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  • Stocks plummet after Fed signals more rate hikes ahead

    Stocks plummet after Fed signals more rate hikes ahead

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    Stocks fell sharply on Wall Street Wednesday after Federal Reserve Chief Jerome Powell signaled that it’s too early for the central bank to consider pausing its interest rate increases as it tries to crush the worst inflation in decades.

    The S&P 500 fell 96 points, or 2.5%, closing at 3,760. It had been up by 1% earlier in the day. The Dow Jones Industrial Average shed 336 points, or 1.6%, at 32,148. The Nasdaq composite fell 3.6%. Before their brief afternoon rally, the indexes had all been in the red much of the day ahead of the Fed’s interest rate policy statement release at 2:00 p.m. Eastern.

    Powell’s remarks came after the Fed announced a widely expected fourth straight extra-large rate increase of three-quarters of a percentage point. The market rallied briefly after the central bank released a statement that seemed to suggest it could ease back on the rate-increase program. That was welcome news for markets, which have been worried the recent pace of rate hikes could slow the economy so much that it goes into a recession.

    Not so dovish

    But during a press conference, Powell said that to bring inflation down, the Fed will need to keep rates high enough to hurt the economy “for some time.”

    “It’s very premature, in my view, to think about or to be talking about pausing our rate hikes,” Powell said. “We have a ways to go.”

    Paul Ashworth of Capital Economics suggested the Fed’s latest policy statement is less dovish than it sounds, noting that Powell emphasized in his press conference that any pause in rate hikes are a long way away.

    “Although market rate expectations fell in response to the release of the statement, those declines were more than reversed during Powell’s hawkish press conference, with the peak in the fed funds rate expected to be slightly above 5.0% next summer,” Ashworth said in a report.


    U.S. economy grows but recession fears linger

    02:33

    Long-term Treasury yields jumped after a brief pullback. The yield on the two-year Treasury, which tends to track market expectations of future Fed action, rose to 4.61% from 4.55% shortly before the Fed released its statement. The yield on the 10-year Treasury, which helps set mortgage rates, climbed to 4.09% after having fallen to 3.98% earlier in the afternoon.

    The Fed’s move raised its key short-term rate to a range of 3.75% to 4%, its highest level in 15 years. It was the central bank’s sixth rate hike this year, a streak that has made mortgages and other consumer and business loans increasingly expensive and heightened the risk of a recession.

    More deliberate pace

    The Fed’s statement said that, in coming months, it would consider the cumulative impact of its large rate hikes on the economy. It noted that its rate hikes take time to fully affect growth and inflation.

    But any encouragement that gave investors faded when Powell said during a press conference that the central bank would rather make a mistake of taking interest rates too high than easing too quickly, noting that a premature pullback on rate hikes could lead inflation to become entrenched, which risks more pain for households.

    “What the Fed statement giveth, the Fed chairman taketh away,” Chris Zaccarelli, chief investment officer for independent Advisor Alliance said in a note. 

    “The Fed statement – especially the part that referred to ‘cumulative tightening’ – made traders very excited that a step-down or pause in rate hikes was upon us, however, the press conference took that hope away once Chairman Powell spoke about how far in the future was the timeline for them to stop their rate hikes,” Zaccarelli said.

    Powell said that regardless of whether the Fed dials down its interest rate hike in December, it may still end up pulling its key short-term rate ultimately to a higher level than previously thought because of data show inflation is worse than expected.


    Key inflation measure shows prices still high ahead of Fed interest rate meeting

    03:24

    The path ahead for the Fed is closely tied to whether inflation cools from its hottest levels in four decades. Wall Street is concerned about inflation squeezing consumers and businesses while worries grow that the Fed could bring on a recession by slowing the economy too much.

    Markets racked by uncertainty

    “At the end of the day, the markets like certainty and they don’t have certainty from the Fed,” said Ryan Grabinski, managing director of investment strategy at Strategas, a Baird company.

    Wall Street has been closely watching the latest economic data, which is heavy on the employment market this week. The job market has remained strong despite inflation, which is being taken as a sign that the Fed will have to remain aggressive in its fight against high prices.

    The latest jobs data from private payroll company ADP shows that companies added positions at a greater pace than expected in October. The report follows hotter-than-expected data from the government Tuesday on job openings.

    “It’s sort of confirming that the Fed still has more work to do,” Grabinski said.

    Investors will get more employment data with the government’s weekly unemployment report on Thursday and a broader monthly jobs report on Friday. They have been closely watching the latest round of company earnings to get a better sense of inflation’s impact on corporate profits and outlooks. It’s been a mixed bag so far.

    The 11 sectors in the S&P 500 were in the red after shedding all their gains after the brief rally following the Fed statement. Technology stocks and retailers were among the biggest weights on the index.

    Drugstore operator CVS rose 3.6% after raising its profit forecast following a strong third quarter. Casino operator Caesars Entertainment rose 2.1% after beating Wall Street’s third-quarter profit and revenue forecasts.

    Short-term vacation rental marketplace Airbnb fell 10.8% after warning investors that bookings growth will slow in the fourth quarter. Beauty products maker Estee Lauder slid 6.4% after slashing its profit forecast as COVID-19 lockdowns in China and inflation hurt business.

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  • Why booking travel on your phone is a bad idea

    Why booking travel on your phone is a bad idea

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    Since the first iPhone launched 15 years ago, consumer shopping habits have slowly but relentlessly shifted toward mobile devices. According to a survey of 3,250 U.S. consumers from Pymnts.com, a website dedicated to analyzing the role of payments in new tech, the majority of travel service purchases (51.4%) were made on a mobile device in February 2022.

    The trend is even starker among younger shoppers. About 48% of millennials ages 25-40 prefer using mobile phones for online shopping, compared with only 34% of all shoppers globally, according to a 2021 survey of 13,000 shoppers from Klarna, an online payment company.

    It therefore seems that shopping for travel on an old-fashioned desktop will eventually go the way of the horse and buggy. Indeed, some travel-shopping services, such as the travel search engine Hopper, offer only in-app shopping for certain bookings, leaving desktop users high and dry.

    However, buying a flight on a phone is more convenient could be more costly. Here’s why.

    Watch out for “drip pricing”

    The rise in mobile shopping in the past decade has coincided with a sea change in how travel brands earn revenue. Add-on fees, including baggage and seat selection fees on flights and cleaning and resort fees with lodging, have become more common and pricey. U.S. airlines collected $5.3 billion in baggage fees alone in 2021, according to the Bureau of Transportation Statistics.

    However, a 2021 study in the journal Marketing Science found that shoppers tend to make suboptimal decisions under these so called drip pricing situations, that is, when hidden fees are tacked on throughout the checkout process. Shoppers tend to compare initial prices across competitors, which are low, rather than the higher final price.


    Airlines charge fees for “premium” seats

    04:10

    “When firms employ a drip pricing strategy, the initial price is almost always lower than a competitor’s all-in price,” said Shelle Santana, assistant professor of marketing at Bentley University and one of the study’s authors, in an email interview. “But once they start to add on amenities such as a checked bag, seat options, etc., that difference in price across firms diminishes and sometimes reverses.”

    Anyone who has shopped for airfare on a budget airline such as Spirit or Frontier knows exactly how this drip pricing plays out. Yet what surprised Santana and her colleagues was how unwilling customers were to compare alternatives, even after the final price had risen.

    “Consumers perceive high search costs associated with starting their decision process over, and they think they will save less money than they actually will,” Santana said.

    Basically, shoppers tend to get to the final checkout screen and grudgingly accept whatever fees have been added on. They assume it will be too much hassle to start over and find another option, even if doing so would save them money.

    Too many tabs, apps needed

    Shopping on mobile devices is quick and easy for simple purchases, like ordering cat food or paying a bill. Yet shopping for travel is far from simple, and usually requires switching between several tabs and apps to find the best deal.

    Consider the common decision of whether to purchase a flight with either cash or reward miles. This involves several steps. First, you’ll need to search on the airline app or website for award availability, likely while switching to a personal calendar to check dates. Then, you’ll search on a third-party flight tool, such as Google Flights, for estimated cash fares before determining the value of the redemption in miles versus dollars. Once you’ve determined the best option, you’ll then need to navigate through the entire checkout process from both cash and award flight options to determine the true final price.

    Maybe some fleet-fingered Gen Zers can manage this task on a mobile device. But for many, it’s too daunting.


    Holiday airfare is rising: What to know if you haven’t booked yet

    02:48

    Indeed, a 2018 study in the Journal of Marketing followed nearly a million sessions on a shopping website and found that shoppers who switched from a phone to computer completed their transactions at a higher conversion rate. Interestingly, this higher conversion rate effect was even more true for higher priced or risky products.

    So, even if you like scrolling for flights on your phone, or if you feel overwhelmed by the mobile-based options, follow the advice of the experts who prefer booking travel — which can be both expensive and risky — using a computer.

    “I almost always shop for travel on a desktop,” said Santana. “I like to have several tabs open at once and toggle between them to make sure I understand price differences and drivers across firms.”

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  • Oil giants rake in record profits as energy prices remain high

    Oil giants rake in record profits as energy prices remain high

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    Oil companies are reporting surging profits as energy prices remain elevated.

    Exxon Mobil broke records with its profits in the third quarter, raking in $19.7 billion in net income, a nearly $2 billion increase from its second quarter. The Irving, Texas, company said Friday that it booked $112 billion in quarterly revenue, more than double what it brought in during the year-ago period.

    In August, President Joe Biden said “Exxon made more money than God this year.” The president’s rebuke came a month before Exxon Mobil booked what was then an unprecedented $17.8 billion profit in the second quarter. 

    In its most recent quarter Chevron notched a record $11.2 billion in profits on revenue of $66.6 billion.


    MoneyWatch: Cost of heating your home expected to hit 10-year high this winter

    03:54

    The high cost of energy has hit consumers in multiple ways. Americans, especially low-income workers, have struggled with painfully high fuel costs in recent months. High energy prices also hit manufacturers and retailers, who often pass on those costs to customers in the form of higher prices for food, clothing and other goods.

    Across the U.S., some families are looking to the winter with dread, with the Department of Energy projecting sharp price increases for home heating. 

    Gas prices have eased in more recent months, but customers are still paying an average of more $3.76 for a gallon of regular, up from $3.40 a year ago, according to data from AAA.

    Increased oil and gas production

    Exxon boosted production of gasoline and oil during the quarter to meet growing demand. It had its best-ever refinery output in North America and its highest globally since 2008, the company said. And it produced 3.7 million barrels of oil or oil-equivalent per day, and had record production in the Permian Basin, the most productive oil field in the U.S.

    The investments Exxon made, even during the pandemic, enabled the company to increase production to meet the needs of customers, said CEO Darren Woods in a conference call with investors.

    “Where others pulled back in the face of uncertainty and a historic slowdown, retreating and retrenching, this company move forward, continuing to invest and build to help meet the demand we see today and position the company for long term success in each of our businesses,” Woods said.


    Oil companies see record profits as consumers grapple with rising cost of living

    03:47

    Natural gas prices have also been high, especially as demand for liquefied natural gas has remained strong globally. The U.S. has been increasingly exporting liquefied natural gas to Asia and Europe, especially as supply of Russian natural gas declined after Russia invaded Ukraine and prices skyrocketed. Woods listed inventory concerns as one of the reasons American natural gas prices rose by 15% during the quarter.

    To help meet growing demand, Exxon is expanding its oil refinery in Beaumont, Texas, and expects the additional refined product to become available in early 2023.

    American oil companies aren’t the only ones benefiting from high energy prices. European energy giants Shell and TotalEnergies reported huge profits Thursday. That fueled calls to tax the profits of energy producers which have benefited from high oil and natural gas prices following Russia’s invasion of Ukraine, even as Europe heads into winter during an energy crisis.

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  • Inflation, gas prices threaten sports business, concessions just as fans return

    Inflation, gas prices threaten sports business, concessions just as fans return

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    Sitting on a bench in front of Soldier Field, about to watch his beloved Chicago Bears play in person, money wasn’t exactly a big concern for Corey Metzger.

    Or any concern, really.

    “This trip has been a long time in the making, and I’m splurging whatever I got to spend to make it happen,” said the 45-year-old Metzger, who works in law enforcement in Fargo, North Dakota.

    Metzer’s eager pilgrimage is a familiar one for sports fans, especially after the COVID-19 pandemic eased. But persistently high inflation and gas prices are looming over the monetary pipeline that resumed when fans returned.

    U.S. inflation jumped 8.2% in September from a year ago, the government reported this month. That’s not far from a four-decade high of 9.1% in June. Higher prices for housing, food and medical care were among the largest contributors to the rise.

    Given the industry’s reliance on disposable income, the inflation numbers are a troubling sign for sports business leaders.

    “What’s historically accurate for teams is that they tend to try to take less on the ticketing side because once somebody comes in they typically will make up for it once they are inside,” said Ron Li, a senior vice president at Navigate, a consulting firm in sports and entertainment. “But with costs rising pretty much across the board after the turnstile, I think they have some decisions they need to make.”


    What to expect from the 2022 NFL season

    04:49

    Costlier ticket prices

    According to Team Marketing Report, the average cost for a family of four to attend a 2022 Major League Baseball game was $256.41, an increase of $3.04 from the previous season. The main engine behind the rise was the cost of tickets, with the average general ticket price increasing 3.6% to $35.93.

    Despite the jump in prices, Americans have largely kept up their spending, particularly on entertainment and other services like travel that they missed out on during the pandemic. Still, there are signs the solid spending won’t last: Credit card debt is rising and savings have declined as consumers, particularly low-income ones, have taken hits to their finances from the spike in inflation.

    Casey Lynn, 43, a low-voltage technician from Minneapolis, and his wife, Lori, 44, a commercial lender, aren’t big football fans, but they decided to check out the Bears on a trip to Chicago. While Casey Lynn said he is bothered by the ticket surcharges, the couple didn’t want to pass on the opportunity to see the game.

    “The gas is a necessity. Electric’s a necessity. The sports isn’t a necessity,” he said. “But when in Rome, why not?”

    Dan Coyne, 38, a life insurance wholesaler from Harrisburg, Pennsylvania, makes an annual trip to Chicago to see the Bears with his brother, Dave, 47, of Valparaiso, Indiana, who has season tickets. But this time around was a little different.

    “Flying out here, rental cars have like tripled in price, it definitely factored in,” he said. “But this is a once-in-a-year thing.”

    Eating before the game

    The brothers got something to eat a couple hours before the game. Dave Coyne normally stays away from the concessions at Soldier Field, but “I only had to pay for myself tonight,” he said. “I didn’t have a kid or my wife with me.”

    Concessions typically have a higher profit margin for sports teams and providers, but increased costs for goods, transportation and labor have cut into those margins. The changes come after concessions companies were already profoundly impacted by the pandemic.

    “The whole model has been kind of disrupted in a pretty big way as we’re dealing with inflation of 10, 15, 20, 25, 30% when we have typically underwritten 2 or 3%,” said Jamie Obletz, president of Delaware North Sportservice. “And you can imagine the impact that that’s had on us and what it’s forced us to think about and do over the past six to 12 months, like a lot of companies.”


    2022 World Series preview: Houston Astros vs. Philadelphia Phillies

    03:44

    Paul Pettas, a vice president with Sodexo Live!, estimated overall costs are up 10% to 15% over the past 12 to 24 months.

    “In reality, costs are up across the board, but we certainly try to do as much as we can to keep that down and not have that affect the average fan or guest who comes to our events,” he said.

    Concessions companies also are experiencing lingering issues with their supply chains, which have improved recently but remain a factor. Obletz recalled his company running out of peanuts midway through the 2021 World Series in Atlanta, so two workers drove a truck to another venue, loaded up and then drove through the night to get back to Truist Park.

    One less chicken finger

    “Things are not great,” Obletz said. “They’re better than they were, it feels like, three to six months ago, and our hope is that it continues to improve.”

    The issues have forced concession companies to get creative in an effort to address the rising costs with minimal effect on consumers in terms of culinary options and price.

    Chefs are redesigning menus to replace items that face significant cost increases and consolidating other options. They are using analytics to examine portion sizes — do consumers need six chicken fingers or will five work instead? — and taking a closer look at their vendors.

    “There’s dozens of things like this that we’ve tried to do and are doing as we speak, trying very desperately to offset those pricing increases that we’re seeing,” Obletz said.

    Alison Birdwell, the president and CEO of Aramark Sports + Entertainment, said the company is leaning on analytics and its data science team “more than ever” when it comes to menu strategies and new concessions items.

    “With that guidance, we are working to give fans the items they’re looking for while simultaneously being efficient with our product and mitigating significant increases in cost,” Birdwell said in a statement to AP.

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  • Stocks end mixed as Facebook’s parent company slumps

    Stocks end mixed as Facebook’s parent company slumps

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    Stocks ended mixed on Wall Street as weakness in several tech companies offset gains in other parts of the market. Facebook’s parent company, Meta Platforms, lost another one-fourth of its value after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. That followed weak reports from Google’s parent company, Alphabet, and Microsoft. 

    The S&P 500 fell 23 points, or 0.6%, to close at 3,807, while the Dow climbed 194 points, or 0.6%, to 32,003. Meta’s slump pulled the Nasdaq down 1.6%. Markets got some encouraging economic news as the government reported the U.S. economy returned to growth last quarter, expanding 2.6%. Treasury yields fell.

    Facebook’s parent company, Meta Platforms, plummeted 24.3% after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. It joins other tech and communications stocks, such as Google’s parent company, Alphabet, and Microsoft, in reporting weak results and worrisome forecasts over advertising demand.

    “What you’re seeing is a little bit of relief,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “Earnings are not great but they’re not awful either.”

    The benchmark S&P 500 is still holding on to weekly gains and remains solidly on track to end October in the green.


    Meta announces its first hiring freeze, signaling tech slowdown

    03:23

    Focus on earnings

    Earnings have been the big focus for Wall Street this week, but markets got some encouraging economic news Thursday as the government reported the U.S. economy returned to growth last quarter, expanding 2.6%. That marks a turnaround after the economy contracted during the first half of the year.

    The economy has been under pressure from stubbornly hot inflation and the Federal Reserve’s efforts to raise interest rates in order to cool prices. The central bank is trying to slow economic growth through rate increases, but the strategy risks going too far and brining on a recession.

    The rising interest rates have made borrowing more difficult, particularly with mortgage rates. Average long-term U.S. mortgage rates topped 7% for the first time in more than two decades this week.

    The latest economic data is being closely watched for any signs of a slowdown or that inflation might be easing as Wall Street tries to determine if and when the Fed might pull back on its interest rate increases.

    The central bank is expected to raise interest rates another three-quarters of a percentage point at its upcoming meeting in November. But traders have grown more confident that it will dial down to a more modest increase of 0.50 percentage points in December, according to CME Group.

    Central banks around the world have also been raising interest rates in an effort to tame inflation. The European Central Bank piled on another outsized interest rate hike on Thursday. Markets in Europe were mixed.

    Wall Street has more earnings to review later Thursday. Internet retail giant Amazon and iPhone maker Apple report results after the market closes. Exxon Mobil will report its latest financial results on Friday.

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  • Mortgage rates blow past 7% for first time in two decades

    Mortgage rates blow past 7% for first time in two decades

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    The average long-term U.S. mortgage rate topped 7% for the first time in more than two decades this week, a result of the Federal Reserve’s aggressive rate hikes intended to tame inflation not seen in some 40 years.

    Mortgage buyer Freddie Mac reported Thursday that the average on the key 30-year rate jumped to 7.08% from 6.94% last week. The last time the average rate was above 7% was April 2002, a time when the U.S. was still reeling from the Sept. 11 terrorist attacks, but six years away from the 2008 housing market collapse that triggered the Great Recession.

    Other measures put borrowing costs for a home loan even higher. The Mortgage Bankers Association said Wednesday that the rate on a conventional 30-year mortgage rose this week to 7.16%. Last year at this time, rates on a 30-year mortgage averaged 3.14%.

    “As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month,” Freddie Mac Chief Economist Sam Khater said in a statement. “In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward.”

    The Fed has raised its key benchmark lending rate five times this year, including three consecutive 0.75 percentage point increases that have brought its key short-term borrowing rate to a range of 3% to 3.25%, the highest level since 2008. At their last meeting in late September, Fed officials projected that by early next year they would raise their key rate to roughly 4.5%.

    Mortgage rates don’t necessarily mirror the Fed’s rate increases, but tend to track the yield on the 10-year Treasury note. That’s influenced by a variety of factors, including investors’ expectations for future inflation and global demand for U.S. Treasurys.


    30-year fixed-rate mortgage average reaches highest level since 2001

    03:05

    Many potential homebuyers have moved to the sidelines as mortgage rates have more than doubled this year. Sales of existing homes have declined for eight straight months as borrowing costs have become too high a hurdle for many Americans already paying more for food, gas and other necessities. 

    Higher rates translate into very real costs for homebuyers. Take a home that sells for the U.S. median price of $384,800 and that is purchased with a 20% down payment. At the current mortgage rate of 7.16%, a homebuyer would pay roughly $750 more per month than with a loan at 3.2%, the rate in early 2022.

    Meanwhile, some homeowners have held off putting their homes on the market because they don’t want to jump into a higher rate on their next mortgage.

    Home prices expected to fall

    Housing prices rose roughly 40% during the pandemic, according to Freddie Mac. But the picture next year is likely to be different.

    “As the labor market cools off, housing demand will remain weak in 2023, potentially resulting in declines in prices next year,” the lender said in a recent report. “However, home price forecast uncertainty is wide due to interest rate volatility and the potential of a recession on the horizon.”

    The Fed is expected to raise its benchmark rate another three-quarters of a point when it meets next week. Despite the rate increases, inflation has hardly budged from 40-year highs, above 8% at both the consumer and wholesale level.

    The Fed rate increases have shown some signs of cooling the economy. But the rate increases have seemed to have little effect on the job market yet, which remains strong with the unemployment rate matching a 50-year low of 3.5% and layoffs still historically low.

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  • 10/23: Krebs, Swisher, D’Agata

    10/23: Krebs, Swisher, D’Agata

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    10/23: Krebs, Swisher, D’Agata – CBS News


    Watch CBS News



    This week on “Face the Nation with Margaret Brennan,” with just 15 days to go until Election Day, both sides are making their closing arguments about why they deserve your vote. We’ll talk to House Speaker Nancy Pelosi, plus the administration’s senior energy security adviser Amos Hochstein about those stubbornly high gas prices.

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  • This week on

    This week on

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    “Face the Nation” Guest Lineup:

    • Rep. Nancy Pelosi – Speaker of the House of Representatives

    • Amos Hochstein – Special presidential coordinator for International Energy Affairs

    • Dr. Scott Gottlieb – Former FDA commissioner, Pfizer board member

    • Kara Swisher – Host of “On with Kara Swisher” for New York Magazine

    • Chris Krebs – Former Cybersecurity and Infrastructure Security Agency director, CBS News cybersecurity expert and analyst

    Plus, a focus group with “pressured parents,” one of four election influencer groups CBS News, is reporting on and watching closely through the 2022 midterms.

    How to watch “Face the Nation”

    • Date: Sunday, October 23, 2022

    • TV: “Face the Nation” airs Sunday mornings on CBS. Click here for your local listings

    • Radio: Subscribe to “Face the Nation” from CBS Radio News to listen on-the-go

    • Free online stream: Watch the show on CBS’ streaming network at 10:30 a.m., 1 p.m. and 4 p.m. ET.

    With the latest news and analysis from Washington, don’t miss Margaret Brennan (@margbrennan) this Sunday on “Face the Nation” (@FaceTheNation). 

    And for the latest from America’s premier public affairs program, follow us on Facebook, Twitter, and Instagram.

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  • Biden to release 15 million barrels of oil from strategic reserve, with more possible

    Biden to release 15 million barrels of oil from strategic reserve, with more possible

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    Washington — President Biden will announce the release of 15 million barrels of oil from the U.S. strategic reserve Wednesday as part of a response to recent production cuts announced by OPEC+ nations, and he will say more drawdowns are possible this winter, as his administration rushes to be seen as pulling out all the stops ahead of next month’s midterm elections.

    Mr. Biden will deliver remarks Wednesday to announce the drawdown from the strategic reserve, senior administration officials said Tuesday on the condition of anonymity to outline Mr. Biden’s plans. It completes the release of 180 million barrels authorized by Mr. Biden in March that was initially supposed to occur over six months. That has sent the strategic reserve to its lowest level since 1984 in what the administration called a “bridge” until domestic production could be increased. The reserve now contains roughly 400 million barrels of oil.

    Mr. Biden will also open the door to additional releases this winter in an effort to keep prices down. But administration officials would not detail how much the president would be willing to tap, nor how much they want domestic and production to increase by to end the withdrawals.

    The president will also say that the U.S. government will restock the strategic reserve when oil prices are at or lower than $67 to $72 a barrel, an offer that administration officials argue will support domestic production by guaranteeing a baseline level of demand. Yet the president is also expected to renew his criticism of the profits reaped by oil companies — repeating a bet made this summer that public condemnation would matter more to these companies than shareholders’ focus on returns.

    It marks the continuation of an about-face by Mr. Biden, who has tried to move the U.S. past fossil fuels to identify additional sources of energy to satisfy U.S. and global supply as a result of disruptions from Russia’s invasion of Ukraine and production cuts announced by the Saudi Arabia-led oil cartel.

    The prospective loss of 2 million barrels a day — 2% of global supply — has had the White House saying Saudi Arabia sided with Russian President Vladimir Putin and pledging there will be consequences for supply cuts that could prop up energy prices. The 15 million-barrel release would not cover even one full day’s use of oil in the U.S., according to the Energy Information Administration.

    The administration could make a decision on future releases a month from now, as it requires a month and a half for the government to notify would-be buyers.

    Mr. Biden still faces political headwinds because of gas prices. AAA reports that gas is averaging $3.87 a gallon. That’s down slightly over the past week, but it’s up from a month ago. The recent increase in prices stalled the momentum that the president and his fellow Democrats had been seeing in the polls ahead of the November elections.

    An analysis Monday by ClearView Energy Partners, an independent energy research firm based in Washington, suggested that two states that could decide control of the evenly split Senate — Nevada and Pennsylvania — are sensitive to energy prices. The analysis noted that gas prices over the past month rose above the national average in 18 states, which are home to 29 potentially “at risk” House seats.

    Even if voters want cheaper gasoline, expected gains in supply are not materializing because of a weaker global economy. The U.S. government last week revised downward its forecasts, saying that domestic firms would produce 270,000 fewer barrels a day in 2023 than was forecast in September. Global production would be 600,000 barrels a day lower than forecast in September.

    The hard math for Mr. Biden is that oil production has yet to return to its pre-pandemic level of roughly 13 million barrels a day. It’s about a million barrels a day shy of that level. The oil industry would like the administration to open up more federal lands for drilling, approve pipeline construction and reverse its recent changes to raise corporate taxes. The administration counters that the oil industry is sitting on thousands of unused federal leases and says new permits would take years to produce oil with no impact on current gas prices. Environmental groups, meanwhile, have asked Mr. Biden to keep a campaign promise to block new drilling on federal lands.

    Mr. Biden has resisted the policies favored by U.S. oil producers. Instead, he’s sought to reduce prices by releasing oil from the U.S. reserve, shaming oil companies for their profits and calling on greater production from countries in OPEC+ that have different geopolitical interests, said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute.

    “If they continue to offer the same old so-called solutions, they’ll continue to get the same old results,” Macchiarola said.

    Because fossil fuels lead to carbon emissions, Mr. Biden has sought to move away from them entirely with a commitment to zero emissions by 2050. When discussing that commitment nearly a year ago after the G-20 leading rich and developing nations met in Rome, the president said he still wanted to also lower gas prices because at “$3.35 a gallon, it has profound impact on working-class families just to get back and forth to work.”

    Since Mr. Biden spoke of the pain of gas at $3.35 a gallon and his hopes to reduce costs, the price has on balance risen another 15.5%.

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  • 3 inflation-savvy money moves to make now

    3 inflation-savvy money moves to make now

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    Inflation is proving to be a stubborn, unwanted houseguest.

    No one particularly likes paying more for food, fuel and other living costs. But so far, the Federal Reserve’s attempts since March to evict inflation with higher interest rates haven’t worked. Because we may be stuck with this unpleasant roommate for a while, we should consider how best to cope.

    The following moves could help.

    Craft a better plan for your cash

    Many people live paycheck to paycheck with little savings. Other people have the opposite problem: They’re letting too much cash sit idle in bank accounts that aren’t earning their keep.

    As of October, the national average interest rate on savings accounts is just 0.17%, according to the Federal Deposit Insurance Corp. Meanwhile, inflation as measured by the consumer price index is over 8%.

    “There’s just no way that cash in the bank is going to keep up with inflation, so it’s going to lose value,” says certified financial planner Ben Henry-Moreland, who blogs at Kitces.com, a site for financial advisers.

    You can get inflation-beating returns by using savings to pay down any high-rate, variable debt, such as credit card balances. If your credit card charges 18% interest, for instance, you’re effectively getting an 18% guaranteed return by paying off that balance.

    Setting goals and timelines for your cash also may help you get more for your money, Henry-Moreland says. For example, financial planners typically recommend maintaining an emergency fund equal to three to six months’ worth of expenses. That money should remain somewhere safe and accessible, such as an FDIC-insured bank account, because you may need it at any time. But you don’t have to accept a brick-and-mortar bank’s negligible return; several online banks are offering interest rates of 2% or more on savings accounts.

    Perhaps you’ll earmark some savings for the vacation you want to take in a year or the down payment on a house in five years. You could lock your vacation money into a one-year certificate of deposit (some online banks are offering 3% on those ), while the down payment could be invested in a Series I savings bond, which is yielding 9.62%. 

    That’s a great rate, obviously, but Series I-bonds have several restrictions: You can’t withdraw money for the first 12 months, and you’ll forfeit three months of interest if you withdraw money in the first five years. You’re limited to buying $10,000 in I-bonds electronically at TreasuryDirect.gov each year and $5,000 more in paper bonds annually using your tax refund.

    Consider using excess cash to beef up your retirement accounts or investing that money in a taxable brokerage account, Henry-Moreland says. A diversified portfolio of stocks is likely to outpace inflation over the long run, although the potential for short-term losses means you shouldn’t invest any money you’ll need within five years or so.

    Review your homeowners insurance coverage

    Building costs have been soaring, and your homeowners insurance coverage may not be keeping up.

    About two-thirds of homeowners who lose their houses to wildfires or other disasters discover their insurance won’t cover the complete cost of rebuilding, says Amy Bach, executive director of United Policyholders, an insurance-focused consumer advocacy group.

    You can ask your insurance company or agent to review your coverage and recommend appropriate limits, Bach says. But those estimates may rely on problematic industry software that could underestimate the costs, she says. She recommends you also talk to a contractor or appraiser who can give you an estimate of rebuilding costs per square foot in your area.

    Lookout for “bracket creep”

    If your earnings increased this year, you may be at risk for “bracket creep.” That’s when you’re pushed into a higher tax bracket — and face higher tax bills — even if your pay isn’t keeping up with inflation.

    Dozens of federal tax provisions can be adjusted for inflation each year, including tax brackets, standard deduction amounts, limits for retirement contributions and certain credits, says Melanie Lauridsen, director for tax practice and ethics at the American Institute of CPAs. 


    Concerns about more aggressive rate hike after hot inflation data

    03:44

    Since 2018, however, Congress has required that the IRS use a measure of inflation called the chained consumer price index that typically lags the consumer price index. What’s more, inflation adjustments for the following year are determined using the inflation rate in August, Henry-Moreland notes. If inflation spikes later in the year, as it did in 2021, bracket creep is more likely.

    Let’s say you got an 8% raise this year to cope with inflation. But the standard deduction and tax brackets increased by only about 3% for 2022. That means you could find yourself in a higher tax bracket when you file your returns in April.

    Calculating your likely 2022 taxes now can alert you to any looming tax bill and give you some time to cope — by stuffing more money into pre-tax retirement accounts, for example, or filling out a new W-4 to adjust your withholding.

    This column was provided to The Associated Press by the personal finance site NerdWallet. The content is for educational and informational purposes and does not constitute investment advice. Liz Weston is a columnist at NerdWallet, a certified financial planner and author of “Your Credit Score.”

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  • Biden makes late push across West aiming to deliver votes for Democrats

    Biden makes late push across West aiming to deliver votes for Democrats

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    President Joe Biden strode into the telephone bank at a crowded union hall and eagerly began making calls and eating doughnuts — one frosted, one glazed — to try and deliver votes for Democrats.

    “What a governor does matters,” the president said, giving a pep talk to volunteers who were making Friday night calls for gubernatorial hopeful Tina Kotek and other candidates. “It matters! It matters, it matters, it matters!”

    Before he left Portland on Saturday, the president planned to attend a reception for Kotek and speak about his administration’s efforts to bring down costs for Americans.

    It was the final stop on a four-day swing through Oregon, California and Colorado that has encapsulated Biden’s strategy for turning out voters on Election Day, Nov. 8: flex the levers of government to help boost candidates, promote an agenda aimed at strengthening an uncertain economy and haul in campaign cash.

    And this: show up for candidates when Mr. Biden can be helpful, but steer clear of places where a visit from a president with approval ratings under 50% may not be as welcome.

    Throughout the trip, Mr. Biden had to compete for the spotlight and contend with a troubling new inflation report and rising gas prices.

    In Oregon, Democratic officials hope that the president can help consolidate the party’s support behind Kotek. The party is in danger of losing the governor’s race in the traditional Democratic stronghold as Betsy Johnson — who has quit both the Democratic and Republican parties — has run a well-financed race against Kotek and the GOP nominee Christine Drazan.

    The settings throughout the president’s trip were tailor-made for him.

    In Los Angeles on Thursday, at a construction site for an extension on the city’s subway line, he spoke about his massive infrastructure law. Giant cranes rose up behind him as he stood before bulldozers and excavators. Many on hand were hard-hat workers in construction orange.

    The stop neatly combined many of the president’s agenda’s successes: investments in infrastructure, job creation, fighting climate change by promoting mass transit.

    “When you see these projects in your neighborhood — cranes going up, shovels in the ground, lives being changed — I want you to feel the way I do: pride,” Mr. Biden said. “Pride in what we can do when we do it together. This is what I mean when I say we’re building a better America.”

    But his remarks came as the government reported that consumer prices, excluding volatile food and energy costs, jumped 6.6% in September from a year ago — the fastest such pace in four decades. Mr. Biden acknowledged that people were being “squeezed by the cost of living. It’s been true for years, and folks don’t need a report to tell them they’re being squeezed.”

    President Biden Delivers Remarks In Southern California On Lowering Costs For American Families
    IRVINE, CALIFORNIA – OCTOBER 14: U.S. President Joe Biden (L) poses for photos after he delivered remarks on lowering costs for American families at Irvine Valley College in Orange County on October 14, 2022 in Irvine, California.

    Mario Tama / Getty Images


    Democratic candidates have been far more likely to appear with the president at official White House events underscoring their achievements than at overt campaign events. In California, Mr. Biden was joined by state lawmakers and the city’s mayor, and he called them out individually. Rep. Karen Bass, who is running for mayor of Los Angeles, made a takeout run with Mr. Biden to a taco shop.

    The president raised $5 million at a fundraiser in the Brentwood backyard of TV producer Marcy Carsey. Guests included fashion designer Tom Ford and actor-filmmaker Rob Reiner.

    In Colorado, the president designated the first national monument of his administration at Camp Hale, a World War II-era training site, with a group of Democrats by his side. His audience in a canyon of stunning views, tall pines and bright yellow aspens included Sen. Michael Bennet, who is facing a tough reelection campaign and had worked for the new monument. Democrats hope the designation, popular in the state, will boost Bennet’s numbers.

    Early voting is underway in California and begins next week in Oregon and Colorado. The president notably stayed away from states where his presence could hurt Democrats, so far skipping Nevada and Arizona, where Democratic senators are tough races.

    Democrats are trying to retain power in the face of widespread economic uncertainty and the traditional midterm headwinds against the party in power. Republicans, aiming to regain the House and Senate, think they can capitalize on gas prices, inflation and the economy.

    During his taco stop, Mr. Biden’s chicken quesadilla order ran to $16.45, but he handed the clerk $60 and asked him to use the change to pay the next patron’s bill.

    It was the kind of personal connection the president loves. But while the moment was unfolding, the headlines in Los Angeles focused on a bitter City Council clash over racist remarks, while in Washington, it was all about how the House voted to subpoena former President Donald Trump on his role in the Jan. 6 insurrection.

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  • Stocks come back strong, shrugging off hot inflation reading

    Stocks come back strong, shrugging off hot inflation reading

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    U.S. stocks soared Thursday, with gains of 2% and above across all major indexes, after falling sharply in opening trading on an unexpectedly hot inflation report that strengthened the Federal Reserve’s position on the need for more aggressive interest rate hikes.

    The S&P 500 rose 84 points, or 2.4%, to close at 3,662. The Dow Jones Industrial Average rose 785 points, or 2.7%, and the Nasdaq Composite climbed 2%. The S&P 500 is down 26% this year and close to a two-year low.

    The Dow’s swing of more than 1,300 points during the day was its largest since March 2020, as was S&P 500’s percentage move from low to high.

    Stocks in Europe also flipped from losses caused by the U.S. inflation data, while Treasury yields pulled back from their initial surge. The value of the U.S. dollar against other currencies sank after initially jumping.

    They’re the latest jagged, back-and-forth moves for markets, which have been swinging sharply due to all the uncertainties about economies around the world and how badly higher interest rates will hurt them.

    Is inflation heating or cooling?

    Analysts said some data points buried deep within the inflation report may be offering hope that inflation is on its way to marking a peak and then easing, even though current conditions look dour. Others said technical reasons could also be helping to support markets, as some investors closed out of trades betting on declines following the inflation report.

    “Hopefully it’s because people have dug into the details of the inflation report and noticed a few signs that we could get inflation relief by the end of the year,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

    “Markets have talked themselves off a ledge, so to speak, and they’re a bit more hopeful,” said Kristina Hooper, chief global markets strategist at Invesco.

    Most investors came into the morning already expecting the Fed to hike its key overnight interest rate by three-quarters of a percentage point next month, which would be its fourth straight hike that was triple the usual size.

    “Not only is the Federal Reserve going to raise rates by 75 bps next month, but there is now a possibility that they will raise rates by another 75 bps in December,” predicted Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

    Minutes from the Fed’s last meeting, released Wednesday, underscored the central bank’s commitment to taming “unacceptably high” inflation.

    Higher rates make buying a house, car or anything else purchased on credit more expensive, and the hope is that will slow the economy and job market enough to undercut inflation. But higher rates take a notoriously long time to take full effect, and the Fed risks causing a recession if it ends up going too far.

    As the day progressed, and investors had more time to dig into the inflation report’s details, analysts said they perhaps saw some glimmers of hope. Even though what’s called “core” inflation accelerated last month, overall inflation including food and energy prices slowed by a touch.

    September retail sales data to be released Friday could give a clearer picture of where prices are hottest and how Americans are reacting.


    El-Erian: “We are in this incredible situation where good news for the economy is bad news for the markets”

    06:48

    The Fed and other central banks in Europe and Asia have raised rates by unusually big margins to cool inflation that is at multidecade highs, but traders are afraid they might tip the global economy into recession.

    “While inflation is still way too high, and core inflation is at a new generational high, the Fed is unlikely to increase the increment of its rate hikes,” Bill Adams, Chief Economist for Comerica Bank, said in a report.

    Delta Air Lines shares jumped more than 4% premarket after it reported a $695 million third-quarter profit. Atlanta-based Delta said higher average fares this summer and a lucrative credit-card business more than offset rising fuel costs. The airline forecast that revenue during the final three months of the year will top pre-pandemic levels.

    Dollar edges back

    In energy markets, benchmark U.S. crude gained 13 cents to $87.40 per barrel in electronic trading on the New York Mercantile Exchange. 

    The dollar’s exchange rate has been rising against other currencies due to the Fed’s rate hikes and recession fears. The yen’s weakness has prompted expectations Japan’s central bank might intervene for a second time to prop up the exchange rate following an intervention in September.

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  • Stocks rally as inflation remains stubbornly high

    Stocks rally as inflation remains stubbornly high

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    U.S. markets rallied after falling sharply in opening trading Thursday after an unexpectedly hot inflation report strengthened the Federal Reserve’s position on the need for more aggressive interest rate hikes.

    The S&P 500 was up 69 points, or 1.9%, to 3,646, as of noon. Eastern time. The Dow Jones Industrial Average rose 668 points, or 2.3%, and the Nasdaq Composite climbed 1.5%. The S&P 500 is down 26% this year and close to a two-year low.

    “Not only is the Federal Reserve going to raise rates by 75 bps next month, but there is now a possibility that they will raise rates by another 75 bps in December,” predicted Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

    Minutes from the Fed’s last meeting, released Wednesday, underscored the central bank’s commitment to taming “unacceptably high” inflation.

    “A hawkish reaction to the data could add more pressure to stocks,” Anderson Alves of ActivTrades said in a report.

    September retail sales data to be released Friday could give a clearer picture of where prices are hottest and how Americans are reacting.


    El-Erian: “We are in this incredible situation where good news for the economy is bad news for the markets”

    06:48

    The Fed and other central banks in Europe and Asia have raised rates by unusually big margins to cool inflation that is at multidecade highs, but traders are afraid they might tip the global economy into recession.

    “While inflation is still way too high, and core inflation is at a new generational high, the Fed is unlikely to increase the increment of its rate hikes,” Bill Adams, Chief Economist for Comerica Bank, said in a report.

    Delta Air Lines shares jumped more than 4% premarket after it reported a $695 million third-quarter profit. Atlanta-based Delta said higher average fares this summer and a lucrative credit-card business more than offset rising fuel costs. The airline forecast that revenue during the final three months of the year will top pre-pandemic levels.

    Dollar edges back

    In energy markets, benchmark U.S. crude gained 13 cents to $87.40 per barrel in electronic trading on the New York Mercantile Exchange. 

    The dollar’s exchange rate has been rising against other currencies due to the Fed’s rate hikes and recession fears. The yen’s weakness has prompted expectations Japan’s central bank might intervene for a second time to prop up the exchange rate following an intervention in September.

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  • Gas prices in the U.S. expected to rise

    Gas prices in the U.S. expected to rise

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    Gas prices in the U.S. expected to rise – CBS News


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    A decision by the OPEC+ alliance of oil-exporting nations to cut production of crude coupled with refinery woes in the West and Midwest are pushing gas prices higher just before the midterm elections. Jonathan Vigliotti reports.

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  • Gas prices rise as OPEC announces oil production cut

    Gas prices rise as OPEC announces oil production cut

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    Gas prices rise as OPEC announces oil production cut – CBS News


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    It now costs nearly $100 to fill up a mid-size car with gas in California. Though gas prices are rising amid the decision by OPEC+ to cut 2 million barrels of oil per day, California prices have little to do with it. Jonathan Vigliotti takes a look.

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  • OPEC and Russia slash oil production in bid to boost prices

    OPEC and Russia slash oil production in bid to boost prices

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    The OPEC+ alliance of oil-exporting countries on Wednesday decided to sharply cut production to support sagging oil prices, a move that could deal the struggling global economy another blow and raise politically sensitive pump prices for U.S. drivers just ahead of key national elections.

    Energy ministers meeting at the Vienna headquarters of the OPEC oil cartel cut production by 2 million barrels per day starting in November at their first face-to-face meeting since the start of the COVID-19 pandemic.

    Besides a token trim in oil production last month, the major cut is an abrupt turnaround from months of restoring deep cuts made during the depths of the pandemic and could help alliance member Russia weather a looming European ban on oil imports.

    In a statement, OPEC+ said the decision was based on the “uncertainty that surrounds the global economic and oil market outlooks.”

    The impact of the production cut on oil prices — and thus the price of gasoline made from crude — will be limited somewhat because OPEC+ members are already unable to meet the quotas set by the group.

    The alliance also said it was renewing its cooperation between members of the OPEC cartel and non-members, the most significant of which is Russia. The deal was to expire at year’s end.

    Receding oil prices

    The decision comes as oil trades well below its summer peaks because of fears that major global economies such as the U.S. or Europe will sink into recession due to high inflation, rising interest rates meant to curb rising consumer prices, and uncertainty over Russia’s war against in Ukraine.

    The fall in oil prices has been a boon to U.S. drivers, who saw lower gasoline prices at the pump before costs recently started ticking up, and for President Biden as his Democratic Party gears up for congressional elections next month. Nationwide, the average price for a gallon of regular gas is $3.83, down a June peak of $5.02, according to AAA, although fuel costs have edged up in recent weeks. 

    “An average cut of 2 million barrels a day should push gasoline prices higher, but not at a pace that would bring back prices to the $5 a gallon that led to the Biden administration draining supplies from the Strategic Petroleum Reserve,” Quincy Krosby, chief global strategist for LPL Financial, said in an email.

    White House press secretary Karine Jean-Pierre told reporters Tuesday that the U.S. would not extend releases from its strategic reserve to increase global supplies.

    Biden has tried to receive credit for falling gas prices, with administration officials highlighting a late March announcement that a million barrels a day would be released from the strategic reserve for six months. High inflation is a fundamental drag on Biden’s approval and has dampened Democrats’ chances in the midterm elections.

    Oil supply could face further cutbacks in coming months when a European ban on most Russian imports takes effect in December. A separate move by the U.S. and other members of the Group of Seven wealthy democracies to impose a price cap on Russian oil could reduce supply if Russia retaliates by refusing to ship to countries and companies that observe the cap.

    New sanctions on Russia

    The EU agreed Wednesday on new sanctions that are expected to include a price cap on Russian oil.

    Russia “will need to find new buyers for its oil when the EU embargo comes into force in early December and will presumably have to make further price concessions to do so,” analysts at Commerzbank wrote in a note. “Higher prices beforehand — boosted by production cuts elsewhere — would therefore doubtless be very welcome.”

    Dwindling prospects for a diplomatic deal to limit Iran’s nuclear program have also lowered prospects for a return of as much as 1.5 million barrels a day in Iranian oil to the market if sanctions are removed.

    Oil prices surged this summer as markets worried about the loss of Russian supplies from sanctions over the war in Ukraine, but they slipped as fears about recessions in major economies and China’s COVID-19 restrictions weighed on demand for crude.

    International benchmark Brent has sagged as low as $84 in recent days after spending most of the summer months over $100 per barrel.

    At its last meeting in September, OPEC+ reduced the amount of oil it produces by 100,000 barrels a day in October. That token cut didn’t do much to boost lower oil prices, but it put markets on notice that the group was willing to act if prices kept falling.

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  • U.S. starts fiscal year with record $31 trillion in debt, approaching debt ceiling

    U.S. starts fiscal year with record $31 trillion in debt, approaching debt ceiling

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    The nation’s gross national debt has exceeded $31 trillion, according to a U.S. Treasury report released Tuesday that logs America’s daily finances.

    Nearing the statutory ceiling of roughly $31.4 trillion — an artificial cap Congress placed on the U.S. government’s ability to borrow — the debt numbers are hitting an already tenuous economy facing the highest inflation in 40 years, rising interest rates and a strong U.S. dollar.

    Even as President Joe Biden has touted his administration’s deficit reduction efforts this year and recently signed the so-called Inflation Reduction Act, which attempts to tame high price increases caused by a variety of economic factors, economists say the latest debt numbers are a reason for concern.

    Owen Zidar, a Princeton economist, said rising interest rates will exacerbate the nation’s growing debt issues and make the debt itself more costly. The Federal Reserve has raised rates several times this year in an effort to combat inflation.

    Zidar said the debt “should encourage us to consider some tax policies that almost passed through the legislative process but didn’t get enough support,” like imposing higher taxes on the wealthy and closing the carried interest loophole, which allows money managers to treat their income as capital gains.

    “I think the point here is if you weren’t worried before about the debt before, you should be — and if you were worried before, you should be even more worried,” Zidar said.


    Food bank demand spikes amid inflation

    02:37

    The Congressional Budget Office earlier this year released a report on America’s debt load, warning in its 30-year outlook that, if unaddressed, the debt will soon spiral upward to new highs that could ultimately imperil the U.S. economy. If unchecked, investors could lose confidence in the U.S. government’s ability repay its debt, which would result in a spike in interest rates and rising inflation, the CBO warned.

    And as interest rates rise — as they are now under the Federal Reserve’s regime of rate hikes — the U.S. will be forced to spend “substantially” more on interest payments, the CBO added. That could weaken the fiscal position of the U.S., it noted.

    “Addicted to debt”

    In its August Mid-Session Review, the administration forecasted that this year’s budget deficit will be nearly $400 billion lower than it estimated back in March, due in part to stronger than expected revenues, reduced spending and an economy that has recovered all the jobs lost during the multiyear pandemic.

    In full, this year’s deficit will decline by $1.7 trillion, representing the single largest decline in the federal deficit in American history, the Office of Management and Budget said in August.

    Maya MacGuineas, president of the Committee for a Responsible Federal Budget said in an emailed statement Tuesday, “This is a new record no one should be proud of.”

    “In the past 18 months, we’ve witnessed inflation rise to a 40-year high, interest rates climbing in part to combat this inflation, and several budget-busting pieces of legislation and executive actions,” MacGuineas said. “We are addicted to debt.”

    A representative from the Treasury Department was not immediately available for comment.

    Sung Won Sohn, an economics professor at Loyola Marymount University, said “it took this nation 200 years to pile up its first trillion dollars in national debt, and since the pandemic we have been adding at the rate of 1 trillion nearly every quarter.”

    Predicting high inflation for the “foreseeable future,” he said, “when you increase government spending and money supply, you will pay the price later.”

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  • Stocks sink to new low for 2022, closing dismal month with mounting recession fears

    Stocks sink to new low for 2022, closing dismal month with mounting recession fears

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    Wall Street is at its worst levels in almost two years Friday as the end nears for what’s been a miserable month for markets around the world.

    The S&P 500 closed down 1.5%, at 3,585, after flipping between small losses and gains through the morning. It’s at its lowest level since the early 2020 coronavirus crash and its third straight losing quarter.

    The Dow Jones Industrial Average closed down 500 points, or 1.7%, and the Nasdaq composite was down 1.5%.


    Fed rate hike decision raises recession fears on Wall Street

    06:04

    Global inflation

    The main reason for this year’s struggles for financial markets has been fear of a possible recession, as interest rates soar in hopes of beating down the highest inflation in 30 years.

    The Federal Reserve has been at the forefront of the global campaign to slow economic growth and hurt job markets just enough to undercut inflation but not so much that it causes a recession. More data arrived Friday to suggest the Fed will keep its foot firmly on the brakes of the economy, raising the risk it will bring on a downturn.

    The Fed’s preferred measure of inflation showed it was worse last month than economists expected. That should keep the Fed on track to keep raising rates and hold them at high levels for some time, as it’s loudly and repeatedly promised to do.

    Vice Chair Lael Brainard was the latest Fed official on Friday to insist the central bank won’t pull back on rates prematurely, dashing Wall Street’s hopes for a “pivot” toward easier rates as the economy slows.

    “The Fed isn’t about to ‘pivot’ and there is more monetary tightening to come (both domestically and internationally),” said analyst Adam Crisafulli of Vital Knowledge in a research note.

    Crisafulli argued the Fed’s aggressive moves are working, and that prices are about to stabilize. “The disinflationary pressures already evident throughout the economy are growing more powerful,” Crisafulli said. “Housing, rents, shipping, commodities, apparel, autos, etc. – all these categories … are now witnessing intense disinflation (or outright deflation).

    Other analysts have a less positive outlook.

    “At this point, it’s not a matter of if we’ll have a recession, but what type of recession it will be,” said Sean Sun, portfolio manager at Thornburg Investment Management.


    Recession fears mount as U.S. stocks fall sharply

    03:01

    Double-whammy on stocks

    With the exception of financial companies such as banks, brokerages or mortgage companies, higher interest rates generally knock down stock prices. The other market lever that also looks to be under threat is earnings, as the slowing economy, high interest rates and other factors weigh on record-high corporate profits.

    Cruise ship operator Carnival dropped 21% for one of Wall Street’s worst losses after it reported a bigger loss for its latest quarter than analysts expected and revenue that fell short of expectations.

    Nike slumped 12.1% in what could be its worst day in two decades after it said its profitability weakened during the summer because of discounts needed to clear suddenly overstuffed warehouses. The amount of shoes and gear in Nike’s inventories swelled by 44% from a year earlier.

    The U.S. dollar’s powerful surge against other currencies also hurt Nike. Its worldwide revenue rose only 4%, instead of the 10% it would have if currency values had remained the same.

    Glimmers of hope

    Nike isn’t the only company to see its inventories balloon. So have several big-name retailers — but such bad news for businesses could actually mean some relief for shoppers if overstocks lead to more discounts. Friday’s report on the Fed’s preferred gauge of inflation had some glimmers of enocuragement — showing slowing inflation for goods, even as price gains accelerated for services.

    Another report on Friday also offered some good news. A measure of consumer sentiment showed U.S. expectations for future inflation came down in September. That’s crucial for the Fed because tightly held expectations for higher inflation can create a debilitating, self-reinforcing cycle that worsens it.

    Treasury yields eased a bit on Friday, letting off some of the pressure that’s built on markets.

    The yield on the 10-year Treasury fell to 3.75% from 3.79% late Thursday. The two-year yield, which more closely tracks expectations for Fed action, sank to 4.16% from 4.19%.

    Still, a long list of other worries continues to hang over global markets, including increasing tensions between much of Europe and Russia following the invasion of Ukraine. A controversial plan to cut taxes by the U.K. government also sent bond markets spinning recently on fears it could make inflation even worse. Bond markets calmed a bit only after the Bank of England pledged mid-week to buy however many U.K. government bonds are needed to bring yields back down.


    MoneyWatch: Value of British pound drops to historic low against the dollar

    05:12

    The stunning and swift rise of the U.S. dollar against other currencies, meanwhile, raises the risk of creating so much stress that something cracks somwhere in global markets.

    Stocks around the world were mixed after a report showed that inflation in the 19 countries that use Europe’s euro currency spiked to a record and data from China said that factory activity weakened there.

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  • U.S. stocks return to red as markets deal with aggressive rate hikes

    U.S. stocks return to red as markets deal with aggressive rate hikes

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    Stocks plunged on Wall Street Thursday as bond yields marched higher and put the squeeze back on markets.

    The S&P 500 dropped 79 points, or 2.1%, to 3,640. Nearly every stock in the benchmark index lost ground. The Dow Jones Industrial Average dropped 458 points, or 1.5%, to 29,225 and the Nasdaq fell 2.8%.

    The slide marked a reversal from Wednesday, when stocks jumped and bond yields tumbled in relief after the Bank of England moved forcefully to keep borrowing rates in the United Kingdom from spiking further. That relief was short-lived, however, with Wall Street still focused on the Federal Reserve’s push to ratchet up interest rates and cool inflation. 


    MoneyWatch: Value of British pound drops to historic low against the dollar

    05:12

    “The primary driver of today’s slump is the U.K. as [Prime Minister Liz] Truss defended her government’s fiscal agenda, calling it the ‘right plan’ and vowing to press forward with its implementation,” analyst Adam Crisafulli of Vital Knowledge said in a research note. “Not until Truss yields on her plans (or provides additional details) will gilts and the [British pound] truly settle,” he said.

    U.S. bond yields jumped. The yield on the 2-year Treasury, which tends to follow expectations for Federal Reserve action, fell to 4.23% from 4.14% late Wednesday. It is trading at its highest level since 2007. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.80% from 3.73%.

    Russia’s war in Ukraine

    “The situation with Russia remains a source of concern, too,” added Crisafulli. 

    Russia confirmed on Thursday it will formally annex parts of Ukraine where occupied areas held Kremlin-orchestrated “referendums” on living under Moscow’s rule.

    “The referendums could bring a stalemate to the fighting, but this isn’t necessarily a ‘positive’ as Europe’s energy crisis grows more acute,” Crisafulli said. 


    Russia’s war, inflation prompt major economies to bring back price controls

    04:22

    However, the United States and its Western allies have sharply condemned the votes as “sham referenda” and vowed never to recognize their results. German Foreign Minister Annalena Baerbock on Thursday joined other Western officials in denouncing the referendums.
     
    “Under threats and sometimes even (at) gunpoint people are being taken out of their homes or workplaces to vote in glass ballot boxes,” she said at a conference in Berlin.

    Recession fears bolstered by jobs report

    A better-than-expected government report on U.S. layoffs only bolstered expectations that the Fed will keep hiking interest rates and investors are worried that it could hit the brakes on the economy too hard and cause a recession.

    The U.S. economy has already contracted for two consecutive quarters, which is one informal measure of a recession. But, the employment market remains strong and consumers continue spending. That has helped bolster the economy and is making it more difficult to get inflation under control.

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  • California sues Amazon, alleging its dominance pushes up prices

    California sues Amazon, alleging its dominance pushes up prices

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    California is suing Amazon, accusing the company of violating the state’s antitrust and unfair competition laws by allegedly stifling competition and forcing sellers to maintain higher prices on their products on other sites.

    In the lawsuit, filed Wednesday in San Francisco Superior Court, California Attorney General Rob Bonta claims that Amazon uses contract provisions to effectively bar third-party sellers and wholesale suppliers from offering lower prices for products on non-Amazon sites, including on their own websites. That, in turn, harms the ability of other retailers to compete, according to the complaint. 

    “Without basic price competition, without different online sites trying to outdo each other with lower prices, prices artificially stabilize at levels higher than would be the case in a competitive market,” the complaint states. 

    According to the suit, merchants who don’t follow Amazon’s pricing policy could have their products stripped from prominent listings on Amazon and face other sanctions, such as suspensions or terminations of their accounts. The suit seeks to stop Amazon from entering into contracts with sellers that harm price competition, as well as a court order to compel Amazon to pay damages to the state for increased prices. State officials did not say how much money they are seeking.

    The 84-page lawsuit mirrors another complaint filed last year by the District of Columbia, which was dismissed by a district judge earlier this year and is now going through an appeals process.

    But officials in California believe they won’t encounter a similar fate, partly due to information collected during a more than two-year investigation that involved subpoenas and interviews with sellers, Amazon’s competitors as well as current and former employees at the company.

    “Blocking competition”

    Seattle-based Amazon controls roughly 38% of online sales in the U.S., more than that of Walmart, eBay, Apple, Best Buy and Target combined, according to the research firm Insider Intelligence. A report from Democrats in Congress estimated Amazon’s share at about 50%. About 2 million sellers list their products on Amazon’s third-party marketplace, accounting for 58% of the company’s retail sales.

    During a news conference on Wednesday, Bonta said some vendors have expressed they would offer lower prices on other sites with lower seller fees, but don’t do so to avoid punishment from Amazon.

    “Amazon has stifled its competition for years, not by successfully competing, but by blocking competition on price,” Bonta said. “As a result, California families paid more, and now Amazon must pay the price.”

    He said the lawsuit is also a message to other companies who “illegally bend the market at the expense of California consumers, small business owners and the economy.”

    Amazon did not immediately reply to a request for comment from the Associated Press. The company has said in the past that sellers set their own prices on the platform. It has also said it has the right to avoid highlighting products that are not priced competitively.

    Despite that defense, Amazon’s market power has been a subject of scrutiny from lawmakers and advocacy groups calling for stricter antitrust regulations. Earlier this year, congressional lawmakers urged the Justice Department to investigate if the company collects data on sellers to develop competing products and offer them more prominently on its site. Critics have also lambasted the increasing fees Amazon imposes on sellers, which makes it more difficult for merchants to enter the market.

    Lawmakers on Capitol Hill have been pushing bipartisan legislation aiming to limit Amazon and other Big Tech companies, including Apple, Meta and Google, from favoring their own products and services over rivals. The bill has cleared key committees but has languished in Congress for months amid intense pushback from the companies.

    Meanwhile, regulators have also been looking into Amazon’s business practices and deals. In July, the company offered concessions to settle two antitrust investigations in the European Union, including a promise to apply equal treatment to all sellers when ranking product offers on the site’s “buy box,” a coveted spot that makes items more visible to shoppers.

    In the U.S., the Federal Trade Commission is investigating Amazon’s $3.9 billion acquisition of the primary health organization One Medical as well as the sign-up and cancellation practices of Amazon Prime, the company’s paid subscription service that offers deals and faster shipping.

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