below its January peak. So long as the Fed signals its intention to keep the pressure on, boosting the odds of a US recession, volatility is expected to persist.

    Even relatively solid corporate earnings may not be sufficient to change the direction.

    “So far, the results are decent, but they’re being compared to consensus estimates that have been persistently lowered since early summer,” noted strategists at Charles Schwab.

    Tesla

    (TSLA)     posted a solid quarter of earnings and record revenue, but now says it will likely fall short of its target for a 50% growth in the number of cars it sells this year.

    Quick rewind: As recently as July, the company said it was still aiming for a target of 50% growth from the 936,000 cars it delivered in 2021.

    But with two quarters of disappointing deliveries caused by supply chain issues and Covid-related shutdowns in China, that goal has looked increasingly out of reach, my CNN Business colleague Chris Isidore reports.

    CEO Elon Musk said that the electric carmaker is not struggling with demand.

    “We expect to sell every car that we make, for as far in the future as we can see,” he said on a call with analysts on Wednesday.

    Instead, the company said it would “just” miss its target due to complications with delivery of cars from its factories to customers at the end of the year.

    Shares are down 5% in premarket trading on Thursday. They’ve dropped 37% year-to-date, compared to a 22.5% fall in the S&P 500.

    “This quarter was not roses and rainbows,” said Dan Ives, tech analyst for Wedbush Securities. “Competition is increasing. There are some logistical challenges.”

    America’s business leaders are becoming more pessimistic. The Conference Board recently reported a slide in its CEO confidence index, which it said had hit levels not seen “since the depths of the Great Recession.”

    Of the 136 CEOs who were surveyed, 98% said they were preparing for a US recession over the next 12 to 18 months — and 99% said they were bracing for a recession in Europe.

    Notably, the business community is not being quiet about its concerns.

    Amazon founder Jeff Bezos tweeted Tuesday that “the probabilities in this economy tell you to batten down the hatches.”

    He was responding to a clip of an interview with Goldman Sachs CEO David Solomon, who told CNBC that “it’s a time to be cautious.”

    “You have to expect that there’s more volatility on the horizon now,” Solomon said. “That doesn’t mean for sure that we have a really difficult economic scenario. But on the distribution of outcomes, there’s a good chance that we have a recession in the United States.”

    American Airlines

    (AAL)    , AT&T

    (T)    , Dow, Nucor

    (NUE)     and Quest Diagnostics

    (DGX)     report results before US markets open. CSX

    (CSX)    , Snap

    (SNAP)     and Whirlpool

    (WHR)     follow after the close.

    Also today:

    • Initial US jobless claims for last week post at 8:30 a.m. ET.
    • Existing home sales for September follow at 10 a.m. ET.

    Coming tomorrow: Earnings from American Express and Verizon.

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  • Stocks try for another rally as big banks report earnings | CNN Business

    Stocks try for another rally as big banks report earnings | CNN Business

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    Retail sales data shows consumers are growing cautious about spending amid biting inflation

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  • Food prices are still surging — here’s what’s getting more expensive | CNN Business

    Food prices are still surging — here’s what’s getting more expensive | CNN Business

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    New York
    CNN Business
     — 

    Prices at the grocery store continued to soar last month, adding even more pressure to shoppers’ wallets.

    The food at home index, a proxy for grocery store prices, increased 0.7% in September from the month prior and a stunning 13% over the last year, according to new government data released Thursday.

    Just about everything got more expensive in September.

    Fruits and vegetables surged 1.6% for the month, while cereals and bakery products rose 0.9%. Other groceries increased 0.5% in September, following a 1.1% increase in August.

    Meats, poultry, fish and eggs rose 0.4% over the month and beverages increased 0.6%.

    Prices on many of these items are up double digits annually.

    A number of factors have contributed to the surge in prices. Producers say they’re paying more for labor and packaging materials. Extreme weather, including droughts and flooding, and disease, such as the deadly avian flu, have been hurting crops and killing egg-laying hens, squeezing supplies.

    “The environment clearly is still very inflationary with a lot of supply chain challenges across the industry,” Pepsi

    (PEP)    CEO Ramon Laguarta said on an earnings call Wednesday. The company’s prices increased 17% annually.

    Meanwhile, demand is high. Consumers may be able to pull back on some discretionary items, but they have to eat. Many people are still working from home and consuming more of their meals there than they did before the pandemic.

    This imbalance between supply and demand means companies can pass along higher prices to shoppers without sales plunging.

    But higher prices at the grocery store are forcing customers to make some trade offs.

    Many shoppers are buying fewer products, switching to cheaper private-label brands and pulling back on discretionary items.

    More than one million new households have shopped at discount grocery chain Aldi for the first in the past year, according to the company.

    Walmart

    (WMT)     said recently that high levels of food inflation are impacting customers’ ability to purchase discretionary goods such as clothing and furniture.

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  • Saudis aren’t weaponizing oil like Americans claim, top official says | CNN Business

    Saudis aren’t weaponizing oil like Americans claim, top official says | CNN Business

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    CNN
     — 

    Saudi Minister of State for Foreign Affairs Adel al-Jubeir said his country partnered with Russia to slash oil production in order to stabilize markets and denied that there were political motives behind the decision, which has enraged US leaders and sparked calls to rethink ties with Riyadh.

    “We’re trying to make sure we don’t have erratic swings in prices,” al-Jubeir, one of Saudi Arabia’s top diplomats, told CNN’s Becky Anderson on Wednesday. “Our track record has been clear – we have always worked assiduously to maintain stability in the oil markets.”

    Last week, OPEC+, the oil cartel led by Saudi Arabia and Russia, agreed to slash production by 2 million barrels per day, twice as much as analysts had predicted, in the biggest cut since the Covid-19 pandemic.

    The move came despite an intense pressure campaign from the United States, which had warned Arab allies that such a move would increase prices and help Russian President Vladimir Putin continue to fund his war in Ukraine. Experts also fear that continued high oil prices could make it more difficult for the US to tamp down inflation, which has already skyrocketed this year.

    Al-Jubeir, who is also the country’s climate minister, denied that there were any political motives to the decision and said the production cut was made to avoid major swings in the price of oil, which can affect consumers worldwide, and pointed to the fact that the price of oil has gone down since the reduction was announced last week.

    “Saudi Arabia is not siding with Russia,” he told CNN. “Saudi Arabia is taking the side of trying to ensure the stability of the oil markets.”

    “Saudi Arabia does not politicize oil. We don’t see oil as a weapon. We see oil as our commodity. Our objective is to bring stability to the oil market,” al-Jubeir said.

    US President Joe Biden told CNN on Tuesday that Washington must now “rethink” its relationship with Riyadh following the cut. The decision was a particular affront for Biden because of his efforts over the summer to repair ties with Saudi Arabia, despite the kingdom’s woeful human rights record and the role of Saudi Crown Prince Mohammed bin Salman in the murder of dissident journalist Jamal Khashoggi. Bin Salman denied involvement in the murder, which captured international headlines in part due to the lurid details of the killing.

    “I am in the process, when the House and Senate gets back, they’re going to have to – there’s going to be some consequences for what they’ve done with Russia,” Biden said.

    Watch the full exclusive interview with President Joe Biden

    On Wednesday, US national security adviser Jake Sullivan said Biden would examine all aspects of US ties with Saudi Arabia, including arms sales, as administration officials begin quiet discussions with members of Congress and congressional aides about how the US could impose consequences on the kingdom following the oil output cut.

    “There is a range of interests and values that are implicated in our relationship with that country,” Sullivan told reporters. “The President will examine all of that. But one question he’s going to ask is: Is the nature of the relationship serving the interest and values of the United States and what changes would make it better serve the interests and values?”

    Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud said in an interview with Saudi TV earlier Wednesday that OPEC+ needed to be proactive as central banks in the West moved to tackle inflation with higher interest rates, a move that could raise prospects of a global recession, which could in turn reduce demand for oil and drive its price down. Cutting production would ensure a smaller supply of oil, keeping its price higher. While that would protect the Saudi economy by ensuring it receives a steady flow of income from oil sales, it would force consumers across the world to pay more for energy and gas, further fueling inflation.

    Saudi officials have insisted that the production cut is being done to protect the country’s economic interests. Because of its heavy dependence on oil revenues, the Saudi economy has a history of falling victim to boom and bust cycles in the oil market, where high prices bring in a flow of cash followed by downturns.

    In the United States, however, the cut could have massive political ramifications ahead of next month’s midterm elections. After reaching highs over the summer, gas prices in the United States had been steadily decreasing, providing Biden and his top aides a potent talking point in the lead-up to the elections.

    But a combination of factors, including rising demand and maintenance at some US refineries, has caused prices to begin ticking back up. The OPEC+ decision is likely to aggravate those factors.

    The decision set off bipartisan fury in Washington when it was first announced last week. Saudi Arabia is now being accused of filling the Kremlin’s coffers with oil revenues just days after President Putin’s regime began carrying out large-scale missile attacks on civilian targets across Ukraine

    “What Saudi Arabia did to help Putin continue to wage his despicable, vicious war against Ukraine will long be remembered by Americans,” tweeted Senate Majority Leader Chuck Schumer, a Democrat, on Friday.

    Democratic Sen. Richard Blumenthal of Connecticut on Wednesday called for immediate action on his bill that would stop US arm sales to Saudi Arabia.

    “The Saudis actions aid and abet a murderous and brutal criminal invasion by Russia,” Blumenthal said.

    When asked about growing calls in Washington to limit ties with Saudi Arabia, al-Jubeir said he hoped that such talk was motivated by domestic politics ahead of the midterms.

    Al-Jubeir said the relationship between the US and Saudi Arabia remains “robust.”

    “The Kingdom of Saudi Arabia and the US have had a very strong relationship for eight decades … and we look forward to this relationship continuing for the next eight decades,” he added.

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  • The Fed only cares about inflation. That’s bad news for you | CNN Business

    The Fed only cares about inflation. That’s bad news for you | CNN Business

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    New York
    CNN Business
     — 

    Jerome Powell and other members of the Federal Reserve are obsessed with choking off inflation once and for all, even if the Fed’s series of aggressive rate hikes slow the economy to a crawl. That could be bad news for consumers, investors and Corporate America.

    What’s more, many market experts and economists note that the rate of inflation, while still uncomfortably high, is falling and should continue to decline – but there is a noted lag effect. Fed vice chair Lael Brainard admitted as much in a speech Monday, saying that “policy actions to date will have their full effect on activity in coming quarters.”

    Still, the Fed isn’t done raising rates. Investors are pricing in the strong probability of a fourth consecutive three-quarters of a percentage point hike at the Fed’s next meeting on November 2. And the chances of a fifth straight hike of that magnitude at the Fed’s December 14 meeting are also on the rise.

    It seems that Powell wants to atone for his mistake of repeatedly calling inflation “transitory” for much of last year. So the Fed is going to keep raising rates to prove that it is taking inflation seriously, even if that leads to a bigger pullback in stocks…and tipping the economy into a recession.

    Needless to say, that’s a problem. Especially since the Fed has two mandates: price stability and maximum employment. That means the jobs market might get hit due to the Fed’s laser-like focus on inflation.

    “My concern is that the Fed is tightening so quickly and so significantly without knowing what it means for the economy,” said Brian Levitt, global market strategist with Invesco.

    Keep in mind that the Fed’s series of rate hikes are unprecedented in the “modern” era of central banking, i.e. after Alan Greenspan became Fed chair in 1987 and the Fed became far more transparent.

    The Fed was far more opaque before Greenspan, and the market didn’t pick apart every speech, policy move and economic forecast the way Wall Street does now. Inflation in the 1970s and early 1980s was also a much different animal, due largely to an oil price shock that lasted years because of a supply shortage.

    The current inflation crisis stems from more temporary (we won’t say transitory) supply chain issues tied to the pandemic as well as the rapid reopening of the global economy following a brief recession.

    But the economy is now showing cracks. Long-term bond yields have surged, and mortgage rates have popped, cooling off the housing market. The stock market has deflated as well, wringing even more excess from the economy.

    “We’re more cautious because the Fed is tightening into a weakening economy,” said Keith Lerner, co-chief investment officer and chief market strategist with Truist Advisory Services. “These supersized hikes are the most aggressive in decades. But the Fed has scar tissue from inflation.”

    As painful this current bout of inflation is for Americans, it’s nothing compared to what people lived through in the early 1980s before then Fed chair Paul Volcker squashed inflation with a series of massive rate hikes.

    Unless pricing pressures pick up again, it appears the year-over-year increase for the consumer price index (CPI) peaked at 9% in June. That’s a big move from about 2.3% in February 2020 just before the pandemic shutdown. But 9% is still a far cry from the CPI high during the Volcker years of 14.6% in early 1980.

    And with consumer and wholesale prices already edging lower, some experts worry that the continued uber-hawkish stance by the Fed will do more harm than good for the economy.

    “The speed at which the Fed is increasing rates will certainly have some unintended consequences,” said Michael Weisz, president of Yieldstreet, an investment firm that specializes in so-called alternative assets such as real estate, private equity, venture capital and art.

    Weisz said the surge in interest rates could lead to a “consumer credit crunch being more pronounced,” in which loans beyond mortgages might become more expensive and harder to get.

    Rate hikes raise the costs for companies to pay down their debt, increasing the possibility of corporate bankruptcies and defaults on commercial loans. It may even potentially lead to stagflation…the double whopper of stagnant growth and continued inflation. In other words, prices may remain high and the job market will probably be worse.

    “The Fed runs a real risk of over-tightening, as the impacts of the restrictive policy may not flow through inflation and unemployment data until it’s too late,” Weisz added.

    As long as inflation remains the bigger issue for the economy, the Fed is going to focus more on getting prices under control. After all, the unemployment rate is at 3.5%, a half-century low.

    “The Fed has made it clear their number one priority right now is price stability,” said Dustin Thackeray, chief investment officer of Crewe Advisors. “Until the Fed sees sustained evidence their monetary policy is having a material impact on…the job market, they will maintain their persistent efforts in reining in inflationary pressures.”

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  • The econ Nobel offers a timely warning about central banks’ power | CNN Business

    The econ Nobel offers a timely warning about central banks’ power | CNN Business

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    This story is part of CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.


    New York
    CNN Business
     — 

    The Nobel in economics is sort of the step-cousin of the Nobel family.

    It came about nearly 70 years after its literature and sciences counterparts, in 1969, and is technically called the “Sveriges Riksbank Prize in Economic Sciences.” It is awarded by the Swedish central bank, in honor of the namesake renaissance man Alfred Nobel who established the prizes.

    Some scholars really dislike the economics prize, including one of Nobel’s own descendants, who dismissed it as a “PR coup by economists.”

    But hey, it still comes with a cash prize. And it’s also pretty useful in reminding the world that economics as an academic field is, frankly, a barely understood hodge-podge of studies that is constantly evolving and so variable it’s almost useless outside of academia. (And I mean that with the utmost respect to economists, who, not unlike journalists, knew what they were doing when they chose their life of suffering.)

    Here’s the thing: Ben Bernanke, the former Federal Reserve chairman who guided the US economy through the 2008 financial crisis and subsequent recession, was awarded the Nobel in economics along with two other economists, Douglas Diamond and Philip Dybvig. (Congrats to all the winners, with apologies to Doug and Phil, who will forever be referred to in headlines about the Nobel as “and two other economists.”)

    Bernanke, who previously taught at Princeton and earned his Ph.D from MIT, received the award for his research on the Great Depression. In short, his work demonstrates that banks’ failures are often a cause, not merely a consequence, of financial crises.

    That was groundbreaking when he published it in 1983. Today, it’s conventional wisdom.

    WHY IT MATTERS

    The timing is everything here. The Nobel committee has been known to play politics (see: that time Barack Obama was awarded the Nobel Peace Prize after being in office for just eight months). And right now, it is using its spotlight to call attention to the high-stakes gamble playing out at central banks around the world, most notably the Fed.

    The rapid run-up in interest rates, led by the US central bank, is causing markets around the world to go haywire. And it’s especially bad news for emerging economies.

    Monetary tightening — especially when it is aggressive and synchronized across major economies — could inflict worse damage globally than the 2008 financial crisis and the 2020 pandemic, a United Nations agency warned earlier this month. It called the Fed’s policy “imprudent gamble” with the lives of those less fortunate.

    LESSONS FROM HISTORY

    On Monday, Diamond, one of the three newly minted Nobel laureates, acknowledged that the rate moves around the world were causing market instability.

    But he believes the system is more resilient than it used to be because of hard lessons learned from the 2008 crash, my colleague Julia Horowitz reports.

    “Recent memories of that crisis and improvements in regulatory policies around the world have left the system much, much less vulnerable,” Diamond said.

    Let’s hope he’s right.

    Oh hey, speaking of the Fed inflicting pain: We’re about to see big job losses, according to Bank of America.

    Under the rate hikes imposed by Jay Powell & Co, the US economy could see job growth cut in half during the fourth quarter of this year. Early next year, the bank expects to see losses of about 175,000 jobs a month.

    The litigation between Elon Musk and Twitter is officially on hold. The two sides now have until October 28 to work out a deal or once again gear up for a courtroom battle.

    The big question now is all about the money.

    Here’s the deal: Not even the world’s richest person has this kind of cash just lying around. Musk’s wealth is tied up in Tesla stock, which he can’t easily offload for a whole bunch of reasons. He needs to borrow the money, which means he’s got to get banks to pony up.

    By most accounts, he’ll be able to make it happen. But the Twitter deal is a harder pitch to make now than it was back in April, when Musk said he’d lined up more than $46 billion in financing, including two debt commitment letters from Morgan Stanley and other unnamed financial institutions, my colleague Clare Duffy writes.

    Musk has spent the past several months trashing Twitter as he sought to renege on his offer. Meanwhile, tech stocks have been hammered, ad revenues are declining, and the global economy has inched closer to a recession, sapping investor appetite for risk.

    Musk’s legal team said last week the banks that had committed debt financing previously were “working cooperatively to fund the close.”

    Twitter is, understandably, skeptical, given the many curve balls Musk has thrown at them since he got involved with the company earlier this year. The company raised concerns last week that a representative for one of the banks testified that Musk had not yet sent a borrowing notice and “has not otherwise communicated to them that he intends to close the transaction, let alone on any particular timeline.”

    What’s Musk’s endgame?

    No one knows, perhaps least of all Musk. But many legal experts following the case say Musk understood he’d likely lose at trial and then be forced to buy Twitter anyway. He’d rather buy the entire company than be deposed by Twitter’s lawyers and do further damage to Twitter in a trial.

    And the banks may not be able to walk away even if they want to.

    “The only way they could get out of it is to claim a material adverse effect and that Twitter has changed so much since they agreed to the deal that they no longer want to finance the deal,” said George Geis, professor of strategy at the UCLA Anderson School of Management.

    Even if the banks succeeded there, Musk may not be off the hook. The judge in the case could rule that Musk was at fault for the financing falling through — not a far-fetched notion after all the trash-talking — and order him to sue Morgan Stanley to provide the funds or close the deal without it.

    Bottom line, it seems like Musk will end up owning Twitter one way or another. And given his only vague musings about what he’d actually do with it, there are a whole host of unknowns lurking in Twitter’s future.

    Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day work week around here.)

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  • White-collar workers are feeling the brunt of the Fed’s rate hikes. Here’s why | CNN Business

    White-collar workers are feeling the brunt of the Fed’s rate hikes. Here’s why | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN Business
     — 

    September’s hotly anticipated jobs data ended up cooling markets on Friday. Stocks fell sharply as investors evaluated the report, which showed more jobs than expected were added to the US economy and indicated that more pain-inflicting interest rate hikes from the Federal Reserve lie ahead.

    But a breakdown of the numbers shows that the Fed’s plans to weaken the labor market to fight persistent inflation may already be working, just not for everybody.

    White-collar office workers appear to be feeling the brunt of the Fed’s actions: The financial and business sector saw a large decline in employment last month. Legal and advertising services also experienced drops. Service and construction workers, meanwhile, are still thriving.

    What’s happening: The US economy added 263,000 jobs in September, higher than analyst estimates of 250,000. The unemployment rate came in at 3.5%, down from 3.7% in August.

    Leading the gain in jobs was the leisure and hospitality industry, which added 83,000 jobs in September — and employment in food services and drinking places made up 60,000 of those jobs alone. Manufacturing and construction also came in hot, adding 22,000 and 19,000 jobs, respectively.

    The largest non-governmental losses in jobs came from the financial industry, which shed 8,000 between August and September. Large banks hire in cycles, extending offers to recent graduates in the early fall months. That makes this September’s drop particularly significant.

    Business support services — such as telemarketing, accounting and administrative and clerical jobs — are also bleeding jobs. The sector lost 12,000 in September. Meanwhile, legal services lost 5,000 jobs, and advertising services also dropped 5,000 jobs.

    What it means: The Federal Reserve’s hawkish policy appears to be cooling certain parts of the economy, but not others. Finance workers are likely beginning to worry as their industry depends on stock and lending markets which have been particularly hard hit by Fed actions.

    Friday’s numbers indicate that we’re beginning to see that impact in the employment data.

    What remains to be seen is whether the Fed can cool the economy just by loosening employment in white-collar industries or if these losses will trickle down to other industries, hurting lower-income workers.

    Coming up: Earnings season begins in earnest this week with big banks like JPMorgan, Citigroup

    (C)    , Morgan Stanley

    (MS)     and BlackRock

    (BLK)     reporting. Investors will be watching closely for any guidance on hiring and layoff plans.

    Two key inflation indicators, PPI and CPI are also set to be released. Expect markets to react poorly if inflation comes in hot.

    A panel of top US economists just released its economic outlook for the next year, and it’s not great.

    The panel of 45 forecasters, led by the National Association for Business Economics (NABE), said they expected slower growth, higher inflation, higher interest rates, and weakening employment in both 2022 and 2023 than they previously expected.

    Most of the worries come down to the Federal Reserve’s interest rate policy.

    “More than three-quarters of respondents believe the odds are 50-50 or less that the economy will achieve a ‘soft landing’,” said NABE Vice President Julia Coronado. “More than half the panelists indicate that the greatest downside risk to the U.S. economic outlook is too much monetary tightness.”

    NABE panelists downgraded their median forecast for real GDP for the fourth quarter of 2022 to a 0.1% increase, compared to a 1.8% increase in the May 2022 survey. The vast majority of respondents placed more than a 25% probability of a recession occurring in 2023, with the most likely start date in the first quarter.

    The latest report comes as a growing number of economists are predicting that recession is imminent. Former US Treasury Secretary Larry Summers told CNN on Thursday that it’s “more likely than not” the US will enter a recession, calling it a consequence of the “excesses the economy has been through.”

    Friday’s jobs report showed that the share of workers telecommuting or working from home because of the pandemic ticked lower — falling to just 5.2% in September from 6.5% in August.

    Fully remote work in the United States, which many predicted would remain the norm long after the pandemic, appears to be edging away, especially as the job market loosens for white collar workers and employees have less leverage.

    Last week, a KPMG survey of US-based CEOs found that two-thirds believed in-office work would be the norm within the next three years.

    Still, it may not be enough to help an ailing commercial real estate market, where the outlook is dire. New York City office properties declined by nearly 45% in value in 2020 and are forecast to remain 39% below their pre-pandemic levels long-term as hybrid policies continue, according to a recent study from the National Bureau of Economic Research.

    Looking forward: The Bureau of Labor Statistics has noted that while hybrid work may still be popular, Covid-19 is no longer fueling work from home trends. The October report will rephrase its telework questions to remove references to the pandemic.

    Since May 2020, each jobs report has asked: “At any time in the last four weeks, did you telework or work at home for pay because of the Coronavirus pandemic?”

    In May 2020, 35.4% answered yes.

    Starting next month, the question will be revised. “At any time in the last week did you telework or work at home for pay?” it will ask, limiting the timeline and eliminating any reference to the pandemic.

    The US bond market is closed for Columbus Day/Indigenous Peoples’ Day.

    Coming later this week:

    ▸ Third quarter earnings season begins. Expect reports from big banks like JPMorgan Chase

    (JPM)    , Wells Fargo

    (WFC)    , Citigroup

    (C)    , Morgan Stanley

    (MS)    , PNC

    (PNC)     and US Bancorp

    (USB)     and consumer staples like Pepsi

    (PEP)    , Walgreen

    (WBA)    s and Domino’s

    (DMPZF)    . 

    ▸ CPI and PPI, two closely watched measures of inflation in the US are also due to be released. 

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  • Biden has a big oil problem. Here’s what you need to know about the recent OPEC+ decision. | CNN Politics

    Biden has a big oil problem. Here’s what you need to know about the recent OPEC+ decision. | CNN Politics

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    A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.


    Washington
    CNN
     — 

    With just weeks to go until the November midterms, four letters are haunting President Joe Biden and the Democrats: OPEC.

    Last week, the Organization of Petroleum Exporting Countries (OPEC) and its allies, led by Saudi Arabia and Russia, said that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

    The group announced the production cut following its first meeting in person since March 2020. The reduction is equivalent to about 2% of global oil demand.

    The Biden administration criticized the decision in a statement, calling it “shortsighted” and saying that it’s harmful to some countries already struggling with elevated energy prices the most.

    The production cuts will start in November. OPEC+, which combines OPEC countries and allies such as Russia, will meet again in December.

    For one perspective on the OPEC+ decision and to better understand how it affects everyone, we turned to Hossein Askari, who teaches international business at The George Washington University.

    Our conversation, conducted over the phone and lightly edited for flow and brevity, is below.

    WHAT MATTERS: Can you walk us through this recent OPEC decision? What’s happening exactly?

    ASKARI: So when the war in Ukraine started, sorry to tell your audience, but the United States was not very well prepared in what it was going to do. It sanctioned Russia for this and for that. And so the price of oil started going up. And at the same time, the United States actually put sanctions on Russian oil, not on gas, on oil. And so there was less Russian oil in the Western markets.

    Russia actually started selling its oil more and more to China and to India and cutting its prices to those countries. So they would buy Russian oil, but there was a shortage of oil.

    Another reason why the shortage had developed was America basically sanctions like a mad cowboy, if I may say that. It has sanctioned Venezuela for many years.

    But Saudi Arabia, with the new effective ruler who’s known as MBS, he has cozied up to Putin. And so when President Biden went and saw him a few months back and kind of asked him to increase oil production – I’m sorry to say this, I have to throw in this bit of politics – I think America really shamed itself by doing that.

    Of course, MBS did not respond positively. But now he, in fact, has gone over the top. He has agreed within OPEC – and of course he’s the main spokesman in OPEC with Russia – that they will cut back.

    WHAT MATTERS: What does the OPEC decision mean for the average American?

    ASKARI: From where we are now, crude oil prices by the end of the year, my guess, maximum, they’ll go up by $5 a barrel. Now, a lot of people think they’re gonna go up more than that. I don’t believe that, because I think the world economy is going to grow less and I think that we are going to see some Venezuelan oil come on the market, and I think we may see some deals made so some more Iranian oil may come on the market.

    For gasoline, I think Americans can see maybe prices going up from where they are today, if nothing else happens, by about another 30 to 50 cents a gallon.

    However, there is also another problem for Americans that is home heating oil, and that can also go up. So for the average American, they’re going to pay, no matter what, something more per gallon of gasoline at the pump. And I think there’s going to be more of an impact, actually, on the fuel oil that they heat their houses with. So it’s gonna put on the squeeze on the average American. There’s no two ways about it.

    WHAT MATTERS: What should the US do now?

    ASKARI: I think the United States should be much, much tougher with Saudi Arabia because we have bent over backward to accommodate them in every way. And we have looked the other way with what they’ve done. And now it’s the time to be tough. They’ve been tough with us. I think the President of the United States should be tough with Saudi Arabia.

    WHAT MATTERS: What else can the US do in terms of helping with oil prices in the immediate term?

    ASKARI: I think undoubtedly this administration has very bad rapport with US oil companies and energy companies. I think that there should be more behind-the scenes cooperation with the oil companies and the administration because you really need them now to cooperate.

    I know a lot of people don’t believe in fracking, but maybe it’s time to do some more fracking. Maybe it’s time to increase output. They can increase output elsewhere too. I think that would be extremely, extremely helpful.

    And I think the US oil companies – and I’m not a backer of oil companies, please don’t misunderstand – but I think they feel that the administration basically just wants to drive them out business.

    WHAT MATTERS: Anything else you’d like to add?

    ASKARI: Some people think that OPEC decisions are purely economic. Some people think purely political. It has always been both, especially for Saudi Arabia.

    It is really Saudi Arabia and the United Arab Emirates driving OPEC’s decision. I think Americans should understand it’s not the other members, it’s not Nigeria or Iran. I feel Americans should understand who are our friends and who are not our friends.

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  • Elon Musk’s bumpy road to possibly owning Twitter: A timeline | CNN Business

    Elon Musk’s bumpy road to possibly owning Twitter: A timeline | CNN Business

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    CNN Business
     — 

    A board seat accepted and then rejected. A stunning $44 billion takeover offer with uncertain financing. And a surprise early morning tweet putting the deal on hold, temporarily.

    Even by the standards of Twitter, a company that has known plenty of chaos and dysfunction in its history, the weeks-long effort by billionaire Elon Musk to buy the company has proven to be uniquely tumultuous – and there’s no clear end in sight.

    Should the deal go through, it would place the world’s richest man in charge of one of the world’s most influential social media platforms. The acquisition has the potential to upend not just Twitter itself but politics, media and the tech industry. The Tesla and SpaceX CEO has repeatedly stressed that his goal is to bolster what he calls “free speech” on the platform, by which he means all legal speech that complies with local laws in the markets where Twitter operates. He has also said he would reverse Twitter’s ban of former President Donald Trump.

    But the attempt by Musk, a wildly successful entrepreneur with a history of erratic behavior, to buy Twitter has been viewed with some skepticism from the start. On the day he made his offer, Musk said: “I’m not sure I’ll actually be able to acquire it.” Some have questioned how he would finance the deal, especially as shares of Tesla

    (TSLA)    , which he’s partially using to back his financing of the Twitter deal, and the broader tech sector have declined in the weeks since.

    After Musk recently said he was temporarily pausing the deal so he could assess the amount of spam and fake accounts, it prompted speculation that the billionaire might be looking to renegotiate the deal – or back out of it entirely. His actions in the days that followed only reinforced that thinking.

    Here is a look back at the many twists and turns in one of the most high-profile tech deals in recent memory.

    Musk starts quietly buying up Twitter shares, building his stake in the company. But it would be months before he disclosed this fact to the public.

    Musk’s stake in Twitter tops 5%, but that fact is not disclosed until the following month. Musk was obligated to disclose his stake within 10 days of crossing the 5% threshold, but waited 21 days to do so. During that time, he continued building up his stake.

    The billionaire begins to make pointed statements about the platform from his account. “Twitter algorithm should be open source,” he wrote, with a poll for users to vote “yes” or “no.”

    The following day, Musk tweets out another poll to his followers: “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?”

    Musk reaches out to Twitter cofounder and former CEO Jack Dorsey to “discuss the future direction of social media,” according to a company filing later put out by the company. The two tech founders are known to have a bit of a billionaire bromance on and off Twitter.

    Twitter’s board and some of its leadership team meet with representatives from Wilson Sonsini, a law firm, and J.P. Morgan to discuss the possibility of Musk joining the company’s board, according a later securities filing. Dorsey is said to have told the board that “he and Mr. Musk were friends,” according to the filing.

    In the meeting, the Twitter board discussed wanting Musk to agree to “‘standstill’ provisions”,” according to the filing. This would effectively “limit his public statements regarding Twitter, including the making of unsolicited public proposals to acquire Twitter (but not private proposals) without the prior consent of the Twitter Board.”

    Musk is revealed to be Twitter’s largest individual shareholder, with a more than 9% stake in the company.

    News of the purchase sends shares of the social media company soaring more than 20% in early trading and kicks off a wave of speculation about how Musk might push for changes on the platform.

    Twitter CEO Parag Agrawal announces Musk will join Twitter’s board of directors. “Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board,” Agrawal says in a post on Twitter.

    As part of the appointment, Musk agrees not to acquire more than 14.9% of the company’s shares while he remains on the board. His term on the board is set to go through 2024, according to a regulatory filing.

    Twitter CEO Parag Agrawal (left) and former CEO Jack Dorsey in an undated photo.

    Agrawal announces that Musk has decided not to join the board after all. “I believe this is for the best,” Agrawal writes in a letter to the Twitter team.

    The reversal opens the door for Musk to pursue a greater stake in the company – and frees him to tweet his many thoughts about the company.

    Musk stuns the industry by making an offer to acquire all the shares in Twitter he does not own at a valuation of $41.4 billion. The cash offer represents a 38% premium over the company’s closing price on April 1, the last trading day before Musk disclosed that he had become the company’s biggest shareholder.

    “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company,” Musk writes in his offer letter. “Twitter has extraordinary potential. I will unlock it.”

    Twitter’s board of directors adopts a “poison pill” provision, a limited-term shareholder rights plan that potentially makes it harder for Musk to acquire the company.

    Tesla CEO Elon Musk speaks during the official opening of the new Tesla electric car manufacturing plant on March 22, 2022 near Gruenheide, Germany.

    Musk lines up $46.5 billion in financing for the deal, including two debt commitment letters from Morgan Stanley and other unnamed financial institutions and one equity commitment letter from himself, according to a regulatory filing.

    The billionaire also reveals that he has not received a formal response from Twitter a week after his acquisition offer. He said he is “seeking to negotiate” a definite acquisition agreement and “is prepared to begin such negotiations immediately” — an apparent reversal from his statement in his acquisition offer letter that it would be his “best and final” offer.

    Although he is the richest person in the world, much of Musk’s wealth is tied up in Tesla stock, and some followers of the company speculate that it could be challenging for Musk to raise debt against the historically volatile stock.

    Twitter announces that it has agreed to sell itself to Musk in a deal valued at around $44 billion. At a conference later in the day, Musk describes his offer to buy Twitter in characteristically sweeping terms as being about “the future of civilization,” not just making money.

    At an all-hands meeting that afternoon, Twitter employees raise questions about everything from what the deal would mean for their compensation to whether former US President Donald Trump would be let back on the platform.

    Filings reveal Musk sold $8.5 billion of his Tesla stock in the three days after Twitter board agreed to the sale for an average of $883.09 per share. The filings did not disclose the reason for the sale, but Musk appeared to be raising funds to buy Twitter.

    Tesla cars sit in a dealership lot on March 28, 2022 in Chicago, Illinois.

    Musk raises another $7 billion in financing for the deal. The new investors include Oracle founder Larry Ellison, cryptocurrency platform Binance and venture capital firm Sequoia Capital, according to a filing.

    Musk aims to increase Twitter’s annual revenue to $26.4 billion by 2028, up from $5 billion last year, according to a New York Times report, citing Musk’s pitch deck presented to investors. To achieve that lofty goal, Musk intends to bolster Twitter’s subscription revenue and build up a payments business while decreasing the company’s reliance on advertising sales, according to the report.

    Musk confirms what many have assumed for weeks: he would reverse Twitter’s Trump ban if his deal to buy the company is completed.

    “I do think it was not correct to ban Donald Trump, I think that was a mistake,” Musk said. “I would reverse the perma-ban. … Banning Trump from Twitter didn’t end Trump’s voice, it will amplify it among the right and this is why it’s morally wrong and flat out stupid.”

    Former President Donald Trump looks at his phone during a roundtable with governors on the reopening of America's small businesses, in the State Dining Room of the White House in Washington, June 18, 2020.

    Twitter confirms to CNN Business that the platform is pausing most hiring and backfills, except for “business critical” roles, and pulling back on other non-labor costs ahead of the acquisition. In addition, Twitter says general manager of consumer, Kayvon Beykpour, and revenue product lead, Bruce Falck, are leaving the company.

    Musk tweets that the deal is on hold, linking to a Reuters report from nearly two weeks earlier, about Twitter’s most recent disclosure about its amount of spam and fake accounts. The figure cited in the report, however, is in line with prior quarterly disclosures.

    “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk tweeted.

    Shares of the social media site plummet after Musk’s announcement, dropping more than 10% at market open. Two hours after announcing the hold, Musk says he remains set on purchasing Twitter. “Still committed to acquisition,” he wrote.

    Later in the day, Musk says his team is testing Twitter’s numbers and “picked 100 as the sample size number, because that is what Twitter uses to calculate

    Musk tweets out that Twitter’s legal team accused him of breaking a nondisclosure agreement when the billionaire revealed the platform’s sample size for automated user checks is allegedly just 100 users.

    “Twitter legal just called to complain that I violated their NDA by revealing the bot check sample size is 100! This actually happened,” wrote Musk.

    The standoff over bot accounts continues as Musk exchanges a series of tweets with Agrawal over the issue. After Agrawal carefully explains how Twitter attempts to combat and measure spam accounts, Musk responds with a poop emoji.

    Musk follows up with a somewhat more thoughtful question. “So how do advertisers know what they’re getting for their money?” Musk asked. “This is fundamental to the financial health of Twitter,” he added.

    Musk announces that his acquisition of Twitter “cannot move forward” until he sees more information about the prevalence of spam accounts, claiming that the social media platform falsified numbers in filings. Without citing a source, he claims in a tweet that Twitter is “20% fake/spam accounts” and suggests Twitter’s previous filings with the SEC were misleading.

    Later in the day, Musk posts a poll to his Twitter followers: “Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?” before calling on the SEC to evaluate the platform’s numbers. “Hello @SECGov, anyone home?” Musk tweets, in an apparent attempt to get the regulator to look into the matter.

    In a statement, Twitter says it remains “committed to completing the transaction on the agreed price and terms as promptly as practicable.” Later, the company says it intends to “enforce the merger agreement.”

    In a letter to Twitter’s head of legal, Musk threatens to walk away from his purchase of the platform, alleging that Twitter is “actively resisting and thwarting his information rights” as outlined by the deal.

    In the letter, an attorney for Musk accuses the social media company of breaching the merger agreement by not providing the data he has requested on Twitter spam bots, stating that the lack of information gives him a right “not to consummate the transaction” and “to terminate the merger agreement.”

    Musk moved to terminate the acquisition agreement. A lawyer representing him claimed in a letter to Twitter’s top lawyer that the company is “in material breach of multiple provisions” of the deal over its alleged failure to provide all the data Musk says he needs to evaluate the number of spam and fake accounts on the platform.

    “For nearly two months, Mr. Musk has sought the data and information necessary to ‘make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform,’” the letter reads. “This information is fundamental to Twitter’s business and financial performance and is necessary to consummate the transactions contemplated by the Merger Agreement. … Twitter has failed or refused to provide this information.”

    Twitter was not having it.

    “The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement,” Twitter board chair Bret Taylor said in a tweet Friday, echoing earlier statements by the company that it planned to follow through with the deal. “We are confident we will prevail in the Delaware Court of Chancery.”

    Twitter sued the Tesla billionaire in Delaware court in an attempt to force him to complete the deal.

    The 62-page lawsuit, sprinkled with memes, tweets and a poop emoji, effectively highlighted the bizarre spectacle of the deal from the start. The company paints Musk as a non-serious potential owner — alleging at one point that he has “disdain” for the company, and at another saying, “Musk’s strategy is … a model of bad faith” — while seeking to compel him to become its owner. (Twitter’s board has an obligation to its shareholders to try to see the deal through if they believe it is in their best interest. The dispute could also end in a settlement.)

    Twitter’s lawsuit against Musk over his move to terminate their $44 billion acquisition agreement will go to trial on Oct. 17 and run for five days, a Delaware judge ruled.

    The decision came after Judge Kathaleen St. Jude McCormick, who is overseeing the case, previously ruled in Twitter’s favor that the proceedings could be expedited and take place in October. Twitter initially pushed for an October 10th start.

    Musk’s legal team had asked for the trial to take place in 2023. Twitter’s legal team argued it was necessary to expedite the case in order to limit the “harm” to its business and to ensure the deal can be completed before Oct. 24, the “drop dead” date by which the two sides had previously agreed to close the deal.

    Peiter

    Twitter whistleblower Peiter “Mudge” Zatko testifies before Congress in his first public appearance after his bombshell allegations against the social media company were reported in August by CNN and The Washington Post.

    In a whistleblower disclosure sent to multiple lawmakers and government agencies in July, Zatko accused Twitter of failing to safeguard users’ personal information and of exposing the most sensitive parts of its operation to too many people, including potentially to foreign spies. Zatko — who was Twitter’s head of security from November 2020 until he was fired in January — also alleged company executives, including CEO Parag Agrawal, have deliberately misled regulators and the company’s own board about its shortcomings.

    Zatko claimed in his testimony that Twitter is extremely vulnerable to being penetrated and exploited by agents of foreign governments, as well as detailed some of the personal information Twitter collects on users and alleged that the company does not know where the majority of its collected data goes.

    Days earlier, a judge allowed Musk’s legal team to add arguments based on the whistleblower disclosure to its case.

    Musk sends a letter to Twitter proposing to complete the deal as originally signed for $54.20 per share, citing people familiar with the negotiations. News of the letter, revealed in a security filing the next day, sends Twitter stock surging more than 20%, approaching the deal price for the first time in months.

    Such an agreement could bring to an end a contentious, months-long back and forth between Musk and Twitter that has caused massive uncertainty for employees, investors and users of one of the world’s most influential social media platforms.

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  • How meltdown in a $1 trillion market brought the UK to the brink of a financial crisis | CNN Business

    How meltdown in a $1 trillion market brought the UK to the brink of a financial crisis | CNN Business

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    London
    CNN Business
     — 

    Pension funds are designed to be dull. Their singular goal — earning enough money to make payouts to retirees — favors cool heads over brash risk takers.

    But as markets in the United Kingdom went haywire last week, hundreds of British pension fund managers found themselves at the center of a crisis that forced the Bank of England to step in to restore stability and avert a broader financial meltdown.

    All it took was one big shock. Following finance minister Kwasi Kwarteng’s announcement on Friday, Sept. 23 of plans to ramp up borrowing to pay for tax cuts, investors dumped the pound and UK government bonds, sending yields on some of that debt soaring at the fastest rate on record.

    The scale of the tumult put enormous pressure on many pension funds by upending an investing strategy that involves the use of derivatives to hedge their bets.

    As the price of government bonds crashed, the funds were asked to pony up billions of pounds in collateral. In a scramble for cash, investment managers were forced to sell whatever they could — including, in some cases, more government bonds. That sent yields even higher, sparking another wave of collateral calls.

    “It started to feed itself,” said Ben Gold, head of investment at XPS Pensions Group, a UK pensions consultancy. “Everyone was looking to sell and there was no buyer.”

    The Bank of England went into crisis mode. After working through the night of Tuesday, Sept. 27, it stepped into the market the next day with a pledge to buy up to £65 billion ($73 billion) in bonds if needed. That stopped the bleeding and averted what the central bank later told lawmakers was its worst fear: a “self-reinforcing spiral” and “widespread financial instability.”

    In a letter to the head of the UK Parliament’s Treasury Committee this week, the Bank of England said that if it hadn’t interceded, a number of funds would have defaulted, amplifying the strain on the financial system. It said its intervention was essential to “restore core market functioning.”

    Pension funds are now racing to raise money to refill their coffers. Yet there are questions about whether they can find their footing before the Bank of England’s emergency bond-buying is due to end on Oct. 14. And for a wider range of investors, the near-miss is a wake-up call.

    For the first time in decades, interest rates are rising quickly around the world. In that climate, markets are prone to accidents.

    “What the previous two weeks have told you is there can be a lot more volatility in markets,” said Barry Kenneth, chief investment officer at the Pension Protection Fund, which manages pensions for employees of UK companies that become insolvent. “It’s easy to invest when everything’s going up. It’s a lot more difficult to invest when you’re trying to catch a falling knife, or you’ve got to readjust to a new environment.”

    The first signs of trouble appeared among fund managers who focus on so-called “liability-driven investment,” or LDI, for pensions. Gold said he started to receive messages from worried clients over the weekend of Sept. 24-25.

    LDI is built on a straightforward premise: Pensions need enough money to pay what they owe retirees well into the future. To plan for payouts in 30 or 50 years, they buy long-dated bonds, while purchasing derivatives to hedge these bets. In the process, they have to put up collateral. If bond yields rise sharply, they are asked to put up even more collateral in what’s known as a “margin call.” This obscure corner of the market has grown rapidly in recent years, reaching a valuation of more £1 trillion ($1.1 trillion), according to the Bank of England.

    When bond yields rise slowly over time, it’s not a problem for pensions deploying LDI strategies, and actually helps their finances. But if bond yields shoot up very quickly, it’s a recipe for trouble. According to the Bank of England, the move in bond yields before it intervened was “unprecedented.” The four-day move in 30-year UK government bonds was more than twice what was seen during the highest-stress period of the pandemic.

    “The sharpness and the viciousness of the move is what really caught people out,” Kenneth said.

    The margin calls came in — and kept coming. The Pension Protection Fund said it faced a £1.6 billion call for cash. It was able to pay without dumping assets, but others were caught off guard, and were forced into a fire sale of government bonds, corporate debt and stocks to raise money. Gold estimated that at least half of the 400 pension programs that XPS advises faced collateral calls, and that across the industry, funds are now looking to fill a hole of between £100 billion and £150 billion.

    “When you push such large moves through the financial system, it makes sense that something would break,” said Rohan Khanna, a strategist at UBS.

    When market dysfunction sparks a chain reaction, it’s not just scary for investors. The Bank of England made clear in its letter that the bond market rout “may have led to an excessive and sudden tightening of financing conditions for the real economy” as borrowing costs skyrocketed. For many businesses and mortgage holders, they already have.

    So far, the Bank of England has only bought £3.8 billion in bonds, far less than it could have purchased. Still, the effort has sent a strong signal. Yields on longer-term bonds have dropped sharply, giving pension funds time to recoup — though they’ve recently started to rise again.

    “What the Bank of England has done is bought time for some of my peers out there,” Kenneth said.

    Still, Kenneth is concerned that if the program ends next week as scheduled, the task won’t be complete given the complexity of many pension funds. Daniela Russell, head of UK rates strategy at HSBC, warned in a recent note to clients that there’s a risk of a “cliff-edge,” especially since the Bank of England is moving ahead with previous plans to start selling bonds it bought during the pandemic at the end of the month.

    “It might be hoped that the precedent of BoE intervention continues to provide a backstop beyond this date, but this may not be sufficient to prevent a renewed vigorous sell-off in long-dated gilts,” she wrote.

    As central banks jack up interest rates at the fastest clip in decades, investors are nervous about the implications for their portfolios and for the economy. They’re holding more cash, which makes it harder to execute trades and can exacerbate jarring price moves.

    That makes a surprise event more likely to cause massive disruption, and the specter of the next shocker looms. Will it be a rough batch of economic data? Trouble at a global bank? Another political misstep in the United Kingdom?

    Gold said the pension industry as a whole is better prepared now, though he concedes it would be “naive” to think there couldn’t be another bout of instability.

    “You would need to see yields rise more quickly than we saw this time,” he said, noting the larger buffers funds are now amassing. “It would require something of absolutely historic proportions for that not to be enough, but you never know.”

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  • Biden’s student loan forgiveness application is coming soon. Here’s what you need to know | CNN Politics

    Biden’s student loan forgiveness application is coming soon. Here’s what you need to know | CNN Politics

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    Washington
    CNN
     — 

    The application for President Joe Biden’s student loan forgiveness plan is expected to go live as soon as this week.

    Announced in late August, the plan will deliver federal student loan forgiveness to millions of low- and middle-income borrowers.

    Individuals who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years will see up to $10,000 of their federal student loan debt forgiven.

    If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness.

    In addition to federal Direct Loans used to pay for an undergraduate degree, federal PLUS loans borrowed by graduate students and parents may also be eligible if the borrower meets the income requirements.

    Facing mounting legal challenges to the student loan forgiveness policy, the Biden administration announced some last-minute changes to the program last week. Borrowers are still awaiting final details on the policy.

    The Department of Education regularly updates the Federal Student Aid website with information on the forgiveness program.

    Here’s what we know so far:

    The application has not been released yet but the Biden administration has said it will come out sometime in October.

    The online application will be short, according to the Department of Education. Borrowers won’t need to upload any supporting documents or use their Federal Student Aid ID to submit the application.

    “Once you submit your application, we’ll review it, determine your eligibility for debt relief and work with your loan servicer(s) to process your relief. We’ll contact you if we need any additional information from you,” the department said an email to borrowers last week.

    Borrowers will have more than a year to apply. The deadline will be December 2023.

    To be notified when the process has officially opened, sign up at the Department of Education subscription page.

    About 8 million people are expected to receive student loan forgiveness automatically because the Department of Education already knows what their income is, likely due to previously submitted financial aid forms or income-driven repayment plan applications.

    It’s unclear when exactly debts will be discharged. But due to ongoing lawsuits, the government has agreed in court to hold off canceling any federal student loan debt before October 17.

    The Biden administration scaled back eligibility for the program last week, as it faces mounting legal challenges to the policy.

    The program will now exclude borrowers whose federal student loans are guaranteed by the government but held by private lenders. The administration has said the change could affect about 700,000 people.

    The Department of Education initially said these loans, many of which were made under the former Federal Family Education Loan program and Federal Perkins Loan program, would be eligible for the one-time forgiveness action as long as the borrower consolidated his or her debt into the federal Direct Loan program.

    But the agency has reversed course after six Republican-led states sued the Biden administration, arguing that forgiving the privately held loans would financially hurt states and student loan servicers.

    Now, privately held federal student loans must have been consolidated before September 29 in order to be eligible for the debt relief.

    The White House clarified last week that borrowers will be able to opt out if they don’t want to receive the debt forgiveness.

    The Biden administration’s announcement came hours after a borrower sued, arguing that he would be forced to pay state taxes on the amount canceled – an expense he would otherwise avoid.

    There are a handful of states that may tax the debt discharged under Biden’s plan if state legislative or administrative changes are not made beforehand, according to the Tax Foundation.

    There are currently at least three significant lawsuits aiming to block the Biden administration from implementing its student loan forgiveness plan.

    Republican states are leading the charge. In addition to the lawsuit filed by six Republican-led states that say they could be hurt financially by the forgiveness plan, Arizona Attorney General Mark Brnovich also filed a lawsuit last week.

    Brnovich, a Republican, argues that the policy could reduce Arizona’s tax revenue because the state code doesn’t consider the loan forgiveness as taxable income, according to the lawsuit. The complaint also argues that the forgiveness policy will hurt the attorney general office’s ability to recruit employees. Currently its employees may be eligible for the federal Public Service Loan Forgiveness program, but some potential job candidates may not view that as a benefit if their student loan debt is already canceled, the lawsuit argues.

    A federal judge has already denied the request in the third lawsuit – from a borrower who sued arguing that they would incur a bigger state tax bill due to the loan forgiveness. The plaintiff, a public interest lawyer at the Pacific Legal Foundation, has until October 10 to file a revamped lawsuit.

    The nonpartisan Congressional Budget Office said in a report released last week that the student loan cancellation could come at a price of $400 billion but noted that those estimates are still “highly uncertain.”

    The Biden administration argues that the CBO’s cost estimate should be viewed over a 30-year time period and came out with its own analysis two days later. It said the program will cost an average of $30 billion per year over the next decade and $379 billion over the course of the program.

    The Department of Education is warning borrowers of scams related to the student loan forgiveness program that ask for payment in return for help getting debt relief.

    “Make sure you work only with the US Department of Education and our loan servicers, and never reveal your personal information or account password to anyone,” it said in an email to borrowers.

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  • White House left looking for answers after OPEC+ announces oil production cuts | CNN Politics

    White House left looking for answers after OPEC+ announces oil production cuts | CNN Politics

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    CNN
     — 

    The OPEC+ decision to dramatically cut its oil output targets has left the White House grappling with a complex – and potentially damaging – mix of geopolitical and domestic challenges with few easy answers.

    President Joe Biden now faces the reality that an already complex and tenuous bilateral relationship with Saudi Arabia has deeply fractured, the Western effort to isolate and shrink Russia’s war effort has taken a direct hit and the US economy and political picture have both grown more fragile.

    “Disappointment. We’re looking at what alternatives we may have” to bring down oil prices, Biden told reporters when asked his reaction to the OPEC+ news.

    “There’s a lot of alternatives. We haven’t made up our mind yet,” he added.

    Biden’s advisers are now re-doubling efforts to find policy and diplomatic options to address the unwelcome surprise.

    “We’re going to work to identify the tools that we have to ensure that organizations like OPEC that assign quotas to their members of how much to produce are not – have a muted and less of an impact on American consumers, and quite frankly, on the global economy,” Amos Hochstein, Biden’s top energy envoy, told Bianna Golodryga on CNN’s “New Day” Thursday.

    The full scale of the fallout from Saudi Arabia-led oil cartel’s decision may not be apparent for months or longer, officials say. But they are also keenly aware just how many acutely important elements of the administration’s foreign and domestic agenda the production cut spills directly into.

    Biden administration officials acknowledge they’re in a very difficult position over their relationship with Saudi Arabia.

    Secretary of State Antony Blinken called OPEC’s move to cut oil production both “shortsighted and disappointing,” and said the administration is reviewing a “number of response options” when it comes to US-Saudi relations.

    “We will not do anything that would infringe on our interests, that’s first and foremost, what will guide us,” Blinken said during a news conference in Peru on Thursday. “We will keep all of those interests in mind and consult closely with all of the relevant stakeholders as we decide on any steps going forward.”

    There is clearly a tacit effort underway to evaluate ways to respond to the OPEC+ decision to cut back oil production by 2 million barrels per day. But as has been laid bare repeatedly over the course of Biden’s time in office, the power dynamics between the US and the Kingdom of Saudi Arabia are simply in a different place now than at any earlier point due to the economic and energy pressures tied to Russia’s invasion.

    Crown Prince Mohammed bin Salman has made abundantly clear he feels no need to be the junior actor, and his overt and explicit moves toward China and Russia have ensured there is no subtlety in his approach.

    On a purely oil market basis, the Saudis prize stability over anything else – stability the OPEC+ configuration has provided after damaging price wars and the volatility of the pandemic. Moscow, of course, is the key player in that configuration and it’s notable that beneath the output cut, an extension of the OPEC+ arrangement was also approved on Wednesday.

    Still, while administration officials always viewed Biden’s trip to Jeddah – which resulted in the diplomatic fist bump seen around the world – as a critical regional security move, the cartel’s willingness to move in ways so obviously detrimental to US interests has reverberated across the administration. Biden again defended the trip Thursday, saying, “The trip was not essentially for oil. The trip was about the Middle East and about Israel and rationalization of positions.”

    “It’s not always about us, we get it,” one US official said. “But they’re just as aware of the perceptions and implications of this move as we are.”

    The most obvious lever for the US to pull is security related – it’s far and away the biggest leverage point. But the ramifications of any moves on that front are much broader than the bilateral relationship, officials note, and would directly undercut more than a year of intensive work to establish a coherent regional security posture.

    White House press secretary Karine Jean-Pierre’s statement on Wednesday that it “is clear OPEC+ is aligning with Russia” and its war effort was as intentional as it was blunt. Hochstein, in his CNN interview, reiterated that the OPEC+ decision was a “huge mistake” and “the wrong thing to do” amid Russia’s ongoing war in Ukraine and high energy prices, saying that Russia and Saudi Arabia are “working together.”

    US officials had previously been cautious about directly criticizing the obvious dance Saudi Arabia and others in the region have conducted with Moscow. That posture is gone.

    Biden administration officials, according to people with knowledge, made very clear to the Saudis in the days leading up the move that US rhetoric would change dramatically and they would open the door to new options to respond to a major cut. The specifics of those options were left somewhat ambiguous intentionally. But the warning was there.

    One notable line in the White House statement issued Wednesday by National Economic Council Director Brian Deese and national security adviser Jake Sullivan statement was the idea of working with Congress on legislation related to OPEC.

    It’s a reference to a bill that would remove sovereign immunity from antitrust suits, opening the door for the US to sue cartel members. The White House has been cool to the idea due to the very real concern it would launch a price war with the market’s biggest players that would only serve to hurt US consumers. But just cracking the door open to looking at it is notable – and underscores the scale of the anger inside the West Wing.

    The legislative reference underscores a key piece how the response will play out in the weeks ahead – the White House has made its statement, which – in a world of cautious diplo-speak – was sharply critical. Now officials have said they are perfectly comfortable letting congressional Democrats rail on the Saudis on their behalf, something they expect to only escalate in the days ahead given the convergence of geopolitical and domestic political factors.

    The blistering response from Capitol Hill has the potential to create some the kind of pressure that could create space to pursue actions the administration has been wary of pursuing up to this point.

    Connecticut Democratic Sen. Chris Murphy, for instance, tweeted, “I thought the whole point of selling arms to the Gulf States despite their human rights abuses, nonsensical Yemen War, working against US interests in Libya, Sudan, etc, was that when an international crisis came, the Gulf could choose America over Russia/China.”

    The biggest focus for the White House now on oil is on the domestic front. Biden’s top energy and economic advisers met privately with oil executives last week and discussions between officials and industry players have continued this week. Another meeting is likely soon as they continue to search for options to boost US production.

    While several options have been floated – including some that infuriate the industry, like potential curbs on exports – it remains unclear whether the White House is ready to move forward on any of them.

    A question being weighed now is if OPEC+’s decision changes that dynamic at all in a relationship between the White House and industry that has ping-ponged between clear animosity to cooler heads prevailing and back toward palpable tension over the course of the last several months.

    The White House rhetorical reversal hinting at the potential for new Strategic Petroleum Reserve releases, a complete 180-degree turn in less than 24 hours, was notable even if it didn’t signal anything concrete.

    What it did signal, however, was a clear message to markets that the option was, in fact, on the table.

    Blinken on Thursday once again highlighted what the administration has done to boost oil production in the US.

    “We’ve taken a number of steps over the last months to try and ensure that that’s the case, including releasing oil from the Strategic Petroleum Reserve, increasing significantly our production. Oil production is up in the United States by about 500,000 barrels a day,” he said.

    Blinken also added that the administration is “looking at other steps that we can take to ensure that there is adequate supply to meet to meet global demand.”

    The final release of 10 million from Biden’s announced 180 million barrel release over six months is still scheduled for November, even though the actual total barrels released will fall under the full amount Biden initially targeted. Cracking the door open on additional releases was an effort to signal there is a view inside the White House that there are still metaphorical bullets in the chamber if they need them.

    One key point to remember amid the hand-wringing: Predictions of specific price increases at the pump are a fool’s errand.

    “I believe it will have less of an impact in the United States and far more of an impact on lower-income countries around the world,” Hochstein said.

    The market has been pricing in the output cut for several days. A key element of the output cut is that nearly all OPEC+ members have been missing their production targets for months. So “2 million barrels per day” is actually far less than that from a production basis.

    In other words, there are a myriad of factors that drive retail prices – such as in California, where soaring gas prices over the last two weeks were in large part due to a mess of refinery issues – and no single answer to the range of new complications White House officials are now facing.

    Biden’s message, behind his disappointment with the production cut, was clear cut, according to Hochstein.

    “The President is still instructing us to work, to do whatever we can,” he said.

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  • Mortgage rates take a breather after rising for several weeks in a row | CNN Business

    Mortgage rates take a breather after rising for several weeks in a row | CNN Business

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    After rising for six weeks in a row, mortgage rates retreated last week.

    The 30-year fixed-rate mortgage averaged 6.66% in the week ending October 5, down from 6.70% the week before, according to Freddie Mac.

    Mortgage rates have more than doubled since the start of this year as the Federal Reserve continues its unprecedented campaign of hiking interest rates in order to tame soaring inflation. But uncertainty about the possibility of a recession and the impact of rate hikes on the economy have made mortgage rates more volatile.

    “Mortgage rates decreased slightly this week due to ongoing economic uncertainty,” said Sam Khater, Freddie Mac’s chief economist. “However, rates remain quite high compared to just one year ago, meaning housing continues to be more expensive for potential homebuyers.”

    The average mortgage rate is based on a survey of conventional home purchase loans for borrowers who put 20% down and have excellent credit, according to Freddie Mac. But many buyers who put down less money upfront or have less than perfect credit will pay more.

    Investors and analysts have been scrutinizing each piece of economic data, searching for clues about the Fed’s next steps and the future of the US and global economies, said Danielle Hale, Realtor.com’s chief economist.

    The Fed does not set the interest rates borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds. As investors see or anticipate rate hikes, they often sell government bonds, which sends yields higher and mortgage rates rise.

    Over the past month, yields on 10-year Treasuries soared from 3.25% to nearly 4% before falling back around 3.75% this week.

    Hale likened investors’ actions to a driver navigating a road in dense fog, prone to over-correcting at each turn.

    “Signs that we are closer to the end of the tightening cycle – such as a surprisingly steep decline in job openings – tend to cause rates to slip, while rates bounce higher on signals like robust activity in the services sector,” Hale said.

    Even though rates dipped slightly this week, the average interest rate for a 30-year, fixed-rate loan is still more than double what it was at this time last year.

    A year ago, a buyer who put 20% down on a $390,000 home and financed the rest with a 30-year, fixed-rate mortgage at an average interest rate of 2.99% had a monthly mortgage payment of $1,314, according to calculations from Freddie Mac.

    Today, a homeowner buying the same-priced house with an average rate of 6.66% would pay $2,005 a month in principal and interest. That’s $691 more each month.

    As rates have been rising over the last several weeks, fewer people have been applying for mortgages said Bob Broeksmit, president and CEO of the Mortgage Bankers Association.

    Ongoing economic uncertainty together with Hurricane Ian’s devastation in Florida resulted in a 14% decline in mortgage applications last week from the week before, he said.

    MBA also found that an increasing number of borrowers are applying for adjustable rate mortgages, or ARMs. Applications for ARMs climbed to nearly 12% of all applications last week.

    The average rate for the ARM tracked by Freddie Mac (a 5-year Treasury-indexed hybrid ARM) was 5.36%, more than a percentage point lower than the 30-year fixed rate.

    “While rate increases are needed to tame inflation and alleviate the burden it places on household budgets, higher borrowing costs have caused consumers to think twice about major purchases like homes and cars,” said Hale.

    With more prospective buyers sitting on the sidelines, those still looking to buy have a little more breathing room.

    Correction: “Today’s home shoppers have more choices, but for many, the increased cost of financing and higher home prices mean fewer affordable options,” Hale said. “As challenging as it may be to set and stick to a budget in this environment of rising prices and rates, it’s more important than ever to do so.”
    A previous version of this story misstated the number of weeks mortgage rates have been rising. Rates rose for six consecutive weeks before falling this week.

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  • The bond market is crumbling. That’s bad for Wall Street and Main Street | CNN Business

    The bond market is crumbling. That’s bad for Wall Street and Main Street | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN Business
     — 

    The global bond market is having a historically awful year.

    The yield on the 10-year US Treasury bond, a proxy for borrowing costs, briefly moved above 4% on Wednesday for the first time in 12 years. That’s a bad omen for Wall Street and Main Street.

    What’s happening: This hasn’t been a pretty year for US stocks. All three major indexes are in a bear market, down more than 20% from recent highs, and analysts predict more pain ahead. When things are this bad, investors seek safety in Treasury bonds, which have low returns but are also considered low-risk (As loans to the US government, Treasury notes are seen as a safe bet since there is little risk they won’t be paid back).

    But in 2022’s topsy-turvy economy, even that safe haven has become somewhat treacherous.

    Bond returns, or yields, rise as their prices fall. Under normal market conditions, a rising yield should mean that there’s less demand for bonds because investors would rather put their money into higher-risk (and higher-reward) stocks.

    Instead markets are plummeting, and investors are flocking out of risky stocks, but yields are going up. What gives?

    Blame the Fed. Persistent inflation has led the Federal Reserve to fight back by aggressively hiking interest rates, and as a result the yields on US Treasury bonds have soared.

    Economic turmoil in the United Kingdom and European Union has also caused the value of both the British pound and the euro to fall dramatically when compared to the US dollar. Dollar strength typically coincides with higher bond rates as well.

    So while we’d normally see a rising 10-year yield as a signal that US investors have a rosy economic outlook, that isn’t the case this time. Gloomy investors are predicting more interest rate hikes and a higher chance of recession.

    What it means: Portfolios are aching. Vanguard’s $514.5 billion Total Bond Market Index, the largest US bond fund, is down more than 15% so far this year. That puts it on track for its worst year since it was created in 1986. The iShares 20+ Year Treasury bond fund

    (TLT)     (TLT) is down nearly 30% for the year.

    Stock investors are also nervously eyeing Treasuries. High yields make it more expensive for companies to borrow money, and that extra cost could lower earnings expectations. Companies with significant debt levels may not be able to afford higher financing costs at all.

    Main Street doesn’t get a break, either. An elevated 10-year Treasury return means more expensive loans on cars, credit cards and even student debt. It also means higher mortgage rates: The spike has already helped push the average rate for a 30-year mortgage above 6% for the first time since 2008.

    Going deeper: Still, investors are more nervous about the immediate future than the longer term. That’s spurred an inverted yield curve – when interest rates on short-term bonds move higher than those on long-term bonds. The inverted yield curve is a particularly ominous warning sign that has correctly predicted almost every recession over the past 60 years.

    The curve first inverted in April, and then again this summer. The two-year treasury yield has soared in the last week, and now hovers above 4.3%, deepening that gap.

    On Monday, a team at BNP Paribas predicted that the inverted gap between the two-year and 10-year Treasury yields could grow to its largest level since the early 1980s. Those years were marked by sticky inflation, interest rates near 20% and a very deep recession.

    What’s next: The bond market may face fresh volatility on Friday with the release of the Federal Reserve’s favored inflation measure, the Personal Consumption Expenditure Price Index for August. If the report comes in above expectations, expect bond yields to move even higher.

    The Bank of England held an emergency intervention to maintain economic stability in the UK on Wednesday. The central bank said it would buy long-dated UK government bonds “on whatever scale is necessary” to prevent a market crash.

    Investors around the globe have been dumping the British pound and UK bonds since the government on Friday unveiled a huge package of tax cuts, spending and increased borrowing aimed at getting the economy moving and protecting households and businesses from sky-high energy bills this winter, reports my colleague Mark Thompson.

    Markets fear the plan will drive up already persistent inflation, forcing the Bank of England to push interest rates as high as 6% next spring, from 2.25% at present. Mortgage markets have been in turmoil all week as lenders have struggled to price their loans. Hundreds of products have been withdrawn.

    “This repricing [of UK assets] has become more significant in the past day — and it is particularly affecting long-dated UK government debt,” the central bank said in its statement.

    “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

    Many final salary, or defined-benefit, pension funds were particularly exposed to the dramatic sell-off in longer dated UK government bonds.

    “They would have been wiped out,” said Kerrin Rosenberg, UK chief executive of Cardano Investment.

    The central bank said it would buy long-dated UK government bonds until October 14.

    Steep drops in bond prices may be signaling doom and gloom for the economy, but some analysts say short-term bonds are still looking more attractive than equities right now.

    “Record low yields have kept fixed income in the shadow of equities for decades,” said analysts at BNY Mellon Wealth Management in a research note. “But the aggressive shift in Fed policy is beginning to change this.”

    Central banks around the globe have responded to elevated inflation by hiking interest rates– and bond yields have increased alongside them. The two-year US Treasury bond is currently yielding nearly 4%. That’s still a relatively low return, but better than the S&P 500’s dividend yield of around 1.7%.

    “For the first time in several years, bonds are attractive investment options. In addition to providing diversification versus equities…you now get paid for owning them,” wrote Barry Ritholtz of Ritholtz Wealth Management on Wednesday.

    Consider the alternative: the S&P is down more than 20% year to date.

    The US Bureau of Economic Analysis releases its third estimate for Q2 GDP and US weekly jobless claims.

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  • White House says Biden’s Saudi trip wasn’t a waste as he lambastes OPEC+’s ‘shortsighted’ decision to cut oil output | CNN Politics

    White House says Biden’s Saudi trip wasn’t a waste as he lambastes OPEC+’s ‘shortsighted’ decision to cut oil output | CNN Politics

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    CNN
     — 

    President Joe Biden is “disappointed” the Saudi-led OPEC+ oil cartel agreed to cut output by 2 million barrels per day, the White House said Wednesday, as the threat of rising gas prices looms weeks ahead of critical midterm elections.

    The decision by the grouping of major oil producers rebuffed heavy lobbying from US administration officials and prompted Biden to say he was concerned about the move. It reversed a small increase in output OPEC+ announced shortly after Biden visited Saudi Arabia for a conference in July.

    Still, the White House insisted that visit was not a “waste of time,” even as it sharply criticized the decision to cut production.

    “The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” said two of Biden’s top aides, national security adviser Jake Sullivan and National Economic Council Director Brian Deese, in a statement.

    “At a time when maintaining a global supply of energy is of paramount importance, this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices,” the two advisers wrote.

    The administration will “consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the statement read, without specifying which actions are under consideration dampen the oil cartel’s sway.

    Slashing oil production just ahead of November’s midterm elections poses a potential political problem for the President, who has touted this summer’s decreasing gas prices as he works to promote his agenda. The average gas price has been rising nationally again in recent days, according to AAA.

    Earlier this year, Biden announced a major release of barrels from the Strategic Petroleum Reserve in an effort to alleviate pump prices. On Tuesday, the White House said it was not considering additional releases beyond the 180 million previously announced.

    But after OPEC+ announced its decision on Wednesday, the White House said Biden would “continue to direct SPR releases as necessary,” apparently cracking open the door again to potential releases.

    Departing the White House on Wednesday, Biden said he was concerned about the possibility of a significant cut to production.

    “I need to see what the detail is. I am concerned, it is unnecessary,” he said in response to a question about the OPEC+ decision as he departed the White House for Florida, where he was set to tour storm damage.

    The international cartel of oil producers held a critical meeting Wednesday, where energy ministers decided to slash production by 2 million barrels per day, the biggest cut since the start of the pandemic.

    For the past several days, Biden’s senior-most energy, economic and foreign policy officials had been lobbying their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia and the United Arab Emirates to vote against cutting oil production.

    When he visited Saudi Arabia in July, Biden sought to make clear it wasn’t solely to ask the oil-rich kingdom to increase its oil output. After decrying the regime’s human rights record as a candidate, Biden fist-bumped the powerful Crown Prince Mohammed bin Salman, who US intelligence has said masterminded the murder of Saudi journalist and US resident Jamal Khashoggi.

    Speaking on Fox News shortly after the decision was announced, National Security Council communications coordinator John Kirby said the oil cartel was “adjusting back their numbers down a little bit” after making a small increase after Biden’s visit.

    “OPEC+ has been saying and telling the word they’re actually producing 3.5 million more barrels than they actually are. So in some ways this announced decrease really gets them back into more align with actual production,” Kirby said, noting there hadn’t yet been dramatic shifts in the price of oil. 

    “We have to see how it plays out over the long term,” he said.

    Kirby said Biden’s visit to Jeddah, Saudi Arabia, for a regional conference “was not about oil.”

    “It was about larger national strategic and national interest goals throughout the region to try to foster more integrated cooperative region,” he said.

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  • OPEC announces the biggest cut to oil production since the start of the pandemic | CNN Business

    OPEC announces the biggest cut to oil production since the start of the pandemic | CNN Business

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    London
    CNN Business
     — 

    OPEC+ said Wednesday that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

    The group of major oil producers, which includes Saudi Arabia and Russia, announced the production cut following its first meeting in person since March 2020. The reduction is equivalent to about 2% of global oil demand.

    The price of Brent crude oil rose 1.5% to more than $93 a barrel on the news, adding to gains this week ahead of the gathering of oil ministers. US oil was up 1.7% at $88.

    The Biden administration criticized the OPEC+ decision in a statement on Wednesday, calling it “shortsighted” and saying that it will hurt low and middle-income countries already struggling with elevated energy prices the most.

    The production cuts will start in November, and the Organization of Petroleum Exporting Countries (OPEC) and its allies will meet again in December.

    In a statement, the group said the decision to cut production was made “in light of the uncertainty that surrounds the global economic and oil market outlooks.”

    Global oil prices, which soared in the first half of the year, have since dropped sharply on fears that a global recession will depress demand. Brent crude is down 20% since the end of June. The global benchmark hit a peak of $139 a barrel in March after Russia’s invasion of Ukraine.

    OPEC and its allies, which control more than 40% of global oil production, are hoping to preempt a drop in demand for their barrels from a sharp economic slowdown in China, the United States and Europe.

    Western sanctions on Russian oil are also muddying the waters. Russia’s production has held up better than predicted, with supply being diverted to China and India. But the United States and Europe are now working on ways to implement a G7 agreement to cap the price of Russian crude exports to third countries.

    The oil cartel came under intense pressure from the White House ahead of its meeting in Vienna as President Biden tried to secure lower energy prices for US consumers. Senior Biden administration officials were lobbying their counterparts in Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) to vote against cutting oil production, according to officials.

    The prospect of a production cut was framed as a “total disaster” in draft talking points circulated by the White House to the Treasury Department on Monday, which CNN obtained. “It’s important everyone is aware of just how high the stakes are,” one US official said.

    With just a month to go before the critical midterm elections, US gasoline prices have begun to creep up again, posing a political risk the White House is desperately trying to avoid.

    Rising oil prices could mean inflation remains higher for longer, and add to pressure on the Federal Reserve to hike interest rates even more aggressively.

    But the impact of Wednesday’s cut, while a bullish signal for oil prices, may be limited as many smaller OPEC producers were struggling to meet previous production targets.

    “An announced cut of any volume is unlikely to be fully implemented by all countries, as the group already lags 3 million barrels per day behind its stated production ceiling,” Rystad Energy analyst Jorge Leon said in a note.

    Rystad Energy estimates that the global oil market will be oversupplied between now and the end of the year, dampening the effect of production cuts on prices.

    — Alex Marquardt, Natasha Bertrand, Phil Mattingly, Mark Thompson and Betsy Klein contributed to this report.

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  • Who won the Musk-Twitter fight? Lawyers | CNN Business

    Who won the Musk-Twitter fight? Lawyers | CNN Business

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    This story is part of CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.


    New York
    CNN Business
     — 

    Well, well, well. Look who’s asking to buy Twitter for the exact same price he agreed to pay for it four months ago…

    In a major reversal just days before he was scheduled to give a deposition, Elon Musk offered to complete his acquisition of Twitter under the original terms of the deal both sides agreed to back in May.

    A Twitter spokesperson said in a statement to CNN that the company received Musk’s offer and reiterated its intention to close the deal for the original price of $54.20 per share, or $44 billion.

    It wasn’t clear when, or if, Twitter would accept the offer. The case could still go to trial.

    Twitter’s shares were halted twice on Tuesday, and jumped more than 20% when they resumed trading.

    Let’s step back: Even for a deal that has been defined by unexpected twists and turns, Tuesday’s development is a doozy. A settlement before trial isn’t unusual, but a settlement for the exact same price is.

    Should the deal move forward, it’d be a something of a pyrrhic victory for Twitter. The company will have succeeded in securing the best possible price for shareholders (good work if you can get it). But it would also be handing the car keys over to a mercurial billionaire who’s shown little understanding of how media companies work and whose history on the platform is that of an unfiltered troll.

    Musk would be the clear loser here, having to tap into billions of his own wealth to finance a deal for a company he no longer wants.

    The winners in all of this? The lawyers.

    Twitter sued Musk in July to try force him to complete the deal, setting off months of legal back forth between some of the nation’s most powerful white-shoe law firms.

    Twitter tapped Wachtell, Rosen, Lipton and Katz — an elite New York practice where partners earn about $8 million a year, according to Bloomberg. On Musk’s side is another Wall Street power firm, Skadden, Arps, Slate, Meagher & Flom.

    The bill for both sides combined could easily reach the low- to mid- eight figures, said Peter Ladig, a Delaware lawyer with extensive experience in the court where the Musk-Twitter battle would take place. (“Eight figures” is just a mind-boggling way to phrase the concept of $10 million. Minimum.)

    “It appears that Twitter is throwing everything they have at this in terms of bodies, and that adds up quickly,” Ladig told me. “You’re talking probably 20 lawyers at least, I would guess. The amount of data is massive.”

    The timing of Musk’s latest pivot can’t be ignored. He was due to sit for a deposition starting Thursday, ahead of a trial scheduled for October 17.

    “That is often the leverage point,” Ladig said. “When it comes down to the CEO… being deposed, lots of cases settle on the eve of that deposition.”

    There’s a lot to unpack here, and my colleague Clare Duffy is all over it.

    For reasons no one really seems to understand, stocks rose sharply again Tuesday.

    The Dow has soared more than 1,500 points in the past two days, coming out of bear territory and rising up above the 30,000 milestone.

    “It almost feels like a panic rally. The market mood got way too sour and people started to jump in,” said Callie Cox, US investment analyst with eToro. “But this rally feels random. It’s great to see stocks go up but these moves are a little disorienting.”

    My colleague Paul R. La Monica has more.

    If you’d made the past few days at Credit Suisse into a movie, you might have opened with scene-setting shots of stock and bond traders looking pained, hands in their heads, neckties askew. There’d be scenes of frantic bankers spending all weekend on the phone with clients, assuring them everything is fine. A CEO would slowly sip a glass of Scotch, reading over a memo assuring employees the leadership is doing everything it can to avoid layoffs…

    As a connoisseur of the Wall Street-in-crisis genre, I would have been all in.

    But it looks like the real-life drama at the Swiss bank may not yield the cinematic crash we’ve come to expect in the shadow of the 2008 financial crisis.

    Here’s the thing: Speculation that Credit Suisse was about to collapse sparked a selloff on Monday, with the bank’s shares hitting a record low. It took no time at all for investors and commentators to start speculating about whether Credit Suisse was the new Lehman Brothers — the first big Wall Street domino to fall in the subprime mortgage crisis, almost exactly 14 years ago.

    That fear is understandable. When faced with a complex, scary problem, we tend to look to the past for solutions, hoping we can see now what we couldn’t see then.

    But, as my colleague Julia Horowitz writes, the hand-wringing over Credit Suisse says more about the market’s ~mood~ right now than it does about the bank’s financial position.

    Credit Suisse has been battered by years’ worth of scandals and fines. And there are still risks ahead. But it’s far from bankrupt. One analyst even described Credit Suisse’s liquidity position as “healthy.”

    That’s partly why, by Tuesday, the panic was subsiding. Credit Suisse shares bounced back, along with the broader stock market.

    “I do not think this is a ‘Lehman moment,’” said Mohamed El-Erian, an adviser to Allianz, on CNBC Monday.

    BIG PICTURE

    It’s not hard to see why investors would be triggered by Credit Suisse’s latest wobbling, triggered by a memo from the CEO that, rather than assuaging nerves, made people worry the bank was on even less solid footing than it seemed.

    Combine that anxiety with the related anxiety of a looming global recession and chaos in UK bond markets and you’ve got yourself a big ol’ anxiety smoothie.

    Everyone on Wall Street wants to get ahead of the next big risk, remembering that it doesn’t always come from where you’d expect. (Few saw the dangers in the subprime mortgage trade that predicated the implosion of the housing market in 2008, for example.)

    The devil is always in what you don’t know, and Credit Suisse, for all we know, could be exposed to risks that the market doesn’t know about, according to José-Luis Peydró, a professor of finance at Imperial College Business School.

    The silver lining: We didn’t emerge from 2008 without some guard rails. Large banks have much higher capital requirements to meet now than they did before the crisis, which should reduce the risk of contagion from any one failure.

    Credit Suisse is far from insolvent, but even if things do go from bad to worse, it’d be unlikely to take the whole ship down with it.

    Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day work week around here.)

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  • In major reversal, Elon Musk again proposes buying Twitter at full price | CNN Business

    In major reversal, Elon Musk again proposes buying Twitter at full price | CNN Business

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    New York
    CNN
     — 

    Elon Musk on Monday sent a letter to Twitter proposing to follow through with his deal to buy the company at the originally agreed upon price of $54.20 per share, according to a securities filing on Tuesday.

    In the letter, Musk said he would proceed with the acquisition on the original terms, pending receipt of the debt financing for the deal and provided that the Delaware Chancery Court stay the litigation proceedings over Musk’s initial attempt to pull out of the deal and adjourn the upcoming trial over the dispute.

    A Twitter spokesperson said in a statement to CNN that the company received Musk’s letter and reiterated its previous statement that the “intention of the Company is to close the transaction at $54.20 per share.”

    Musk on Tuesday night tweeted: “Buying Twitter is an accelerant to creating X, the everything app.”

    News of the letter was first reported by Bloomberg earlier on Tuesday. Twitter

    (TWTR)     stock was halted twice, the second time for news pending. After the stock resumed trading, it was up more than 20%, topping $51 a share and approaching the agreed upon deal price for the first time in months.

    The news comes as the the two sides have been preparing to head to trial in two weeks over Musk’s attempt to terminate of the $44 billion acquisition agreement, which Twitter had sued him to complete. Twitter CEO Parag Agrawal had been set to be deposed by Musk’s lawyers on Monday, and Twitter’s lawyers had planned to depose Musk starting on Thursday.

    It also follows the release on Friday of a trove of Musk’s personal text messages about the deal. The messages offered a look at the cast of Silicon Valley insiders and billionaires — from Larry Ellison to members of the Murdoch family — who contacted him to weigh in on and, in some cases, offer financing for the deal.

    Such an agreement could bring to an end a contentious, months-long back and forth between Musk and Twitter that has caused massive uncertainty for employees, investors and users of one of the world’s most influential social media platforms.

    The ball will now be in Twitter’s court to determine how to respond to Musk’s proposal. Twitter’s board will likely agree to move forward with closing the deal, according to Josh White, assistant professor of finance at Vanderbilt University.

    “The very public saga has certainly taken a toll on them and Twitter employees,” White said. “It is best for all parties to finish the deal and make a quick and seamless transition. I suspect it will close quickly.”

    However, Twitter may not want to hit pause on the litigation, per Musk’s proposal, until the deal is officially closed, according to Columbia Law School professor Eric Talley. The company may want to proceed with the litigation process as it negotiates with Musk, in case his offer to complete the deal falls through again.

    “Twitter is probably going to say, ‘look, we definitely want to engage you on this … But we’ve still got a trial on Oct 17 and until this is signed, sealed and delivered, we’ve got to get ready for trial,” Talley said.

    The saga began in April when Musk revealed he had become Twitter’s largest shareholder. Over the next several months, Musk accepted and then backed out of an offer to sit on Twitter’s board, threatened a hostile takeover of the company, signed an agreement to buy the company, started raising concerns about bots on the platform, attempted to terminate the agreement, was sued by Twitter to follow through with the deal and added claims from a Twitter whistleblower to his argument.

    Musk initially moved to terminate the deal citing claims that the company has misstated the number of spam and fake bot accounts on the platform. Twitter claimed that Musk had breached the deal and was using bots as a pretext to exit a deal he’d gotten buyer’s remorse over after the broader market decline, which also hurt Tesla stock and, by extension, Musk’s personal wealth.

    Throughout the back and forth, Twitter had maintained that it planned to follow through with deal at the price and terms originally agreed upon.

    Many legal experts have said that Twitter has the stronger argument heading into court, and that Musk would a face a significant burden in trying to prove that the company had made materially misleading statements in its securities filings or in the deal contract.

    The lawsuit was the final hurdle remaining in the way of the deal getting closed, after Twitter shareholders last month voted to approve the deal. The deal had originally been set to close this month.

    With news that the deal could end up closing, attention may once again shift to what Musk’s control could mean for the social media platform.

    Musk has previously suggested a series of potential changes to Twitter, the most significant of which could be returning former President Donald Trump to the platform and doing away with permanent account bans. Musk has also said he wants to make Twitter more open to “free speech” and could change its content moderation policies.

    Twitter employees have also raised questions about what a Musk takeover could mean for benefits such as remote working and parental leave.

    Twitter General Counsel Sean Edgett said in a message to employees Tuesday that the company had received Musk’s letter and planned to close the deal at $54.20 per share. “I will continue to keep you posted on significant updates, but in the meantime, thank you for your patience as we work through this on the legal side,” he said, according to a copy of the message obtained by CNN.

    Blind, an anonymous private forum popular among Twitter employees, was abuzz on Tuesday amid reports about Musk’s reversal. Reaction on the forum was overwhelmingly negative, according to screenshots provided to CNN by a Twitter employee.

    “Cue the layoffs,” one comment read. Several other employees expressed fear that Musk would roll back Twitter’s benefits package, including the severance offered to departing employees.

    –CNN’s Donie O’Sullivan contributed to this report.

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