Tag: iab-business

Yeezy fallout could push Adidas into its first annual loss in 31 years | CNN Business

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London
CNN
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Adidas has warned that it could suffer its first annual operating loss in more than three decades this year, mostly because it may have to write off the entire range of Yeezy-branded clothing and sneakers.

The German sportswear maker said Wednesday that it would face an operating loss of €700 million ($736 million) this year— its first in 31 years — because of a potential €500 million ($527 million) hit related to unsold Yeezy stock, and the cost of a strategic review.

Shares in Adidas

(ADDDF) fell 2.2% Wednesday morning after it published its 2022 results and outlook for 2023.

The company broke off its lucrative nine-year partnership with Yeezy designer Ye, the rapper formerly known as Kanye West, in October.

Adidas said last month that its annual revenue could plunge by €1.2 billion ($1.27 billion) this year as a direct result of the split, which came after Ye made a series of antisemitic remarks.

The rupture knocked around €600 million ($633 million) off the company’s fourth-quarter revenue, Adidas said Wednesday.

But the controversy has appeared to fuel demand for Yeezy sneakers through other sellers. Last week, John Mocadlo, chief executive of Impossible Kicks, a large online reseller of high-end sneakers and clothing, said demand for the shoes had surged 30% since around last October.

Adidas could perform better this year if it “repurposes” some of its Yeezy products, the company said without elaborating.

The gloomy outlook for Adidas follows what Chief Financial Officer Harm Ohlmeyer called a “disappointing year” for the German giant.

“We definitely did not perform as we should have performed,” he said when presenting the company’s results Wednesday.

Its operating profit fell 66% year-over-year to €669 million ($705 million).

While the company’s global sales grew 1% last year, it saw a 36% annual sales decline in China — its biggest single market — due partly to the nation’s now-ditched zero-Covid policy.

Adidas is hoping this year will mark a turning point.

“2023 will be a year of transition to set the base to again be a growing and profitable company,” Chief Executive Officer Bjørn Gulden said in a statement last month.

“I am convinced that over time we will make Adidas shine again. But we need some time.”

— Olesya Dmitracova contributed reporting.

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March 8, 2023
Buying bank stocks before a recession used to be madness. Not anymore | CNN Business

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London
CNN
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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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March 8, 2023
Elon Musk thinks he can fix Twitter’s advertising business after derailing it | CNN Business

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CNN
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Elon Musk on Tuesday offered an optimistic picture for how Twitter can improve the advertising business he helped derail and boost its bottom line while also admitting that keeping the social network running is proving to be a challenge after multiple rounds of layoffs.

In remarks at a Morgan Stanley Conference, Musk laid out his vision to boost Twitter’s core advertising business by adopting the standard strategy of most of the company’s peers: improving the relevance of the ads it serves.

“The advertising relevance is the most gigantic thing,” Musk said. “And this is going to sound totally bizarre, but Twitter did not consider relevance in advertising until three months ago.”

With that change, and larger cost cuts across the organization, Musk said he believes Twitter has “got a shot at being cash flow positive next quarter.”

“Going forward, Twitter will have very relevant, useful advertising,” Musk said. “And because it is useful, because it is relevant, there will be a massive increase in revenue, because it is now useful. So I’m very optimistic about the future. It’s been a very difficult four months, but I’m optimistic about the future.”

Since taking over the platform in late October, Twitter has suffered a mass exodus of top brands as Musk relaxed some content moderation policies, restored incendiary accounts and made a number of erratic remarks concerning politics and world affairs. Musk, who has previously tweeted about his hatred for advertising, made a quick bet on bolstering a paid subscription offering instead, but it has reportedly struggled to gain traction.

He also took the time to thank advertisers that have stuck with Twitter throughout his rocky takeover, including Disney and Apple.

But even as Musk looks to grow Twitter’s ad business, which has long made up nearly all of the company’s revenue, there are sincere doubts about whether the platform can even stay online.

Twitter has been inundated with outages, including a significant service disruption on Monday, and other user headaches since Musk took over, likely linked to the multiple rounds of mass layoffs that occurred under his watch. On Tuesday, he blamed the “overly complex” underlying technology for some of the recent service disruptions.

“The code base is like a Rube Goldberg machine, and when you zoom in on one part of the Rube Goldberg machine, there’s another Rube Goldberg machine, and then there’s another one,” Musk said at the event on Tuesday. “So it’s quite difficult to keep this thing running, and then also difficult to advance the product because it is really overly complex, to say the least.”

“We’ll make a change, what appears to be a small change somewhere, that then causes a massive disruption,” he said. Musk said Monday’s outage was the result of “what was supposed to be a small change to 1% of the Twitter user base [that] ended up being a catastrophic change to 100% of the Twitter user base.”

At the same time, Musk continues to make controversial remarks that may give brands pause about returning to, or increasing their spending on, the platform. Musk was criticized by some this week after he publicly mocked a Twitter worker with a disability who asked the Twitter owner whether he had been laid off.

At Tuesday’s event, Musk went on a series of unrelated tangents, including repeatedly taking aim at legacy media organizations. “What I’d say to advertisers and brands is, you know, use Twitter yourself and believe what you see on Twitter, not what you read in the newspapers,” Musk said. “Because what you see on Twitter is the real thing, and what you read in newspapers is not.”

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March 7, 2023
What’s changed since Powell last headed to Capitol Hill | CNN Business

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CNN
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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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March 7, 2023
JPMorgan Chase CEO Jamie Dimon says Ukraine invasion is a top economic concern | CNN Business

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CNN
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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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March 6, 2023
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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March 6, 2023
More rate hikes are needed, says Fed’s Mary Daly | CNN Business

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New York
CNN
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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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March 5, 2023
$30 million of Funko Pop! toys will be thrown in the trash | CNN Business

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CNN
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Thirty million dollars worth of Funko

(FNKO) Pop! figures – those big-headed, vinyl pop-culture dolls – will soon make their way into the hands of a new collector: The garbage collector.

Funko said in its fourth quarter earnings report that a combination of waning demand for the toys and a surplus of inventory is creating financial trouble for the company. Last year, they had to rent excess warehouse space just to hold the buildup of Funko figures, which range from Baby Yoda to Eddie Van Halen.

Funko was holding onto about $246.4 million worth of dolls at the end of 2022. That’s 48% more than what they had on hand just one year before.

The company intends to “eliminate” a bit of that nearly $250 million in inventory in the first half of 2023 “to reduce fulfillment costs by managing inventory levels to align with the operating capacity of our distribution center,” Funko said in a statement Wednesday. “This is expected to result in a write down in the first half of 2023 of approximately $30 to $36 million.”

In short, the product they’re storing is now worth less than the cost of keeping it on hand, so they’re dumping at least $30 million worth of it.

On a call with investors last week, CEO Brian Mariotti said Funko had already filled its Arizona distributing center to the brim with dolls and was forced to rent excess storage containers for them. The cost of that extra storage, he said, was causing the company to lose money at a rapid clip.

Company executives also announced that they would cut 10% cut of their workforce as a cost-saving measure.

Funko benefited during the pandemic boom, posting $1 billion in net sales for 2021 – a 58% increase from 2020 – but those gains didn’t hold up as the global economy reopened.

The company reported a total loss of $47 million in the fourth quarter of 2022. That’s down from a profit of $17 million during the same period the year before.

“It was clear on our last earnings call that the business and our operations hit an inflection point,” Mariotti said. “A combination of macro factors and Funko-specific issues have disrupted our financial and operating performance to an unacceptable degree.”

Funko stock has fallen by 9.4% so far this year.

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March 5, 2023
‘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
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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.

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.

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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March 5, 2023
Tesla recalls almost 3,500 Model Y cars for loose bolts | CNN Business

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New York
CNN
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Tesla is recalling 3,470 2022-2023 Model Y cars due to bolts in the second-row seat back frames not being secured properly.

An estimated 4% of cars are affected, a recall report submitted in late February said.

The loose bolts could cause the seat belts to not work properly in a crash, “which may increase the risk of an injury for occupants seated in affected second-row seating positions,” the National Highway Traffic Administration said.

On Model Y vehicles, the second-row driver- and passenger-side seat back frames are secured with four bolts per seat back. But during production for certain Model Y cars, one or more of the bolts securing the seat back frames to the lower seat frame “may not have been torqued to specifications.”

Owners can tell if their car is affected by seeing if their second-row seat back frame folds improperly or if it’s loose and rattles when driving.

Tesla found five warranty claims regarding the bolts since last December, but is not aware of any injuries or deaths due to it.

A driver in Fremont, California, found a faulty seat back bolt last December, triggering a Tesla investigation and risk assessment which ended February 17. A recall determination was made on the same day.

Tesla will inspect the bolts and tighten them if necessary for free of charge, and owner notification letters will be mailed.

The recall was filed the same month Tesla recalled all 363,000 US vehicles with the “Full Self Driving” driver assist software due to safety risks, a significantly larger recall, which was a blow to the automaker’s business model.

The NHTSA said, based on its analysis, Tesla’s “Full Self Driving” feature “led to an unreasonable risk to motor vehicle safety based on insufficient adherence to traffic safety laws.” And it warned the feature could violate traffic laws at some intersections “before some drivers may intervene.”

“The FSD Beta system may allow the vehicle to act unsafe around intersections, such as traveling straight through an intersection while in a turn-only lane, entering a stop sign-controlled intersection without coming to a complete stop, or proceeding into an intersection during a steady yellow traffic signal without due caution,” said the recall notice, posted on NHTSA’s website.

Tesla will attempt to fix the feature, which costs $15,000, through an over-the-air software update, the notice added.

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March 4, 2023
CFPB: What it does and why its future is in question | CNN Business

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New York
CNN
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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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March 3, 2023
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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March 3, 2023
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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March 3, 2023
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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March 2, 2023
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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March 1, 2023
Alphabet’s self-driving car unit has cut 8% of its staff this year | CNN Business

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CNN
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Waymo, the self-driving car division of Google

(GOOGL)’s parent company Alphabet, said on Wednesday that it has cut approximately 8% of its staff across two rounds of layoffs this year.

Some 209 jobs were eliminated in total, after cuts in late January and another more recent round, the company confirmed on Wednesday.

“We took a thoughtful approach and feel confident that we’re providing for each of these former teammates through this transition,” the company said in a statement to CNN Wednesday. “We’re confident that we have the right teams in place to achieve success for Waymo.”

The Waymo job cuts come amid a spate of layoffs in the tech sector, as the industry adjusts to waning demand for digital services years into the pandemic and confronts broader uncertainty in the global economy. Rising interest rates have also dried up the easy access to funding tech companies used to fuel ambitious projects and bets on the future.

Alphabet said in January that it was cutting 12,000 jobs, or 6% of its workforce, after having grown by more than 50,000 employees over the prior two years. The cuts to Waymo highlight how even Alphabet’s most ambitious and high-profile long-term bets are not immune to its renewed focus on reining in costs.

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March 1, 2023
Tesla to build next plant in Mexico | CNN Business

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New York
CNN
—

Tesla’s next vehicle assembly plant will be in Mexico near Monterrey, CEO Elon Musk announced Wednesday.

“We’re super excited about it,” Musk said during an investor day for the company. “We’ll continue to expand production at all of our existing factories. So this is not moving output to anywhere, from anywhere. This is supplemental production.”

The company currently has capacity to build about 2 million cars a year at four factories, in Fremont, California; Shanghai, China; Austin, Texas; and Berlin, Germany. It has set a goal of eventually building 20 million cars a year. The company delivered just over 1.3 million cars in 2022. The largest automaker in the world by production volume, Toyota, delivered just over 10 million cars globally in 2022.

Tesla did not comment on the cost of the new plant. The news was a confirmation of plans announced Tuesday by Mexican President Andres Manuel Lopez Obrador for Tesla to build its next factory in the country. Reuters reported that Mexican officials said the plant could cost $1 billion.

The company estimates to build the additional plants needed to reach 20 million vehicles will cost a total of $150 billion to $175 billion, including the $28 billion in investment that it has already made in its history.

“Maybe this total investment looks large,” said CFO Zachary Kirkhorn. “I think its quite small relative to our ambitions.”

The company also announced that earlier Wednesday it built 4 million vehicles in its history.

Shares of Tesla

(TSLA) slipped more than 5% in after-hours trading Wednesday, although that was up a bit from a larger decline before Musk’s announcement more than three hours into the presentation. There had been hope by some investors that Tesla

(TSLA) would announce details about a next generation of vehicles. Musk declined to answer a question about the next generation vehicle.

“We will have a proper sort of product event,” Musk said. “We’d be jumping the gun if we were to answer that question.”

In response to another question from an analyst, Musk said he doesn’t anticipate Tesla ever having more than 10 different vehicles in its product lineup. He derided the broad offerings of competing automakers as simply a “shuffling” of many similar models.

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March 1, 2023
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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March 1, 2023
Biden administration tells student loan forgiveness applicants it is ‘confident’ in face of Supreme Court skepticism | CNN Politics

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CNN
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The Biden administration is projecting confidence about the fate of President Joe Biden’s student loan cancellation program in a message to applicants, even in the face of skepticism from conservative Supreme Court justices in Tuesday’s high-stakes oral arguments.

Education Secretary Miguel Cardona said in an email sent to millions of borrowers who applied for debt cancellation that the administration “mounted a powerful case” in support of Biden’s executive action.

“Our Administration is confident in our legal authority to adopt this plan, and today made clear that opponents of the program lack standing to even bring their case to court,” Cardona wrote in the email update obtained by CNN.

The email update to applicants reflects a position administration officials have maintained in the wake of the oral arguments. But it also implicitly lays out the administration’s view of the political dynamics of a move that has became an immediate partisan flashpoint. As applicants and administration officials alike settle in for what will likely be months of waiting for a final decision, the update sent to roughly 7 million people also provides a window into the reach the administration would have to frame the debate – and consequences – should the program be struck down.

Cardona’s message comes as millions of borrowers remain in limbo as they await a Supreme Court decision on whether Biden’s action to cancel up to $20,000 in student loan debt will stand.

White House officials, who closely monitored the oral arguments in two challenges, have maintained the position that they will ultimately prevail in the cases that challenge Biden’s authority to discharge millions of dollars in federally held loans. While they remain confident on the merits, sources continue to highlight the view inside the administration that the plaintiffs lack standing to bring the challenges – which would render the arguments over the authority itself moot.

One source familiar told CNN that the White House remains confident that things will go their way, simply saying: “We’ll win.”

A particular flashpoint in the hearing was the states’ arguments that the loan forgiveness program’s potential harms to MOHELA – the Missouri-created entity that services loans in the state – gives Missouri standing.

Justice Amy Coney Barrett stood out among the conservatives for asking particularly pointed questions of the GOP states about their standing arguments, setting her apart as a potential pickup vote for the court’s three liberal members.

“If MOHELA is an arm of the state, why didn’t you just strong-arm MOHELA and say you’ve got to pursue this suit,” Barrett asked Nebraska Solicitor General James Campbell.

The question was one of several directed at Campbell, who represented the group of Republican-led states that argue the administration exceeded its authority, about the states’ standing claims.

Another source familiar said that Barrett’s comments only raised optimism within the administration.

But as several conservative justices leveled sharp questions related the government’s authority on the matter, Cardona’s update appeared intended to assuage overarching concerns.

It also previewed a political contrast officials will likely elevate should Supreme Court strike down Biden’s actions – one White House officials have repeatedly pressed as the challenges have made their way through the courts.

“While opponents of this program would deny relief to tens of millions of working- and middle-class Americans, we are fighting to deliver relief to borrowers who need support as they get back on their feet after the economic crisis caused by the pandemic,” Cardona wrote.

Biden’s plan would cancel as much as $10,000 in federal student loan debt for people earning less than $125,000 a year, or less than $250,000 for married couples. Individuals on Pell Grants could see up to $20,000 forgiven. In all, more than 40 million federal borrowers would qualify for some level of debt cancelation, with roughly 20 million who would have their balance forgiven entirely.

The Biden administration received 26 million applications for the program, which has been frozen as the court battles have played out, and more than 16 million applications had already been approved.

Cardona reiterated that a pause on federal loan payments, which was implemented during the Trump administration in response to the pandemic and was set to restart at the same time cancellation was implemented, remain on hold as the Supreme Court deliberations play out.

“While we await the Supreme Court’s decision, the pause on student loan payments remains in effect,” Cardona wrote. “Payments will resume 60 days after the Supreme Court announces its decision.”

If the litigation is not resolved by June 30, payments are scheduled to resume 60 days after that date. If it has not made a decision or resolved the litigation by June 30, payments will resume 60 days after that.

The Supreme Court’s decision is expected to come this summer.

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March 1, 2023
Nissan recalling more than 700,000 SUVs that can accidentally shut off while driving | CNN Business

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New York
CNN
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Nissan is recalling more than 700,000 Rogue and Rogue Sport compact SUVs because they can be shut off accidentally while driving.

Some model year 2016 through 2020 Nissan Rogue and 2017 through 2022 Rogue Sports, have jackknife-style keys – the type in which the metal blade of the key flips out from within a plastic key fob. An internal joint in the key can weaken over time, allowing the key to accidentally fold while in use. If this happens while the key is in the ignition, then the vehicle can be accidentally turned off if they is key is touched or bumped.

The recall only involves the base Rogue S and smaller Rogue Sport S models. Nissan hasn’t yet worked out a solution to the problem, according to documents the automaker filed with the National Highway Traffic Safety Administration. Once a solution is available, according to NHTSA, it will be provided by Nissan dealers free of charge.

In the meantime, owners of vehicles involved in the recall are advised not to attach anything to the keys that might pull it down and, also, to insert the key into the ignition in a direction that allows the key to fold fold only upward, not down.

Nissan will begin alerting owners about the recall later in March. Owners with questions about recall can also call NHTSA’s Vehicle Safety Hotline at 888-327-4236.

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February 28, 2023