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  • Treasury secretary rules out bailout for Silicon Valley Bank | CNN Politics

    Treasury secretary rules out bailout for Silicon Valley Bank | CNN Politics

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    Washington
    CNN
     — 

    Treasury Secretary Janet Yellen on Sunday ruled out a federal bailout for Silicon Valley Bank following its spectacular collapse last week.

    “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking,” Yellen told CBS News when asked if there will be a bailout. “And the reforms that have been put in place means that we’re not going to do that again.”

    Also Sunday, Shalanda Young, the director of the White House Office of Management and Budget, stressed in an interview with CNN’s Kaitlan Collins on “State of the Union” that the US banking system at large was “more resilient” now.

    “It has a better foundation than before the [2008] financial crisis. That’s largely due to the reforms put in place,” Young said on “State of the Union.”

    Yellen said she’s been hearing from depositors all weekend, many of whom are “small businesses” and employ thousands of people. “I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” the Treasury secretary said, declining to provide further details.

    SVB collapsed Friday morning after a stunning 48 hours in which a bank run and a capital crisis led to the second-largest failure of a financial institution in US history.

    California regulators closed down the tech lender and put it under the control of the US Federal Deposit Insurance Corporation. The FDIC is acting as a receiver, which typically means it will liquidate the bank’s assets to pay back its customers, including depositors and creditors.

    Despite initial panic on Wall Street over the run on SVB, which caused its shares to crater, analysts said the bank’s collapse is unlikely to set off the kind of domino effect that gripped the banking industry during the financial crisis.

    But the collapse has prompted a bailout debate in Washington as lawmakers assess the fallout.

    Republican Rep. Nancy Mace of South Carolina told Collins in a separate interview on “State of the Union” that she doesn’t support a bailout “at this time” but cautioned, “It’s still very early.”

    “We cannot keep bailing out private companies because there’s no consequences to their actions. People, when they make mistakes or break the law, have to be held accountable in this country,” she said.

    While relatively unknown outside Silicon Valley, SVB was among the top 20 American commercial banks, with $209 billion in total assets at the end of last year, according to the FDIC. It’s the largest lender to fail since Washington Mutual collapsed in 2008.

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  • SVB employees to receive 45 days of employment at 1.5 times pay, reports say | CNN Business

    SVB employees to receive 45 days of employment at 1.5 times pay, reports say | CNN Business

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    New York
    CNN
     — 

    The US Federal Deposit Insurance Corporation offered Silicon Valley Bank employees 45 days of employment and 1.5 times their salary, reports say.

    An FDIC official did not comment on the details to CNN, but said it is standard practice and one of the first steps the independent government agency takes after being named receiver.

    US workers also received their annual bonuses on Friday, just hours before FDIC took over the collapsed lender, Axios reported.

    SVB collapsed Friday morning after a stunning 48 hours in which a bank run and a capital crisis led to the second-largest failure of a financial institution in US history.

    California regulators shuttered the tech lender and put it under the control of the FDIC.

    The FDIC is acting as a receiver, which typically means it will liquidate the bank’s assets to pay back its customers, including depositors and creditors.

    Employees, except essential and branch workers, were told to keep working remotely, Reuters reported. The bank had more than 8,500 employees at the end of 2022.

    The FDIC said the main office and all 17 branches of SVB, located in California and Massachusetts, will reopen Monday.

    The FDIC, an independent government agency that insures bank deposits and oversees financial institutions, said all insured depositors will have full access to their insured deposits by no later than Monday morning. It said it would pay uninsured depositors an “advance dividend within the next week.”

    The FDIC took over in the midmorning Friday; usually it waits until markets close.

    “SVB’s condition deteriorated so quickly that it couldn’t last just five more hours,” wrote Better Markets CEO Dennis M. Kelleher. “That’s because its depositors were withdrawing their money so fast that the bank was insolvent, and an intraday closure was unavoidable due to a classic bank run.”

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  • Snap stock surges as Congress renews efforts to ban TikTok | CNN Business

    Snap stock surges as Congress renews efforts to ban TikTok | CNN Business

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    CNN
     — 

    Investors are betting that Washington’s mounting scrutiny on TikTok could be good news for rival Snapchat.

    Shares of Snapchat’s parent company surged nearly 10% on Monday and another 5% in early trading Tuesday following news that US senators are planning to introduce legislation that could make it easier to ban rival app TikTok.

    Virginia Democratic Sen. Mark Warner is expected to unveil bipartisan legislation Tuesday afternoon that expands President Joe Biden’s authority to ban TikTok and other suspected information technology risks from the United States, a person familiar with the matter told CNN. The bill is expected to have nearly a dozen co-sponsors from both sides of the aisle.

    The stock surge suggests some on Wall Street are taking the possibility of a TikTok ban more seriously, after years of chatter in the nation’s capital about cracking down on the short-form video app due to security concerns related to its Chinese parent company.

    It also highlights how lawmakers’ efforts to address the perceived threat of TikTok could ultimately benefit large US tech platforms, including dominant companies that some in Washington also want to rein in for other reasons.

    Angelo Zino, senior equity analyst CFRA Research, wrote in a note Monday that the “biggest beneficiaries of a TikTok ban” would be Snapchat, Facebook-parent Meta, and YouTube.

    “TikTok’s emphasis on short-form videos has increased engagement/time spent by consumers and has upended the entire industry, creating a headwind for META/SNAP,” Zino wrote. “Given TikTok’s growing engagement/user growth, it has been taking an increasing portion of the digital ad dollars pie from other social media players.”

    In recent years, TikTok’s popularity has led a number of major US apps to imitate some of its features, including the launch of Instagram’s Reels and YouTube’s Shorts.

    Shares of YouTube’s parent company Alphabet were essentially flat on Tuesday. Meta, which is up 50% so far this year thanks to its commitment to “efficiency,” was up slightly in early trading Tuesday, likely because of a report claiming it’s planning more layoffs.

    A TikTok ban, or the possibility of it, may just be one more positive for Meta’s stock this year.

    – CNN’s Brian Fung contributed to this report.

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  • Camp toy store pleads for help after Silicon Valley Bank collapse | CNN Business

    Camp toy store pleads for help after Silicon Valley Bank collapse | CNN Business

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    New York
    CNN
     — 

    A toy company based in New York has gotten caught up in the collapse of Silicon Valley Bank and is pleading with customers for help keeping it afloat.

    Camp, a venture-backed retailer, sent an email to customers Friday announcing it was slashing prices and would use sales to help fund its continued operations after much of its money was tied up in the bank failure.

    “Unfortunately, we had most of our company’s cash assets at a bank which just collapsed. I’m sure you’ve heard the news,” co-founder Ben Kaufman said in an email to customers.

    He urged customers to use the code “BANKRUN” to save 40% off all merchandise, in an apparent nod to the run on the bank that may have helped bring down the Silicon Valley lender. Camp also said customers could pay full price, which it said would be appreciated.

    Kaufman said the company was “hopeful that this will be resolved soon.”

    CNN has not confirmed if Camp had funds with Silicon Valley Bank when the bank collapsed.

    Silicon Valley Bank was put under control of the US Federal Deposit Insurance Corporation on Friday, capping off a stunning 48 hour period during which fears of a liquidity crisis at the firm prompted some startups to weigh withdrawing funds.

    The sudden collapse of the Silicon Valley lender has pushed tech investors and startups to scramble to figure out their financial exposure to the bank, with founders worrying about getting their money out, making payroll and covering operating expenses.

    The rapidly unfolding fallout at Silicon Valley Bank comes at a challenging moment for startup and tech industries. Rising interest rates have eroded the easy access to capital that helped fuel soaring startup valuations and funded ambitious, money-losing projects.

    Kaufman, a former BuzzFeed executive, founded Camp in 2018. It has nine stores in California, Connecticut, Massachusetts, New York, New Jersey and Texas.

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  • Takeaways from the February jobs report | CNN Business

    Takeaways from the February jobs report | CNN Business

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    Minneapolis
    CNN
     — 

    February’s jobs report had a little something for everyone.

    For workers, there were jobs; for employers, there were workers filling shortfalls caused by the pandemic; for the Federal Reserve, there were indications that the labor market was loosening and wage pressures were easing.

    Then again, the total of 311,000 net jobs added was significantly higher than expectations of 205,000, and the unemployment rate surprisingly grew to 3.6%.

    The report was a “mixed bag” at a time when the Fed — which this week signaled a more hawkish approach after a strong batch of recent economic data — is weighing to go lighter or heavier on rate hikes.

    Here are some takeaways from Friday’s report:

    Economists were anticipating that January’s blockbuster 504,000 net job gain was an anomaly due to a combination of factors such as annual data adjustments, warm weather and employers hoarding workers.

    But the US labor market in February showed that, overall, it remained fairly resistant to the Fed’s yearlong barrage of interest rate hikes. The latest employment snapshot from the Bureau of Labor Statistics also showed only a slight downward revision to the January jobs total.

    “This report, it’s not about the Federal Reserve, it’s not about inflation, it’s about you; it’s about how workers are doing,” said Claudia Sahm, founder of Sahm Consulting and a former Fed economist. “And once again, we had a month in which we were adding jobs on net, and this is really good for workers.”

    There are also encouraging signs for employers, she said, noting some of the biggest gains were in industries that have been suffering from the deepest shortages since the pandemic.

    The leisure and hospitality industry added 105,000 jobs in February, accounting for 34% of the entire month’s total gains and putting the sector that much closer to matching its pre-pandemic levels. As of February, the leisure and hospitality industry was 410,000 jobs, or 2.42%, shy of February 2020 employment levels, a CNN analysis of BLS data shows.

    “Right now, we’re still in a phase of getting back to normal in terms of not having labor shortages, not having the costs of serving customers rise and rise,” Sahm said. “I would much rather see us get back to normal by workers coming back as opposed to customers going away.”

    Despite the Fed hammering out a succession of rate hikes during the past year, construction employment hasn’t yet faltered. In February, the construction industry added 24,000 jobs, marking 12 consecutive months of employment growth.

    “Contractors are continuing to work through existing backlogs that have grown over the past two years as new opportunities arose and supply chain issues extended construction timelines,” wrote Nick Grandy, construction and real estate senior analyst at RSM US.

    Notable sectors that recorded job losses during the month were in information, which was down another 25,000 jobs (-0.8%); transportation and warehousing, which was down 21,500 jobs (0.3%); and manufacturing, which was down 4,000 positions.

    While the headline job figure and relatively minimal losses show overall strength, there is an indication of a pullback across industries. The BLS’ employment diffusion index, which shows the percentage of 250 industries that added jobs, fell to 56, which is the lowest reading since April 2020.

    “That indicates that the impact of high interest rates is spilling over to more industries,” said Julia Pollak, chief economist at ZipRecruiter.

    The labor market has remained extremely tight and fairly out of whack for the past three years. Friday’s report showed that “a modicum of slack crept back into the jobs market,” wrote Wells Fargo economists Sarah House and Michael Pugliese.

    The unemployment rate moved to 3.6% from its 53-year-low of 3.4%. That increase was in part due to more people reentering the workforce and joining the ranks of the unemployed, which the BLS classifies as people without jobs actively searching for work.

    February’s employment report showed a 0.1 percentage point increase in the labor force participation rate to 62.5% — the highest it’s been since April 2020.

    The average workweek ticked down to 34.5 hours from a revised 34.6 hours, signaling a “significant overall drop” in labor demand, said Brad McMillan, chief investment officer for Commonwealth Financial Network.

    Still, with the prime-age employment to population ratio increasing to 80.5% — on par with early 2020 levels — there may be little space left for sustained labor supply gains, according to Matt Colyar, a Moody’s Analytics economist.

    “February’s figure, apart from early 2020 readings, is higher than any rate during the previous decade-long expansion,” Colyar noted. “Even in corners of the economy where demand has slumped, businesses have shown little appetite to lay off workers en masse. As other sectors continue to hire rapidly, an acceleration in wage growth will remain a looming threat.”

    A softening in average hourly earnings is helping fuel hopes for a soft landing.

    At 0.2% on the month, wage growth was below expectations and measured 4.6% year over year.

    “There were signs in today’s report that progress on inflation can be made without torpedoing employment,” the Wells Fargo economists noted.

    As of February, the annualized rate of wage growth during the past three months is slightly under 3.6%, a pace seen when inflation was below the Fed’s target, said economist Dean Baker, co-founder of the Center for Economic and Policy Research.

    “Perhaps most important from the Fed’s perspective is the slowdown in wage growth,” Baker wrote in a statement. “The 3.6% annual rate over the last three months can hardly be seen as posing a serious threat of inflation. This slowing in the average hourly wage, coupled with the 4% rate reported in the fourth quarter Employment Cost Index, should provide solid evidence that wage growth has slowed sharply.”

    A hot batch of January economic data helped to send the Fed into a more hawkish turn. Fed Chair Jerome Powell told members of Congress this week that the Fed is prepared to increase the pace of its rate hikes if warranted.

    “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell told lawmakers.

    There’s still more data to come before the Fed meets for its two-day policymaking meeting on March 21-22, notably the Consumer Price Index, Producer Price Index and the Commerce Department’s retail sales report. However, Friday’s jobs report likely won’t spur a more dovish turn from the Fed, said Sean Snaith, an economist and director of the University of Central Florida’s Institute for Economic Forecasting.

    “We didn’t go from a four-alarm fire to a five-alarm fire with this data report, but the inflation flames aren’t out either,” he wrote in a note Friday. “And nothing today indicates that the Fed needs to change its more aggressive approach to raising interest rates.”

    Still, economist Gregory Daco cautioned that the Fed shouldn’t fall into the trap of confirmation bias by letting the stronger-than-expected economic data influence the analysis of Friday’s jobs report and next week’s CPI report.

    The Fed may see the low unemployment rate and the robust job gains as fueling wage growth, said Daco, chief economist at EY Parthenon.

    “Our view, however, is slower job growth in the goods sector, easing hours worked and moderating sequential wage growth momentum and a rise in the labor force participation rate indicate a welcome easing of labor market tightness,” Daco noted. “While we acknowledge this report was by no means a weak one, we also observe that some of the job gains were in sectors where there has been a structural employment shortfall — health care and education in particular. Employment strength in those sectors may not be indicative of cyclical wage pressures, but rather easing structural constraints.”

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  • The US economy added 311,000 jobs in February, outpacing expectations | CNN Business

    The US economy added 311,000 jobs in February, outpacing expectations | CNN Business

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    Minneapolis
    CNN
     — 

    The US economy added 311,000 jobs in February, according to the latest monthly employment snapshot from the Bureau of Labor Statistics, released Friday.

    That’s a pullback from the blockbuster January jobs report, when a revised 504,000 positions were added, but shows the labor market is still emitting plenty of heat.

    The unemployment rate ticked up to 3.6% from 3.4%.

    February’s net job gains surpassed economists’ estimates for a more modest month, with only 205,000 to be added. Separately, downward revisions to December’s and January’s totals weren’t that drastic.

    While Friday’s report is a strong one, that’s actually bad news in the broader context of the Federal Reserve’s campaign to curb high inflation, said PNC Financial Services chief economist Gus Faucher.

    “It’s much hotter than the economy can run, and so this means the Fed is going to have to continue to hike interest rates,” he told CNN. “And that makes a recession more likely.”

    Barring a surprisingly low Consumer Price Index inflation report next week, Faucher said he expects the Fed to go forward with a half-point rate hike at its March 21-22 meeting, which would be a higher pace than the recent, more moderate quarter-point increase.

    The Fed has been battling for almost a year to slow the economy and crush the highest inflation in 40 years, but the labor market continues to defy those efforts.

    “Coming up on the one-year anniversary of the Fed’s first rate hike, we never thought we would see the economy churning out 311,000 more jobs this month,” said Chris Rupkey, chief economist of FwdBonds, in a statement. “The party is on and the labor market is having a blast. The economy clearly is not landing, it is soaring.”

    The monthly job gains remain well above pre-pandemic norms, when roughly 180,000 jobs were added per month between 2010 and 2019, BLS data shows. However, the labor market remains tight and imbalances continue to persist in the ongoing recovery efforts from the devastating pandemic.

    Labor turnover data released earlier this week for January showed that there were 1.9 job openings for every person looking for one. Fed Chair Jerome Powell has frequently highlighted how the labor market remains short of pre-pandemic growth projections by more than 3 million people.

    The pandemic accelerated expected demographic trends (the aging out of the massive Baby Boom generation) with increased retirements; people also dropped out of the workforce for care-related needs and health concerns such as long Covid; and there were hundreds of thousands of workers who died from Covid.

    February’s employment report showed a 0.1 percentage point increase in the labor force participation rate to 62.5% — the highest its been since April 2020. However, it remains below pre-pandemic levels of 63.4%.

    Additionally, there was some upward movement in the jobless rate, which increased 0.2 percentage points to 3.6%.

    “Contributing to upward pressure here, there were more people looking for work,”said Mark Hamrick, senior economic analyst at Bankrate.

    Industries with notable job gains included leisure and hospitality, retail trade, government and health care. After being crushed during the pandemic, the leisure and hospitality has been steadily adding back employees and trying to meet increased demand from consumers shifting their spending from goods to services.

    Average hourly earnings — a closely watched metric as the Fed seeks to evaluate the impact of rising wages on inflation — grew 0.2% month-on-month and were up 4.6% over the year before.

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  • Rain rates in California during newest storm may reach 1 inch per hour | CNN

    Rain rates in California during newest storm may reach 1 inch per hour | CNN

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    CNN
     — 

    Millions of Californians already hammered by ferocious snowfall were hit Thursday by a new storm, with torrential rain threatening to cause dangerous flooding and the Weather Prediction Center increasing its excessive rainfall outlook for parts of the state to a level 4 of 4.

    “If you have feet of snow on your roof, all of a sudden that’s going to get very, very heavy. That snow is going to absorb the rainfall,” CNN Meteorologist Chad Myers warned Thursday.

    “And then in the higher elevations, it will wash away some of that snowfall. So, rain on snow will begin to fill up parts of the San Joaquin Valley.”

    About 16.7 million people are under flood watches in California and slices of Nevada. Hourly rainfall rates will steadily increase in intensity across California from Thursday overnight through Friday morning, potentially reaching 1 inch per hour.

    The level 4 excessive rainfall warning is targeted to two sections in central California – the coast from Salinas southward to San Luis Obispo and areas in the foothills of the Sierras near Fresno – Thursday overnight into Friday. The last time the Bay Area and Central Coast were in “high risk” was in 2010, the National Weather Service office in San Francisco said.

    Much of the state is under some risk of excessive rainfall Thursday and Friday.

    “An atmospheric river will bring anomalous moisture to California Thursday and Friday. The combination of heavy precipitation and rapid snow melt below 5,000 feet will result in flooding,” the prediction center said Wednesday, adding that “numerous” floods are likely for millions.

    The most vulnerable areas for flooding from rain and snowmelt are creeks and streams in the foothills of the Sierra Nevada, the prediction center said.

    Higher elevations will see heavy, wet snow. “This will lead to difficult travel, and combined with an already deep snowpack, may lead to increasing impacts from the depth and weight of the snow,” the prediction center said.

    The bleak forecast spurred officials across central and Northern California to urge residents to prepare, with residents in one area advised to stock up on essentials for two weeks. Others were asked to use sandbags to protect their properties and clear their waterways to lessen any flooding impacts.

    “We are asking people to watch their news, stay informed, have a full tank of gas in case they need to evacuate, get snow off of their roof if they can, if it’s safe,” Lt. Gov. Eleni Kounalakis told CNN on Thursday. “And just be very vigilant and prepared, because we are in the era of extreme weather, and that’s what we are seeing this week.”

    Here’s what the storm could bring:

    • Heavy rainfall: The National Weather Service in San Francisco forecasts rainfall totals through Sunday morning will be from 1.5-3 inches for most urban areas with 3-6 inches in some hilly areas. As many as 8 inches could fall on the Santa Cruz Mountains and locally up to 12 inches over some peaks and higher terrain of the Santa Lucia Mountains. The National Weather Service in Los Angeles is forecasting 2-4 inches across Santa Barbara and San Luis Obispo counties, with some areas in the latter receiving as many as 10 inches through late Friday night. The Weather Prediction Center said: “The abnormally warm and wet conditions moving in are expected to cause rapid snowmelt.”

    • Ferocious winds: More than 15 million people across central and Northern California, northern Nevada and southwestern Idaho are under high wind alerts. Wind gusts could reach up to 55 mph across lower elevations and up to 70 mph across peaks and mountains. Strong winds could knock down power lines and trees – exacerbating thousands of existing power outages from previous storms that dumped heavy snow, particularly in higher elevations.

    • More intense snow: Parts of the Sierra Nevada above 8,000 feet could get hit with 8 feet of snow. And some higher elevations across southern Oregon and the Rocky Mountains in Idaho, Montana and Wyoming could get pounded by 2 feet of snowfall between Thursday and Friday.

    Already, 34 of California’s 58 counties are under a state of emergency issued by the governor’s office due to previous storms and this week’s severe weather. The state activated its flood operations center Thursday morning.

    The forecast also led some ski resorts to announce closings. Kirkwood Mountain Resort said it would not open Friday, as did the Northstar California resort and the Heavenly resort in South Lake Tahoe, on Nevada’s border with California.

    Meanwhile, the Eastern Sierra Avalanche Center issued a backcountry avalanche warning for sections of Mono County, according to the National Weather Service in Reno, Nevada.

    Many of the areas preparing for Thursday’s storm have not had a chance to recover from the multiple rounds of fierce snow that buried some neighborhoods and made roads inaccessible as residents ran low on essential supplies.

    In hard-hit San Bernardino County, one of the recent storms claimed the life of a resident in a car crash, the sheriff’s department told CNN on Wednesday.

    video thumbnail california snowbank 81year-old

    Grandson reveals 81-year-old’s reaction after surviving in snowbank for a week

    As the storm hits central California, some urban flooding along with flooding from the smaller creeks and streams is likely. Eventually, more roads are expected to flood as the main rivers rise, said Katrina Hand, a meteorologist at the weather service’s Sacramento office.

    San Francisco officials urged small businesses to clear storm drains, stock up on inventory, use sandbags and ensure equipment is properly stored. They also suggested employers consider adjusting their work schedules for workers’ safety.

    In Merced, crews tried to clear storm drains and fortify creek banks ahead of the storm.

    City officials said flooding from previous, deadly rounds of atmospheric rivers that battered much of the state in January has made the city’s water ways unsafe.

    Atmospheric rivers are long, narrow bands of moisture in the atmosphere that carry warm air and water vapor from the tropics.

    “The city urges all residents to avoid these waterways and walking paths,” Merced officials said. “Because of ground saturation and erosion from prior storms, expect to see more debris in creek flows.”

    In San Luis Obispo, city officials on Wednesday said residents should be informed on flood insurance policies and be prepared to protect their homes. On Thursday, they issued an evacuation order for residents south of the Arroyo Grande Creek Levee.

    Evacuation warnings were also issued for residents in low-lying areas of Santa Cruz County and for people in Tulare County.

    In the Big Sur area, officials urged residents to have enough food and other essentials for at least two weeks. The Big Sur area, a roughly 90-mile stretch of California’s central coast, is one of the area’s renowned tourist attractions with rugged cliffs, mountains and hidden beaches along the Pacific Coast Highway.

    In Kern County, home to Bakersfield, fire officials urged residents to create emergency kits and to be aware of escape routes and safe areas to seek shelter if needed. Officials also encouraged the use of sandbags to protect properties.

    And in Sacramento, city officials said they intend to open overnight warming centers beginning Friday in preparation for the expected heavy rainfall and low temperatures.

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  • Credit Suisse delays annual report after ‘late call’ from the SEC | CNN Business

    Credit Suisse delays annual report after ‘late call’ from the SEC | CNN Business

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    London
    CNN
     — 

    Credit Suisse can’t catch a break.

    In the latest piece of troubling news, the beleaguered Swiss bank has delayed the publication of its 2022 annual report following a “late call” from the US Securities and Exchange Commission on Wednesday evening.

    The SEC got in touch over revisions the bank had previously made to its cash flow statements for 2019 and 2020, Credit Suisse

    (CS)     said in a statement Thursday.

    Shares in the bank, which have been trading around record lows, slid 5%.

    “Management believes it is prudent to briefly delay the publication of its accounts in order to understand more thoroughly the comments received,” the company said.

    Credit Suisse added that its 2022 financial results were not impacted. Those revealed the biggest annual loss since the financial crisis in 2008, laying bare the scale of the challenge the bank faces as it attempts a turnaround.

    Thursday’s news underscores that challenge and will also add to concerns about governance at Credit Suisse. It is already in the crosshairs of Switzerland’s financial regulator, which is reportedly looking into comments the lender’s chairman made about the health of its finances.

    Customers withdrew 111 billion Swiss francs ($121 billion) in the final three months of 2022, when the bank was hit by social media speculation that it was on the brink of collapse.

    The rumors, which sparked a selloff in the lender’s shares, followed a series of missteps and compliance failures that have hurt the bank’s reputation and profit, as well as costing top executives their jobs.

    Finma, the Swiss regulator, is seeking to establish the extent to which Axel Lehmann, and other bank representatives, were aware that clients were still withdrawing funds when he told reporters that outflows had stopped, Reuters reported last month, citing people familiar with the matter.

    Finma declined to comment and Credit Suisse told CNN it did not “comment on speculation.”

    In October, Credit Suisse embarked on a “radical” restructuring plan that entails cutting 9,000 full-time jobs, spinning off its investment bank and focusing on wealth management.

    “We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation by reshaping our portfolio, reallocating capital, right-sizing our cost base, and building on our leading franchises,” CEO Ulrich Körner said on February 9.

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  • Buying bank stocks before a recession used to be madness. Not anymore | CNN Business

    Buying bank stocks before a recession used to be madness. Not anymore | CNN Business

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    London
    CNN
     — 

    Investors are bucking tradition this year by piling into big bank stocks just as major economies are expected to either slow down or fall into recession.

    The Stoxx Europe 600 Banks index, a group of 42 big European banks, climbed 21% between the start of the year and late February — when it hit a five-year high — outperforming its broader benchmark index, the Euro Stoxx 600

    (SXXL)    . The KBW Bank Index, which tracks 24 leading US banks, has risen by a more modest 4% so far this year, slightly outpacing the broader S&P 500

    (DVS)    .

    Both bank-specific indexes have surged since lows hit last fall.

    The economic picture is far less rosy. The United States and the biggest economies in the European Union are expected to grow at a much slower rate this year than last, while UK output is likely to contract. A sudden recession “at some stage” is also a risk for the United States, former Treasury Secretary Larry Summers told CNN Monday.

    But the widespread economic weakness has coincided with high inflation, forcing central banks to raise interest rates. That’s been a boon for banks, helping them make heftier returns on loans to households and businesses, and as savers deposit more of their money into savings accounts.

    Rate hikes have buoyed the stocks of big banks, but so too has a greater confidence in their ability to weather economic storms 15 years after the 2008 global financial crisis nearly toppled them, fund managers and analysts told CNN.

    “Banks are, generally speaking, much stronger, more resilient, more capable to [withstand a] recession,” than in the past, said Roberto Frazzitta, global head of banking at consultancy Bain & Company.

    Interest rates in major economies started climbing last year as policymakers launched their campaigns against soaring inflation.

    The steep rate hikes followed a prolonged period of ultra-low borrowing costs that started in 2008. As the financial crisis ravaged economies, central banks slashed interest rates to unprecedented lows to incentivize spending and investment. And, for more than a decade, they barely budged.

    Banks are a less attractive bet for investors in that environment as lower interest rates often feed into lower returns for lenders.

    “[The] post-crisis period of very low interest rates was seen as very bad for bank profitability, it squeezed their margins,” said Thomas Mathews, senior markets economist at Capital Economics.

    But the rate hiking cycle that got underway last year, and shows few signs of abating, has changed investors’ calculations. Fed Chair Jerome Powell said Tuesday that interest rates would rise more than people anticipated.

    Higher potential returns for shareholders are drawing investors back into the sector. For example, the average dividend yield for bank stocks in Europe — the amount of money a company pays its shareholders every year as a proportion of its share price — is now around 7%, said Ciaran Callaghan, head of European equity research at Amundi, a French asset management firm.

    By comparison, the dividend yield for the S&P 500 currently stands at 2.1%, and for the Euro Stoxx 600 at 3.3%, according to Refinitiv data.

    European bank stocks have risen particularly sharply in the past six months.

    Mathews at Capital Economics attributed their outperformance relative to US peers partly to the fact that interest rates in the countries that use the euro are still closer to zero than in the United States, meaning that investors have more to gain from rates rising.

    It can also be put down to Europe’s remarkable reversal of fortune, he said.

    Wholesale natural gas prices in the region, which hit a record high in August, have tumbled back to their levels seen before the Ukraine war, and a much-feared energy shortage has been avoided this winter.

    “Only a few months ago people were talking about a very deep recession in Europe compared to the US,” Mathews said. “As those worries have unwound, European banks have done particularly well.”

    But European economies are still fragile. When economic activity slows down, bank stocks are typically among those hit hardest. That’s because banks’ earnings are, to varying extents, tied to borrowers’ ability to repay their loans, as well as to consumers’ and businesses’ appetite for more credit.

    This time around, though — unlike in 2008 — banks are in a much better position to withstand defaults on loans.

    After the global financial crisis, regulators sprang into action, requiring lenders, among other measures, to have a large capital cushion against future losses. Capital is made up of a bank’s own funds, rather than borrowed money such as customer deposits.

    Lenders must also hold enough cash, or assets that can be quickly converted into cash, to repay depositors and other creditors.

    Luc Plouvier, a senior portfolio manager at Van Lanschot Kempen, a Dutch wealth management firm, noted that banks had undergone “structural change” in the past decade.

    “A lot of the regulation that’s been put in place [has] forced these banks to be more liquid, to have much more [of a] capital buffer, to take less risk,” he said.

    Joost de Graaf, co-head of European credit at Van Lanschot Kempen, agreed.

    “There are not any hidden skeletons in [banks’] balance sheets as far as we know.”

    — Julia Horowitz contributed reporting.

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  • What’s changed since Powell last headed to Capitol Hill | CNN Business

    What’s changed since Powell last headed to Capitol Hill | CNN Business

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    Minneapolis
    CNN
     — 

    Federal Reserve Chair Jerome Powell is set to appear before the Senate Banking Committee Tuesday to deliver the first part of his two-day semiannual monetary policy testimony before Congress.

    It’s his first appearance before the committee since June last year, when inflation was on its way to 9%.

    Powell is expected to speak to the progress the US central bank has made in its yearlong campaign to rein in high inflation by ratcheting up its benchmark interest rate from near zero to between 4.5% to 4.75%.

    Inflation has slowed in recent months, measuring 6.4% in January after hitting a 40-year high of 9.1% in June. However, the battle is not yet won, and Powell and other Fed officials have cautioned that disinflation will be bumpy and there’s a long “ways to go.”

    Fed policymakers have warned in recent weeks that interest rates will likely have to remain higher for longer in order for inflation to settle down to the central bank’s 2% target.

    This time last year, Powell’s congressional address came on the heels of Russia’s invasion of Ukraine, surging gas prices and a significant escalation in US inflation. The economy continuing to rebound and repair itself from the lingering effects of the pandemic — including the disruptions of the Omicron variant.

    Faced with a strong labor market, uncertain geopolitical developments and surging inflation, Powell told members of Congress then that he’d likely propose a quarter-point rate hike at the central bank’s forthcoming meeting.

    It’s now March 2023, and the central bank is faced with an “extraordinarily strong” labor market, ongoing geopolitical uncertainty and stubborn inflation. However, there are signals that some inflationary pressures have eased: China’s economic growth was recently downgraded; and supply chain disruptions are easing, the Federal Reserve Bank of New York reported Monday.

    The markets are currently expecting the Fed to make another quarter-point rate hike during its next meeting two weeks from now: The CME FedWatch Tool is showing a 69.4% probability of such a hike. However, the perceived chances of a half-point increase (at 30.6%) have grown considerably during the past few weeks. One month ago, the probability for a half-point increase was 3.3%, according to the CME FedWatch Tool.

    Still, several major pieces of economic data — including the latest labor turnover report, monthly jobs report, Consumer Price Index, Producer Price Index, and retail sales — are all due ahead of the Fed’s next policymaking meeting on March 21-22.

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  • JPMorgan Chase CEO Jamie Dimon says Ukraine invasion is a top economic concern | CNN Business

    JPMorgan Chase CEO Jamie Dimon says Ukraine invasion is a top economic concern | CNN Business

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    New York
    CNN
     — 

    The war in Ukraine and US-China relations are two of JPMorgan Chase CEO Jamie Dimon’s largest economic concerns, he said Monday.

    “The thing I worry the most about is Ukraine,” he told Bloomberg Television in an interview Monday morning. “It’s oil, gas, the leadership of the world, and our relationship with China — that is much more serious than the economic vibrations that we all have to deal with on a day-to-day basis.”

    Russia’s invasion of Ukraine began more than a year ago and has roiled the global economy, leading to energy and food price shocks, along with global supply chain disruptions that fueled surging inflation across the world and led to painful interest rate hikes from the world’s central banks.

    “This is the most serious geopolitical thing we’ve had to deal with since World War II,” Dimon said Monday, also highlighting the war’s impact on relations with China.

    Beijing enjoys a close relationship with Moscow, and the Chinese government has been purchasing Russian energy and supplying machinery, electronics, base metals, vehicles, ships and aircraft, throwing the Kremlin an economic lifeline.

    In recent months, tensions between the United States and China have increased as the countries compete for dominance of the microchip industry and argue over tariffs, US support for Taiwan and potential spy balloons.

    Dimon said JPMorgan Chase is taking an active role in improving the relationship between the United States and China by advising and engaging with both governments on keeping cordial relations. He’s hoping that “cooler heads prevail” but he doesn’t believe a business solution exists to ease growing disputes. While JPMorgan Chase does a fair share of business with Beijing, it’s the government, not private enterprise, that has to smooth tensions, he said.

    “We probably should have started resetting this 10 years ago,” he said. The US government has to sit down and have a “very serious conversation with the Chinese government,” he said.

    Dimon added that he believes the war in Ukraine could continue for years to come.

    On the home front, Dimon is still holding out hope for the possibility that the Federal Reserve can execute a soft landing — lowering interest rates while avoiding recession. But overall, his outlook remains cloudy.

    “A mild recession is possible, a harder recession is possible,” he said Monday. “I think there’s a good chance that inflation will come down, but not enough by the fourth quarter — the Fed may actually have to do more,” he said.

    Dimon did note that the US consumer is still very healthy: Home prices and wages are high, households still have more money in their bank accounts than they did before the pandemic and they’re still spending it.

    Consumers are in great shape, he said. “But that’s going to end at some point.”

    Still, even if America does enter a recession, he said, consumers are much stronger and will be able to better withstand a downturn than they were in 2008.

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  • Investor Mark Mobius says he cannot get his money out of China | CNN Business

    Investor Mark Mobius says he cannot get his money out of China | CNN Business

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    Mark Mobius has said he cannot take his money out of China due to the country’s capital controls, cautioning investors to be “very, very careful” about investing in an economy under a tight government grip.

    “I have an account with HSBC in Shanghai. I can’t take my money out. The government is restricting flow of money out of the country,” Mobius, founder of Mobius Capital Partners, told FOX Business in an interview published on March 2.

    “I can’t get an explanation of why they’re doing this … They’re putting all kinds of barriers. They don’t say: No, you can’t get your money out. But they say: give us all the records from 20 years of how you made this money … This is crazy.”

    Mobius’ comments were circulated on Chinese social media site WeChat at the weekend.

    Mobius led emerging market investment at Franklin Templeton Investments for three decades and is known for his bullish view on China. Now, though, he said, he “would be very, very careful” investing in the country.

    “The bottom line is that China is moving in a completely different direction than what Deng Xiaoping instituted when they started the big reform program,” he said, referring to the former Chinese leader.

    “Now you have a government which is taking golden shares in companies all over China. That means they’re going to try to control all of these companies … So I don’t think it’s a very good picture when you see the government becoming more and more control-oriented in the economy.”

    Mobius, who calls himself “the Indiana Jones of Emerging Market investing,” told FOX Business he’s increasing exposure to alternative markets such as India and Brazil.

    Mobius and HSBC could not be reached at the weekend.

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  • More rate hikes are needed, says Fed’s Mary Daly | CNN Business

    More rate hikes are needed, says Fed’s Mary Daly | CNN Business

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    New York
    CNN
     — 

    Federal Reserve policymakers will need to raise interest rates higher and keep them there longer to tackle the higher prices caused by sticky inflation, San Francisco Fed President Mary Daly said Saturday.

    “It’s clear there is more work to do,” Daly said in a speech at Princeton University. “In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary.”

    Daly acknowledged that high inflation and the aggressive policy action taken by the Fed to bring it down have caused panic on Main Street and Wall Street. “The responses range from fearing these actions will tip the economy into a recession to fearing they won’t be enough to get the job done,” she said.

    That fear has led volatile market swings upon each release of new economic data as uncertainty leads investors to “look for answers in the immediate,” said Daly, “but achieving our mandated goals takes time and a broader view.” The Fed’s current tightening regimen, she said, “was and remains appropriate given the magnitude and persistence of elevated inflation readings.”

    High inflation levels in goods, housing and other sectors along and strong economic data, she said, has led her to question the momentum of disinflation.

    Daly does not currently vote on Fed policy decisions but is a member of the Federal Open Market Committee and participates in policy meetings.

    Her speech followed a week of similar warnings from the Federal Reserve.

    Minneapolis Federal Reserve President Neel Kashkari said last Wednesday that he’s “open to the possibility” of a larger interest rate increase in the Fed’s March policy meeting, “whether it’s 25 or 50 basis points.” (That’s a quarter or half of a percent. A basis point is one hundredth of one percent).

    Atlanta Fed President Raphael Bostic also said Wednesday that he believes the Fed needs to raise its policy rate by half a percentage point at the next meeting.

    On Thursday, Fed Governor Christopher Waller warned that painful interest rates could go higher than expected, citing a slew of recent stronger-than-expected economic data.

    The Federal Reserve has lifted its target range for interest rates from near zero to between 4.5% to 4.75% over the past year in their fight against inflation. In February, they slowed the pace of their hikes to a quarter of a percentage point, down from half a percent in December. Inflation reached a 40-year high in 2022 but began to fall in the final quarter of the year. January’s inflation data showed that the rate of prices increases had inched up once again.

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  • ‘We are in limbo:’ Student loan borrowers still face months of uncertainty about Biden’s forgiveness program | CNN Politics

    ‘We are in limbo:’ Student loan borrowers still face months of uncertainty about Biden’s forgiveness program | CNN Politics

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    Washington
    CNN
     — 

    More than 40 million federal student loan borrowers could be eligible for up to $20,000 in debt forgiveness, but they will likely have to wait several more months before the Supreme Court rules on whether President Joe Biden can implement his proposed relief program.

    The Supreme Court heard oral arguments last week in two cases challenging Biden’s student loan forgiveness program, but justices aren’t expected to issue their decision until late June or early July.

    When the ruling comes will also determine when federal student loan payments, which have been paused due to the pandemic since March 2020, will restart.

    Some borrowers have been anxiously waiting for years to see if Biden would fulfill his campaign pledge to cancel some federal student loan debt. The president finally announced a forgiveness plan last August.

    But after 26 million people applied, the program was blocked by lower courts in November – before any debt could be canceled.

    “In some ways, it feels like we are one step closer now that they’ve heard the oral arguments, but until a decision is made, it still feels like we are in limbo,” said Lindsay Clausen, who has about $68,000 in student loan debt and works as an instructional designer at a university.

    Clausen, 33, filed for relief from Biden’s forgiveness program last fall as soon as the application was open, hoping the forgiveness would help her and her husband save for a new home and expand their family.

    “I felt relief, and then it was like a rug was pulled from underneath me,” Clausen said.

    “Whichever way SCOTUS (Supreme Court of the US) decides to rule, it will at least be nice to have an answer,” she added.

    The Biden administration has estimated that more than 40 million federal student loan borrowers would qualify for some level of debt cancellation, with roughly 20 million who would have their balance forgiven entirely, if the forgiveness program is allowed to move forward.

    But not everyone with a federally held student loan would qualify.

    Individual borrowers who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years could see up to $10,000 of their federal student loan debt forgiven. Those with higher incomes would be excluded.

    If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness. Pell grants are a key federal aid program that help students from the lowest-income families pay for college, but these borrowers are still more likely to struggle paying off their student loans.

    Student debt cancellation would deliver financial relief to millions of Americans, potentially helping them buy their first homes, start businesses or save for retirement.

    But those who have already paid off their student loans, or chose not to borrow money to go to college to begin with, would get nothing. And the estimated $400 billion cost of canceling some debt would shift to all taxpayers.

    At last week’s hearing, several of the conservative justices questioned whether that tradeoff is fair, while liberal Justice Sonia Sotomayor pushed back, arguing how many borrowers “don’t have friends or families or others who can help them make these payments.”

    The back-and-forth on fairness touches on one of the biggest complaints about the nation’s higher education system: many people feel they need to go to college, and as a result borrow money, to get ahead.

    Angel Enriquez, a 30-year-old meteorologist with about $61,000 in student loan debt, is one of those people.

    Angel Enriquez poses for a portrait at Bizzell Memorial Library at the University of Oklahoma on June 3, 2022.

    His parents, immigrants from Mexico, couldn’t afford to help him pay for college. Enriquez was wait-listed at a state school that had a meteorology program, so he instead enrolled at a more expensive school out of state. He is now pursuing a master’s degree, which he felt he needed to stand out in a competitive industry.

    “When you talk about fairness, it’s a complicated argument,” Enriquez said.

    “But if you talk to someone who comes from poverty, or someone who’s a person of color, they are going to benefit from the forgiveness program the most because they’re the ones that have to jump through extra financial hoops in order to get where everyone else in the educated country is,” he said.

    For some students, college degrees do not deliver the step up in the world they hoped for.

    Even though Blake Goddard worked part-time jobs while in college, he still had to borrow nearly $90,000 for his bachelor’s degree in network communications management from DeVry University. In an effort to land a higher-paying job in the information technology industry, he then earned his master’s degree, borrowing another $44,000.

    Despite those degrees, most of his jobs have been temporary contract positions, and many of his co-workers opted for getting lower-cost IT industry certifications rather than a four-year degree.

    Blake Goddard poses for a portrait in his home on June 10, 2022.

    Meanwhile, the Department of Education has found that DeVry University, a for-profit college, misled at least 1,800 borrowers with false advertising about job placement rates.

    While Goddard, 45, considers himself “one of the lucky ones” who would qualify for $20,000 of debt relief, the cancellation wouldn’t make too much of a dent in his more than $150,000 balance.

    His debt, Goddard said, is “so detrimental” to his American dream, which was to buy a house and have a family.

    “I was stupid enough to fall for it,” Goddard said about taking out student loans.

    “I wish we could make it so nobody else in this country falls into the same trap,” he added.

    Now, he’s committed to helping others avoid borrowing so much money for college and volunteers with an organization that helps students pursue careers in STEM fields.

    One criticism of Biden’s one-time forgiveness program is that it would do nothing to address the cost of college for future students.

    A more permanent solution to the college affordability problem would have to be created by Congress, but lawmakers have failed to pass any sweeping measure. A provision to make community college free was dropped from Biden’s Build Back Better agenda before it came to a vote in the House in 2021.

    The Biden administration is also working on changes to existing federal student loan repayment plans, which don’t need congressional approval, and that aim to make it easier for borrowers to pay for college.

    The Department of Education is currently finalizing a new income-driven repayment plan to lower monthly payments as well as the total amount borrowers pay back over time. In contrast to the one-time student loan cancellation program, the new repayment plan could help both current and future borrowers.

    Additionally, in July, changes will be made to the Public Service Loan Forgiveness program, which allows certain government and nonprofit employees to seek federal student loan forgiveness after making 10 years of qualifying payments. The changes will make it easier for some borrowers to receive debt forgiveness.

    If the Supreme Court ultimately gives the student loan forgiveness program the green light, it’s possible the government will begin issuing some debt cancellations fairly quickly. The administration has said it already approved 16 million applications for relief.

    But several of the conservative justices expressed skepticism last week about whether Biden has the power to implement his student loan forgiveness program.

    Lawyers for the government have remained confident that their plan is legal. They point to a 2003 law passed after the September 11, 2001, terrorist attacks that grants the secretary of education power to make sure people are not worse off in respect to their student loans in the event of a national emergency.

    “I’m confident we’re on the right side of the law,” Biden told CNN a day after the oral arguments when asked if he was confident the administration would prevail in the case. “I’m not confident of the outcome of the decision yet.”

    If the Supreme Court strikes down Biden’s student loan forgiveness program, it could be possible for the administration to make some modifications to the policy and try again – though that process could take months.

    The pandemic pause on payments will remain in effect until either 60 days after the Supreme Court’s decision, or late August – whichever comes first.

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  • CFPB: What it does and why its future is in question | CNN Business

    CFPB: What it does and why its future is in question | CNN Business

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    New York
    CNN
     — 

    The US Supreme Court decided this week to hear a case that will consider the constitutionality of funding for the Consumer Financial Protection Bureau and, in doing so, test the constraints of US regulators’ power. The case would be heard in the fall, with a decision likely by summer 2024.

    But what is the CFPB? How does its work affect your wallet? And why is its future potentially at risk?

    The agency was created after the 2008 financial meltdown, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. That law was passed in the wake of the 2007 subprime mortgage crisis and the Great Recession that followed.

    The broad purpose of the CFPB is to protect consumers from financial abuses and to serve as the central agency for consumer financial protection authorities.

    Prior to its creation, as the agency notes on its site, “[c]onsumer financial protection had not been the primary focus of any federal agency, and no agency had effective tools to set the rules for and oversee the whole market.”

    The CFPB has regulatory authority over providers of many types of financial products and services, including credit cards, banking accounts, loan servicing, credit reporting and consumer debt collection.

    It is charged with implementing and enforcing consumer protection laws, making rules and issuing guidance for consumer financial institutions. And it is the place consumers can go to lodge complaints about financial products and services.

    Importantly, Dodd-Frank also gave the agency new authority to determine whether any given consumer financial product or service is unfair, deceptive or abusive and therefore unlawful.

    While there are critics of the agency’s current structure and funding, it has saved consumers money, made it easier for them to seek redress and to get better clarity and more tailored responses from companies when they have a problem with their accounts, loans or credit reports.

    “It has completely changed the consumer financial marketplace. Overall it has had a tremendous impact on making it more fair and transparent,” said Lauren Saunders, associate director of the National Consumer Law Center.

    For instance, the CFPB has taken action against bank overdraft policies. “Arguably, the focus on overdraft practices has led some banks to eliminate or reduce their overdraft fees,” said Christine Hines, legislative director of the National Association of Consumer Advocates.

    And it has gone after institutions for saddling consumers with pointless products, excessive fees and punitive terms.

    Both Hines and Saunders made a special note of CFPB’s actions against Wells Fargo, after the agency found the bank had been engaging in multiple abusive and unlawful consumer practices across several financial products between 2011 and 2022 — from auto loans to mortgage loans to bank accounts.

    Last month, the agency required the bank to pay more than $2 billion to customers who were harmed by such practices, plus a $1.7 billion fine that will go into a relief fund for victims.

    “More than 16 million accounts at Wells Fargo were subject to their illegal practices, including misapplied payments, wrongful foreclosures, and incorrect fees and interest charges,” the agency said in a blog post.

    In the area of mortgages, “CFPB has written rules to implement new protections so that mortgage lenders don’t make loans with tricks and traps that lead people to lose their homes,” Saunders said.

    It also has created other safeguards, including rules on how service providers should communicate with borrowers who want to find alternatives to foreclosure, Hines noted.

    Currently, the agency is in the midst of an effort to curb excessive or “junk” fees on a range of consumer financial products, such as credit card late fees.

    Critics of the CFPB have been trying for years to limit its power and independence, attacking the way the agency is structured and funded. Like federal banking regulators, its funding is not determined by lawmakers in Congress as part of the annual appropriations process. Rather, it gets its money from the Federal Reserve System’s earnings.

    “This nontraditional funding source limits congressional oversight of the agency and is the subject of legal challenges,” according to the Congressional Research Service.

    The latest challenge — arising from a federal appeals court ruling that CFPB’s funding violates the Constitution’s Appropriations Clause and separation of powers — is what the Supreme Court will take up in its October term.

    While it’s impossible to predict how the justices will rule, should they decide to uphold the appeals court ruling, that will put in doubt how the agency will be funded going forward, and whether it can continue to function effectively.

    It’s also unclear whether the agency’s actions and rule-making over the past 11 years would be invalidated, nor what impact it would have on banks and other financial institutions that have set up systems to be in compliance with CFPB rules and safe harbors.

    “The agency would be unable to do anything if the funding is invalidated. And prior rules could be challenged as the agency did not have a legal funding source that it could use to write those rules,” Cowen Washington Research Group analyst Jaret Seiberg said in a note to clients.

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  • What you need to know about this earnings season | CNN Business

    What you need to know about this earnings season | CNN Business

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


    New York
    CNN
     — 

    About 99% of all S&P 500 companies have reported fourth quarter earnings and the results aren’t great.

    Companies listed in the S&P 500 index beat analysts’ earnings estimates by an average of just 1.3% last quarter. For context, that’s way down on the index’s 5-year average of 8.6%, according to FactSet data.

    What’s happening: There have been some steep and disappointing profit misses as corporate America feels the sting of sticky inflation and the Federal Reserve’s interest rate hikes.

    Tech companies fared poorly this season: Apple

    (AAPL)     recorded a rare earnings miss while Intel

    (INTC)     and Google-parent company Alphabet also fell short of expectations.

    But it wasn’t all doom-and-gloom. Energy companies brought in yet another quarter of record profits, with Big Oil companies — such as Chevron, ConocoPhillips, Exxon and Shell — notching their most profitable years in history. Elsewhere, Tesla

    (TSLA)     reported record revenue gains and beat earnings expectations. Big box retailers Target

    (TGT)     and Walmart

    (WMT)     also surpassed estimates as US consumers kept on spending.

    Here’s what else traders need to know about the final few months of last year and beyond.

    Corporate profits could drop for the first time since 2020

    S&P 500 companies are on track to report a 4.6% drop in earnings year-over-year, according to FactSet data. That would mark their first earnings decline since the third quarter of 2020, when Covid shut down large swaths of the economy.

    Gloomy forecasts abound

    About 81 S&P 500 companies have issued negative earnings-per-share guidance for the first quarter of 2023, according to FactSet. That’s a lot higher than the 23 companies reporting positive guidance.

    There was no shortage of foreboding forecasts from top execs on earnings calls this season.

    Walmart beat estimates last quarter, but they also lowered expectations for future earnings.

    Home Depot

    (HD)     CEO Ted Decker said he was concerned that consumers were becoming less resilient to the economy. “We noted some deceleration in certain products and categories, which was more pronounced in the fourth quarter,” he said on an analyst call.

    Lowe’s executives, meanwhile, warned that they were preparing for a “more cautious consumer” this year.

    Investors feel like celebrating

    Wall Street traders appear to be taking this dour earnings season in their stride. The market is “rewarding positive earnings surprises more than average and punishing negative earnings surprises much less than average for the fourth quarter,” reports FactSet.

    Inflation is (still) a big deal

    More than 325 S&P 500 companies have cited the term “inflation” during their earnings calls for the fourth quarter. That’s well above the 10-year average of 157, according to FactSet document searches.

    But the worries over price hikes appear to be waning, at least a little bit. This marks the lowest number of S&P 500 companies using the “I”-word on their calls since the third quarter of 2021. Since last quarter, the number of inflation mentions has fallen by about 20%.

    ▸ ISM Services PMI — a report that measures the strength of the US service sector — is due out at 10 a.m. ET. The data is expected to show a slight slowdown in growth between January and February (54.5 in February vs. 56.5 in January. For context, a reading above 50 means the services economy is expanding).

    That deceleration would be a big deal. It would signal that the economy is beginning to cool and that the Fed’s efforts to fight inflation by raising interest rates are working. If services sector growth accelerates, however, it could signal that more aggressive rate hikes are ahead and send markets lower.

    ▸ Wall Street is anticipating (or dreading, depending on who you ask) next Friday’s unemployment report. The February data is expected to shed some light on a shockingly resilient labor market.

    Another unexpected surge in non-farm payrolls, like the 517,000 new jobs added in January, could indicate more Fed rate hikes are ahead. That could roil markets in this “good news is bad news” environment.

    Analysts expect that the economy added 200,000 new jobs last month, according to Refinitiv data.

    ▸ The Chinese economy surprised investors this week by quickly bouncing back from its zero-Covid shutdowns. China’s first consumer price index, producer price index and trade figures of 2023 are set to be released next week, which will show the full extent of the country’s rebound.

    “These numbers will offer the first official indications of mainland China’s reopening effect following the rebound seen in PMI numbers,” wrote analysts at S&P Global.

    Global manufacturing rose in February for the first time in seven months, according to the latest PMI surveys compiled by S&P Global. That growth was largely spurred on by China’s reopening.

    Shares of Silvergate Capital, a large lender to cryptocurrency firms, plunged nearly 60% — a record drop — on Thursday after the company told the Securities and Exchange Commission that it won’t be able to file its annual report on time and cited concerns about its ability to remain in business.

    The majority of Silvergate’s crypto clients, including Coinbase, Paxos, Galaxy Digital and Crypto.com, quickly cut ties with the bank amid the chaos.

    So what does it all mean?

    My colleague Allison Morrow explains: The California-based lender reported a $1 billion loss for the fourth quarter as investors panicked over the collapse of FTX, the exchange founded by Sam Bankman-Fried that is now at the center of a massive federal fraud investigation.

    FTX’s collapse in November rippled through the digital asset sector, forcing several firms to halt operations and even declare bankruptcy as liquidity dried up and investors fled.

    But unlike FTX, BlockFi, Celsius, Voyager and other crypto companies that folded last year, Silvergate is a traditional, federally insured lender that has positioned itself as a gateway to the crypto sector.

    It’s among the first major instances of crypto’s volatility spilling into the mainstream banking system — a scenario regulators and crypto skeptics have long feared.

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  • Tesla, Musk sued by shareholders over self-driving safety claims | CNN Business

    Tesla, Musk sued by shareholders over self-driving safety claims | CNN Business

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    Reuters
     — 

    Tesla

    (TSLA)     and its Chief Executive Elon Musk were sued on Monday by shareholders who accused them of overstating the effectiveness and safety of their electric vehicles’ Autopilot and Full Self-Driving technologies.

    In a proposed class action filed in San Francisco federal court, shareholders said Tesla defrauded them over four years with false and misleading statements that concealed how its technologies, suspected as a possible cause of multiple fatal crashes, “created a serious risk of accident and injury.”

    They said Tesla’s share price fell several times as the truth became known, including after the National Highway Traffic Safety Administration began investigating the technologies, and reports that the Securities and Exchange Commission was investigating Musk’s Autopilot claims.

    The share price also fell 5.7% on Feb. 16 after NHTSA forced a recall of more than 362,000 Tesla vehicles equipped with Full Self-Driving beta software because they could be unsafe around intersections.

    Tesla has said it acquiesced to the recall, though it disagreed with NHTSA’s analysis.

    “As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common stock, plaintiff and other class members have suffered significant losses and damages,” the complaint said.

    Tesla, which does not have a media relations department, did not immediately respond to requests for comment.

    Monday’s lawsuit led by shareholder Thomas Lamontagne seeks unspecified damages for Tesla shareholders from Feb. 19, 2019 to Feb. 17, 2023. Chief Financial Officer Zachary Kirkhorn and his predecessor Deepak Ahuja are also defendants.

    Tesla’s share price closed Monday up $10.75, or 5.5%, at $207.63, but the stock has lost about half its value since peaking in Nov. 2021.

    Musk is expected at Tesla’s March 1 investor day to promote the company’s artificial intelligence capability and plans to expand its vehicle lineup.

    The case is Lamontagne v Tesla Inc et al, U.S. District Court, Northern District of California, No. 23-00869.

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  • The US dollar is at a crossroads | CNN Business

    The US dollar is at a crossroads | CNN Business

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


    New York
    CNN
     — 

    Wall Street investors are reaching for their neck braces in preparation for yet another volatile swing in stock markets: A surging US dollar.

    The greenback — which is not just the dominant global currency but also “the key variable affecting global economic conditions,” according to the New York Federal Reserve — reached a 20-year high last year after the Fed turned hawkish with its aggressive rate hikes.

    Since then, inflation seemed to have softened, pushing the dollar down. But in recent weeks, as a slew of economic data has shown the Fed’s inflation battle is far from over, the currency soared by about 4% from its recent lows, and now sits near a seven-week high.

    Investors are stressing about this sudden rebound, since a stronger dollar means American-made products become more expensive for foreign buyers, overseas revenue decreases in value and global trade weakens.

    Multinational companies, naturally, aren’t thrilled about any of this. And around 30% of all S&P 500 companies’ revenue is earned in markets outside the US, said Quincy Krosby, chief global strategist for LPL Financial.

    What’s happening: The US dollar “finds itself at a significant crossroads yet again,” said Krosby. “While the Fed remains steadfastly data dependent, the dollar’s course as well remains focused on inflation and the Fed’s monetary response.”

    “The strong US dollar has been a headwind for international earnings and stock performance (for US investors),” wrote Wells Fargo analysts in a recent note.

    February was a rough month for markets: The Dow ended February down 4.19%, the S&P 500 fell 2.6% and the Nasdaq lost just over 1%.

    What’s next: Investors are clearly focused on the next Fed policy meeting, which is still three weeks away, for signals about the direction of rates. But until then, investors may gain some insight Tuesday when Fed Chairman Jerome Powell speaks before the Senate Banking Committee.

    They’ll also be watching next Friday’s jobs report for any softening in the labor market that could temper the Fed’s hawkish mood.

    Don’t forget the debt ceiling: Another significant threat to the dollar is looming in Congress — the ongoing debt ceiling fight. The United States could start to default on its financial obligations over the summer or in the early fall if lawmakers don’t agree to raise the debt limit — its self-imposed borrowing limit — before then, according to a new analysis by the Bipartisan Policy Center.

    That could potentially lead to a disastrous downgrade to America’s credit rating and could send the dollar spiraling as investors start to sell off their US assets and move their money to safer currencies.

    “It would certainly undermine the role of the dollar as a reserve currency that is used in transactions all over the world. And Americans — many people — would lose their jobs and certainly their borrowing costs would rise,” Treasury Secretary Janet Yellen told CNN in January.

    ▸ A lot has changed in the last twenty years. The gender pay gap hasn’t.

    In 2022, US women on average earned about 82 cents for every dollar a man earned, according to a new Pew Research Center analysis of median hourly earnings of both full- and part-time workers.

    That’s a big leap from the 65 cents that women were earning in 1982. But it has barely moved from the 80 cents they were earning in 2002.

    “Higher education, a shift to higher-paying occupations and more labor market experience have helped women narrow the gender pay gap since 1982,” the Pew analysis noted. “But even as women have continued to outpace men in educational attainment, the pay gap has been stuck in a holding pattern since 2002, ranging from 80 to 85 cents to the dollar.”

    ▸ Initial jobless claims, which measures the number of people who filed for unemployment insurance for the first time last week, are due out at 8:30 a.m. ET on Thursday.

    This will be the last official jobs data investors see before February’s heavily anticipated unemployment report next Friday.

    Economists are expecting 195,000 Americans to have filed for unemployment, which is higher than the seasonally adjusted 192,000 who applied two weeks ago.

    Initial claims have come in lower than expected in recent weeks and remain well below their pre-pandemic levels.

    The white-hot labor market in the US added more than 500,000 jobs in January, blowing analysts’ expectations out of the water and bringing the unemployment rate to its lowest level since May of 1969.

    That’s bad news for the Federal Reserve where policymakers have been attempting to tame inflation by cooling the economy through painful interest rate hikes.

    ▸ It’s a big day for groceries. Kroger (KR), Costco (COST) and Anheuser-Busch (BUD) all report earnings on Thursday.

    Investors will be watching closely for clues about consumer sentiment during an uncertain retail earnings season. On Tuesday, Kohl’s reported that it had a rough holiday season and executives at the company put the blame on inflation. The company said higher prices squeezed sales and forced it to mark down some products to entice shoppers — which hurt its profit margin.

    Those comments echoed those of other big box retailers like Walmart (WMT) and Target (TGT), who have said consumers are feeling the pinch of inflation.

    Still, Target and Walmart’s bottom lines were bolstered by food sales even as consumers pulled back on discretionary purchases.

    The US Senate voted on Wednesday to overturn a Biden administration retirement investment rule that allows managers of retirement funds to consider the impact of climate change and other ESG factors when picking investments.

    As my CNN colleagues Ali Zaslav, Clare Foran and Ted Barrett write: The rule is not mandated – it allows, but does not require, the consideration of environmental, social and governance factors in investment selection.

    Republicans complained that the rule is a “woke” policy that pushes a liberal agenda on Americans and will hurt retirees’ bottom lines.

    “This rule isn’t about saying the left or the right take on a given environmental, social, or governance issue is ‘correct,’” countered Senator Patty Murray (D-WA) on the Senate floor Wednesday. “It’s about acknowledging these factors are reasonable for asset managers to consider.”

    The measure will next go to President Joe Biden’s desk as it was passed by the House on Tuesday. The administration, however, has issued a veto threat. As a result, passage of the resolution could pave the way for Biden to issue the first veto of his presidency.

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  • Senate votes to overturn Biden administration retirement investment rule Republicans decry as ‘woke’ | CNN Politics

    Senate votes to overturn Biden administration retirement investment rule Republicans decry as ‘woke’ | CNN Politics

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    CNN
     — 

    The Senate passed a politically charged resolution on Wednesday to overturn a Biden administration retirement investment rule that allows managers of retirement funds to consider the impact of climate change and other environmental, social and governance factors when picking investments.

    Republicans complain the rule is “woke” policy that pushes a liberal agenda on Americans and will hurt retirees’ bottom lines, while Democrats say it’s not about ideology and will help investors.

    The measure, which would rescind a Department of Labor rule, will next go to President Joe Biden’s desk as it was passed by the House on Tuesday. The administration, however, has issued a veto threat. As a result, passage of the resolution could pave the way for Biden to issue the first veto of his presidency.

    Opponents of the rule could try to override a veto, but at this point it appears unlikely they could get the two-thirds majority needed in each chamber to do so.

    The resolution, authored by GOP Sen. Mike Braun of Indiana, only needed a simple majority to pass. It passed on a vote of 50 to 46 with Democratic Sens. Joe Manchin of West Virginia and Jon Tester of Montana voting with Republicans.

    Republican lawmakers advanced it under the Congressional Review Act, which allows Congress to roll back regulations from the executive branch without needing to clear the 60-vote threshold in the Senate that is necessary for most legislation.

    Opponents of the rule have argued that it politicizes retirement investments and that the Biden administration is using it as a way to push a liberal agenda on Americans.

    “The Biden Administration wants to let Wall Street use workers’ hard-earned savings to pursue left-wing political initiatives,” Senate GOP leader Mitch McConnell said in remarks on the Senate floor on Tuesday morning.

    Republican Sen. John Barrasso of Wyoming said at a news conference on Tuesday, “What’s happened here is the woke and weaponized bureaucracy at the Department of Labor has come out with new regulations on retirement funds, and they want retirement funds to be invested in things that are consistent with their very liberal, left-wing agenda.”

    Supporters of the rule argue that it is not a mandate – it allows, but does not require, the consideration of environmental, social and governance factors in investment selection.

    Senate Majority Leader Chuck Schumer said on Wednesday that Republicans are “using the same tired attacks we’ve heard for a while now that this is more wokeness. … But Republicans are missing or ignoring an important point: Nothing in the (Labor Department) rule imposes a mandate.”

    “This isn’t about ideological preference, it’s about looking at the biggest picture possible for investments to minimize risk and maximize returns,” he said, noting it’s a narrow rule that is “literally allowing the free market to do its work.”

    The statement of administration policy saying that Biden would veto the measure similarly states, “the 2022 rule is not a mandate – it does not require any fiduciary to make investment decisions based solely on ESG factors. The rule simply makes sure that retirement plan fiduciaries must engage in a risk and return analysis of their investment decisions and recognizes that these factors can be relevant to that analysis.”

    Republicans are also working to advance a measure to rescind a controversial Washington, DC, crime law – which critics argue is soft on violent criminals – with a simple majority vote in the Senate.

    Many Democrats oppose overriding the DC law. They argue local officials should make their own laws free of congressional interference and decry Republicans as hypocrites since they typically promote state and local rights.

    A Senate vote on the DC measure is expected next week.

    This story and headline have been updated with additional developments.

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  • UK house prices post sharpest fall since 2012 as high mortgage rates hurt | CNN Business

    UK house prices post sharpest fall since 2012 as high mortgage rates hurt | CNN Business

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    London
    CNN
     — 

    UK house prices last month saw their biggest annual decline since November 2012, in the latest indication of the lasting pain that former Prime Minister Liz Truss’s ill-fated “mini” budget inflicted on Britain’s property market.

    The average price of a house fell 1.1% to £257,406 ($310,000) in February compared with a year earlier, taking UK house price growth into negative territory for the first time since June 2020, lender Nationwide said Wednesday.

    House prices have now declined for six months in a row and are 3.7% below their August 2022 peak, according to Nationwide’s index based on purchases involving a mortgage.

    “The recent run of weak house price data began with the financial market turbulence in response to the mini budget at the end of September last year,” Nationwide’s chief economist Robert Gardner said in a statement.

    “While financial market conditions normalized some time ago, housing market activity has remained subdued,” reflecting “the lingering impact on confidence, as well as the cumulative impact of the financial pressures that have been weighing on households for some time,” he added.

    The “mini” budget unveiled in September by Truss and then-finance minister Kwasi Kwarteng collapsed UK bond prices, sent borrowing costs soaring and sparked chaos in the mortgage market, as lenders withdrew hundreds of products, and deals fell through.

    “The economy has largely moved on from the mini budget, but the hangover for the UK housing market is more prolonged. We’re still seeing the effects of higher mortgage rates in the last three months of last year,” said Tom Bill, head of UK residential research at broker Knight Frank.

    Surging food and energy costs alongside feeble pay growth have also taken a bite out of household budgets, weighing on consumer confidence and housing market activity.

    “Inflation has continued to outpace wage growth, and mortgage rates remain significantly higher than the lows recorded in 2021,” said Gardner at Nationwide. “Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis.”

    According to Bill, activity since Christmas has been “solid” but prices still have further to fall. He expects a decline of 5% this year.

    “House prices are 20% higher than they were before the pandemic and we expect around half of this to unwind over the next two years as buyers revise down their budgets,” Bill said.

    Mortgage rates have started to fall but recent stronger-than-expected UK economic data could lead the Bank of England to keep interest rates higher for longer, causing the downward drift in mortgage rates to “stall,” he told CNN. “That’s something we’re keeping an eye on.”

    — This is a developing story and will be updated.

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