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  • U.S. stocks staged a surprising rally on Friday. But can the party last?

    U.S. stocks staged a surprising rally on Friday. But can the party last?

    U.S. stocks saw a surprising bounce on Friday, culminating in the S&P 500 index’s biggest intraday comeback since the March banking crisis, even though a monthly jobs report for September came in much higher than expected.

    So, are investors no longer worried about the Federal Reserve’s inflation fight or higher interest rates wrecking the U.S. economy?

    “Stocks initially sold off on the blockbuster jobs report which indicates the Fed may not be done,” said Gina Bolvin, president of Bolvin Wealth Management Group. “However, after digesting the strong labor market is still strong, stocks rallied. And why shouldn’t they? Will good news- finally – be good news?”

    Bolvin said part of the rally could be seasonal, with September typically being a rough months for stocks. There also has been increased optimism that the earnings recession for American corporations may be over, she said.

    Analysts are predicting corporate earnings growth rates of 5.9% for the fourth quarter for S&P500 companies, according to John Butters, senior earnings analyst at FactSet. Estimates are for the third-quarter of 2023 after the stock index’s fourth straight quarterly earnings decline on a year-over-year basis.

    At Friday’s session lows, the S&P 500 index
    SPX
    was down 0.9%, but it ended up posting a 1.2% advance, its largest intraday comeback since March 24, 2023, according to Dow Jones Market Data. The Dow Jones Industrial Average
    DJIA
    booked a 0.9% gain and the Nasdaq Composite Index
    COMP
    rose 1.6% higher.

    “The movement in stocks today is certainly encouraging given yields are up as well,” said Chris Fasciano, portfolio manager, Commonwealth Financial Network. “But we will need to see follow through next week.”

    The yield on 10-year Treasury
    BX:TMUBMUSD10Y
    note rose for five straight weeks in a row to 4.783% on Friday, while the 30-year yield
    BX:TMUBMUSD30Y
    rose to 4.941%, according to Dow Jones Market Data.

    Read: Why 5% bond yields could wreak havoc on the market

    While the U.S. stock-market will be open for business on Monday, the bond market will be closed for Columbus Day and Indigenous Peoples Day holiday, giving investors somewhat of a pause before a big week of economic data that could shape the Fed’s next decision on interest rates.

    “Ultimately, stocks and bonds will take their cues next week from the economic releases,” Fasciano told MarketWatch.

    Key items on the calendar for the week will be September inflation reports, with the producer-price index on Wednesday and the consumer-price index due Thursday. In between, Fed minutes of its policy meeting in September also are due to be released Wednesday.

    “That makes next week an important week for the future direction of both the bond and equity markets as the Fed will certainly be focused on those reports prior to their next meeting on Oct. 31-Nov. 1,” Fasciano said.

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  • U.S. stocks stage a surprising rally on Friday. But can the party last?

    U.S. stocks stage a surprising rally on Friday. But can the party last?

    U.S. stocks saw a surprising bounce on Friday, culminating in the S&P 500 index’s biggest intraday comeback since the March banking crisis, even though a monthly jobs report for September came in much higher than expected.

    So, are investors no longer worried about the Federal Reserve’s inflation fight or higher interest rates wrecking the U.S. economy?

    “Stocks initially sold off on the blockbuster jobs report which indicates the Fed may not be done,” said Gina Bolvin, president of Bolvin Wealth Management Group. “However, after digesting the strong labor market is still strong, stocks rallied. And why shouldn’t they? Will good news- finally – be good news?”

    Bolvin said part of the rally could be seasonal, with September typically being a rough months for stocks. There also has been increased optimism that the earnings recession for American corporations may be over, she said.

    Analysts are predicting corporate earnings growth rates of 5.9% for the fourth quarter for S&P500 companies, according to John Butters, senior earnings analyst at FactSet. Estimates are for the third-quarter of 2023 after the stock index’s fourth straight quarterly earnings decline on a year-over-year basis.

    At Friday’s session lows, the S&P 500 index
    SPX
    was down 0.9%, but it ended up posting a 1.2% advance, its largest intraday comeback since March 24, 2023, according to Dow Jones Market Data. The Dow Jones Industrial Average
    DJIA
    booked a 0.9% gain and the Nasdaq Composite Index
    COMP
    rose 1.6% higher.

    “The movement in stocks today is certainly encouraging given yields are up as well,” said Chris Fasciano, portfolio manager, Commonwealth Financial Network. “But we will need to see follow through next week.”

    The yield on 10-year Treasury
    BX:TMUBMUSD10Y
    note rose for five straight weeks in a row to 4.783% on Friday, while the 30-year yield
    BX:TMUBMUSD30Y
    rose to 4.941%, according to Dow Jones Market Data.

    Read: Why 5% bond yields could wreak havoc on the market

    While the U.S. stock-market will be open for business on Monday, the bond market will be closed for Columbus Day and Indigenous Peoples Day holiday, giving investors somewhat of a pause before a big week of economic data that could shape the Fed’s next decision on interest rates.

    “Ultimately, stocks and bonds will take their cues next week from the economic releases,” Fasciano told MarketWatch.

    Key items on the calendar for the week will be September inflation reports, with the producer-price index on Wednesday and the consumer-price index due Thursday. In between, Fed minutes of its policy meeting in September also are due to be released Wednesday.

    “That makes next week an important week for the future direction of both the bond and equity markets as the Fed will certainly be focused on those reports prior to their next meeting on Oct. 31-Nov. 1,” Fasciano said.

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  • Social Security Administration to review overpayments, may claw back payments

    Social Security Administration to review overpayments, may claw back payments

    The Social Security Administration said Wednesday it would review its overpayment procedures and policies, and may claw back any overpayments found.

    During the 2022 fiscal year, the agency recovered $4.7 billion of overpayments, according to a report by the SSA’s Office of the Inspector General. 

    While payment accuracy rates are high, overpayments do happen given the number of people the agency serves, the number of changes in their circumstances and the complexity of the programs, the SSA said.  

    “Despite our high accuracy rates, I am putting together a team to review our overpayment policies and procedures to further improve how we serve our customers,” said Kilolo Kijakazi, acting commissioner of Social Security.

    “There is misinformation in the media claiming that the Social Security Administration is attempting to collect $21 billion. This figure was derived from the total amount of overpayments that have occurred over the history of the programs,” the SSA said in a statement.

    The announcement comes the week before Social Security’s cost-of-living adjustment, or COLA, is expected to be released.

    The 2024 COLA for Social Security is expected to rise about 3.2%, according to estimates from the Senior Citizens League, a pro-senior think tank. That’s compared with an 8.7% increase for 2023, which was the highest COLA in more than 40 years amid high inflation.

    Social Security is an important benefit for most Americans. Half of the population age 65 or older live in households that receive at least 50% of their family income from Social Security benefits, according to SSA data, and about 25% of senior households rely on Social Security benefits for at least 90% of their income.

    “The government’s got to fix this,” Sen. Sherrod Brown, the Ohio Democrat who chairs a Senate panel that oversees Social Security, recently told KFF Health News on the subject of overpayments. Meanwhile, Rep. Mike Carey of Ohio, the No. 2 Republican on a House panel that oversees Social Security, has called for a congressional hearing to review the problem, according to the KFF Health News report.

    Social Security pays $1.4 trillion in benefits to more than 71 million people each year. Only around 0.5% of Social Security payments are overpayments, the SSA said.

    “For the Supplemental Security Income (SSI) program, overpayments also represent a small percentage of payments — about 8% — but are higher due to the complexity in administering statutory income and resource limits and asset evaluations,” the agency said in the announcement.

    If a person doesn’t agree that they’ve been overpaid, or believes the amount is incorrect, they can appeal. If they believe they shouldn’t have to pay the money back, they can request that the agency waive collection of the overpayment. There’s no time limit for filing a waiver.

    The SSA said it is required by law to adjust benefits or recover debts when overpayments occur. The law allows Social Security to waive recovery in some cases.

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  • Government shutdown looms: Here’s how to help preserve your investment portfolio.  

    Government shutdown looms: Here’s how to help preserve your investment portfolio.  

    The economic impact of a shutdown and the potential implications on your portfolio depend largely on how long the shutdown lasts.

    The potential for a U.S. government shutdown can raise alarm for investors and send the phone of a financial adviser like me ringing off the hook. Headlines in front of them, my clients are increasingly asking about potential portfolio implications and how they should respond.

    There is certainly a measured response, which includes not overreacting to the headlines and sticking to your long-term investment plan, and I’ll show you how to draw it.

    Government shutdown explained

    First, it’s important to understand what is happening. During a shutdown, the federal government will suspend all services that are deemed nonessential until a funding agreement is reached. This is much different than a default — which can happen when the government can’t pay its debts or satisfy its obligations. A default can have significant ramifications on U.S. creditworthiness and in turn, the global financial system. You may recall lawmakers’ discussions earlier this year regarding raising the debt ceiling — a solution to avoid defaulting. 

    A U.S. default has never happened, but shutdowns have occurred more than 20 times since 1976. Unlike a default, a shutdown does not affect the government’s ability to pay its obligations, and many critical government services, like Social Security may continue. When weighing the two, one can presume that markets may react more negatively to a default.   

    Markets may experience heightened volatility in response to the shutdown uncertainty, but markets do not react consistently to the news. In the past we have seen U.S. stocks — as measured by the S&P 500
    SPX
    — finish positively after more than half of these shutdowns. Results are similar for fixed-income securities, as we’ve seen an even split between positive and negative returns in the bond markets in shutdowns since 1976. 

    Of course, all investing is subject to risk, past performance is not a guarantee for future returns, and the performance of an index is not an exact representation of any particular investment. 

    The economic impact of a shutdown — and the potential implications on your portfolio — depend largely on how long the shutdown lasts. The longer the shutdown, the more Americans experience dampened economic activity from things like loss of furloughed federal workers’ contribution to GDP, the delay in federal spending on goods and services, and the reduction in aggregate demand (which lowers private-sector activity). 

    Read: Government shutdown: Analysts warn of ‘perhaps a long one lasting into the winter’

    A measured response 

    A government shutdown is just one of many factors, both positive and negative, that can cause fluctuation in the market, so it’s important to treat it just as you would other fluctuations.

    With so many variables, it’s impossible to precisely predict the effects the shutdown will have or determine how long it will last. This can seem scary for many, so it’s important to remember your long-term financial plan and focus on the factors you can control.  

    First, do not try to time the market. Doing so based on short-term events is never a good idea, and volatility is unpredictable. Even if the markets fall, we don’t know when they might recover. If you make an emotionally charged decision, you run the risk of missing out on potentially substantial market gains. 

    Instead, focus on the following: align your asset allocation with your risk tolerance; control your costs; adopt realistic expectations; hold a broadly diversified portfolio and stay disciplined. Doing so can help you weather any form of market uncertainty, including a shutdown.

    Stick to healthy financial habits

    In addition to not making any sudden moves in your investment portfolio, now is a suitable time to make sure you are keeping up with healthy financial habits, especially if you are a federal employee facing a furlough. This can look like readjusting your budget based on your current needs, keeping high-interest debt to a minimum, paying the minimum on all debt to keep your credit score in good standing and continuing to save.

    Remember, using your emergency fund to navigate tight times is exactly what you have saved for and tapping it in this instance is considered a healthy financial habit. Just be sure to replenish it when you have the funds to do so. As a good practice, Vanguard recommends having three- to six months of expenses saved in readily accessible investments.

    With a level, long-term approach and a personalized financial plan, you can be prepared for this potential storm and the inevitable ones to come. 

    Lauren Wybar is a senior financial adviser with Vanguard Personal Advisor. 

    More: Bill Ackman says Treasury yields are going higher in a hurry, and that investors should shun U.S. government debt

    Plus: Social Security checks will still come if there’s a shutdown. But there are other immediate threats to America’s benefits.

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  • Tesla sued for racial discrimination, retaliation by EEOC

    Tesla sued for racial discrimination, retaliation by EEOC

    Tesla Inc. was sued Thursday by the U.S. Equal Employment Opportunity Commission, which alleges the EV maker violated federal law by “tolerating widespread and ongoing racial harassment of its Black employees” at its Fremont, Calif., plant, and by retaliating against those opposing the harassment.

    Black employees at the Fremont factory, Tesla’s
    TSLA,
    +2.44%

    first assembly plant and for years its only vehicle-manufacturing facility in the U.S., “have routinely endured racial abuse, pervasive stereotyping and hostility” as well as having racial slurs hurled at them, the lawsuit alleges.

    “Slurs were used casually and openly in high-traffic areas and at worker hubs,” the EEOC said. Black employees “regularly” saw graffiti with slurs, swastikas, threats and nooses throughout the facility, including on desks, in bathroom stalls and elevators, according to the suit.

    Tesla, which disbanded its media relations team during the pandemic, did not immediately return a request for comment. In August, SpaceX, another one of Tesla’s Chief Executive Elon Musk’s companies, was sued by the Justice Department over its hiring practices.

    Employees who spoke up against the racial hostility suffered retaliations that included being fired or transferred, the EEOC said.

    The lawsuit was filed in the U.S. District Court for the Northern District of California after attempts at reaching a settlement before the litigation. It seeks compensatory and punitive damages as well as back pay for the affected workers. It also seeks changes to Tesla’s employment practices to prevent discrimination in the future, the EEOC said.

    A Black Tesla employee was awarded $137 million in 2021 by a jury that agreed he was subjected to racial harassment at the Fremont factory, but in April 2022 a judge reduced the award to $15 million.

    Shares of Tesla have doubled so far this year, compared with an advance of around 12% for the S&P 500 index
    SPX.

    The first Model S rolled out of the Fremont factory in 2012, and the plant now makes Model S, Model 3, Model X and Model Y vehicles, with capacity to make more than a million vehicles a year as well as energy products and battery cells.

    Tesla opened up its second U.S. vehicle-making factory in the Austin, Texas, area in the spring of 2022.

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  • Hollywood writers strike declared over after boards approve new contract with studios

    Hollywood writers strike declared over after boards approve new contract with studios

    LOS ANGELES — Leaders of the screenwriters union declared their nearly five-month-old strike over Tuesday after board members approved a contract agreement with studios, bringing Hollywood at least partly back from a historic halt in production.

    The governing boards of the eastern and western branches of the Writers Guild of America and their joint negotiating committee all voted to accept the deal, two days after the tentative agreement was reached with a coalition of Hollywood’s biggest studios, streaming services and production companies. After the vote they declared that the strike would be over and writers would be free to start on scripts at 12:01 a.m. Wednesday.

    Late-night talk shows — the first to go dark when writers walked out on May 2 — are likely the first shows that will resume. Scripted shows will take longer to return, with actors still on strike and no negotiations yet on the horizon.

    The writers still have to vote to ratify the contract themselves in early October, but lifting the strike will allow them to work during that process, the guild told members in an email.

    After Tuesday’s board votes, the contracts were released for the first time to the writers, who had not yet been given any details on the deal, which their leaders called “exceptional.”

    The three-year agreement includes significant wins in the main areas writers had fought for — compensation, length of employment, size of staffs and control of artificial intelligence — matching or nearly equaling what they had sought at the outset of the strike.

    The union had sought minimum increases in pay and future residual earnings from shows of between 5% and 6%, depending on the position of the writer. The studios had wanted between 2% and 4%. The compromise deal was a raise of between 3.5% and 5%.

    The guild also negotiated new residual payments based on the popularity of streaming shows, where writers will get bonuses for being a part of the most popular shows on Netflix
    NFLX,
    -1.44%
    ,
    Max and other services, a proposal studios initially rejected. Many writers on picket lines had complained that they weren’t properly paid for helping create heavily watched properties.

    The writers also got the requirement they sought that shows intended to run at least 13 episodes will have at least six writers on staff, with the numbers shifting based on the number of episodes. They did not get their desire for guaranteed staffs of six on shows that had not yet been ordered to series, settling instead for a guaranteed three.

    Writers also got a guarantee that staffs on shows in initial development will be employed for at least 10 weeks, and that staffs on shows that go to air will be employed for three weeks per episode.

    On artificial intelligence, the writers got the regulation and control of the emerging technology they had sought. Under the contract, raw, AI-generated storylines will not be regarded as “literary material” — a term in their contracts for scripts and other story forms a screenwriter produces. This means they won’t be competing with computers for screen credits. Nor will AI-generated stories be considered “source” material, their contractual language for the novels, video games or other works that writers may adapt into scripts.

    Writers have the right under the deal to use AI in their process if the company they are working for agrees and other conditions are met. But companies cannot require a writer to use AI.

    Still-striking members of the Screen Actors Guild-American Federation of Television and Radio Artists returned to the picket lines earlier Tuesday for the first time since the writers struck their tentative deal, and they were animated by a new spirit of optimism.

    “For a hot second, I really thought that this was going to go on until next year,” said Marissa Cuevas, an actor who has appeared on the TV series “Kung Fu” and “The Big Bang Theory.” “Knowing that at least one of us has gotten a good deal gives a lot of hope that we will also get a good deal.”

    Writers’ picket lines had been suspended, but they were encouraged to walk in solidarity with actors, and many were on the lines Tuesday, including “Mad Men” creator Matthew Weiner, who picketed alongside friend and “ER” actor Noah Wyle as he has throughout the strikes.

    “We would never have had the leverage we had if SAG had not gone out,” Weiner said. “They were very brave to do it.”

    The Alliance of Motion Picture and Television Producers, which represents the studios in negotiations, chose to deal with the longer-striking writers first, and leaders of SAG-AFTRA said they had received no overtures on resuming talks. That’s likely to change soon.

    Actors also voted to authorize their leadership to potentially expand their walkout to  include the lucrative videogame market, a step that could put new pressure on Hollywood studios to make a deal with the performers who provide voices and stunts for games.

    The Screen Actors Guild-American Federation of Radio and Television Artists announced the move late Monday, saying that 98% of its members voted to go on strike against videogame companies if ongoing negotiations are not successful. The announcement came ahead of more talks planned for Tuesday.

    Acting in videogames can include a variety of roles, from voice performances to motion capture work as well as stunts. Video game actors went on strike in 2016 in a work stoppage that lasted nearly a year.

    Some of the same issues are at play in the video game negotiations as in the broader actors strike that has shut down Hollywood for months, including wages, safety measures and protections on the use of artificial intelligence. The companies involved include gaming giants Activision Blizzard
    ATVI,
    -0.05%
    ,
    Electronic Arts
    EA,
    -1.13%
    ,
    Epic Games, Take 2 Productions
    TTWO,
    -0.99%

    as well as Disney
    DIS,
    -1.19%

    and Warner Bros.′
    WBD,
    +0.28%

    videogame divisions.

    “It’s time for the videogame companies to stop playing games and get serious about reaching an agreement on this contract,” SAG-AFTRA President Fran Drescher said in a statement.

    Audrey Cooling, a spokesperson for videogame producers, said they are “continuing to negotiate in good faith” and have reached tentative agreements on more than half of the proposals on the table.

    So far this year, U.S. consumers have spent $34.9 billion on videogames, consoles and accessories, according to market research group Circana.

    The threat of a videogame strike emerged as Hollywood writers were on the verge of getting back to work after months on the picket lines.

    The alliance of studios, streaming services and producers has chosen to negotiate only with the writers so far, and has made no overtures yet toward restarting talks with SAG-AFTRA. That will presumably change soon.

    SAG-AFTRA leaders have said they will look closely at the writers’ agreement, which includes many of the same issues, but it will not effect their demands.

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  • Alcoa’s stock rocked after unexpected CEO transition

    Alcoa’s stock rocked after unexpected CEO transition

    Shares of Alcoa Corp. slumped to a multiyear low Monday as the aluminum company said that Roy Harvey had been replaced as chief executive officer after seven years in the role.

    The company named William Oplinger as president and CEO, effective Sunday. Oplinger had served as Alcoa’s chief operations officer since February and before that as chief financial officer since November 2016.

    Alcoa’s stock
    AA,
    -5.20%

    dropped 5.1% in morning trading. That put it on track for the lowest close since March 1, 2021. It has tumbled 18% over the past three months and plunged 40.8% year to date, while the S&P 500
    SPX
    has rallied 12.8% this year.

    “In our opinion, investors have expressed concern around cash flow and the company’s medium to long-term outlook,” B. Riley analyst Lucas Pipes wrote in a note to clients. “While the timing of the transition is somewhat unexpected, we believe Mr. Oplinger is the most well-positioned candidate for the CEO role.”

    Harvey had been CEO since the company completed its separation from Arconic Inc. in November 2016. Arconic was acquired by Apollo Global Management Inc.
    APO,
    +1.55%

    in a deal that was completed in August 2023.

    “The transition of the president and CEO roles reflects the company’s succession planning process,” Alcoa said in a statement.

    “Our board believes Bill’s extensive experience with Alcoa makes him well-positioned to carry the company forward,” said Steven Williams, Alcoa’s board chair.

    B. Riley’s Pipes said that as Alcoa has faced challenging aluminum markets in recent quarters, and given the troubles associated with approvals of mine plans in Australia, he believes the change in leadership reflects the company’s desire to reposition its asset base for stronger cash-flow generation.

    “While Mr. Harvey has successfully transformed Alcoa in recent years, particularly as [Alcoa] has aggressively deleveraged, we believe the transition will be viewed favorably by investors,” Pipes wrote.

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  • UAW expands strike to 38 GM and Stellantis auto-parts distribution centers in 20 states

    UAW expands strike to 38 GM and Stellantis auto-parts distribution centers in 20 states

    The United Auto Workers on Friday expanded its strike to 38 General Motors Co. and Stellantis NV auto-parts distribution centers in 20 states, hobbling the two carmakers’ repair networks.

    UAW President Shawn Fain said that the union has made “some real progress” in negotiations with Ford Motor Co.
    F,
    +1.89%
    ,
    which agreed to cost-of-living increases, some job protections and other concessions, and it won’t be striking at additional Ford plants.

    “Ford is showing us they are serious about reaching a deal,” Fain said.

    Nearly 13,000 UAW members have been on strike since last Friday at a Missouri GM plant making GMC Canyons and Colorados, an Ohio Stellantis plant making Jeep Wranglers and Gladiators, and portions of a Michigan Ford plant making Broncos and Rangers.

    Joining them are 3,475 workers at 18 GM fulfillment centers and 2,150 workers at 20 Stellantis centers across the U.S. The workers at the auto-parts distribution centers started to walk off at noon Eastern on Friday.

    GM said that the strike’s “escalation” was “unnecessary.”

    “We have contingency plans for various scenarios and are prepared to do what is best for our business, our customers, and our dealers,” the company said in a statement Friday. “We will continue to bargain in good faith with the union to reach an agreement as quickly as possible.”

    Don’t miss: Tesla may be the winner of the Big Three labor woes

    Stellantis said later Friday that it made a “very competitive offer” on Thursday that included a pay raise of 21% over the four-year life of the contract for some of its full-time hourly workers and a “significant product allocation that allows for workforce stability through the end of the contract.”

    “And yet, we still have not received a response to that offer. We look forward to the UAW leadership’s productive engagement so that we can bargain in good faith to reach an agreement that will protect the competitiveness of our company and our ability to continue providing good jobs,” said Stellantis, which was formed in 2021 with the merger of Fiat Chrysler and France’s Groupe PSA and is headquartered in the Netherlands.

    Meanwhile, Wall Street seemed encouraged by the progress with Ford negotiations.

    That was “encouraging,” suggesting that the Big Three could “perhaps reach a labor agreement sooner than some have been expecting,” measured in days and weeks and not months, Citi analyst Itay Michaeli said in a note Friday. The new strikes at auto-parts distribution facilities would likely immediately impact “a relatively smaller yet high-margin revenue stream” for GM, Michaeli said.

    A potential parts shortage could add pressure on the carmakers to reach an agreement sooner, he said. Compared with the possibility of strike at full-size truck plants, at the heart of the automakers’ profits, however, “today’s update seems somewhat more encouraging.”

    Wedbush analyst Dan Ives called the UAW action “an aggressive move that essentially goes at the hearts and lungs of auto operations for GM and Stellantis.”

    A settlement with Ford is likely over the coming week, Ives said. “The UAW and GM/Stellantis now have crossed the invisible line and the UAW strike is about to get a lot nastier.”

    Since the strike began, the union and the automakers have said they are engaging in constant talks as they try to reach a compromise on a new national contract.

    The union is demanding wage increases, an end to tiers, the restoration of pensions and cost-of-living adjustments and other concessions. Although both the union and companies have claimed progress during talks, GM President Mark Reuss said in a recent opinion piece in the Detroit Free Press that the UAW’s demands are “untenable.” That’s in line with Ford President Jim Farley’s characterization of the union’s wage proposal as “unsustainable” for the company before the strike deadline.

    Fain mentioned Reuss’s “untenable” comment in his update Friday via webcast. GM and Stellantis “are going to need some serious pushing” to meet union demands, he said.

    See: 5 things to know about the UAW strike


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  • UAW expands strike to 38 GM and Stellantis auto-parts distribution centers in 20 states

    UAW expands strike to 38 GM and Stellantis auto-parts distribution centers in 20 states

    The United Auto Workers on Friday expanded its strike to 38 General Motors Co. and Stellantis NV auto-parts distribution centers in 20 states, hobbling the two carmakers’ repair networks.

    UAW President Shawn Fain said that the union has made “some real progress” in negotiations with Ford Motor Co.
    F,
    +1.89%
    ,
    which agreed to cost-of-living increases, some job protections and other concessions, and it won’t be striking at additional Ford plants.

    “Ford is showing us they are serious about reaching a deal,” Fain said.

    Nearly 13,000 UAW members have been on strike since last Friday at a Missouri GM plant making GMC Canyons and Colorados, an Ohio Stellantis plant making Jeep Wranglers and Gladiators, and portions of a Michigan Ford plant making Broncos and Rangers.

    Joining them are 3,475 workers at 18 GM fulfillment centers and 2,150 workers at 20 Stellantis centers across the U.S. The workers at the auto-parts distribution centers started to walk off at noon Eastern on Friday.

    GM said that the strike’s “escalation” was “unnecessary.”

    “We have contingency plans for various scenarios and are prepared to do what is best for our business, our customers, and our dealers,” the company said in a statement Friday. “We will continue to bargain in good faith with the union to reach an agreement as quickly as possible.”

    Don’t miss: Tesla may be the winner of the Big Three labor woes

    Stellantis said later Friday that it made a “very competitive offer” on Thursday that included a pay raise of 21% over the four-year life of the contract for some of its full-time hourly workers and a “significant product allocation that allows for workforce stability through the end of the contract.”

    “And yet, we still have not received a response to that offer. We look forward to the UAW leadership’s productive engagement so that we can bargain in good faith to reach an agreement that will protect the competitiveness of our company and our ability to continue providing good jobs,” said Stellantis, which was formed in 2021 with the merger of Fiat Chrysler and France’s Groupe PSA and is headquartered in the Netherlands.

    Meanwhile, Wall Street seemed encouraged by the progress with Ford negotiations.

    That was “encouraging,” suggesting that the Big Three could “perhaps reach a labor agreement sooner than some have been expecting,” measured in days and weeks and not months, Citi analyst Itay Michaeli said in a note Friday. The new strikes at auto-parts distribution facilities would likely immediately impact “a relatively smaller yet high-margin revenue stream” for GM, Michaeli said.

    A potential parts shortage could add pressure on the carmakers to reach an agreement sooner, he said. Compared with the possibility of strike at full-size truck plants, at the heart of the automakers’ profits, however, “today’s update seems somewhat more encouraging.”

    Wedbush analyst Dan Ives called the UAW action “an aggressive move that essentially goes at the hearts and lungs of auto operations for GM and Stellantis.”

    A settlement with Ford is likely over the coming week, Ives said. “The UAW and GM/Stellantis now have crossed the invisible line and the UAW strike is about to get a lot nastier.”

    Since the strike began, the union and the automakers have said they are engaging in constant talks as they try to reach a compromise on a new national contract.

    The union is demanding wage increases, an end to tiers, the restoration of pensions and cost-of-living adjustments and other concessions. Although both the union and companies have claimed progress during talks, GM President Mark Reuss said in a recent opinion piece in the Detroit Free Press that the UAW’s demands are “untenable.” That’s in line with Ford President Jim Farley’s characterization of the union’s wage proposal as “unsustainable” for the company before the strike deadline.

    Fain mentioned Reuss’s “untenable” comment in his update Friday via webcast. GM and Stellantis “are going to need some serious pushing” to meet union demands, he said.

    See: 5 things to know about the UAW strike


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  • Hollywood writers reportedly near deal with studios to end strike

    Hollywood writers reportedly near deal with studios to end strike

    Hollywood writers and studios are reportedly near an agreement to end one of the months-long strikes that have brought production of TV shows and movies to a halt.

    Citing sources close to the negotiations, CNBC reported Wednesday night that the two sides were close to a deal following a face-to-face meeting earlier in the day. The sides are reportedly optimistic that an agreement can be finalized Thursday. However, the report also said the strike could drag on through the end of the year if a deal is not reached.

    Separately,…

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  • UAW sets deadline for further possible strikes

    UAW sets deadline for further possible strikes

    United Auto Workers President Shawn Fain said Monday that if the union has not made substantial progress toward reaching an agreement with the Big Three automakers by Friday at noon Eastern time, it is prepared to call for additional strikes. About 13,000 auto workers from three UAW plants in three different states are currently on strike at Ford Motor
    F,
    -2.14%
    ,
    General Motors
    GM,
    -1.80%

    and Stellantis
    STLA,
    -1.61%
    ,
    and the union has said it is prepared to call on more workers to walk off their jobs if necessary. “We’ve been available 24/7 to bargain a deal that recognizes our members’ sacrifices and contributions to these record profits,” Fain said in a livestreamed update. “Still the Big Three failed to get down to business.” A GM spokesman said “we’re continuing to bargain in good faith with the union to reach an agreement as quickly as possible for the benefit of our team members, customers, suppliers and communities across the U.S.” An earlier Stellantis statement said the company resumed negotiations with the union Monday, which the union confirmed. “We continue to listen to the UAW to identify where we can work together and will continue to bargain in good faith until an agreement is reached,” the statement said. Ford did not immediately respond to a request for comment.

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  • Block’s stock has been a laggard lately. Will management shakeup provide a needed jolt?

    Block’s stock has been a laggard lately. Will management shakeup provide a needed jolt?

    Block Inc.’s stock has been a sizable laggard this year, and now it’s losing the leader of a critical business — albeit one that hasn’t necessarily lived up to investor expectations lately.

    Alyssa Henry, the head of Block’s
    SQ,
    -2.99%

    Square merchant business, is stepping down after a long tenure with the company, and Jack Dorsey will assume her role while continuing to lead Block on the whole, the company announced in a Monday filing.

    The announcement comes as Block shares have declined 18% so far this year, while the S&P 500
    SPX
    has risen 16%. Other payment-technology stocks, including Shift4 Payments Inc.,
    FOUR,
    -0.54%

    Toast Inc.
    TOST,
    +1.34%

    and even PayPal Holdings Inc.
    PYPL,
    -1.98%

    have logged better year-to-date performances.

    Block’s stock closed at its lowest level since April 7, 2020 on Monday, according to Dow Jones Market Data. It was down about 2% in after-hours trading.

    The stock is also down 82% from its all-time closing high achieved Aug. 5, 2021.

    See also: PayPal’s ‘fresh start’ isn’t enough to help its stock, analyst cautions

    The performance of the Square merchant business, which includes payment processing and other tools for sellers, has been a sore point for investors recently. Wolfe Research analyst Darrin Peller notes that Block’s second-quarter U.S. gross payment volume (GPV) was up 10% from a year earlier, a four-point spread above Visa Inc.’s
    V,
    +1.49%

    domestic growth. Historically, the spread has been in double digits, he said.

    Additionally, while the 12% overall growth in Square’s GPV “continues to imply that Square is a market-share gainer, we note that this growth spread relative to the industry has trended lower and also suggests slightly softer growth trends versus competitors like Clover,” which is part of Fiserv Inc.
    FI,
    +0.12%
    ,
    whose shares are up 20% on the year.

    “While some of Square’s success over the years should be attributed to Alyssa’s execution, the company’s more recent performance remains a concern for investors (and we suspect for management, internally),” Peller wrote.

    He pointed to “mixed” feedback from investors thus far.

    “Bulls argue that this change is positive, indicating that management is taking change seriously,” Peller said. “Further, it’s worth noting that Jack has been more receptive to cost management and other adjustments. Meanwhile, bears are citing that Alyssa was the ‘face’ of Seller and was more receptive to changes in Square’s business model compared to Jack (particularly around outsourced distribution).”

    Block, for its part, said in its filing that Henry “provided significant contributions” to the company during a tenure that spanned more than nine years.

    UBS downgraded Block shares earlier this month, in part due to concerns about the Square business. Analyst Rayna Kumar said she was concerned about a potential slowdown in gross-profit growth owing to a moderation in consumer spending.

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  • UAW strike sets the stage for the 4-day work week — and a win could take it mainstream

    UAW strike sets the stage for the 4-day work week — and a win could take it mainstream

    Striking United Auto Workers want better wages, improved job security, retiree pay increases, and a 32-hour work week that could turbocharge broader acceptance of shorter work weeks.

    Right now, nearly 13,000 UAW workers have walked off the job at Ford Motor Co.
    F,
    -0.08%
    ,
    General Motors Co.
    GM,
    +0.86%

    and Jeep and Chrysler parent Stellantis
    STLA,
    +2.18%
    ,
    still considered the influential Big Three for car makers.

    If the union gets a win from on its 32-hour work week demand, that could be a big deal for momentum behind the broader four-day work week movement, experts say.

    Four days of work is “still in the early-adoption phase,” said Alex Soojung-Kim Pang, director at Four Day Week Global, where he advises companies considering how to implement a curtailed traditional work week.

    A UAW win on the 32-hour demand “would help move the four-day week from being something you do if you have a bold leader and you want to stand out in your industry, to a mainstream aspiration for every worker and business owner,” said Soojung-Kim Pang.

    “A lot more people can look at the four-day week and say if they are doing this in an auto factory, I absolutely can do it here in my small plant, or in my business,” he added.

    Even if the 32-hour work week doesn’t make it to the final deal, it’s a “game changer” that the demand is there at all, he said. The demand could plant the idea in labor talks far beyond the UAW-company standoff.

    A UAW win on the 32-hour week would cause a “massive reverberation,” said Cathy Creighton, of Cornell University’s School of Industrial and Labor Relations.

    The demand’s presence is a sign of the COVID-19 pandemic’s lasting effects, said Creighton. While five days of in-person office attendance seems like a thing of the past, “we’ve had fundamental changes in how workers and employers view work life and work-life balance.”

    Many factory workers may not be able to pull off remote work but they can press for a shortened week on the physically demanding work, she noted. Historically, the UAW was one of the first unions to deliver health benefits, vacation and pensions for its members, she noted.

    “I think the labor movement has been playing it safe for a long time, and now they are not,” Creighton said. The UAW’s 32-hour work week demand is a prime example, she said. “The five-day work week is so ingrained in our psyche that to think of something different is like an earthquake.”

    Some research indicates people are ready for a shake-up. Nearly six in 10 people who work five days say they would prefer four 10-hour days, according to an August poll in an ongoing look at worker attitudes run by academic researchers.

    “We all know that living in a plant seven days a week, 12 hours a day, isn’t a living at all. We need real work-life balance. Auto workers deserve a life,” UAW president Shawn Fain told members in a video update days before the targeted strike.

    Roughly 12,700 UAW members so far have walked off the job at a Ford Motor plant in Michigan, a GM plant in Missouri and an Ohio plant for Stellantis NV, the maker of brands like Dodge, Chrysler, Jeep and Ram Trucks.

    Of course, there’s no guarantee how far the demand gets. The companies have counter proposals for the array of union asks, as a chart shows from researchers at Evercore ISI. They don’t yet have counters on the 32-hour work week.

    Switching to a 32-hour week with a 40-hour pay rate would be a sharp labor cost on top of the wage increases the UAW is already seeking, a Stellantis spokeswoman said. It would require hiring at least 25% more workers to stick with current manufacturing schedules, she said.

    “We are extremely disappointed by the UAW leadership’s refusal to engage in a responsible manner to reach a fair agreement in the best interest of our employees, their families and our customers,” the company said in a statement.

    In a statement, GM said it was “disappointed by the UAW leadership’s actions, despite the unprecedented economic package GM put on the table, including historic wage increases and manufacturing commitments.”

    Ford did not respond to a request for comment.

    “It’s a big game of chess that Shawn Fain is playing. We’ll see how it turns out,” Creighton said.

    “Even if they don’t get the four-day week this time, there are going to be other moves in this game in the future,” from the UAW and beyond, Soojung-Kim Pang said.

    “Even if you have to give on the four-day week now, that doesn’t mean you give on the four-day week as an ideal or a goal.”

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  • Paid off your mortgage? Be careful — you’re at risk of title theft.

    Paid off your mortgage? Be careful — you’re at risk of title theft.

    Homeowners may be thrilled when they finally pay off their mortgage, but the accomplishment comes with risks. 

    Retirement Tip of the Week: Be vigilant in protecting your identity and assets, and be aware of how you could fall victim to various scams or theft associated with your home.

    With title theft, thieves transfer a house deed from the rightful owner to another person’s name by using the owner’s personal information. Title theft could also take the form of using equity in a home, such as by opening a home equity line of credit, known as a HELOC, according to Quicken Loans. When a house is unoccupied, thieves could go so far as to sell or rent out the property. 

    Title theft isn’t particularly common, but it does happen, and it’s another reason people should protect their identity and other sensitive information. Older Americans could be at higher risk, especially if they have a lot of equity in their home. About 11,500 people reported losing more than $350 million to real-estate scams in 2021, although that figure includes fraud pertaining to real-estate advertisements and rental agreements, according to the FBI

    Homeowners should keep on top of their documents and may even want to occasionally confirm their information with their county deeds office, the FBI said. Any mail from a mortgage lender should be checked to make sure it doesn’t pertain to your specific property.

    If you are a victim of title theft, open an identity-theft case with the Federal Trade Commission, alert creditors about the fraud and look over your title insurance, which protects homeowners’ rights and which mortgage companies often require home buyers to have, Quicken Loans said

    There are companies that offer title-protection services, although critics say it’s not the same as title insurance and only alerts a homeowner of a problem after it has occurred. 

    “Do you need this service to protect your home from property thieves? The answer is no,” the Maryland Attorney General’s office said in a consumer alert about title-protection services. “Title fraud is very rare, and hardly ever successful. If someone ever tries to transfer your deed without your permission or knowledge, like these title lock companies suggest could happen, the transfer is fraudulent and void from the outset.” 

    Instead, homeowners should monitor their identity and keep an eye on their credit scores, the office said.

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  • Household income rose in just 5 states last year. Is your state one of them?

    Household income rose in just 5 states last year. Is your state one of them?

    American workers are feeling the pinch.

    The median annual household income in the U.S. was $74,755 in 2022, a 0.8% decline from the previous year after adjusting for inflation, according to the latest data from the Census Bureau.

    The decline in income is “disappointing,” said Sharon Parrott, president of the Center on Budget and Policy Priorities,…

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  • UAW strike: 12,700 Ford, GM and Stellantis auto workers walk off the job

    UAW strike: 12,700 Ford, GM and Stellantis auto workers walk off the job

    Nearly 13,000 U.S. auto workers went on strike early Friday after the Big Three and the United Auto Workers failed to reach an agreement before their national contract expired just before midnight.

    UAW President Shawn Fain called the targeted strike at a Ford Motor
    F,
    -0.16%

    plant in Michigan, a General Motors
    GM,

    plant in Missouri and a Stellantis NV
    STLA,
    -0.58%

    plant in Ohio. A strike at all three U.S. car makers is a break with tradition, as the union for many years has elected to center strike efforts at one company to protect its strike fund and picket-line firepower. Fain said the union could add more plants to strike as part of its strategy to keep the automakers guessing, and urged all 150,000 UAW members to be ready if and when they’re called to strike.

    “This is our generation’s defining moment,” Fain said Thursday night as he addressed UAW workers by webcast two hours before the deadline. “The money is there. The cause is righteous.”

    Fain said the union is committed to a contract that reflects the “incredible sacrifices and contributions” that its members have made for years. The union has said wages for auto workers who make the top rate have risen about 6% over the past four years, while the three automakers’ North American profits have increased about 65% during that time.

    The union is asking for double-digit wage increases, an end to tiered wages and benefits, the restoration of pensions and cost-of-living adjustments, retiree pay increases and more.

    A Stellantis spokesperson said the company is in contingency mode and sent the following statement: “We are extremely disappointed by the UAW leadership’s refusal to engage in a responsible manner to reach a fair agreement in the best interest of our employees, their families and our customers.”

    A GM spokesperson said the company will continue to bargain with the union and that “we are disappointed by the UAW leadership’s actions, despite the unprecedented economic package GM put on the table, including historic wage increases and manufacturing commitments.”

    Ford did not immediately comment after the strike began, but said in a statement earlier Thursday night that it was unhappy with the union’s counterproposal: “If implemented, the proposal would more than double Ford’s current UAW-related labor costs.”

    GM’s Wentzville, Mo., plant, which the union said has about 3,600 UAW members, builds some of the car maker’s mid-size trucks and full-size vans, including the Chevy Colorado and the GMC Canyon. Ford’s plant in Wayne, Mich., makes Ford Broncos, and about 3,300 members who work in final assembly and paint would be striking. The Stellantis Toledo, Ohio, plant, which has about 5,800 UAW members, makes Jeep Gladiators and Wranglers.

    UAW members join workers around the nation and across industries — such as Hollywood writers and actors, hotel staff and healthcare workers — who are on strike or are preparing to walk off their jobs. Fain reiterated to UAW members Thursday night that amid rising economic inequality, he looks at the auto workers’ strike as part of a larger battle between the haves and the have-nots.

    Michelle Kaminski, associate professor in the School of HR and Labor Relations at Michigan State University, said in an interview with MarketWatch that “when the union president says this is a generational strike, I really agree with him.”

    She added: “When I think about economic conditions, they are more favorable to the union now than [at any point] in the 30 years I’ve been in this field.” She said auto workers have “given up a lot” over the past couple of decades as the companies have needed both government help and worker concessions to survive.

    Kaminski also cited the auto makers’ profit and financial position; the pandemic’s effect on the labor force and how workers’ commitments to their jobs have changed; and increasing inflation as factors in why she sees the timing as key. “The union’s window of opportunity is right now,” she said.

    But CFRA analyst Garrett Nelson said in an interview with MarketWatch that the union “needs to be careful not to overplay their hand, as the balance sheets of the Detroit three are flush with cash and they can probably wait things out longer than the workers can.”

    Automakers could weather a strike, although anything longer than about two weeks is viewed as more impactful and detrimental to the companies. GM has about $39 billion in cash and equivalents, while Ford has around $51 billion, according to a recent Moody’s Investors Service report. Stellantis’s cash and equivalent pile towers over the others, at $69 billion.

    The union’s strike fund starts at $825 million, and striking workers will receive $500 a week. Fain said earlier this week that a targeted strike would help the union have flexibility and apply pressure to the companies as negotiations continue; analysts say it means the union wouldn’t deplete its strike fund so quickly.

    See: Why United Auto Workers are fighting to end a two-tier system for wages and benefits

    The effects of the strike could be far-reaching, both for the companies and workers who may not necessarily be on the picket lines.

    Nelson said the union’s strategy of targeting specific plants could turn into a supply-chain “logistical nightmare” for the auto makers. They will have to adjust deliveries of specific parts to their assembly plants, and the average vehicle is made of more than 30,000 parts.

    “The automotive supply chain is among the most complex of any industry,” Nelson said. “Not knowing which plants the UAW will target in advance could create a massive level of uncertainty and have a crippling impact on production. If the strike goes on for too long, we think auto suppliers could have to cut production and furlough workers at their plants, creating a ripple effect across the industry.”

    Major suppliers’ balance sheets are not as strong, and GM, Ford and Stellantis together generally account for between 25% and 45% of their net sales, so the degradation of the supply chain is a major risk in the event of a prolonged strike.

    The U.S. Chamber of Commerce this week warned about the potential widespread impact of a UAW strike. In a letter to President Joe Biden urging him to help the parties reach an agreement, the chamber said the “Detroit Three are critical to our economy.” More than 690,000 supplier jobs are tied to the auto makers, along with about 660,000 dealership jobs, the chamber said.

    “A strike will quickly impact large segments of the economy, leading to layoffs and potentially even bankruptcies of U.S. businesses,” the chamber said.

    See: Tesla may be the winner of Big Three-UAW labor talks

    Also: Would a United Auto Workers strike push up used-car prices?

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  • UAW strike countdown: Union president says targeted strike possible at all Big Three automakers

    UAW strike countdown: Union president says targeted strike possible at all Big Three automakers

    United Auto Workers President Shawn Fain said Wednesday that autoworkers and the Big Three automakers are still far apart, although negotiations continue, and that the union may strike all of the Big Three at once.

    “We’re keeping all of our options open. An all-out strike is still a possibility,” Fain said during a webcast with members.

    The UAW and Ford Motor Co.
    F,
    +1.53%
    ,
    General Motors Co.
    GM,
    +0.57%

    and Stellantis NV
    STLA,
    -0.42%

    have made progress during their talks but were still far apart on the union’s key priorities, though negotiations will continue until the deadline of 11:59 p.m. Eastern on Thursday, Fain said.

    “For the first time in our history, we may strike all of the Big Three at once,” Fain said, adding that he looked at this time as “our defining moment.”

    He said if no deal is reached, there’s also the possibility of doing “standup strikes” at certain plants, designed to keep the companies guessing. These could escalate and spread elsewhere in order to give the union leverage in bargaining. He told UAW members that they should not strike unless their local is called to do so.

    A targeted strike helps the UAW avoid distributing strike pay, set recently at $500 a week per member, to all 150,000 of its members. But it could have a broader effect.

    “It is possible for strikes at critical parts plants to have much wider implications,” Marick Masters, a business professor at Wayne State University in Detroit, said in an interview with MarketWatch on Wednesday. 

    He noted that the 1998 strike against GM, a work stoppage by 9,200 workers at two of that company’s plants in Flint, Mich., resulted in shutdowns that affected more than 150,000 workers. 

    See: These Ford, GM plants are the most likely strike targets

    Jody Calemine, a senior fellow and director of labor and employment policy at the Century Foundation, a progressive think tank, said Wednesday that the union is employing an interesting strategy.

    “It will turn the screws slowly and probe for weaknesses, and try to get as much movement out of companies as possible while keeping the options to escalate,” he said.

    Calemine said Fain has done a “masterful job” of painting the fight as a “real showdown” between working families and the companies. But he added that “the principal danger for the union would be losing the narrative. Other places would continue to work, or get laid off or locked out.”

    That’s reflected in some of the online comments by UAW members who watched Fain’s update. One worker said on Facebook: “Strike us all or none at all.”

    The UAW president quoted scripture, repeated his calls for unity and said the “strike plan is driven by faith that together we can and will move mountains.”

    Fain said the companies have revised some of their offers: On wages, Ford has put forward a 20% increase over the life of the four-year contract, up from its previous offer of 9%, while GM’s latest offer is 18% and Stellantis’s offer is 17.5%. That’s compared to a wage increase of 40% — or 46% when compounded annually — that the union sought originally and later revised to 36%.

    “Their proposals don’t reflect the massive profits that we’ve generated for these companies,” Fain said.

    The union has pointed out that while the Big Three’s profit has risen 65% over the past four years, and the pay of each of the companies’ chief executives have risen 40%, the UAW top wage rate has risen 6% over that time.

    See: Why United Auto Workers are fighting to end a two-tier system for wages and benefits

    A GM spokesperson said Wednesday that the company continues to bargain in good faith and sent a statement that reads in part: “We are making progress in key areas that we believe are most important to our represented team members. This includes historic guaranteed annual wage increases, investments in our U.S. manufacturing plants to provide opportunities for all, and shortening the time for in-progression employees to reach maximum wages.”

    Ford and Stellantis did not immediately return a request for comment.

    The most recent U.S. autoworkers’ strike was at GM in 2019, which lasted for nearly six weeks and involved about 50,000 workers.

    See: Would a United Auto Workers strike provide an opportunity for Tesla — and push up used-car prices?

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  • Nasdaq ends 1% down, leading stocks lower as tech shares slump

    Nasdaq ends 1% down, leading stocks lower as tech shares slump

    U.S. stocks closed lower on Tuesday, with the Nasdaq Composite leading the way down, as Apple’s unveiling of its new iPhone and watch failed to boost appetite for equities. The Dow Jones Industrial Average
    DJIA,
    -0.05%

    shed about 16 points, or about 0.1%, to end near 34,647, while the S&P 500 index
    SPX,
    -0.57%

    closed 0.6% lower and the Nasdaq Composite Index
    COMP,
    -1.04%

    slumped 1%, according to preliminary FactSet data. That was the biggest daily percentage drop in about a week for the Nasdaq. Shares of Apple Inc.
    AAPL,
    -1.71%

    were a focus Tuesday as it rolled out a lineup of new consumer products, including its iPhone Pro Max, which will now start at $1,199 instead of $1,099, while its Pro model’s price stays the same. Investors also remain focused on the inflation data, including the release on Wednesday of the consumer-price index for August, before the U.S. stock market’s open. Apple shares fell 1.9% on Tuesday. Climbing bond yields can pressure high-growth stocks as borrowing costs rise. The benchmark 10-year Treasury yield
    TMUBMUSD10Y,
    4.297%

    edged down 2.4 basis points to 4.263% Tuesday, but was still near its highest level of the year.

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  • Fed rate hikes can end now that U.S. job gains are the size of an economy like Australia’s, says BlackRock

    Fed rate hikes can end now that U.S. job gains are the size of an economy like Australia’s, says BlackRock

    The Federal Reserve can probably end its inflation fight now that the U.S. labor market is cooling after generating a historic 26 million jobs in roughly the past three years, according to BlackRock’s Rick Rieder.

    “In fact, 26 million jobs is like adding an economy the size of Australia or Taiwan (including every man, woman, and child),” said Rieder, BlackRock’s chief investment officer in global fixed income, in emailed commentary following Friday’s monthly jobs report for August.

    The August nonfarm-payrolls report showed the U.S. adding 187,000 jobs, slightly more than had been forecast, but also pointing to an uptick in the unemployment rate to 3.8% from 3.5%.

    “Remarkably, 22 million people were hired between May 2020 and April 2022, and 11 million were added to the workforce from June 2021 to May 2023, as the economy has opened up massive amounts of roles for fulfillment,” said Rieder.

    He expects wage pressures to ease, he said, and thinks the “economy may now have fulfilled many of its needs,” which should make the Fed feel more confident in “the permanence of lower levels of inflation,” so that it can slow or stop its interest-rate rises by year-end.

    Hiring in the U.S. has slowed, except in education and in healthcare services, when looking at private payrolls based on a three-month moving average.

    Payrolls are slowing in many sectors, expect education and healthcare


    Bureau of Labor Statistics, BlackRock

    The Fed has already raised interest rates in July to a 5.25%-to-5.5% range, a 22-year high, with traders in federal-funds futures on Friday pricing in only about a 7% chance of a Fed rate hike in September and favoring no hike again at the central bank’s November policy meeting.

    Rieder of BlackRock, one of the world’s largest asset managers with $2.7 trillion in assets under management, said he thinks a Fed pause or outright end to rate hikes could calm markets, even if the Fed, as BlackRock expects, keeps rates high for a time.

    U.S. closed mostly higher Friday ahead of the Labor Day holiday weekend, with the Dow Jones Industrial Average
    DJIA
    up 0.3%, the S&P 500 index
    SPX
    up 0.2% and the Nasdaq Composite Index
    COMP
    0.02% lower, according to FactSet.

    The 10-year Treasury yield
    BX:TMUBMUSD10Y
    was at 4.173%, after hitting its highest level since 2007 in late August, adding to volatility that has wiped out earlier yearly gains in the roughly $25 trillion Treasury market.

    Read on: This hadn’t happened on the U.S. Treasury market in 250 years. Now it has.

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  • Labor Day is just a ‘milestone’ in the marathon to get workers back to the office

    Labor Day is just a ‘milestone’ in the marathon to get workers back to the office

    The U.S. Labor Day holiday will mark another milestone in the marathon to bring workers back to the office, but it won’t be a quick fix for landlords, according to Thomas LaSalvia, head of commercial real estate economics at Moody’s Analytics.

    Employers from Facebook parent Meta
    META,
    +0.27%

    to Goldman Sachs
    GS,
    -0.26%

    recently laid out mandates for staff to return to the office more frequently, starting this fall, including the big one — the federal government.

    “A lot of companies are saying that after Labor Day, ‘We expect more out of you,” LaSalvia said, referring to days in the office. Still, office attendance, he argues, likely only stages a fuller comeback if a job or promotion is on the line.

    Amazon.com Inc.’s
    AMZN,
    +2.18%

    Chief Executive Andy Jassy has been trying to drive home the point by warning staff to return at least three days a week, or face the consequences.

    That could prove difficult, with Friday’s U.S. jobs report for August expected to show U.S. unemployment at a scant 3.5%, near the lowest levels since the late 1960s, even if hiring has been slowing. The labor market, so far, appears unfazed by the Federal Reserve’s benchmark rate reaching a 22-year high.

    It has been a different story for landlords facing a roughly 19% vacancy rate nationally and piles of debt coming due, especially for owners of older Class B and C office buildings with a bleak outlook or properties in cities with wobbling business centers.

    See: San Francisco’s office market erases all gains since 2017 as prices sag nationally

    As with shopping malls, LaSalvia said it’s largely a problem of oversupply, with many office properties at risk of becoming obsolete as tenants flock to better buildings and locations staging a rebirth. The trend can be traced in leasing data since 2021, with Class A properties in central business districts (blue line) showing a big advantage over less desirable buildings in the heart of cities (orange line).

    Return to office isn’t going to save the entire office property market


    Moody’s Analytics

    “Little by little, we are finding the office isn’t dead,” LaSalvia said, but he also sees more promise in neighborhoods with a new purpose, those catering to hybrid work and communities that bring people together.

    Another way to look at the trend is through rents. Manhattan’s Penn Station submarket, with its estimated $13 billion overhaul and neighboring Hudson Yards development, has seen asking rents jump 32% to $74.87 a square foot in the second quarter since the fourth quarter of 2019, according to Moody’s Analytics. That compares with a 2% bump in asking rents in downtown New York City to $61.39 a square foot for the same period.

    The push for a return to the office also doesn’t mean a repeat of prepandemic ways. Goldman Sachs analysts estimate that part-time remote work in the U.S. has stabilized around 20%-25%, in a late August report, but that’s still up from 2.6% before the 2020 lockdowns.

    Furthermore, the persistence of remote work will likely add another 171 million square feet of vacant U.S. office space through 2029, a period that also will see tenants’ long-term leases expire and many companies opting for less space. The additional vacancies would roughly translate to 57% of Los Angeles roughly 300 million square feet of office space sitting empty.

    “The fundamental reason why we had offices in the first place have not completely disintegrated,” LaSalvia said. “But for some of those Class B and C offices, the writing was on the wall before the pandemic.”

    U.S. stocks were mixed Thursday, but headed for losses in a tough August for stocks, with the S&P 500 index
    SPX
    off about 1.5% for the month, the Dow Jones Industrial Average
    DJIA
    2.1% lower and the Nasdaq Composite
    COMP
    down 2% in August, according to FactSet.

    Related: Some employers mandate etiquette classes as returning office workers walk barefoot, burp loudly and microwave fish

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