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As President Joe Biden prepares to host a much-anticipated meeting on the U.S. debt ceiling with the country’s four top lawmakers, analysts are predicting there won’t be a deal yet on this issue.
If the meeting at the White House, scheduled for around 4 p.m. Eastern time Tuesday, were to conclude with an agreement, that would be very surprising, said Chris Krueger, managing director at TD Cowen’s Washington Research Group, in a note on Tuesday.
The…
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The U.S. government will no longer be able to meet all its obligations in full and on time sometime between early June and early August if Congress doesn’t raise the federal borrowing limit, according to a new projection released Tuesday by the Bipartisan Policy Center.
The think tank’s estimate falls in line with a projection that Treasury Secretary Janet Yellen made last week, as she said her department’s best estimate is that it could be unable to continue to satisfy all obligations “by early June, and potentially as early…
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President Joe Biden rolled out a plan on Monday that targets how airlines handle flight cancellations and significant delays that are within a carrier’s control.
Biden said his administration will propose a new regulation later this year that would require airlines to provide cash compensation in addition to refunds and amenities for stranded passengers.
“Airline…
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Foreign investors and businesspeople with exposure to China are becoming increasingly unnerved. And for good reason.
In March, Chinese authorities detained an employee of Japanese drug manufacturer Astellas Pharma JP:4503 ALPMY for alleged espionage violations. The Chinese seem confident in their case. Beijing’s ambassador to Japan said there was ample evidence of wrongdoing, and, despite the uproar, the Astellas employee remains detained.
That…
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The pandemic opened the floodgates to telehealth. Now, many patients and doctors are curbing their enthusiasm for virtual care.
Four out of five primary-care doctors who had video visits with patients during the pandemic would prefer to provide just a small portion of care or no care at all via telemedicine in the future, according to a survey designed and analyzed by researchers at Harvard T.H. Chan School of Public Health and published last month in Health Affairs, a peer-reviewed journal. And 60% of the doctors surveyed…
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BELGRADE, Serbia (AP) — A gunman apparently firing at random killed eight people and wounded 14 in a series of villages in Serbia, authorities said, shaking a nation still in the throes of grief over a mass shooting a day earlier. Police arrested a suspect Friday after an all-night manhunt.
Serbian President Aleksandar Vučić called Thursday’s shootings an attack on the whole nation — and said the person arrested wore a T-shirt with a pro-Nazi slogan on it but did not specify a motive.
The slayings came a day after a 13-year-old boy used his father’s guns to kill eight fellow students and a guard at a school in Belgrade, the capital.
The bloodshed sent shockwaves through a Balkan nation scarred by wars, but unused to mass murders. Though Serbia is awash with weapons left over from the conflicts of the 1990s, Wednesday’s shooting was the first at a school in the country’s modern history.
The last mass shooting before this week was in 2013, when a war veteran killed 13 people in a central Serbian village.
Public figures, politicians and experts appeared successively on TV Friday, desperately seeking to explain the tragedies. The first made the country numb with grief, while the second heightened feelings of insecurity and anxiety over what might come next. As a nationwide period of mourning began, TV screens were filled with people wearing black and music was banned from the airwaves as well as in cafes and restaurants.
“This is a moment when a nation decides whether it will go along a healing path,” Actor Srdjan Timarov said on N1 television. “The only other way is to declare capitulation.”
Late Thursday, an attacker shot at people in three villages near Mladenovac, some 50 kilometers, or 30 miles, south of the capital. Vučić said the assailant targeted people “wherever they were.”
“I heard some tak-tak-tak sounds,” recalled Milan Prokić, a resident of Dubona, near Mladenovac. Prokić said he first thought people were shooting to celebrate a birth, as is tradition in Serbia. “But it wasn’t that. Shame, great shame,” he added.
AP/Armin Durgut
Police said a suspect, identified by the initials U.B., was arrested near the central Serbian town of Kragujevac, about 100 kilometers (60 miles) south of Belgrade.
Authorities released a photo showing a young man in a police car in a blue T-shirt with the slogan “Generation 88” on it. The double eights are often used as shorthand for “Heil Hitler” since H is the eighth letter of the alphabet.
Vučić said the suspect repeated the word “disparagement” but it wasn’t clear what that meant.
The president vowed to the nation in an address that the suspect “will never again see the light of the day.” He referred to the attack as an act of terror and announced tougher gun-control measures, on top of ones put forward by the government a day earlier.
He called for a moratorium on new licenses for all weapons in the next two years, a review of all current licenses, longer prison sentences for those who break the rules and “fierce” punishment for anyone with illegal weapons. But first police will offer an amnesty to encourage people to hand over illegal guns — an action that has had limited success in the past.
“We will disarm Serbia,” Vučić promised, saying the government would outline the new rules on Friday.
Before the second shooting, Serbia spent much of Thursday reeling. Students, many wearing black and carrying flowers, filled streets around the school in central Belgrade as they paid silent homage to slain peers. Serbian teachers’ unions announced protests and strikes to warn about a crisis in the school system and demand changes.
Wednesday’s shooting at the Vladislav Ribnikar school also left seven people hospitalized, six children and a teacher. One girl who was shot in the head remains in life-threatening condition, and a boy is in serious condition with spinal injuries, doctors said Thursday.
Authorities have identified the shooter as Kosta Kecmanović and said he is too young to be charged and tried. He has been placed in a mental hospital, and his father has been detained on suspicion of endangering public security.
Gun ownership is common in Serbia and elsewhere in the Balkans: The country has one of the highest number of firearms per capita in the world. And guns are often fired into the air at celebrations in the region.
Experts have repeatedly warned of the danger posed by the number of weapons in Serbia, a highly divided country where convicted war criminals are frequently glorified and violence against minority groups often goes unpunished. They also note that decades of instability stemming from the conflicts of the 1990s, as well as ongoing economic hardship, could trigger such outbursts.
Dragan Popadić, a psychology professor at Belgrade University, told the Associated Press that the school shooting has exposed the level of violence present in society and caused a deep shock.
“People suddenly have been shaken into reality and the ocean of violence that we live in, how it has grown over time and how much our society has been neglected for decades,” he warned. “It is as if flashlights have been lit over our lives and we can no longer just mind our own business.”
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The Federal Reserve’s interest-rate increases have been propping open a window for people to get tempting yields in turbulent times from savings accounts, certificates of deposit and other low-risk cash investments.
Now the Fed increased its benchmark rate again Wednesday. The 25-basis point increase is the central bank’s tenth straight rate hike since March 2022. The increase, which brings the rate to a range of 5%-5.25%, could also be the final increase too, some Fed watchers say.
So if the window for high yields on low-risk cash investments is at its highest point for now, there’s likely only one direction they’ll go next, observers say.
“In our view, we are now at the peak or very near the peak in the federal funds rate. If you look at the market signals, they indicate exactly that,” said Angelo Kourkafas, investment strategist at Edward Jones.
What that means for rate-sensitive cash investments — like bank accounts, CDs, money-market funds and short-term Treasury debt maturing within one year — “is an opportunity to take advantage of these high yields that are not going to last forever,” he said.
The largest money-market funds currently offer an average 4.64% seven-day yield as of Monday, according to Crane Data. Meanwhile, the yields on Treasury bills are also ranging around 4% to 5%, according to data.
The annual percentage yields on high-yield savings accounts and one-year online bank CDs can now reach 4% and 5%, according to DepostAccounts.com.
But some of the longest maturity CDs “may have already peaked,” according to Ken Tumin, the site’s founder and senior industry analyst at LendingTree.
Long-term CD rates are less influenced by the federal funds rate moves and “are the first ones to react,” he said. The APY on a five-year CD averaged 3.95% in April, down from 4.04% in January, he noted.
Rate retreats show elsewhere. I-bonds, the fixed-income investments pegged to inflation that caught wide attention, now offer a 4.3% rate. That’s down from 6.89% in the previous six months, and off their recent peak of 9.62%.
Even as inflation rates declined from scorching to warm, Americans amassed $1 trillion in personal savings as of March. But recession worries continue to to build among many economists and consumers.
“It’s not imminent that we see lower [Federal Reserve] rates down the road, but we could potentially by the end of the year,” said Kourkafas. “From an investor standpoint, locking in some of these high yields makes sense,” he later added.
“This could be ‘last call’ for savers,” said Greg McBride, Bankrate chief financial analyst. “CD yields on maturities of one year and longer have peaked, and now is the time to lock in. A slowing economy coupled with the Fed moving to the sidelines mean CD yields will start pulling back soon.”
It’s tough to say for sure whether the Fed has reached the top of this particular interest-rate cycle, but it’s a key question for Wednesday’s Fed meeting. Another question is when the central bank starts considering rate decreases.
With its latest rate increase Wednesday, the central bank said, looking ahead, it will weigh a range of factors to decide the extent that “additional policy firming may be appropriate.”
There’s been no decision on a pause, Federal Reserve Chair Jerome Powell told reporters Wednesday. But the central bank had a tone shift in its latest statement, discarding a line that said “some” extra increases “may” be necessary.
It was “a meaningful change that we’re no longer saying we anticipate. So we’ll be driven by incoming data meeting by meeting, and we’ll approach that question at the June meeting,” Powell said.
For around a year, “retail investors — as they do in every tightening cycle — they’ve been gradually moving their deposits into higher yielding places, such as CDs and other things, including money market funds,” Powell noted.
“That’s a gradual process that is quite natural and happens during a tightening cycle,” he said.
If the Fed keeps its rate higher for longer, the window for higher yields will likely stay at its peak for a while, said Tumin. “Deposit rates might not fall quickly, so people might have time to take advantage of higher deposit rates.”
Federal Deposit Insurance Corporation data showed banks paying $78.7 billion in interest on domestic deposit accounts last year, according to DepositAccounts.com research. That’s more than triple the $24.3 billion that banks paid for deposit interest in 2021.
“If things turn for the worse,” Tumin said, “deposit rates could fall quickly, before the first Fed rate cut.” If banks tone down their personal and business lending portfolios, they wouldn’t need to entice as many depositors with higher rates, he explained.
Economists say credit is already tightening as banks mull their next move after the failures of Silicon Valley Bank and Signature Bank last month. This week, JPMorgan Chase & Co.
JPM,
acquired First Republic Bank after the troubled lender closed its doors.
Ever since the Fed started tightening, consumers have become “increasingly rate-conscious,” said Jennifer White, senior director of banking and payments intelligence at JD Power.
“What goes along with rate chasing is all the other behavior that consumers learned during this process,” she said. That includes a heightened focus on the customer services a bank offers, and the costs it charges for those services, she said.
If and/or when interest rates decline, “I don’t think that’s going to be lost on customers,” White said.
“With cash rates where they are right now, you can get meaningful yield,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s
MS,
Global Investment Office. “It can make sense to hold a larger portion of cash, and cash-like investments.”
Just how much cash you decide to hold onto depends on your own risk tolerance, and the amount of time before you need to tap your portfolio, he said. Just don’t go overboard, he said.
There are many convenient trade-offs, like the lock-up period for money in a CD, or the fact that returns on cash ultimately cannot outrun inflation. “If you’re holding excess cash in your portfolio, you run the risk of not maintaining purchasing power over time,” Loewengart added.
Suppose investors pulled all their money from stocks and bonds, and put it all into Treasury bills that matured in three months’ time?
That cash-focused investor would have a 74% chance of underperforming a 60/40 portfolio, according to Vanguard’s number crunch on four decades of data. The person’s returns would be around 4% lower, researchers said.
(A 60/40 portfolio is a classic investment mix comprised of 60% stocks and 40% bonds — though its effectiveness is a source of debate.)
If the investor stayed in three-month Treasury bills for a year, Vanguard’s analysts said they faced an 87% chance of underperforming a 60/40 portfolio. Here, the T-bill investor underperformed the 60/40 portfolio by an average 13.5% underperformance, Vanguard said.
Joe Davis, Vanguard’s chief global economist, said does not expect a rate cut this year.
Vanguard sees inflation cooling, but it also predicts a recession in the second half of the year that entails less bank lending, more job losses, and more bankruptcy cases, he said.
Financial advisers always emphasize the importance of keeping the long view, and avoiding knee-jerk investment decisions that attempt to time the market.
Markets and investors have experienced “the most aggressive Fed rate-hiking campaign” in decades, said Kourkafas. “It’s a big milestone, but now we have to think about what’s next.”
It’s been “painful for everything — except cash — last year,” Kourkafas said. “But now, as we make that turning point, there’s an opportunity with cash, but also investors shouldn’t forgo other parts of their portfolio.”
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Vice President Kamala Harris will host the chief executives of Alphabet GOOG GOOGL, Microsoft MSFT, OpenAI and Anthropic at the White House on Thursday to discuss artificial-intelligence issues.
Harris and senior administration officials aim to have a “frank discussion” of the risks in AI development and of “ways we can work together to ensure the American people benefit from advances in AI while being protected from its harms,” according to an invitation for the meeting obtained by MarketWatch.
The…
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As some U.S. hotels hung on to practices they adopted during the early stages of the coronavirus pandemic — such as eliminating daily room cleanings — the number of hotel housekeepers fell by more than 102,000 last year from prepandemic levels, new data show.
The total number of hotel housekeeping jobs as of May 2022 was 364,990, a 22% decline from the total of 467,270 such positions during the same period in 2019, according to numbers released last week by the Bureau of Labor Statistics.
Unions…
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It might take a market mishap to end a debt-ceiling standoff that threatens to trigger a previously unthinkable default on U.S. government debt.
“An interesting question now is whether financial market vigilantes, in bonds, stocks or even currencies could flex their muscles the closer the government gets to running out of cash,” said Steven Barrow, head of G-10 strategy at Standard Bank, in a note late last week.
U.S….
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WASHINGTON — Treasury Secretary Janet Yellen notified Congress on Monday that the U.S. could default on its debt as early as June 1, if legislators do not raise or suspend the nation’s borrowing authority before then and avert what could potentially become a global financial crisis.
In a letter to House and Senate leaders, Yellen urged congressional leaders “to protect the full faith and credit of the United States by acting as soon as possible” to address the $31.4 trillion limit on its legal borrowing authority. She added that it is impossible to predict with certainty the exact date of when the U.S. will run out of cash.
“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” Yellen said in the letter.
Also Monday, the Congressional Budget Office reported that it saw a greater risk of the U.S. running out of funds in early June. CBO Director Phillip L. Swagel said because of less-than-expected tax receipts this filing season and a faster IRS having processed already received returns, “Treasury’s extraordinary measures will be exhausted sooner than we previously projected.”
In January, Yellen sent a letter to congressional leaders, stating that her department had begun resorting to “extraordinary measures” to avoid a federal government default.
The Treasury said Monday it plans to increase its borrowing during the April to June quarter of this year, even as the federal government is close to breaching the debt limit.
The U.S. plans to borrow $726 billion during the quarter. That’s $449 billion more than projected in January, due to a lower beginning-of-quarter cash balance and projections of lower-than-expected income tax receipts and higher spending.
While Russia’s invasion of Ukraine remains a burden on U.S. economic growth, Treasury officials say the debate over the debt ceiling poses the greatest risk to the U.S. financial position.
Eric Van Nostrand, acting assistant secretary for economy policy, said in a statement that “even if Congress ultimately raises the debt limit before a default occurs, the ensuing uncertainty could raise borrowing costs and induce other financial stress that would weaken our labor market and our standing in the world.”
“There is no time to waste,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center, which forecasts the so-called X-date when the government exhausts its extraordinary measures. His organization will also provide an updated X-date projection in the coming days, he says.
“The U.S. government is again within mere months or even weeks of failing to make good on all its obligations. That is not a position befitting of a country considered the bedrock of the financial system, and only adds uncertainty to an already shaky economy.”
Democrats and the White House are pushing for Congress to increase the federal debt limit. President Joe Biden wants the cap raised without negotiation. The House Republican majority has most recently passed a bill to secure spending cuts in exchange for a debt limit increase. Biden on Monday invited the four Congressional leaders to the White House on May 9 to discuss the matter.
Yellen said last week at the Cap-to-Cap policy conference in Washington: “Congress must vote to raise or suspend the debt limit, and it should do so without conditions and it should not wait until the last minute. I believe that is a basic responsibility of our nation’s leaders to get this done.”
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A lawsuit filed in Delaware in April against the travel site Tripadvisor and its majority shareholder is highlighting what may be a growing trend: companies seeking to shift their incorporations to Nevada to avoid Delaware’s more stringent and entrenched legal standards.
The suit was filed on behalf of a group of Tripadvisor Inc. TRIP shareholders, who are hoping to persuade the Delaware Chancery Court to stop the company from pushing ahead with board-approved plans to reincorporate in Nevada, arguing their motive is to take…
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It’s usually not a good sign when obscure financial instruments are making headlines. And that’s the case now as the political standoff over the U.S. government’s debt ceiling puts credit-default swaps back in the spotlight.
Credit-default swaps, or CDS, are instruments that effectively allow a lender to insure against default by a borrower. An investor who owns a corporate bond, bank credits or government debt, can buy CDS to protect against default. Speculators can also use CDS to place bets, though…
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David Rosenberg honestly doesn’t want to be bearish on stocks or bash the Federal Reserve. The veteran market strategist will get no satisfaction if he’s right about Americans having to slog through recession and consequently endure deflation, job losses and a wallop to the stock market.
“As I play the role of economic detective, I can see the smoking gun,” says Rosenberg, a former chief North American economist at Merrill Lynch and now president of Toronto-based Rosenberg Research.
Who’s…
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A U.K. regulator made the surprising decision Wednesday to block Microsoft Corp.’s deal for Activision Blizzard Inc. in a further sign of resistance to the power of Big Tech.
The U.K.’s Competition and Markets Authority announced Wednesday that it would prohibit the $69 billion deal as the merger could hurt competition in the nascent market for cloud gaming. The decision comes after the agency said in late March that it no longer thought the deal would threaten console gaming, which is a vastly larger and more established…
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The U.S. Food and Drug Administration said Tuesday it has granted accelerated approval to Biogen Inc.’s torferson, a treatment for a rare form of amyotrophic lateral sclerosis, or ALS.
The accelerated program is used to approve drugs for serious conditions that have an unmet medical need, where a drug is shown to have an effect on an endpoint that is reasonably likely to predict a clinical benefit to patients.
In…
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Popular crypto exchange Coinbase
COIN,
late Monday asked a federal court to force the U.S. Securities and Exchange Commission to respond yes or no to its petition from July 2022 to make formal rules around digital-asset regulation.
Coinbase’s petition requested that the “Commission propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities.”
In March, Coinbase was hit with a Wells notice from the SEC, identifying potential violations of securities laws that might spur it to take legal action. The notice came after nine months of back-and-forth between the SEC and Coinbase, CEO Brian Armstrong said in March.
Coinbase was expected to respond to the notice by the end of April, but Monday’s filing reveals that Coinbase believes the SEC’s approach doesn’t provide enough regulatory guidance for crypto companies in the U.S. to operate.
“The SEC at a minimum must set forth how those inapt and inapposite requirements are to be adapted to digital assets. But the SEC has refused to do even that,” the filing says. “It has not conducted any rulemaking to provide the regulatory clarity and process that companies need to determine which digital asset products and services to register and how to make the registration that the SEC now demands.”
Coinbase shares slid more than 7% on Monday but are up 55% year to date. Still, the stock is down nearly 60% over the past 12 months. In comparison, the S&P 500
SPX,
is up nearly 8% in 2023 and has declined almost 4% over the past year.
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WASHINGTON (AP) — The Supreme Court on Friday preserved women’s access to a drug used in the most common method of abortion, rejecting lower-court restrictions while a lawsuit continues.
The justices granted emergency requests from the Biden administration and New York–based Danco Laboratories, maker of the drug, called mifepristone. They are appealing a lower-court ruling that would roll back Food and Drug Administration approval of mifepristone.
The drug has been approved for use in the U.S. since 2000 and more than 5 million people have used it. Mifepristone is used in combination with a second drug, misoprostol, in more than half of all abortions in the U.S.
The court faced a self-imposed Friday night deadline to decide whether women’s access to a widely used abortion pill would remain unchanged or be restricted while a legal challenge to its Food and Drug Administration approval goes on.
The justices have been weighing arguments that allowing restrictions contained in lower-court rulings to take effect would severely disrupt the availability of the drug, mifepristone, which is used in the most common abortion method in the United States.
It has repeatedly been found to be safe and effective, and has been used by more than 5 million women in the U.S. since the FDA approved it in 2000.
The Supreme Court had initially said it would decide by Wednesday whether the restrictions could take effect while the case continues. A one-sentence order signed by Justice Samuel Alito on Wednesday gave the justices two additional days, without explanation.
Abortion opponents filed suit in Texas in November, asserting that FDA’s original approval of mifepristone 23 years ago and subsequent changes were flawed.
Senate Judiciary Committee/AP
Further context (March 2023): Trump appointee in single-judge federal district in Texas could bar nationwide access to the abortifacient mifepristone
Also (April 2023): Access to abortion pill in limbo after competing rulings in Texas and Washington
They won a ruling on April 7 by U.S. District Judge Matthew Kacsmaryk, an appointee of former President Donald Trump, revoking FDA approval of mifepristone. The judge, the lone judge in his Amarillo, Texas, federal district, gave the Biden administration and Danco a week to appeal and seek to keep his ruling on hold.
Responding to a quick appeal, two more Trump appointees on the 5th U.S. Circuit Court of Appeals said the FDA’s original approval would stand for now. But Judges Andrew Oldham and Kurt Englehardt said most of the rest of Kacsmaryk’s ruling could take effect while the case winds through federal courts.
MarketWatch contributed.
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Federal prosecutors have leveled a legal dropkick on former pro wrestler Ted DiBiase Jr., charging him with stealing millions of dollars meant to feed needy kids in a Mississippi scandal that has also tarnished the reputation of NFL hall of famer Brett Favre.
From the archives (September 2022): NFL star Brett Favre and Gov. Phil Bryant texted about how to use $5 million of welfare funds to build a new volleyball stadium
DiBiase,…
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