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Tag: Inflation

  • What got really expensive this year, and what got cheaper | CNN Business

    What got really expensive this year, and what got cheaper | CNN Business


    New York
    CNN
     — 

    It’s been a tough year for US consumers, who battled decades-high inflation for the majority of the year and even saw gas prices hit $5 in June.

    The latest inflation data, not adjusted for seasonal swings, shows price hikes have now slowed to 7.1% for the year through November, after hitting a pandemic-era peak of 9.1% in June, according to the Bureau of Labor Statistics.

    From November 1 to December 24, shoppers still had to dig deep for gifts, with retail sales jumping 7.6%, unadjusted for inflation, compared to the same period last year, according to the Mastercard Spending Pulse, which tracks retail sales, excluding automotive sales. Holiday meals were also more expensive, and food prices outpaced inflation throughout the year.

    But while some items saw massive double-digit increases in 2022, others were a deal. Here’s how prices changed this year.

    Consumer demand for big-ticket electronics has fallen recently, leading stores to discount.

    In the year through November, several major electronics got cheaper: Smartphone prices plunged 23.4%, TV prices dropped 17% and computers got 4.4% less expensive.

    The price of major appliances fell 1%.

    Earlier in the year, chains like Best Buy and Walmart stocked up on merchandise, preparing for supply chain shortages and what they projected to be robust consumer demand. But their plans were derailed by inflation and slumping consumer confidence.

    Plus, many consumers had already made large purchases or upgrades while stuck at home early in the pandemic.

    Overall inflation outpaced the increase in apparel and other items.

    Apparel prices rose, but slowly. Clothing increased 3.6%, while footwear rose 2.3%. Sporting goods increased 2.7% and toys 0.6%.

    The increases made these items a relative bargain, as they were all outpaced by overall inflation.

    “In toys, sporting goods, apparel, categories like that, prices have come down more aggressively,” Walmart CEO Doug McMillon said in an interview on CNBC in December. “We’re still inflated but we’re not inflated nearly as much as we are in the other categories.”

    Here, again, many retailers misjudged consumer demand and so had excess inventory pile up. To clear out merchandise and entice shoppers to buy, stores ramped up promotions. This kept prices in check.

    Airfare prices spiked as demand roared back.

    This year, demand for air travel roared back after falling to an all-time low in 2020. Plane ticket prices jumped 36% annually in the year through November.

    In March, Delta president Glen Hauenstein called the spike in demand “unprecedented,” adding “I have never seen … demand turn on so quickly as it has after Omicron,” the Covid-19 variant that caused cases to spike last winter.

    Many airlines reported record revenue in April, May and June thanks to high airfares and full planes as travelers returned in full force two years into the pandemic.

    On the ground, travel got more expensive, as well. Gasoline prices were up 10.1% for the year, but are now off their record highs. Volatility in gas prices was largely due to Russia’s invasion of Ukraine and geopolitical maneuvers that used oil supply as a tool.

    Still, the national average could still climb back above the $4-a-gallon threshold as soon as May, according to GasBuddy projections shared with CNN.

    GasBuddy, an app that tracks fuel prices, doesn’t anticipate another year of extreme volatility, however.

    Food inflation was higher than overall inflation in the year through November.

    In the year through November, food got 10.6% more expensive, outpacing overall inflation.

    In that period, several individual grocery items got even pricier for a variety of reasons.

    Egg prices shot up a massive 49.1%, due to a supply shortage caused by a deadly avian flu, coupled with high demand.

    Margarine got 47.4% pricier because of price swings in the vegetable oil market caused largely by the war in Ukraine, while butter got 27% more expensive after a contraction in the global milk supply.

    Another staple, flour, got 24.9% more expensive due to the war in Ukraine’s impact on the global grain market and high transportation costs in the United States. Even lettuce saw a 19.8% increase, due to crop disease in California.

    Overall, grocery prices jumped 12% in the period, with many consumers accepting the higher prices as thriftier alternatives to restaurant meals, which also grew more expensive, though at a slower clip. Food away from home became 8.5% more expensive in 2022, with many restaurants hiking up menu prices in order to mitigate their own higher input costs.

    — CNN’s Matt Egan and Chris Isidore contributed to this report.

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  • New Year’s pay boost: These states are raising their minimum wage | CNN Business

    New Year’s pay boost: These states are raising their minimum wage | CNN Business


    Minneapolis
    CNN
     — 

    The current period of high inflation that has significantly impacted the US economy will also influence a New Year’s tradition: The annual state minimum wage increases.

    By January 1, hourly minimum wages in 23 states will rise as part of previously scheduled efforts to reach $15 an hour or to account for cost-of-living changes. The increases account for more than $5 billion in pay boosts for an estimated 8.4 million workers, the Economic Policy Institute estimates.

    Additionally, nearly 30 cities and counties across the US will increase their minimum wage, according to the EPI, a left-leaning think tank.

    The larger-than-typical increases for a dozen states come after inflation hit a 40-year high this summer, leaving families struggling to keep up with the rising costs.

    “The fact that there’s high inflation really just underscores how necessary these minimum wage increases are for workers,” said Sebastian Martinez Hickey, a research assistant at the EPI. “Even before the pandemic, there was no county in the United States where you could affordably live as a single adult at $15 an hour.”

    The pandemic and the subsequent period of economic recovery has further revealed the growing chasm in America’s wealth gap. During the past two years, working conditions and low pay contributed to a swelling of labor movement activity and actions by many large corporations to raise their wage floor.

    The pandemic also led to a structural upheaval in the nation’s labor market, creating an imbalance of worker supply and demand that still persists. Employers have found themselves short of workers for most of the year, which has pushed up average annual hourly wages in the battle to recruit and retain staff. While some workers in competitive industries such as retail and dining have found their new salary outpaces inflation, most pay has been outpaced by rising prices.

    “The story is different because wages have been increasing at the low-end, much faster than inflation and much faster than in middle- or high-wage jobs,” said Michael Reich, economics professor at the University of California at Berkeley. “And that means that many workers, even in the $7.25 states, are already getting paid above the minimum wage.”

    In other words, he said, the minimum wage “has become less and less binding.”

    “Even though minimum wages might go up by 7%, in many states and cities, labor costs aren’t going to go up anywhere as much as they have in the past, because they already have gone up,” he said. “That also means that prices aren’t going to go up at [places like] restaurants.”

    The federal minimum wage of $7.25 per hour hasn’t budged since 2009, and 20 states have a minimum wage either equal to or below the federal level, making $7.25 their default baseline. The value of the federal minimum wage peaked in 1968 when it was $1.60, which would be worth about $13.46 in 2022, based on the Bureau of Labor Statistics’ inflation calculator.

    • Delaware: $10.50 to $11.75
    • Illinois: $12 to $13
    • Maryland: $12.50 to $13.25
    • Massachusetts: $14.25 to $15
    • Michigan: $9.87 to $10.10
    • Missouri: $11.15 to $12
    • Nebraska: $9 to $10.50
    • New Jersey: $13 to $14.13* (scheduled increase also includes inflation adjustment)
    • New Mexico: $11.50 to $12
    • New York: $13.20 to $14.20 (Upstate New York); $15 (in and around NYC)
    • Rhode Island: $12.25 to $13
    • Virginia: $11 to $12
    • Alaska: $10.34 to $10.85
    • Arizona: $12.80 to $13.85
    • California: $14.50 (firms with 25 or fewer employees) /$15 (firms with 26+ employees) to $15.50
    • Colorado: $12.56 to $13.65
    • Maine: $12.75 to $13.80
    • Minnesota: $8.42 to $8.63 (small employer); $10.33 to $10.59 (large employer)
    • Montana: $9.20 to $9.95
    • Ohio: $9.30 to $10.10
    • South Dakota: $9.95 to $10.80
    • Vermont: $12.55 to $13.18
    • Washington: $14.49 to $15.74
    • Connecticut (effective July 1): $14 to $15
    • Florida (September 2023): $11 to $12
    • Nevada (effective July 1): $9.50 to $10.25 (firms that offer benefits); $10.50 to $11.25 (no benefits offered)
    • Oregon: $13.50 (effective July 1, indexed annual increase to be based on the CPI)

    Sources: State websites, National Conference of State Legislatures, Economic Policy Institute

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  • S&P 500 caps off dismal year with worst loss since 2008 financial crisis

    S&P 500 caps off dismal year with worst loss since 2008 financial crisis

    Stocks are closing out 2022 with more losses, giving the S&P 500 its worst year since 2008.

    The benchmark index fell 10 points, or 0.3% to close at 3,840, leaving it down 19.4% for the year — its worst loss since the financial crisis 14 years ago. 

    The Dow Jones Industrial Average fell 74 points, or 0.2%, to 33,147. The Nasdaq composite fell 0.1%, ending the year with an annual loss of 33%. The index has fared much worse this year because it is heavily made up of technology stocks that have been leading the broader market slump.

    There was scant corporate or economic news for Wall Street to review on the last trading day of the year. Tesla stabilized from steep losses earlier in the week, though it is still on pace for a 65% loss this year.

    Southwest Airlines shares stabilized as its flights mostly resumed normal service following massive cancellations over the holiday period. The stock rose less than 1% on the day, but it remains down roughly 7% after a week of travel chaos across the carrier’s network. 


    Eye Opener: Southwest Airlines says it’ll resume normal service after days of travel chaos

    01:50

    Energy stocks held up better than the rest of the market as U.S. crude oil prices rose 1.1%.

    Bond yields mostly rose. The yield on the 10-Year Treasury, which influences mortgage rates, rose to 3.88% from 3.82%.

    Yearlong struggle with inflation

    Stocks struggled all year as inflation put increasing pressure on consumers and raised concerns about economies slipping into recession. Central banks raised interest rates to fight high prices. The Federal Reserve’s aggressive rate hikes remain a major focus for investors as the central bank walks a thin line between raising rates enough to cool inflation, but not so much that they stall the U.S. economy into a recession.

    The Fed’s key lending rate stood at a range of 0% to 0.25% at the beginning of 2022 and will close the year at a range of 4.25% to 4.5% after seven increases. The U.S. central bank forecasts that will reach a range of 5% to 5.25% by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

    Russia’s invasion of Ukraine worsened inflation pressure earlier in the year by making oil, gas and food commodity prices even more volatile amid existing supply chain issues. China spent most of the year imposing strict COVID-19 policies which crimped production for raw materials and goods, but is now in the process of removing travel and other restrictions.


    U.S. adds China travel testing requirement amid COVID surge

    04:36

    The Fed’s battle against inflation, though, will likely remain the overarching concern in 2023, according to analysts. Investors will continue searching for a better sense of whether inflation is easing fast enough to take pressure off of consumers and the Fed.

    Several big updates on the employment market are on tap for the first week of 2023. It has been a particularly strong area of the economy and has helped create a bulwark against a recession. That has made the Fed’s job more difficult, though, because strong employment and wages mean it may have to remain aggressive to keep fighting inflation. That, in turn, raises the risk of slowing the economy too much and bringing on a recession.

    The Fed will release minutes from its latest policy meeting on Wednesday, potentially giving investors more insight into its next moves.


    Federal Reserve chair says rate cuts unlikely in 2023

    05:43

    The government will also release a November report on job openings on Wednesday. That will be followed by a weekly update on unemployment on Thursday. The closely-watched monthly employment report will be released on Friday.

    Wall Street is also waiting on the latest round of corporate earnings reports, which will start flowing in around the middle of January. Companies have been warning investors that inflation will likely crimp their profits and revenue in 2023. That’s after spending most of 2022 raising prices on everything from food to clothing in an effort to offset inflation, though many companies went further and actually increased their profit margins.

    Companies in the S&P 500 are expected to broadly report a 3.5% drop in earnings during the fourth quarter, according to FactSet. Analysts expect earnings to then remain roughly flat through the first half of 2023.

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  • Wynn, Marathon Oil rise; Microsoft, Lowe’s fall

    Wynn, Marathon Oil rise; Microsoft, Lowe’s fall

    Stocks that traded heavily or had substantial price changes Friday: Wynn, Marathon Oil rise; Microsoft, Lowe’s fall

    NEW YORK — Stocks that traded heavily or had substantial price changes Friday:

    Marathon Oil Corp., up 29 cents to $27.07.

    Energy stocks held up better than the rest of the market as U.S. crude oil prices edged higher.

    Microsoft Corp., down $1.19 to $239.82.

    Big technology stocks led the broader market lower, as they have all year, amid rising interest rates and inflation concerns.

    Freeport-McMoRan Inc., down 31 cents to $38.

    The copper miner slipped as prices for the metal edged lower.

    Wynn Resorts Ltd., up $1.21 to $82.47.

    Casinos with operations in China rose as that country continues to focus on easing restrictions on travel and commerce.

    Lowe’s Companies Inc., down $3.02 to $199.24.

    Home-improvement retailers slipped amid concerns about a weakening housing market and inflation cutting into consumer spending.

    American Airlines Group Inc., up 2 cents to $12.72.

    Air travel continued stabilizing following delays and cancellations over the last holiday weekend.

    Qualcomm Inc., down 10 cents to $109.94.

    Chipmakers remain weighed down by concerns about weaker demand heading into 2023.

    Rogers Communications Inc., up $1.79 to $46.84.

    Canada’s Competition Tribunal rejected an effort to block the wireless communications company’s purchase of Shaw Communications.

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  • Pain, few gains for investors as markets slumped in 2022

    Pain, few gains for investors as markets slumped in 2022

    Investors found few, if any, places to safely put their money in 2022, as central banks in the U.S. and around the globe raised interest rates for the first time in years to fight surging inflation, stoking fear of a global recession.

    Uncertainty about how far the Federal Reserve and other central banks would go in the fight against inflation sparked a return of volatility. Large swings in stocks were common on Wall Street as the Fed raised its key interest rate seven times and signaled more hikes to come in 2023.

    Russia’s invasion of Ukraine and China’s strict COVID-19 policies also contributed to inflation and roiled the global economy as well as markets in Asia, Europe and the U.S.

    On Wall Street, the benchmark S&P 500 index had its worst start to a year since 1970. By June, t he index fell into a bear market, a drop of more than 20% from the record high set in early January. The energy sector was the lone winner, benefitting from a spike in oil and gas prices. Technology stocks tumbled after leading the market during the pandemic.

    Borrowing money got more expensive. The 10-year Treasury yield, which influences rates on mortgages and other loans, soared, reaching 4.22% in October after starting the year at 1.51%.

    Still, climbing yields in the U.S. and abroad sent prices for older bonds already in investors’ portfolios sharply lower. The rout in bonds was particularly painful for fixed-income investors.

    Cryptocurrency investors weren’t spared either. Bitcoin shed more than half its value and a number of high-flying companies wound up in bankruptcy court.

    — Alex Veiga

    Here’s a look back on the key events in markets for 2022:

    ——

    INFLATION AND THE FED

    Inflation was the dominant global economic theme this year. Gasoline prices in the U.S. reached $5 a gallon. Companies either raised prices, or kept prices steady but put less in each package. Europe feared running short of natural gas and prices there rose more than in the U.S.

    Central banks’ response to inflation overshadowed financial markets in 2022 and could very well do so again next year. As the year began, officials at the Federal Reserve had accepted that inflation was not a temporary phenomenon. Russia’s invasion of Ukraine only made things worse by sending energy and food prices soaring.

    Still, it wasn’t until March, when the U.S. government said inflation had approached 8%, that the Fed acted — too little, too late for some pundits and economists. As the year went on the Fed got more aggressive, eventually raising rates seven times by a total of 4.25 percentage points.

    Inflation in the U.S. appears to have peaked at 9.1% in June. By year-end, there were hopeful signs as prices for goods fell and rents started declining. But tough inflation talk from the Fed at its last meeting of the year took the steam out of what had been a fourth-quarter rally for stocks.

    — Chris Rugaber

    For full coverage of the global economy, go to https://apnews.com/hub/economy

    ———

    THE BEAR ROARS

    Wall Street’s brutal year left few stocks unscathed, and the vast majority fell into a bear market under the weight of fast-rising interest rates.

    After peaking on the very first trading day of 2022, it took about six months for the S&P 500 to drop more than 20%. The biggest losers were the stocks that had performed the best in the rally that followed the coronavirus crash.

    Back then, high-growth tech stocks roared the highest thanks to the juice provided by super-low interest rates. But in the cold light of 2022, those stocks suddenly looked the most expensive and the most vulnerable as the Fed hiked interest rates to their highest level in 15 years.

    The pain did not discriminate much, though. Seven out of 10 stocks in the S&P 500 fell in 2022, as of Dec. 21. Many analysts expect more pain in early 2023 before things get better.

    — Stan Choe

    To see AP’s full coverage of the markets, go to: https://apnews.com/hub/financial-markets and https://apnews.com/hub/off-the-charts

    ———

    BOND MARKET BLUES

    It was one of the worst years in history for bond investors.

    Decades-high inflation meant the fixed payments coming from bonds in the future won’t buy as many groceries, gallons of gasoline or whatever else is rising in price.

    The Federal Reserve’s decision to raise interest rates also hammered bond prices. Because newly issued bonds were paying more in interest, the older bonds sitting in many investors’ portfolios were suddenly much less attractive because of their lower yields.

    The largest bond fund by assets, one from Vanguard that tracks the broad market, had lost 12.5% in 2022, as of Dec. 20. That’s by far its worst year since its inception in 1987.

    Historically bonds have held up better than stocks during downturns, offering some cushion for investors, but both tumbled in 2022.

    — Stan Choe

    ———

    HOUSING MARKET SLUMPS

    As 2022 began, the nation’s housing market was still running red hot.

    House hunters competed for the fewest homes for sale in more than two decades, fueling bidding wars that pushed prices sharply higher. The average rate on a 30-year mortgage was slightly above 3%, near historic lows.

    Then mortgage rates started to climb, spurred by expectations of higher interest rates as the Federal Reserve began raising its short-term lending rate in a bid to tame inflation. By October, the average rate on a 30-year home loan soared above 7%, a 20-year high.

    Higher mortgage rates combined with still-rising home prices make it difficult for many would-be buyers to afford a home. Sales of previously occupied U.S. homes saw their biggest sales slump in more than a decade.

    — Alex Veiga

    ———

    IS TESLA ON AUTOPILOT?

    You can’t blame Tesla shareholders for feeling jilted.

    CEO Elon Musk took over Twitter and appears consumed with turning around the social media company. With Musk’s focus diverted, Tesla shares have lost more than half their value. And Tesla’s dominance of the market for electric vehicles is waning.

    Most of Musk’s wealth is tied up in Tesla stock, which started falling in April when he disclosed a stake in Twitter. The collapse in the stock price has bumped Musk into second place on Forbes’ list of the world’s wealthiest people, behind cosmetic magnate Bernard Arnault.

    After buying Twitter in October, Musk has cut half its staff and picked fights with public officials and others.

    — Tom Krisher

    For full coverage of Elon Musk, Twitter and Tesla, go to https://apnews.com/hub/twitter-inc

    ———

    CONSUMERS FEEL THE PINCH

    The highest inflation in four decades is hitting consumers right in their wallets.

    Households — especially at the lower end of the income spectrum — are likely depleting savings built up during the pandemic, with more pain to come should the economy tip into a recession. Credit card debt ballooned and rents rose in 2022, although there are signs housing costs will be coming down. While President Biden promised student borrowers relief of up to $20,000 this year, that debt cancellation policy is tied up in the courts.

    Wages went up, although not at the same pace as inflation. Aggressive rate hikes by the Federal Reserve have pushed up the cost of borrowing money. But while the average rate on a credit card rose to 16.3% in August from 14.5% at the start of the year, according to the government, the average rate for a savings account is still just 0.2%; it’s 0.9% for a one-year CD.

    — Cora Lewis

    For full coverage personal finance got to https://apnews.com/hub/financial-wellness and https://apnews.com/hub/personal-finance

    ——

    UKRAINE WAR IMPACT

    Russia’s invasion of Ukraine in February sent prices soaring for the commodities the world runs on: oil, natural gas, and wheat.

    European prices for natural gas rose to 17 times their prewar levels after Russia choked off most supplies over the war. The result was an energy crisis that pushed inflation to record levels and left governments and utilities scrambling to find alternative supplies of gas ahead of winter heating season.

    Global oil prices spiked as Western buyers shunned Moscow’s crude, sending Brent to over $120 per barrel in May. Europe banned most Russian oil imports in December and the Group of Seven democracies imposed a $60 per barrel price cap on Russian exports.

    Meanwhile record wheat prices spurred disastrous food inflation in poor countries.

    By year end, lower prices for oil, natural gas and electricity had provided a bit of relief for drivers and homeowners.

    To see full coverage of the Russia-Ukraine war, go to https://apnews.com/hub/russia-ukraine

    ———

    CHINA DITCHES ZERO COVID

    China’s economic growth and stock market slid in 2022 under pressure from pandemic controls and corporate debt, prompting the ruling Communist Party to ease off anti-disease restrictions and try to revive a struggling real estate industry.

    The world’s second-largest economy shrank by 2.6% in the three months ending in June compared with the previous quarter after Shanghai and other industrial centers shut down for up to two months to fight outbreaks.

    Forecasters say annual growth might fall below 3%, among the lowest in decades. To cut the economic drag, the ruling party ended testing for millions of people and stopped requiring supermarkets and other businesses to track the health of employees and customers. Beijing also tried to revive real estate, China’s biggest economic driver, by lending more to apartment buyers while trying to prevent a renewed rise in borrowing by developers.

    — Joe McDonald

    To see full coverage of developments in China, go to https://apnews.com/hub/china

    ———

    CRYPTO’S WILD RIDE

    The year began with bitcoin above $45,000 and the crypto industry making further inroads among politicians and mainstream financial institutions. As 2022 ends, bitcoin is below $17,000, the industry’s “savior” is in jail and Washington is fighting over how to regulate crypto.

    With the steady, steep decline of crypto prices in the background, the dominoes began to fall with the collapse in May of Terra, a so-called stablecoin. Investors lost tens of billions of dollars and a number of crypto companies faced financial ruin. In stepped Sam Bankman-Fried, the young founder of crypto exchange FTX, who bailed out crypto lender BlockFi and crypto firm Voyager, earning him comparisons to the original J.P. Morgan.

    Those plaudits evaporated when FTX unraveled in November. Questions about its financial strength prompted customers to request large withdrawals. Overwhelmed and, it turns out, underfunded, FTX filed Chapter 11 bankruptcy protection on Nov. 11. Bankman-Fried was arrested in the Bahamas and U.S. prosecutors hit him with an eight-count indictment.

    — Ken Sweet

    To see AP’s full coverage of the cryptocurrency industry, go to: https://apnews.com/hub/cryptocurrency

    ——

    THE STREAMING WARS

    Netflix, Warner Bros. Discovery and other big entertainment companies tumbled in 2022 as streaming services struggled amid increased competition and rising inflation stifled advertising spending.

    Streaming services had to contend with a return to normal for many people who had been stuck at home because of lockdowns or other restrictions during the height of the COVID-19 pandemic. The sheer number of streaming options also left companies in a fierce fight for viewers’ attention.

    Streaming giant Netflix lost about half of its value after a steep drop in viewers in the year’s first half. Disney felt the pinch from lower advertising revenue, but the diversified entertainment giant’s stock held up better than most competitors.

    Warner Bros. Discovery also struggled with advertising revenue, and it axed several films including “Batgirl” as it shifted strategy and looked to trim costs.

    — Damian Troise

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  • Pain, few gains for investors as markets slumped in 2022

    Pain, few gains for investors as markets slumped in 2022

    Investors found few, if any, places to safely put their money in 2022, as central banks in the U.S. and around the globe raised interest rates for the first time in years to fight surging inflation, stoking fear of a global recession.

    Uncertainty about how far the Federal Reserve and other central banks would go in the fight against inflation sparked a return of volatility. Large swings in stocks were common on Wall Street as the Fed raised its key interest rate seven times and signaled more hikes to come in 2023.

    Russia’s invasion of Ukraine and China’s strict COVID-19 policies also contributed to inflation and roiled the global economy as well as markets in Asia, Europe and the U.S.

    On Wall Street, the benchmark S&P 500 index had its worst start to a year since 1970. By June, t he index fell into a bear market, a drop of more than 20% from the record high set in early January. The energy sector was the lone winner, benefitting from a spike in oil and gas prices. Technology stocks tumbled after leading the market during the pandemic.

    Borrowing money got more expensive. The 10-year Treasury yield, which influences rates on mortgages and other loans, soared, reaching 4.22% in October after starting the year at 1.51%.

    Still, climbing yields in the U.S. and abroad sent prices for older bonds already in investors’ portfolios sharply lower. The rout in bonds was particularly painful for fixed-income investors.

    Cryptocurrency investors weren’t spared either. Bitcoin shed more than half its value and a number of high-flying companies wound up in bankruptcy court.

    — Alex Veiga

    Here’s a look back on the key events in markets for 2022:

    ——

    INFLATION AND THE FED

    Inflation was the dominant global economic theme this year. Gasoline prices in the U.S. reached $5 a gallon. Companies either raised prices, or kept prices steady but put less in each package. Europe feared running short of natural gas and prices there rose more than in the U.S.

    Central banks’ response to inflation overshadowed financial markets in 2022 and could very well do so again next year. As the year began, officials at the Federal Reserve had accepted that inflation was not a temporary phenomenon. Russia’s invasion of Ukraine only made things worse by sending energy and food prices soaring.

    Still, it wasn’t until March, when the U.S. government said inflation had approached 8%, that the Fed acted — too little, too late for some pundits and economists. As the year went on the Fed got more aggressive, eventually raising rates seven times by a total of 4.25 percentage points.

    Inflation in the U.S. appears to have peaked at 9.1% in June. By year-end, there were hopeful signs as prices for goods fell and rents started declining. But tough inflation talk from the Fed at its last meeting of the year took the steam out of what had been a fourth-quarter rally for stocks.

    — Chris Rugaber

    For full coverage of the global economy, go to https://apnews.com/hub/economy

    ———

    THE BEAR ROARS

    Wall Street’s brutal year left few stocks unscathed, and the vast majority fell into a bear market under the weight of fast-rising interest rates.

    After peaking on the very first trading day of 2022, it took about six months for the S&P 500 to drop more than 20%. The biggest losers were the stocks that had performed the best in the rally that followed the coronavirus crash.

    Back then, high-growth tech stocks roared the highest thanks to the juice provided by super-low interest rates. But in the cold light of 2022, those stocks suddenly looked the most expensive and the most vulnerable as the Fed hiked interest rates to their highest level in 15 years.

    The pain did not discriminate much, though. Seven out of 10 stocks in the S&P 500 fell in 2022, as of Dec. 21. Many analysts expect more pain in early 2023 before things get better.

    — Stan Choe

    To see AP’s full coverage of the markets, go to: https://apnews.com/hub/financial-markets and https://apnews.com/hub/off-the-charts

    ———

    BOND MARKET BLUES

    It was one of the worst years in history for bond investors.

    Decades-high inflation meant the fixed payments coming from bonds in the future won’t buy as many groceries, gallons of gasoline or whatever else is rising in price.

    The Federal Reserve’s decision to raise interest rates also hammered bond prices. Because newly issued bonds were paying more in interest, the older bonds sitting in many investors’ portfolios were suddenly much less attractive because of their lower yields.

    The largest bond fund by assets, one from Vanguard that tracks the broad market, had lost 12.5% in 2022, as of Dec. 20. That’s by far its worst year since its inception in 1987.

    Historically bonds have held up better than stocks during downturns, offering some cushion for investors, but both tumbled in 2022.

    — Stan Choe

    ———

    HOUSING MARKET SLUMPS

    As 2022 began, the nation’s housing market was still running red hot.

    House hunters competed for the fewest homes for sale in more than two decades, fueling bidding wars that pushed prices sharply higher. The average rate on a 30-year mortgage was slightly above 3%, near historic lows.

    Then mortgage rates started to climb, spurred by expectations of higher interest rates as the Federal Reserve began raising its short-term lending rate in a bid to tame inflation. By October, the average rate on a 30-year home loan soared above 7%, a 20-year high.

    Higher mortgage rates combined with still-rising home prices make it difficult for many would-be buyers to afford a home. Sales of previously occupied U.S. homes saw their biggest sales slump in more than a decade.

    — Alex Veiga

    ———

    IS TESLA ON AUTOPILOT?

    You can’t blame Tesla shareholders for feeling jilted.

    CEO Elon Musk took over Twitter and appears consumed with turning around the social media company. With Musk’s focus diverted, Tesla shares lost more than half their value, their biggest-ever annual. And Tesla’s dominance of the market for electric vehicles is waning.

    Most of Musk’s wealth is tied up in Tesla stock, which started falling in April when he disclosed a stake in Twitter. The collapse in the stock price has bumped Musk into second place on Forbes’ list of the world’s wealthiest people, behind cosmetic magnate Bernard Arnault.

    After buying Twitter in October, Musk has cut half its staff and picked fights with public officials and others.

    — Tom Krisher

    For full coverage of Elon Musk, Twitter and Tesla, go to https://apnews.com/hub/twitter-inc

    ———

    CONSUMERS FEEL THE PINCH

    The highest inflation in four decades is hitting consumers right in their wallets.

    Households — especially at the lower end of the income spectrum — are likely depleting savings built up during the pandemic, with more pain to come should the economy tip into a recession. Credit card debt ballooned and rents rose in 2022, although there are signs housing costs will be coming down. While President Biden promised student borrowers relief of up to $20,000 this year, that debt cancellation policy is tied up in the courts.

    Wages went up, although not at the same pace as inflation. Aggressive rate hikes by the Federal Reserve have pushed up the cost of borrowing money. But while the average rate on a credit card rose to 16.3% in August from 14.5% at the start of the year, according to the government, the average rate for a savings account is still just 0.2%; it’s 0.9% for a one-year CD.

    — Cora Lewis

    For full coverage personal finance got to https://apnews.com/hub/financial-wellness and https://apnews.com/hub/personal-finance

    ——

    UKRAINE WAR IMPACT

    Russia’s invasion of Ukraine in February sent prices soaring for the commodities the world runs on: oil, natural gas, and wheat.

    European prices for natural gas rose to 17 times their prewar levels after Russia choked off most supplies over the war. The result was an energy crisis that pushed inflation to record levels and left governments and utilities scrambling to find alternative supplies of gas ahead of winter heating season.

    Global oil prices spiked as Western buyers shunned Moscow’s crude, sending Brent to over $120 per barrel in May. Europe banned most Russian oil imports in December and the Group of Seven democracies imposed a $60 per barrel price cap on Russian exports.

    Meanwhile record wheat prices spurred disastrous food inflation in poor countries.

    By year end, lower prices for oil, natural gas and electricity had provided a bit of relief for drivers and homeowners.

    To see full coverage of the Russia-Ukraine war, go to https://apnews.com/hub/russia-ukraine

    ———

    CHINA DITCHES ZERO COVID

    China’s economic growth and stock market slid in 2022 under pressure from pandemic controls and corporate debt, prompting the ruling Communist Party to ease off anti-disease restrictions and try to revive a struggling real estate industry.

    The world’s second-largest economy shrank by 2.6% in the three months ending in June compared with the previous quarter after Shanghai and other industrial centers shut down for up to two months to fight outbreaks.

    Forecasters say annual growth might fall below 3%, among the lowest in decades. To cut the economic drag, the ruling party ended testing for millions of people and stopped requiring supermarkets and other businesses to track the health of employees and customers. Beijing also tried to revive real estate, China’s biggest economic driver, by lending more to apartment buyers while trying to prevent a renewed rise in borrowing by developers.

    — Joe McDonald

    To see full coverage of developments in China, go to https://apnews.com/hub/china

    ———

    CRYPTO’S WILD RIDE

    The year began with bitcoin above $45,000 and the crypto industry making further inroads among politicians and mainstream financial institutions. As 2022 ends, bitcoin is below $17,000, the industry’s “savior” is under house arrest and Washington is fighting over how to regulate crypto.

    With the steady, steep decline of crypto prices in the background, the dominoes began to fall with the collapse in May of Terra, a so-called stablecoin. Investors lost tens of billions of dollars and a number of crypto companies faced financial ruin. In stepped Sam Bankman-Fried, the young founder of crypto exchange FTX, who bailed out crypto lender BlockFi and crypto firm Voyager, earning him comparisons to the original J.P. Morgan.

    Those plaudits evaporated when FTX unraveled in November. Questions about its financial strength prompted customers to request large withdrawals. Overwhelmed and, it turns out, underfunded, FTX filed Chapter 11 bankruptcy protection on Nov. 11. Bankman-Fried was arrested in the Bahamas and extradited to the U.S. to face criminal and civil charges related to the collapse of FTX.

    — Ken Sweet

    To see AP’s full coverage of the cryptocurrency industry, go to: https://apnews.com/hub/cryptocurrency

    ——

    THE STREAMING WARS

    Netflix, Warner Bros. Discovery and other big entertainment companies tumbled in 2022 as streaming services struggled amid increased competition and rising inflation stifled advertising spending.

    Streaming services had to contend with a return to normal for many people who had been stuck at home because of lockdowns or other restrictions during the height of the COVID-19 pandemic. The sheer number of streaming options also left companies in a fierce fight for viewers’ attention.

    Streaming giant Netflix lost about half of its value after a steep drop in viewers in the year’s first half. Disney felt the pinch from lower advertising revenue, but the diversified entertainment giant’s stock held up better than most competitors.

    Warner Bros. Discovery also struggled with advertising revenue, and it axed several films including “Batgirl” as it shifted strategy and looked to trim costs.

    — Damian Troise

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  • Fed watch 2023: When will rate hikes slow down | CNN Business

    Fed watch 2023: When will rate hikes slow down | CNN Business


    Minneapolis
    CNN
     — 

    America’s central bank found itself in a glaring spotlight for much of this past year, as Federal Reserve Chairman Jerome Powell wielded blunt tools of interest rate hikes and quantitative tightening to curb surging inflation.

    As 2022 draws to a close, inflation metrics show some of that may have worked: Consumer prices are cooling, home sales have ground to a halt, and some of America’s best-known companies have made plans to slow their roll and pull back on capital investment.

    The latest measure of inflation showed that the Consumer Price Index for November came in at 7.1%, down from the 40-year high of 9.1% hit in June; prices for used cars, lumber and gas — once poster children for the painfully steep price hikes — have come down; and housing prices and rents have also been on a downward trajectory.

    “This idea of peak inflation, which people have been talking about for most of the year, is starting to look like it’s valid,” said Thomas Martin, senior portfolio manager at Globalt Investments. “It’s just how quickly does that come down?”

    In a matter of weeks, the Fed’s Act II gets underway.

    The Fed’s recently revised script calls for the federal funds rate, the central bank’s benchmark borrowing rate, to move higher, but at a slower pace than in the past several months.

    While the Fed has — finally — eked out some small victories in slowing the economy, after seven bumper rate hikes, the robust and historically tight labor market has remained a thorn in the central bank’s side. When the number of available jobs far outpaces those looking for work, wages can rise, which in turn could keep prices higher for longer.

    That means the Fed, with its “laser focus on the job market,” could be “continually hawkish” at the start of 2023, said Ross Mayfield, investment strategy analyst at Baird.

    There are already signs that the labor market is softening: Quits and hires have edged downward, while layoffs have moved higher; continuing claims have grown to their highest level since February; and the number of jobs added each month has started to nudge slowly lower.

    However, a “structural labor shortage” remains a major headwind, Powell noted in December, attributing the lack of workers to early retirements, caregiving needs, Covid illnesses and deaths, and a plunge in net immigration.

    As such, employers are hesitant to lay people off, and other areas of the economy are showing such strength that those who are unemployed are able to get rehired quickly, Mayfield said.

    “This latent strength in the job market could be the reason that the Fed over-tightens,” he told CNN. “The rest of the economy, to us, is very clearly signaling slowdown, imminent recession. And when you see the Fed revising their unemployment projections up, revising their GDP growth number down, it seems that they agree.”

    He added: “So, I would hope that they would take their own advice and pause fairly soon.”

    The December projections showed a more aggressive monetary policy tightening path, with the median forecast rising to a new interest rate peak of 5%-5.25%, up from 4.5%-4.75% in September. That would mean Fed officials expect to raise rates by half a percent more than they did three months ago, when the Fed’s economic predictions were last released.

    Jerome Powell, chairman of the US Federal Reserve, from right, Lael Brainard, vice chair of the board of governors for the Federal Reserve System, and John Williams, president and chief executive officer of the Federal Reserve Bank of New York, during a break at the Jackson Hole economic symposium in Moran, Wyoming, on Aug. 26, 2022.

    Policymakers also projected that PCE inflation, the Fed’s favored price gauge, would remain far above its 2% target until at least 2025. Further projections showed souring expectations for the health of the US economy, with Fed officials now predicting that unemployment will rise to 4.6% by the end of 2023 and remain at that level through 2024. That’s 0.2 percentage points higher than the 4.4% rate they were expecting in September and significantly higher than the current 3.7% rate.

    Based on projections from Fed officials and other economists, the pathway has narrowed for the desired “soft landing” of reining in inflation while avoiding recession or significant layoffs.

    “It’s been pretty impressive how well the consumer has held up over the past 18 months, and not pulling the rug out from under the consumer is pretty much how you get to the soft landing,” Mayfield said.

    “I think it’s a really, really narrow path, and the Fed’s tone [during its December meeting] doesn’t give me a lot of optimism that they can navigate that without hitting a recession. … If a soft landing is avoiding a recession altogether, then I think that’s a pretty tough task. If it’s a milder recession than recent history, I think that’s still in the cards.”

    The Federal Open Market Committee, the central bank’s policymaking arm, holds eight regularly scheduled meetings per year. Over the course of two days, the 12-member group looks through economic data, assesses financial conditions and evaluates monetary policy actions that are announced to the public following the conclusion of its meeting on the second day, along with a press conference led by Chair Powell.

    Below are the meetings tentatively scheduled for 2023. Those with asterisks indicate the meeting with a Summary of Economic Projections, which includes the chart colloquially known as the “dot plot” that shows where each Fed member expects interest rates to land in the future.

    • January 31-February 1
    • March 21-22*
    • May 2-3
    • June 13-14*
    • July 25-26
    • September 19-20*
    • October 31-November 1
    • December 12-13*

    — CNN’s Nicole Goodkind contributed to this report.

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  • The Fed won’t be what drives markets in 2023, wealth manager says

    The Fed won’t be what drives markets in 2023, wealth manager says

    The Federal Reserve played a major role in moving markets in 2022, driving a campaign of monetary tightening as it tried to combat inflation that hit multi-decade highs.

    Many who had money in stocks and even bonds suffered, as liquidity was sucked out of the market with every rate hike employed by the Fed — seven of them in the past year alone. In mid-December, the central bank rose its benchmark interest rate to the highest level in 15 years, taking it to a targeted range between 4.25% and 4.5%.

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    Prior to that, the U.S. saw a four consecutive three-quarter point hikes — the most aggressive policy decisions since the early 1980s.

    Fed officials and economists expect rates to stay high next year, with reductions unlikely until 2024. But that doesn’t mean the Fed will remain the primary driver of the markets. Patrick Armstrong, chief investment officer at Plurimi Wealth LLP, sees different financial drivers retaking the reins.

    “Next year I think it’s not going to be the Fed determining the market. I think it’s going to be companies, fundamentals, companies that can grow earnings, defend their margins, probably move higher,” Armstrong told CNBC’s “Squawk Box Europe” on Friday.

    “Bond yields are giving you a real return now, above inflation. So it’s a reasonable place to put capital now, whereas at the start of this year it didn’t make much sense. It was hard to expect a return above inflation where yields were.”

    The yield on the U.S. 10-year Treasury was at 3.856% on Friday, a rapid climb from 1.628% at the start of 2022. The yield on the benchmark note hit an all-time low of 0.55% in July 2020. Bond yields move inversely to prices.

    Screens on the trading floor at New York Stock Exchange (NYSE) display the Federal Reserve Chair Jerome Powell during a news conference after the Federal Reserve announced interest rates will raise half a percentage point, in New York City, December 14, 2022.

    Andrew Kelly | Reuters

    “What happened this year was driven by the Fed,” Armstrong said. “Quantitative tightening, higher interest rates, they were pushed by inflation, and anything that was liquidity driven sold off. If you were equities and bond investors, came into the year getting less than a percent on a 10-year Treasury which makes no sense. Liquidity was the driver of the market, [and] the liquidity, the carpet’s been pulled from underneath investors.”

    Armstrong did suggest that the U.S. may be “flirting with recession probably by the end of the first half of next year,” but noted that “it’s a very strong job market there, wage growth and consumption is 70% of the U.S. economy, so it’s not even sure that the U.S. does fall into recession.”

    Key for 2023, the CIO said, will be “to find companies that can defend their margins. Because that is the real risk for equities.”

    He noted that analysts have a 13% profit margin expectation for the S&P 500 in 2023, which is a record high.

    But inflation and Fed tightening can still present a challenge to that, Armstrong maintained.

    “I don’t think you can achieve that with a consumer that’s having their purses pulled in so many directions, from energy costs, mortgage costs, food prices, and probably dealing with a little bit of unemployment starting to creep up as the Fed continues to hike, and it’s designed to destroy demand,” Armstrong said. “So I think that is going to be the key in equities.”

    — CNBC’s Jeff Cox contributed to this report.

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  • Global markets mixed, headed for annual loss

    Global markets mixed, headed for annual loss

    BEIJING — Asian stocks rose Friday while Europe opened lower as most major markets headed for big annual losses following a year that was roiled by Russia’s invasion of Ukraine and interest rate hikes to cool surging inflation.

    Shanghai and Tokyo advanced. London and Frankfurt declined. U.S. futures were lower heading into Wall Street’s final trading day of 2022. Oil prices fell back.

    Wall Street’s benchmark S&P 500 index gained Thursday after the number of people applying for unemployment benefits rose only slightly last week despite interest rate hikes to cool inflation by slowing economic activity.

    “Considering the market news was sparse, the shift higher has the hallmarks of a dead cat bounce,” said Stephen Innes of SPI Asset Management in a report.

    In early trading, the FTSE in London lost 0.4% to 7,483.42. It is on track to become the only major market with a gain for 2022, rising about 1% for the year.

    Other markets are set for annual losses after Russia’s attack on Ukraine pushed up oil and wheat prices and the Federal Reserve and other global central banks hiked rates to slow economic activity and cool inflation that is at multi-decade highs. China’s shutdown of Shanghai and other cities to fight COVID-19 outbreaks disrupted manufacturing and shipping.

    The DAX in Frankfurt shed 0.6% to 13,996.57. It is headed for a 12% loss in 2022. The CAC-40 in Paris declined 0.5% to 6,539.21. It is down 9.5% for the year.

    On Wall Street, the S&P 500 future was off 0.4%. That for the Dow Jones Industrial Average declined 0.3%.

    On Thursday, the S&P 500 rose 1.7%. It will end the year down about 20%, which would be its biggest annual decline since 2008.

    The Dow gained 1% and the Nasdaq composite added 2.6%. Both are headed for annual losses.

    In Asia, the Shanghai Composite Index gained 0.5% to 3,089.25. The Chinese benchmark is on track to end 2022 down more than 14% after the world’s second-largest economy was depressed by anti-virus controls and a crackdown on corporate debt.

    Tokyo’s Nikkei 225 finished unchanged at 26,094.50. It is headed for an annual loss of almost 10%. The Hang Seng in Hong Kong added 0.2% to 19,781.41. It is off more than 14% this year.

    Sydney’s S&P-ASX 200 was 0.3% higher at 7,038.70. India’s Sensex opened up 0.3% at 61,133.88. New Zealand declined while Southeast Asian markets rose.

    South Korean markets were closed for a holiday. The country’s benchmark Kospi index is headed for a loss of more than 25% for the year.

    Investors worry central banks are willing to cause a recession if necessary.

    The Fed’s key lending rate stands at a range of 4.25% to 4.5% after seven increases this year. The U.S. central bank forecasts that will reach a range of 5% to 5.25% by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

    In energy markets, benchmark U.S. crude fell 50 cents to $77.90 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 56 cents on Thursday to $78.40. Brent crude, used as the price basis for international oil trading, gave up 36 cents to $83.10 per barrel in London. It lost $1 the previous session to $82.26 a barrel.

    The dollar declined to 132.02 yen from Thursday’s 132.90 yen. The euro edged down to $1.0668 from $1.0677.

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  • Senior citizens will soon get that big hike in their Social Security benefits | CNN Politics

    Senior citizens will soon get that big hike in their Social Security benefits | CNN Politics



    CNN
     — 

    Senior citizens and other Social Security recipients will start getting a heftier monthly benefit next month due to an 8.7% annual cost-of-living adjustment aimed at helping them cope with high inflation.

    The increase, the largest in more than 40 years, will boost retirees’ monthly payments by more than $140 to an estimated average of $1,827 for 2023.

    The adjustment is the highest that most current beneficiaries have ever seen because it is based on an inflation metric from August through October, which was also around 40-year highs. Inflation has cooled somewhat since then, though prices remain elevated.

    “I’m sure everyone is anxiously awaiting because prices are still high,” said Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League, an advocacy group. “Just shopping for food to feed people during the holidays is going to be a huge challenge.”

    Roughly 70 million people will receive the increase, which follows a 5.9% adjustment for 2022.

    Many senior citizens depend heavily on Social Security. Some 42% of elderly women and 37% of elderly men rely on the monthly payments for at least half their income, according to the Social Security Administration.

    Just when the beefed-up payment will arrive depends on recipients’ ages and birth dates. Those who received Social Security before May 1997 get their monthly benefit on the 3rd of each month. For more recent retirees, those whose birth dates are the 1st through the 10th of the month receive it on the second Wednesday, while those born on the 11th to 20th and the 21st to 31st of the month are paid the third and fourth Wednesdays, respectively.

    Even though recipients received a sizable adjustment for this year, inflation ate away at the boost.

    The increase fell short of actual inflation by an average of more than $42 – or 46% – every month or roughly $508 for the year, Johnson said.

    Many retirees have been forced to turn to their savings or public assistance. One-third of seniors reported signing up for food stamps or visiting a food pantry over the past 12 months, compared with 22% in 2020, according to recent surveys by The Senior Citizens League. Also, 17% have applied for assistance with heating costs, compared with 10% in 2020.

    This is not a new problem. Benefits have not kept up with the rising cost of living for years, even with the annual adjustments.

    As of March, inflation has caused Social Security payments to lose 40% of their buying power since 2000, according to a study released earlier this year by the league. Monthly benefits would have to increase by $540 to maintain the same level of buying power as in 2000.

    Senior citizens will also see their Medicare Part B premiums drop in 2023, the first time in more than a decade that the tab will be lower than the year before, the Centers for Medicare and Medicaid Services announced in the fall. It’s only the fourth time that premiums are declining since Medicare was created in 1965.

    The standard monthly premiums will be $164.90 in 2023, a decrease of $5.20 from 2022.

    The reduction comes after a large spike in 2022 premiums, which raised the standard monthly premium to $170.10, up from $148.50 in 2021. A key driver of the 2022 hike was a projected jump in spending due to a costly new drug for Alzheimer’s disease, Aduhelm. However, since then, Aduhelm’s manufacturer cut the price and the Centers for Medicare and Medicaid Services limited coverage of the drug.

    Also, spending was lower than projected on other Part B items and services, which resulted in much larger reserves in the Part B trust fund, allowing the agency to limit future premium increases.

    The big annual adjustment could end up hurting some seniors, Johnson said.

    For instance, the resulting increase in income could push them above the thresholds for certain government benefits, such as Medicare Extra Help, Medicaid, food stamps and rental assistance, leaving them eligible for less or no aid. Or they could have to pay more for their Medicare Part B premiums, which are adjusted for income.

    Also, they could have to start paying taxes – or owe higher levies – on their Social Security benefits if their income rises above a certain level.

    Further, the increase could leave Social Security’s finances on even shakier ground. The combined trust funds that pay benefits to retirees, survivors and the disabled will be depleted by 2035 and only able to distribute roughly three-quarters of promised payments unless Congress addresses the program’s long-term funding shortfall, according to the most recent Social Security trustees’ report.

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  • Slightly more Americans sought jobless aid last week

    Slightly more Americans sought jobless aid last week

    Labor market resilient despite rate hikes


    MoneyWatch: Labor market appears resilient despite Federal Reserve’s aggressive rate hikes

    05:28

    The number of people seeking unemployment benefits rose only slightly last week — a sign the labor market remains strong despite the Federal Reserve’s efforts to cool the economy.

    Applications for unemployment aid for the week ending December 24 climbed 9,000 to 225,000, the Labor Department reported Thursday. The four-week average of applications, which smooths out some of the week-to-week swings, slipped just 250 to 221,000.

    Unemployment benefit applications are a proxy for layoffs, and are being closely monitored by economists as the Fed has rapidly raised interest rates in an effort to slow job growth and inflation. Should the Fed’s rate hikes cause a recession, as many economists fear, a jump in layoffs and unemployment claims would be an early sign.

    So far, the level of jobless claims remains quite low, evidence that Americans are enjoying a high degree of job security. In the coming weeks, thousands of workers with temporary jobs during the winter holidays will lose work and apply for jobless aid. The government seeks to seasonally adjust the data to account for those job losses, but the adjustments are not always perfect and the layoff of temporary workers could distort the data.

    The Fed is seeking to slow job growth and the pace of wage increases as part of its efforts to battle inflation. The central bank has hiked rates seven times this year, which has made it more expensive for consumers to take out mortgage and auto loans, and raised borrowing rates for credit cards.

    So far, the interest rate increases have pushed mortgage rates above 6%, essentially double what they were before the Fed began tightening credit. Higher mortgage rates have hammered the housing market, with sales of existing homes falling for 10 straight months.

    Yet so far there has been only a limited impact on hiring. Employers added 263,000 jobs in November, a healthy gain, and the unemployment rate stayed at a low 3.7%.


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  • Holiday procrastinators are back in force. Blame inflation.

    Holiday procrastinators are back in force. Blame inflation.

    NEW YORK (AP) — Last year, Lucila Gomez and her husband started their holiday shopping around Thanksgiving and wrapped it up a week before Christmas, spending $750 on tablets and clothing for their three children and relatives.

    This year? Gomez is waiting until she gets her annual bonus on Friday to get started — and she’s limiting her spending to $200, sticking to World Cup themed jerseys for her 10-year-old twins and a 6-year-old.

    “Last year, we were confident. We were like, ‘Get them whatever they want,’” said the 49-year-old Buckeye, Arizona resident, an hourly worker in the billing department of a health company. “This year, we’re waiting until we both get paid. We want to go into the New Year not owing anything.”

    Last minute holiday shoppers are back in force — and inflation is partly to blame.

    For the first two years of the pandemic, many were buying earlier in the season, afraid of not getting what they wanted because of shortages of products or delays in deliveries. They also had more money to spend thanks to government stimulus checks and child care credits.

    But this year, supply chain snags have eased and shoppers aren’t as worried about availability as they are about higher prices on everything from rent to food, causing them to postpone their buying until the last minute.

    Gomez, for instance, said that even though she and her husband, an electrician, each got a raise, it still wasn’t enough to offset their rising expenses. In fact, she said her family moved in with her parents after their monthly rent jumped from $1,500 to $2,000 earlier this year. She’d hoped to save for a house, but mortgage rates keep going up.

    Last minute shopping is also being encouraged by a quirk in this year’s calendar, according to Brian Field, global leader of Sensormatic Solutions, which tracks store traffic. With Christmas falling on Sunday, consumers have all week to shop.

    Retailers are relying on the last minute spending rush to help meet their holiday sales goals after a weaker-than-expected November.

    Americans cut back sharply on retail spending last month as the holiday shopping season began with high prices and rising interest rates taking their toll on households, particularly lower-income families.

    Retail sales fell 0.6% from October to November after a sharp 1.3% rise the previous month, the government said last week. Sales fell at furniture, electronics, and home and garden stores.

    Americans’ spending has been intact ever since inflation first spiked almost 18 months ago, but the ability of shoppers to keep spending in a period of high inflation may be beginning to ease. Inflation has retreated from the four-decade high it reached this summer but remains elevated, enough to sap the spending power of consumers.

    Still, overall holiday sales should be decent, though holiday sales growth is expected to dramatically slow down from a year ago.

    The National Retail Federation, the nation’s largest retail trade group, is slated to release the actual results for the combined November and December period next month. The group expects holiday sales growth will slow to a range of 6% to 8%, compared with the blistering 13.5% growth of a year ago.

    The last stretch of the holiday season is critical.

    On average, the top 10 busiest shopping days in the U.S. — which includes Wednesday, Thursday, Friday of this week and Monday of next week — account for roughly 40% of all holiday retail traffic, according to Sensormatic. However, retailers might expect even larger numbers this year as high gas prices force consumers to consolidate their shopping trips and everyone converges over the next few days, Sensormatic said.

    For those holding out for bigger discounts right before Christmas, they may be disappointed. Retailers in general have maintained the same discounts they’ve been offering since Black Friday. There could be some deals, however, in areas like home and furniture, according to DataWeave, which tracks prices for hundreds of thousands of items across roughly three dozen retailers, including Walmart, Target and Amazon.

    DataWeave’s recent data shows the average prices for furniture were discounted 23% during the second week of December, compared with 12.8% during Black Friday week. In home furnishings, average price cuts were 17.2% compared with 11.2% for Black Friday week.

    Krish Thyagarajan, president and chief operating officer at DataWeave, believes that discounts for electronics are ticking up from Black Friday levels in the last few days before Christmas, but price cuts for clothing should remain a little over 20%, more generous than the average 16% discount last year around this time.

    Inflation or not, there will always be the perennial procrastinators like Evelyn T. Peregrin, who last year used COVID-19 as an excuse to delay her holiday buying since several relatives had the virus so she didn’t have to buy or deliver gifts until after Christmas.

    Now it’s her travel expenses of about $700 that are eating into her budget. The 28-year-old moved to Puerto Rico from New Jersey with her husband earlier this year, forcing her to scale back her holiday spending to about $150 from last year’s $250.

    “I will order probably a few things online and then end up having to go to a store last minute,” she said.

    ______

    Follow Anne D’Innocenzio: http://twitter.com/ADInnocenzio

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  • U.S. home prices fall for fourth month in October as high mortgage rates bite

    U.S. home prices fall for fourth month in October as high mortgage rates bite

    The numbers: The S&P CoreLogic Case-Shiller 20-city house price index fell 0.5% in October, its fourth monthly decline. 

    Year-over-year prices rose rose 8.6%, slowing from 10.4% in the previous month.

    A broader measure of home prices, the national index, fell a seasonally adjusted 0.3% in October from September.

    A separate report from the Federal Housing Finance Agency showed home prices remaining flat in October, down from a 0.1% gain the prior month. 

    And over the last year, the FHFA index was up 9.8%.

    Key details: Miami, Tampa, and Charlotte reported the highest year-over-year gains among the 20 cities in October. All 20 cities reported lower price increases.

    San Francisco and Seattle reported the lowest year-over-year gains, which have seen prices fall by more than 10% from a peak in May.

    Big picture: Housing is in a slowdown, but affordability hasn’t returned. Homes are still expensive, as mortgage rates remain above 6%, and inventory of homes available for sale remains low.

    What S&P said: “As the Federal Reserve continues to move interest rates higher, mortgage financing continues to be a headwind for home prices,” Craig J. Lazzara, managing director at S&P DJI, said.

    “Given the continuing prospects for a challenging macroeconomic environment, prices may well continue to weaken,” he added.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    -0.22%
    and the S&P 500
    SPX,
    -0.63%
    were up in early trading on Tuesday. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.807%
    rose above 3.81%.

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  • Average holiday debt jumps to $1,550 — an 8-year high

    Average holiday debt jumps to $1,550 — an 8-year high

    Americans are now dealing with the aftermath of completing their holiday shopping during the highest inflation in four decades, with the average holiday debt load soaring 24% from last year to almost $1,550 — the highest amount in the eight years that LendingTree has tracked the trend. 

    To be sure, not everyone is going into debt, with LendingTree finding in its December survey of 2,050 U.S. consumers that about one-third of Americans took on holiday debt in 2022. But for those who accrued charges on their credit cards, the debt load is the highest since 2015. 

    While inflation is showing signs of cooling, consumers are grappling with still-high costs as well as rising interest rates, which have made it more expensive to carry credit card debt or take out loans. For the many Americans who are making financial resolutions for 2023, reducing debt is often at the top of the list.

    “There’s never a good time to carry debt, but this is a particularly bad time with interest rates at record highs,” noted Matt Schulz, chief credit analyst at LendingTree, in a blog post about the findings. 

    About 4 in 10 of those taking on debt told LendingTree they expect it could take them at least five months to pay down their holiday bills, compared with about 3 in 10 consumers a year ago. 

    Many of those consumers weren’t expecting to rack up debt, but this year’s high inflation was the Achilles’ heel of good spending intentions, LendingTree said.

    “Higher prices everywhere led people to take on debt they didn’t plan to accumulate,” Schulz noted. “In all, 63% of those who took on holiday debt say they didn’t plan to do so. That’s up from 54% a year ago.”


    Gift return complications this holiday shopping season

    04:54

    Getting rid of holiday debt

    There are several methods that can help people pare their holiday debt, Schulz said. Chief among them is finding a zero percent balance transfer card, which can give people more breathing room to pay down debt without incurring interest charges for up to 21 months. After that, the card will begin charging interest — but that zero percent grace period can help people reduce their credit card debt.

    Another option is to call your credit card company and ask for a lower rate — a strategy that works surprisingly often, Schulz said. A LendingTree study found that 70% of those who asked for a lower APR in the past year received one, but many consumers don’t even consider trying the strategy, he noted. 

    Lastly, tackle your debt through either the snowball or avalanche approach, depending on which one works best for your personality. With the snowball method, consumers pay off the cards with the lowest balances first. That can be rewarding for people who like to see quick wins. 

    The avalanche method targets credit cards with the highest interest rates first, which can take longer to pay off but may save you more money, Schulz added. 

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  • Holiday sales are up 7.6% despite inflation, but spending changes

    Holiday sales are up 7.6% despite inflation, but spending changes

    Holiday sales rose this year as American spending remained resilient during the critical shopping season despite surging prices on everything from food to rent, according to one measure.

    Holiday sales rose 7.6% — a slower pace than the 8.5% increase from a year earlier when shoppers began spending the money they had saved during the early part of the pandemic, according to Mastercard SpendingPulse, which tracks all kinds of payments including cash and debit cards.

    Mastercard SpendingPulse had expected a 7.1% increase. The data released Monday excludes the automotive industry and is not adjusted for inflation, which has eased somewhat but remains painfully high.

    U.S. sales between November 1 and December 24, a period that is critical for retailers, were fueled by spending at restaurants and on clothing.

    By category, clothing rose 4.4%, while jewelry and electronics dipped roughly 5%. Online sales jumped 10.6% from a year ago and in-person spending rose 6.8%. Department stores registered a modest 1% increase over 2021.

    Electronic sales down, along with clothing and furniture

    “This holiday retail season looked different than years past,” Steve Sadove, the former CEO and chairman at Saks and a senior adviser for Mastercard, said in a prepared statement. “Retailers discounted heavily, but consumers diversified their holiday spending to accommodate rising prices and an appetite for experiences and festive gatherings post-pandemic.”

    Some of the increase reflected the impact of higher prices across the board.

    Consumer spending accounts for nearly 70% of U.S. economic activity, and Americans have remained resilient ever since inflation first spiked almost 18 months ago. Cracks have begun to show, however, as higher prices for basic necessities take up an increasingly large share of everyone’s take-home pay.

    Inflation has retreated from the four-decade high it reached this summer, but it’s still sapping the spending power of consumers. Prices rose 7.1% in November from a year ago, down from a peak of 9.1% in June.


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    Overall spending has slowed from the pandemic-infused splurges and shifted increasingly toward necessities like food, while spending on electronics, furniture, new clothes and other non-necessities has faded. Many shoppers have been trading down to private label goods, which are typically less expensive than national brands. They’ve been going to cheaper stores like dollar chains and big box stores like Walmart.

    Consumers also waited for deals. Stores expected more procrastinators to hit stores in the last few days before Christmas compared with a year ago when people began shopping earlier due to a global disruption of the supply chain that created thousands of product shortages.

    “Consumers are trying to spread out their budget, and they are evaluating and shopping at different stores,” said Katie Thompson, the lead of consultancy Kearney’s Consumer Institute.

    In November, shoppers cut back sharply on retail spending compared with the previous month. Retail sales fell 0.6% from October to November after a sharp 1.3% rise the previous month, the government said in mid-December. Sales fell at furniture, electronics, and home and garden stores.

    Broader picture to come

    A broader picture of how Americans spent their money arrives next month when the National Retail Federation, the nation’s largest retail trade group, comes out with its combined two-month results based on November-December sales figures from the Commerce Department.

    The trade group expects holiday sales growth will slow to a range of 6% to 8%, compared with the blistering 13.5% growth of a year ago.

    Analysts will also be dissecting fourth-quarter financial results from major retailers in February.

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  • Holiday sales up 7.6% despite the squeeze of inflation

    Holiday sales up 7.6% despite the squeeze of inflation

    NEW YORK — Holiday sales rose this year as American spending remained resilient during the critical shopping season despite surging prices on everything from food to rent, according to one measure.

    Holiday sales rose 7.6, a slower pace than the 8.5% increase from a year earlier when shoppers began spending the money they had saved during the early part of the pandemic, according to Mastercard SpendingPulse, which tracks all kinds of payments including cash and debit cards.

    Mastercard SpendingPulse had expected a 7.1% increase. The data released Monday excludes the automotive industry and is not adjusted for inflation, which has eased somewhat but remains painfully high.

    U.S. sales between Nov. 1 and Dec. 24, a period that is critical for retailers, were fueled by spending at restaurants and on clothing.

    By category, clothing rose 4.4%, while jewelry and electronics dipped roughly 5%. Online sales jumped 10.6% from a year ago and in-person spending rose 6.8%. Department stores registered a modest 1% increase over 2021.

    “This holiday retail season looked different than years past,” Steve Sadove, the former CEO and chairman at Saks and a senior advisor for Mastercard, said in a prepared statement. “Retailers discounted heavily, but consumers diversified their holiday spending to accommodate rising prices and an appetite for experiences and festive gatherings post-pandemic.”

    Some of the increase reflected the impact of higher prices across the board.

    Consumer spending accounts for nearly 70% of U.S. economic activity, and Americans have remained resilient ever since inflation first spiked almost 18 months ago. Cracks have begun to show, however, as higher prices for basic necessities take up an increasingly large share of everyone’s take-home pay.

    Inflation has retreated from the four-decade high it reached this summer, but it’s still sapping the spending power of consumers. Prices rose 7.1% in November from a year ago, down from a peak of 9.1% in June.

    Overall spending has slowed from the pandemic-infused splurges and shifted increasingly toward necessities like food, while spending on electronics, furniture, new clothes and other non-necessities has faded. Many shoppers been trading down to private label goods, which are typically less expensive than national brands. They’ve been going to cheaper stores like dollar chains and big box stores like Walmart.

    Consumers also waited for deals. Stores expected more procrastinators to hit stores in the last few days before Christmas compared with a year ago when people began shopping earlier due to a global disruption of the supply chain that created thousands of product shortages.

    “Consumers are trying to spread out their budget, and they are evaluating and shopping at different stores,” said Katie Thompson, the lead of consultancy Kearney’s Consumer Institute.

    In November, shoppers cut back sharply on retail spending compared with the previous month. Retail sales fell 0.6% from October to November after a sharp 1.3% rise the previous month, the government said in mid-December. Sales fell at furniture, electronics, and home and garden stores.

    A broader picture of how Americans spent their money arrives next month when the National Retail Federation, the nation’s largest retail trade group, comes out with its combined two-month results based on November-December sales figures from the Commerce Department.

    The trade group expects holiday sales growth will slow to a range of 6% to 8%, compared with the blistering 13.5% growth of a year ago.

    Analysts will also be dissecting fourth-quarter financial results from major retailers in February.

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  • Holiday sales up 7.6% despite the squeeze of inflation

    Holiday sales up 7.6% despite the squeeze of inflation

    NEW YORK — Holiday sales rose this year as American spending remained resilient during the critical shopping season despite surging prices on everything from food to rent, according to one measure.

    Holiday sales rose 7.6, a slower pace than the 8.5% increase from a year earlier when shoppers began spending the money they had saved during the early part of the pandemic, according to Mastercard SpendingPulse, which tracks all kinds of payments including cash and debit cards.

    Mastercard SpendingPulse had expected a 7.1% increase. The data released Monday excludes the automotive industry and is not adjusted for inflation, which has eased somewhat but remains painfully high.

    U.S. sales between Nov. 1 and Dec. 24, a period that is critical for retailers, were fueled by spending at restaurants and on clothing.

    By category, clothing rose 4.4%, while jewelry and electronics dipped roughly 5%. Online sales jumped 10.6% from a year ago and in-person spending rose 6.8%. Department stores registered a modest 1% increase over 2021.

    “This holiday retail season looked different than years past,” Steve Sadove, the former CEO and chairman at Saks and a senior advisor for Mastercard, said in a prepared statement. “Retailers discounted heavily, but consumers diversified their holiday spending to accommodate rising prices and an appetite for experiences and festive gatherings post-pandemic.”

    Some of the increase reflected the impact of higher prices across the board.

    Consumer spending accounts for nearly 70% of U.S. economic activity, and Americans have remained resilient ever since inflation first spiked almost 18 months ago. Cracks have begun to show, however, as higher prices for basic necessities take up an increasingly large share of everyone’s take-home pay.

    Inflation has retreated from the four-decade high it reached this summer, but it’s still sapping the spending power of consumers. Prices rose 7.1% in November from a year ago, down from a peak of 9.1% in June.

    Overall spending has slowed from the pandemic-infused splurges and shifted increasingly toward necessities like food, while spending on electronics, furniture, new clothes and other non-necessities has faded. Many shoppers been trading down to private label goods, which are typically less expensive than national brands. They’ve been going to cheaper stores like dollar chains and big box stores like Walmart.

    Consumers also waited for deals. Stores expected more procrastinators to hit stores in the last few days before Christmas compared with a year ago when people began shopping earlier due to a global disruption of the supply chain that created thousands of product shortages.

    “Consumers are trying to spread out their budget, and they are evaluating and shopping at different stores,” said Katie Thompson, the lead of consultancy Kearney’s Consumer Institute.

    In November, shoppers cut back sharply on retail spending compared with the previous month. Retail sales fell 0.6% from October to November after a sharp 1.3% rise the previous month, the government said in mid-December. Sales fell at furniture, electronics, and home and garden stores.

    A broader picture of how Americans spent their money arrives next month when the National Retail Federation, the nation’s largest retail trade group, comes out with its combined two-month results based on November-December sales figures from the Commerce Department.

    The trade group expects holiday sales growth will slow to a range of 6% to 8%, compared with the blistering 13.5% growth of a year ago.

    Analysts will also be dissecting fourth-quarter financial results from major retailers in February.

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  • Bank of Japan Governor Haruhiko Kuroda dismisses near-term chance of exiting easy policy

    Bank of Japan Governor Haruhiko Kuroda dismisses near-term chance of exiting easy policy

    Haruhiko Kuroda, governor of the Bank of Japan, speaks during a news conference at the central bank’s headquarters in Tokyo on Dec. 20, 2022.

    Yuya Yamamoto | Jiji Press | Bloomberg | Getty Images

    Bank of Japan Governor Haruhiko Kuroda on Monday brushed aside the chance of a near-term exit from ultra-loose monetary policy but voiced hope that intensifying labor shortages will prod firms to raise wages.

    Kuroda said the BOJ’s decision last week to widen the allowance band around its yield target was aimed at enhancing the effect of its ultra-easy policy, rather than a first step toward withdrawing its massive stimulus program.

    “This is definitely not a step toward an exit. The Bank will aim to achieve the price target in a sustainable and stable manner, accompanied by wage increases, by continuing with monetary easing under yield curve control,” Kuroda said in a speech delivered to a meeting of business lobby Keidanren.

    He also said Japan’s average consumer inflation will likely slow below the BOJ’s 2% target in the next fiscal year as the effects of soaring import costs dissipate.

    Stock picks and investing trends from CNBC Pro:

    But Kuroda said wage growth will likely increase gradually due to intensifying labor shortages and structural changes in Japan’s job market, which are leading to higher pay for temporary workers and a rise in the number of permanent workers.

    “Labor market conditions in Japan are projected to tighten further, and firms’ price- and wage-setting behavior is also likely to change,” Kuroda said.

    “In this sense, Japan is approaching a critical juncture in breaking out of a prolonged period of low inflation and low growth,” he said.

    The strength of wage growth is seen as key to how soon the BOJ could raise its yield curve control targets, which are set at -0.1% for short-term interest rates and around 0% for the 10-year bond yield.

    The BOJ shocked markets last week with a surprise widening of the band around its 10-year yield target. Kuroda had described the move, which allows long-term rates to rise more, as aimed at easing some of the costs of prolonged stimulus rather than a prelude to a full-fledged policy normalization.

    With inflation exceeding its 2% target, however, markets are rife with speculation that the BOJ will raise the yield targets when the dovish governor Kuroda’s term ends in April next year.

    While more companies are starting to hike prices to pass on higher costs to households, the BOJ must examine whether such changes in corporate price-setting behavior will take hold as a new norm in Japan, Kuroda said.

    The outcome of next year’s spring wage negotiations between big companies and unions will also be key to the outlook for wage growth, he said.

    Speaking at the same meeting, Prime Minister Fumio Kishida called for business leaders’ help in achieving wage growth high enough to compensate households for the rising cost of living.

    Japan’s core consumer inflation hit a fresh four-decade high of 3.7% in November as companies continued to pass on rising costs to households, a sign that price hikes were broadening.

    But wages have barely risen for permanent workers, as companies remained cautious about increasing fixed costs amid an uncertain economic outlook.

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  • Asian shares higher in thin holiday trading

    Asian shares higher in thin holiday trading

    BANGKOK — Shares rose Monday in Asia in thin post-Christmas holiday trading, with markets in Hong Kong, Sydney and several other places closed.

    Tokyo’s Nikkei 225 index gained 0.6% to 26,393.32 and the Kospi in Seoul added 0.2% to 2,318.54. The Shanghai Composite index rose 0.5% to 3,061.93 and the SET in Bangkok added 0.6%.

    Bank of Japan Gov. Haruhiko Kuroda indicated in a widely watched speech Monday that the central bank does not intend to alter its longstanding policy of monetary easing to cope with pressures from inflation on the world’s third-largest economy.

    Last week, markets were jolted by a slight adjustment in the target range for the yield of long-term Japanese government bonds, viewing it as a sign the Bank of Japan might finally unwind its massive support for the economy through ultra-low interest rates and purchases of bonds and other assets.

    A widening gap between interest rates in Japan and other countries has pulled the Japanese yen sharply lower against the U.S. dollar and other currencies and accentuated the impact of higher costs for many imported products and commodities.

    But the BOJ has kept its key lending rate at minus 0.1%, cautious over risks of recession.

    Kuroda told the Keidanren, the country’s most powerful business group, that with economies facing likely downward pressure, and with Japan’s economy not fully recovered from the impacts of the pandemic, the BOJ “deems it necessary to conduct monetary easing and thereby firmly support the economy. …”

    On Friday, the S&P 500 reversed a 0.7% loss to close 0.6% higher, at 3,844.82. With one week left of trading in 2022, the benchmark index is down 19.3% for the year.

    The Dow Jones Industrial Average rose 0.5% to 33,203.93, while the tech-heavy Nasdaq edged 0.2% higher, to 10,497.86.

    Small company stocks also rose. The Russell 2000 index picked up 0.4% to 1,760.93.

    Mixed economic news weighed on stocks early on, but the indexes rebounded by late afternoon amid relatively light trading ahead of the long holiday weekend. U.S. and European markets will be closed Monday.

    Markets are in a tricky situation where relatively solid consumer spending and a strong employment market reduce the risk of a recession but also raise the threat of higher interest rates from the Federal Reserve as it presses its campaign to crush inflation.

    The government reported Friday that a key measure of inflation is continuing to slow, though the inflation gauge in the consumer spending report was still far higher than anyone wants to see. Also, growth in consumer spending weakened last month by more than expected, but incomes were a bit stronger than expected.

    Last week’s reports were the last big U.S. economic updates of the year. Investors will soon turn their focus to the next round of corporate earnings.

    The Fed has said it will keep raising interest rates to tame inflation, even though the pace of price increases has continued to ease. The Fed’s key overnight rate is at its highest level in 15 years, after beginning the year at a record low of roughly zero. The key lending rate, the federal funds rate, stands at a range of 4.25% to 4.5%, and Fed policymakers have forecast that the rate will reach a range of 5% to 5.25% by the end of 2023.

    Given the persistence of high inflation, “many are starting to believe the main story is that there will be no scope for Fed cuts in the year ahead and that central banks will maintain these relatively high rates until underlying inflation is truly cracked — and that process will take time,” Stephen Innes of SPI Asset Management said in a commentary.

    The Fed’s forecast doesn’t call for a rate cut before 2024, and the higher rates have raised concerns the economy could stall and slip into a recession in 2023. High rates have also been weighing heavily on prices for stocks and other investments.

    In currency dealings, the U.S. dollar slipped to 132.62 Japanese yen from 132.82 yen late Friday. The euro rose to $1.0629 from $1.0614.

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  • Asian shares higher in thin holiday trading

    Asian shares higher in thin holiday trading

    BANGKOK — Shares rose Monday in Asia in thin post-Christmas holiday trading, with markets in Hong Kong, Sydney and several other places closed.

    Tokyo’s Nikkei 225 index gained 0.5% to 26,367.40 and the Kospi in Seoul added 0.2% to 2,317.48. The Shanghai Composite index surged 0.7% to 3,067.54 and the SET in Bangkok added 0.3%.

    Traders were awaiting a speech by the governor of Japan‘s central bank Monday for hints into whether the Bank of Japan might further adjust its longstanding ultra-lax monetary policy to cope with pressures from inflation.

    Last week, markets were jolted by a slight adjustment in the target range for the yield of long-term Japanese government bonds, viewing it as a sign the Bank of Japan might finally unwind its massive support for the economy through ultra-low interest rates and purchases of bonds and other assets.

    A widening gap between interest rates in Japan and other countries has pulled the Japanese yen sharply lower against the U.S. dollar and other currencies and accentuated the impact of higher costs for many imported products and commodities.

    But the BOJ has kept its key lending rate at minus 0.1%, cautious over risks of recession.

    On Friday, the S&P 500 reversed a 0.7% loss to close 0.6% higher, at 3,844.82. With one week left of trading in 2022, the benchmark index is down 19.3% for the year.

    The Dow Jones Industrial Average rose 0.5% to 33,203.93, while the tech-heavy Nasdaq edged 0.2% higher, to 10,497.86.

    Small company stocks also rose. The Russell 2000 index picked up 0.4% to 1,760.93.

    Mixed economic news weighed on stocks early on, but the indexes rebounded by late afternoon amid relatively light trading ahead of the long holiday weekend. U.S. and European markets will be closed Monday.

    Markets are in a tricky situation where relatively solid consumer spending and a strong employment market reduce the risk of a recession but also raise the threat of higher interest rates from the Federal Reserve as it presses its campaign to crush inflation.

    The government reported Friday that a key measure of inflation is continuing to slow, though it’s still far higher than anyone wants to see. The Federal Reserve monitors the inflation gauge in the consumer spending report, called the personal consumption expenditures price index, even more closely than it does the government’s better-known consumer price index.

    Also, growth in consumer spending weakened last month by more than expected, but incomes were a bit stronger than expected.

    A separate report from the University of Michigan indicating U.S. households are lowering their forecasts for upcoming inflation. That could help avoid a scenario the Federal Reserve has said often it’s desperate to prevent: a vicious cycle where shoppers rush to make purchases in advance of expected price rises, which would only worsen inflation.

    The latest round of reports were the last big U.S. economic updates of the year. Investors will soon turn their focus to the next round of corporate earnings.

    The Fed has said it will keep raising interest rates to tame inflation, even though the pace of price increases has continued to ease. The Fed’s key overnight rate is at its highest level in 15 years, after beginning the year at a record low of roughly zero. The key lending rate, the federal funds rate, stands at a range of 4.25% to 4.5%, and Fed policymakers have forecast that the rate will reach a range of 5% to 5.25% by the end of 2023.

    Given the persistence of high inflation, “many are starting to believe the main story is that there will be no scope for Fed cuts in the year ahead and that central banks will maintain these relatively high rates until underlying inflation is truly cracked — and that process will take time,” Stephen Innes of SPI Asset Management said in a commentary.

    The Fed’s forecast doesn’t call for a rate cut before 2024, and the higher rates have raised concerns the economy could stall and slip into a recession in 2023. High rates have also been weighing heavily on prices for stocks and other investments.

    In currency dealings, the U.S. dollar slipped to 132.53 Japanese yen from 132.82 yen late Friday. The euro rose to $1.0628 from $1.0614.

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