Tag: Leading economic indicators

EXPLAINER: How will we know if the U.S. is in recession?

WASHINGTON — The U.S. economy grew faster than expected in the July-September quarter, the government reported Thursday, underscoring that the United States is not in a recession despite distressingly high inflation and interest rate hikes by the Federal Reserve.

But the economy is hardly in the clear, and the solid growth reported for the third quarter did little to alter the growing conviction among economists that a recession is very likely next year.

Higher borrowing rates and chronic inflation will almost certainly continue to weaken consumer and business spending. And likely recessions in the United Kingdom and Europe and slower growth in China will erode the revenue and profits of American corporations. Such trends are expected to cause a U.S. recession sometime in 2023.

Still, there are reasons to hope that a recession, if it comes, will prove a relatively mild one. Many employers, having struggled to find workers to hire after huge layoffs during the pandemic, may decide to maintain most of their existing workforces even in a shrinking economy.

In the July-September quarter, the economy accelerated to a 2.6% annual pace, after two quarters of contraction. Consumers spent more and exports jumped, offsetting a sharp slowdown in home sales and construction.

Six months of economic decline is a long-held informal definition of a recession. Yet nothing is simple in a post-pandemic economy in which growth was negative in the first half of the year but the job market remained robust, with ultra-low unemployment and healthy levels of hiring. The economy’s direction has confounded the Fed’s policymakers and many private economists ever since growth screeched to a halt in March 2020, when COVID-19 struck and 22 million Americans were suddenly thrown out of work.

By far the biggest threat to the economy remains inflation, which is still near its highest level in four decades. Even for workers who received sizable raises, their pay has dropped once it’s adjusted for inflation. The pain is being felt disproportionately by lower-income and Black and Hispanic households, many of whom are struggling to pay for essentials like food, clothes, and rent.

High inflation has also become a central issue in Republican attacks on President Joe Biden and his fellow Democrats, who have been thrown on the defensive as they seek to maintain control of Congress in the midterm elections.

So what is the likelihood of a recession? Here are some questions and answers:

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WHY DO MANY ECONOMISTS FORESEE A RECESSION?

They expect the Fed’s aggressive rate hikes and persistently high inflation to overwhelm consumers and businesses, forcing them to slow their spending and investment. Businesses will likely also have to cut jobs, causing spending to fall further.

The Fed is poised to keep raising its benchmark interest rate after having already hiked it five times this year, from near zero to a range of 3% to 3.25%. Fed officials have projected that their short-term rate, which affects borrowing costs for consumers and businesses, will reach about 4.6% next year, which would be the highest level since late 2007.

Consumers have been remarkably resilient so far this year. Still, there are signs that high inflation and borrowing costs have begun taking a toll. Last quarter, consumer spending grew at just a 1.4% annual rate, according to Thursday’s government report, down from 2% in the second quarter and less than half its pace of a year ago.

Thursday’s figures also showed that businesses are cutting back on investment in buildings and factories, and the housing market has been hammered by rising mortgage costs. Those trends are expected to intensify, leading to a likely recession.

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WHAT ARE SOME SIGNS THAT A RECESSION MAY HAVE BEGUN?

The clearest signal, economists say, would be a steady rise in job losses and a surge in unemployment. Claudia Sahm, an economist and former Fed staff member, has noted that since World War II, an increase in the unemployment rate of a half-percentage point over several months has always resulted in a recession.

Many economists monitor the number of people who seek unemployment benefits each week, which indicates whether layoffs are worsening. Weekly applications for jobless aid have increased in recent months, but not by very much. Instead, employers have added a robust average of 370,000 jobs in the past three months.

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ANY OTHER SIGNALS TO WATCH FOR?

Many economists monitor changes in the interest payments, or yields, on different bonds for a recession signal known as an “inverted yield curve.” This occurs when the yield on the 10-year Treasury falls below the yield on a short-term Treasury, such as the 3-month T-bill. That is unusual. Normally, longer-term bonds pay investors a richer yield in exchange for tying up their money for a longer period.

Inverted yield curves generally mean that investors foresee a recession that will compel the Fed to slash rates. Inverted curves often predate recessions. Still, it can take 18 to 24 months for a downturn to arrive after the yield curve inverts.

Ever since July, the yield on the two-year Treasury note has exceeded the 10-year yield, suggesting that markets expect a recession soon. And just this week, the three-month yield also temporarily rose above the 10-year, an inversion that has an even better track record at predicting recessions.

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WHO DECIDES WHEN A RECESSION HAS STARTED?

Recessions are officially declared by the obscure-sounding National Bureau of Economic Research, a group of economists whose Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

The committee considers trends in hiring as a key measure in determining recessions. It also assesses many other data points, including gauges of income, employment, inflation-adjusted spending, retail sales and factory output. It puts heavy weight on jobs and a measure of inflation-adjusted income that excludes government support payments like Social Security.

Yet the NBER typically doesn’t declare a recession until well after one has begun, sometimes for up to a year.

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DON’T A LOT OF PEOPLE THINK WE”RE ALREADY IN A RECESSION?

Yes, because many people now feel much more financially burdened. With wage gains trailing inflation for most people, higher prices have eroded Americans’ spending power.

And the Fed’s rate hikes have helped send the average 30-year fixed mortgage rate surging above 7% this week, the highest level in two decades. It has more than doubled from about 3% a year ago, thereby making homebuying increasingly unaffordable.

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DOES HIGH INFLATION TYPICALLY LEAD TO A RECESSION?

Not always. Inflation reached 4.7% in 2006, at that point the highest in 15 years, without causing a downturn. (The 2008-2009 recession that followed was caused by the bursting of the housing bubble).

But when it gets as high as it has this year — it reached a 40-year peak of 9.1% in June — a downturn becomes increasingly likely.

That’s for two reasons: First, the Fed will inevitably sharply raise borrowing costs when inflation gets that high. Higher rates then drag down the economy as consumers are less able to afford homes, cars, and other major purchases.

High inflation also distorts the economy on its own. Consumer spending, adjusted for inflation, weakens. And businesses grow uncertain about the future economic outlook. Many of them pull back on their expansion plans and stop hiring, which can lead to higher unemployment as some people choose to leave jobs and aren’t replaced.

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October 27, 2022
US economy likely returned to growth last quarter

WASHINGTON — The problems have hardly gone away. Inflation, still near a 40-year high, is punishing households. Rising interest rates have derailed the housing market and threaten to inflict broader damage. And the outlook for the world economy grows bleaker the longer that Russia’s war against Ukraine drags on.

But for now anyway, the U.S. economy has likely returned to growth after having shrunk in each of the first two quarters of 2022.

At least that’s what economists expect to see Thursday when the Commerce Department issues its first of three estimates of gross domestic product — the broadest measure of economic output — for the July-September period.

Economists surveyed by the data firm FactSet have predicted, on average, that GDP grew at a 2% annual rate in the third quarter. That would reverse annual declines of 1.6% from January through March and 0.6% from April through June.

Consecutive quarters of declining economic output are one informal definition of a recession. But most economists say they believe the economy has so far skirted a recession, noting the still-resilient job market and steady spending by consumers. Most of them have expressed concern, though, that a recession is likely next year as the Federal Reserve continues to steadily ratchet up interest rates to fight inflation.

Preston Caldwell, head of U.S. economics for the financial services firm Morningstar, notes that the economy’s contraction in the first half of the year was caused largely by factors that don’t reflect its underlying health and so “very likely did not constitute a genuine economic slowdown.” He pointed, for example, to a drop in business inventories, a cyclical event that tends to reverse itself and generally doesn’t reflect the state of the economy.

By contrast, consumer spending, fueled by a healthy job market, and stronger U.S. exports likely restored the world’s biggest economy to growth last quarter.

Thursday’s report from the government comes as Americans, worried about high prices and recession risks, are preparing to vote in midterm elections that will determine whether President Joe Biden’s Democratic Party retains control of Congress. Inflation has become a signature issue for Republican attacks on the Democrats’ stewardship of the economy.

The risk of an economic downturn next year remains elevated as the Fed keeps raising rates aggressively to try to tame stubbornly high consumer prices. The central bank has raised its benchmark short-term rate five times this year, and it’s expected to announce further hikes next week and again in December. Chair Jerome Powell has warned bluntly that taming inflation will “bring some pain’’ — namely, higher unemployment and, possibly, a recession.

Higher borrowing costs have already hammered the home market. The average rate on a 30-year fixed-rate mortgage, just 3.09% a year ago, is approaching 7%. Sales of existing homes have fallen for eight straight months. Construction of new homes is down nearly 8% from a year ago.

Still, the economy retains pockets of strength. One is the vitally important job market. Employers have added an average of 420,000 jobs a month this year, putting 2022 on track to be the second-best year for job creation (behind 2021) in Labor Department records going back to 1940. The unemployment rate was 3.5% last month, matching a half-century low.

But hiring has been decelerating. In September, the economy added 263,000 jobs — solid but the lowest total since April 2021.

International events are causing further concerns. Russia’s invasion of Ukraine has disrupted trade and raised prices of energy and food, creating a crisis for poor countries. The International Monetary Fund, citing the war, this month downgraded its outlook for the world economy in 2023.

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October 26, 2022
UN optimistic on Ukraine grain deal; Russia has reservations

UNITED NATIONS — A senior U.N. official said Wednesday he is “relatively optimistic” the deal for returning Ukrainian grain and Russian grain and fertilizer to world markets will be extended beyond mid-November, but Russia’s U.N. ambassador said Moscow needs to see movement on its own exports first.

The deal brokered by the United Nations and Turkey in July has led to more than 8.5 million metric tons of foodstuffs being shipped from three Black Sea ports in Ukraine.

But Russian envoy Vassily Nebenzia told reporters that “Russia needs to see the export of its grain and fertilizers in the world market, which has never happened since the beginning of the deal.”

The deal has a 120-day limit. U.N. humanitarian chief Martin Griffiths, who has focused on the Ukraine side of the deal, and senior U.N. trade official Rebeca Grynspan, who has focused on the Russian side, were in Moscow earlier this month for talks with Russian officials including on an extension.

“We are keen to see that renewed promptly, now,” Griffiths said in response to a question. “It’s important for the market. It’s important for just continuity. And I’m still relatively optimistic that we’re going to get that. We’re working hard.”

Russia’s Feb. 24 invasion of Ukraine cut off shipments of grain and fertilizer from the two key world suppliers, causing food shortages and rising prices especially in developing countries.

U.N. Secretary-General Antonio Guterres first raised the critical need to restart the supply of Ukraine’s agricultural production and Russia’s grain and fertilizer to world markets in late April during meetings with Russian President Vladimir Putin in Moscow and Ukrainian President Volodymyr Zelenskyy in Kyiv.

Guterres then proposed the deal, pointing to fear that the war could further worsen hunger for up to 181 million people, particularly in poorer developing countries.

On the Ukraine side, the Joint Coordination Center overseeing the logistics and inspection of ships said Monday that there was a backlog — 113 ships registered for inspection and a further 60 vessels waiting to take on cargo.

It noted the next Ukrainian harvest is approaching and silos will soon be full again in the three ports — Odesa, Chernomorsk and Yuzhny. The center said it has increased its inspection teams and is discussing ways to improve its operation.

Ukraine’s president on Saturday accused Russia of artificially creating a line of some 150 ships to slow down Ukrainian shipments.

Nebenzia said hurdles that need to be overcome for Russian grain and fertilizer to reach global markets remain the same as in July: getting insurance for vessels, conducting financial transactions, finding ports of call for Russian ships and freeing up fertilizer on ships detained at European ports that “we committed to distribute free of charge to countries in need.”

The fertilizer, he said, is slowly being “destroyed because these kinds of fertilizers cannot be kept indefinitely.”

“These are the main things which were there on the agenda a few months ago, and they still are the same,” Nebenzia said. “We recognize that the secretary-general and his team are trying to do their best to resolve those issues. But unfortunately, it’s not just on them that it depends upon.”

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October 26, 2022
Global shares mixed after China economy slows, HK down 6.4%

TOKYO — Global shares were mixed, while Hong Kong’s benchmark plunged 6.4% on Monday as dismay over a lack of fresh policy initiatives from a Chinese Communist Party congress overshadowed a report that the No. 2 economy grew at a faster pace in the last quarter.

The dollar rose to nearly 150 yen, a day after the Japanese central bank reportedly again moved to stem the yen’s decline.

Britain’s FTSE 100 slipped 0.7% to 6,918.15 after former Prime Minister Boris Johnson announced he will not run to lead the Conservative Party. Former Treasury chief Rishi Sunak is now the favorite to replace Liz Truss, who quit last week after her tax-cutting economic package caused turmoil in financial markets.

France’s CAC 40 rose nearly 0.6% in early trading to 6,068.71. Germany’s DAX added 0.6% to 12,807.23. The future for the Dow industrials was down 0.4% and that for the S&P 500 shed 0.5%.

Beijing’s report that the Chinese economy gained momentum in the last quarter was better than expected and up from the previous quarter’s 0.4%, but that was among the slowest expansions in decades as the country wrestled with repeated closures of cities to fight virus outbreaks.

There were no new market-boosting initiatives from the Communist Party congress, where Xi Jinping, the most powerful leader in decades, gained a free hand in setting policy. The ruling party named a seven-member Standing Committee made of Xi’s allies and dropped supporters of free enterprise like Premier Li Keqiang, the party’s No. 2 before the party’s once in five years congress.

Xi wants a bigger Communist Party role in business and technology development. That has prompted warnings tighter control of entrepreneurs who generate jobs and wealth will depress growth that already was in long-term decline.

The 6.4% plunge in Hong Kong’s Hang Seng index, to 15,180.69, took it to its lowest level since 2006.

The Shanghai Composite index shed 2.0% to 2,977.56.

Xi also gave no sign of plans to change the severe “zero-COVID” strategy that has crimped business and trade. He indicated no changes in policies straining relations with Washington and Asian neighbors.

Japan’s benchmark Nikkei 225 added 0.3% to finish at 26,974.90. Australia’s S&P/ASX 200 gained 1.5% to 6,779.40. South Korea’s Kospi gained 1.0% to 2,236.16.

Wall Street ended last week with a broad rally, with technology stocks, retailers and health care companies powering a big share of the gains.

The S&P 500 rose 2.4%, notching a weekly gain of 4.7%, its biggest such gain since June. The Dow climbed 2.5% and the Nasdaq composite added 2.3%. The Russell 2000 index rose 2.2%.

Investors have been focusing on corporate earnings as they search for clues about how inflation and rising interest rates are shaping global economies.

The Federal Reserve is expected to raise interest rates another three-quarters of a percentage point at its meeting in November. That’s triple the size of the Fed’s usual move.

In currency trading, the U.S. dollar rose to 149.28 Japanese yen from 147.65 yen. The Bank of Japan was reported to have intervened Friday to prop up the yen after the dollar rose above the 150 yen level. The dollar fell after the reported intervention but bounced back.

The euro cost 98.25 cents, down from 98.62 cents.

The dollar has gained in strength as the U.S. Federal Reserve has raised interest rates to fight inflation. Its growing strength against the yen and other currencies has added to inflationary pressures in those countries by pushing up the costs of imports and of debt repayments.

In energy trading, benchmark U.S. crude fell $1.32 to $83.73 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, declined to $1.29 to $92.21 a barrel.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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October 24, 2022
Stocks end higher on Wall Street, notching weekly gains

NEW YORK — Wall Street capped a volatile run for stocks with a broad rally Friday, contributing to sizable weekly gains for major indexes.

The S&P 500 rose 2.4% and notched its biggest weekly gain since June. The Dow Jones Industrial Average rose 2.5% and the Nasdaq composite ended 2.3% higher.

More than 90% of the stocks in the benchmark S&P 500 index rose. Technology stocks, retailers and health care companies powered a big share of the rally. Oracle rose 5%, Home Depot added 2.3% and Pfizer rose 4.8%.

Social media companies fell broadly after Snapchat’s parent company issued a weak forecast and the Washington Post reported that Elon Musk plans to slash about three-quarters of the payroll at Twitter after he buys the company. Snap slumped 28.1% and Twitter shed 4.9%.

Markets have been unsettled in recent days, as stocks lurched from sharp gains early in the week to losses later in the week. The market appeared headed for another sell-off early Friday, then reversed course amid fresh signals from the Federal Reserve that it may consider easing up on its aggressive pace of interest rate hikes as it tries to bring down inflation.

“The hope is that they at least slow down,” Jay Hatfield, CEO of Infrastructure Capital Advisors.

The Fed is expected to raise interest rates another three-quarters of a percentage point at its upcoming meeting in November. Markets have been unsettled partly because investors have been hoping that any sign of inflation easing or economic growth slowing could signal that the Fed will ease up on its rate increases, which have yet to show any signs of significantly impacting inflation.

Mary Daly, president of the Federal Reserve Bank of San Francisco, said Friday that she’s thinking about the dangers of raising interest rates too high and doing too much damage to the economy.

While the Fed likely isn’t yet ready to start dialing down the size of its rate hikes, she said, “I think the time is now to start talking about stepping down. The time is now to start planning for stepping down.”

If the Fed does come out of its meeting next month with a fourth straight increase of 0.75 percentage points to its key overnight interest rate, as most investors expect, she said: “I would really recommend people don’t take that away as: It’s 75 forever.”

A 0.75 point jump is triple the size of the Fed’s usual move, and the Fed risks creating a recession if it moves too high or too quickly.

Daly’s comments helped push down investors’ expectations for how high the Fed will hike rates through the end of the year. Traders are now pricing in just a 45% chance that the Fed will hike rates by 0.75 percentage points next month and again by the same amount in December.

Just a day ago, they were much more confident about that, pricing in a 75% probability. Instead, traders increasingly see the Fed dialing down to a more modest increase of 0.50 percentage points in December, according to CME Group.

Daly was speaking at meeting of the University of California-Berkeley’s Fisher Center for Real Estate & Urban Economics’ Policy Advisory Board.

Central banks around the world have mostly been raising interest rates to fight inflation and much of the focus has been on the Fed. It has raised its key interest rate to a range of 3% to 3.25%. A little more than six months ago, that rate was near zero.

Even if the Fed does dial down the size of its increases soon, officials at the central bank have also been adamant that they plan to leave rates alone at that high level for a while to continue to slow the economy in hopes of forcing down high inflation.

“The concern is still that bond yields are heading higher and the Fed is not signaling a pivot,” said Ross Mayfield, investment strategist at Baird. “Until there is a meaningful pivot driven by a drop in inflation, it’s a huge headwind to the market.”

Treasury yields, which hit multiyear highs this week on expectations of more Fed rate hikes, eased Friday. The yield on the 10-year Treasury note, which affects mortgage rates, slipped to 4.22% from 4.24% late Thursday. The yield on the two-year Treasury, which tends to track investors’ expectations for Federal Reserve action on interest rates, fell to 4.49% from 4.61%.

Stocks got a boost from the pullback in yields. The S&P 500 rose 86.97 points to 3,752.75. The index posted a 4.7% gain for the week.

The Dow climbed 748.97 points to close at 31,082.56, and the Nasdaq added 244.87 points to 10,859.72.

Small company stocks also gained ground. The Russell 2000 index rose 37.85 points, or 2.2%, to finish at 1,742.24.

Investors have shifted their focus, for now, to the latest round of corporate earnings as they look for more clues about how hot inflation and rising interest rates are shaping the economy. Reports from airlines, banks, railroad operators and others have so far provided mixed financial results and forecasts.

American Express fell 1.7% after setting aside hundreds of millions of dollars to cover potential losses as the economy continues to deteriorate. Railroad CSX rose 1.7% after reporting solid financial results.

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October 21, 2022
How major US stock indexes fared Friday 10/21/2022

Stocks closed higher on Wall Street Friday, notching sizable weekly gains for major indexes.

The benchmark S&P 500 rose 2.4% Friday, while the Dow Jones Industrial Average and the Nasdaq also gained ground. Social media companies were broadly lower after Snapchat’s parent company issued a weak outlook and the Washington Post reported that Elon Musk plans to slash about three-quarters of the payroll at Twitter after he buys the company.

The yield on the two-year Treasury note fell to 4.49% on hopes that the Federal Reserve might consider slowing down its future rate increases after making another big hike next month.

On Friday:

The S&P 500 rose 86.97 points, or 2.4%, to 3,752.75.

The Dow Jones Industrial Average rose 748.97 points, or 2.5%, to 31,082.56.

The Nasdaq rose 244.87 points, or 2.3%, to 10,859.72.

The Russell 2000 index of smaller companies rose 37.85 points, or 2.2%, to 1,742.24.

For the week:

The S&P 500 is up 169.68 points, or 4.7%.

The Dow is up 1,447.73 points, or 4.9%.

The Nasdaq is up 538.33 points, or 5.2%.

The Russell 2000 is up 59.84 points, or 3.6%.

For the year:

The S&P 500 is down 1,013.43 points, or 21.3%.

The Dow is down 5,255.74 points, or 14.5%.

The Nasdaq is down 4,785.26 points, or 30.6%.

The Russell 2000 is down 503.07 points, or 22.4%.

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October 21, 2022
Social media stocks slip amid Musk, Snap news

Shares of social media companies are tumbling before the market open on Friday after a slew of news in the sector that concerned investors, including a report that Elon Musk may cut almost 75% of Twitter‘s workforce and Snap’s muted fourth-quarter outlook.

Musk has told prospective investors in his Twitter purchase that he plans to cut nearly 75% of Twitter’s employee base of 7,500 workers, leaving the company with a skeleton crew, according to a Thursday report by The Washington Post.

Wedbush’s Dan Ives said in a client note that Twitter Inc. is due for some job cuts, but that the reported figure may not be the best approach.

“Musk cannot cut his way to growth with Twitter and a number in the 75% zip code would be way too aggressive in our opinion out of the gates,” he wrote.

A Delaware judge has given Musk and Twitter until Oct. 28 to work out details of the proposed $44 billion deal. Otherwise, there will be a trial in November.

Shares of Twitter dropped more than 4% in premarket trading.

Elsewhere in the sector, Snap Inc.’ stock slid more than 28% after the company behind Snapchat gave a lackluster forecast for the fourth quarter and its third-quarter revenue missed Wall Street’s view.

Snap reported third-quarter revenue of $1.13 billion, below the $1.15 billion that analysts polled by Zacks Investment Research expected.

While the Santa Monica, California-based company said in a letter to investors that it wasn’t giving a formal fourth-quarter outlook, it did say that it’s highly likely that year-over-year revenue growth will slow during the period. Snap said its internal forecasts are for year-over-year revenue growth to be about flat.

A JPMorgan analyst note said that Snap is experiencing weaker demand due to macro pressures, platform policy changes and competition.

“We appreciate management’s efforts to control what they can—cutting costs & doubling down on more resilient performance-based ads—but trends remain choppy, and the macro backdrop is likely even tougher into 2023,” the note said.

Adding to the mix are concerns about the way social media platforms are being used as the mid-term elections near. While platforms like Twitter, TikTok, Facebook and YouTube say they’ve expanded their work to detect and stop harmful claims that could suppress the vote or even lead to violent confrontations, a review of some of the sites shows they’re still playing catchup with 2020, when then-President Donald Trump’s lies about the election he lost to Joe Biden helped fuel an insurrection at the U.S. Capitol.

Shares of Meta Platforms Inc., parent company of Facebook, declined 4.4% before the opening bell.

The flurry of news weighed on others in the sector as well, including Google parent Alphabet Inc., off 2%, and Pinterest Inc., down 8%.

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October 21, 2022
Global stocks lower amid British political turmoil

BANGKOK — Global stock markets declined Thursday as the British prime minister faced demands to quit and Japan reported its 14th straight monthly trade deficit.

London and Frankfurt opened lower and Shanghai, Tokyo and Hong Kong declined. Oil rose more than $1 per barrel.

British Prime Minister Liz Truss faced demands to resign following chaotic scenes in Parliament during a vote on a fracking ban. Truss has been defiant despite financial market turmoil caused by multiple policy U-turns.

Truss “precipitated this political crisis by triggering the market crisis,” said Michael Every of Rabobank in a report. Britain is “deep in an emerging-market rut.”

In early trading, the FTSE 100 in London was off 0.2% at 6,914.12 and the DAX in Frankfurt fell 0.7% to 12,655.08. The CAC 40 in Paris was little-changed at 6,041.18.

On Wall Street, the future for the benchmark S&P 500 index was off 0.3%. That for the Dow Jones Industrial Average was up less than 0.1%.

On Wednesday, the S&P fell 0.7%, breaking two days of gains. The Dow slipped 0.3% and the Nasdaq composite sank 0.9%.

In Asia, the Nikkei 225 in Tokyo tumbled 0.9% to 27,006.96 after September imports ballooned 46% over a year earlier due to a surging oil prices and a weak yen. The Japanese currency is trading at a 32-year low against the dollar.

The yen weakened to 149.82 to the dollar from Wednesday’s 149.81 yen.

The dollar has gained against other currencies following repeated interest rate hikes by the Federal Reserve, which increases the return on assets valued in dollars. Investors also see the U.S. currency as a stable haven amid global uncertainty.

“Rising U.S. yields and the strong U.S. dollar are the sledgehammers pounding global equities lower,” said Stephen Innes of SPI Asset Management in a report.

The Shanghai Composite Index lost 0.3% to 3,035.05 and the Hang Seng in Hong Kong fell 1.4% to 16,280.22.

The Kospi in Seoul retreated 0.9% to 2,218.09 and Sydney’s S&P-ASX 200 sank 1% to 6,730.70.

On Wednesday, Wall Street pulled back as investors reviewed earnings and Treasury yields climbed to multiyear highs.

Netflix soared 13% and United Airlines rose 5% after releasing quarterly results. Abbott Laboratories, M&T Bank and others sank.

The yield on the 10-year Treasury, which influences mortgage rates, climbed to 4.13%, its highest level since June 2008. It was at 4.02% late Tuesday.

The yield on the two-year Treasury, which responds to expectations of future Fed action, rose to 4.54% from 4.43%.

The Fed and central banks in Europe and Asia have been raising interest rates to cool inflation that is at multi-decade highs. Investors worry they might tip the global economy into recession.

Inflation in Britain hit a 40-year high of 10.1% over a year earlier in September.

In energy markets, benchmark U.S. crude rose $1.56 to $86.08 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oil trading, advanced $1.34 to $93.75 per barrel in London.

The euro gained to 97.83 cents from Wednesday’s 97.68 cents.

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October 20, 2022
Wall Street wavers up and down as more earnings roll in

NEW YORK — Stocks wavered between gains and losses in early trading on Wall Street, leaving indexes mixed as another batch of companies reported their latest quarterly results.

Several companies including Netflix and United Airlines rose sharply while others, including Abbott Laboratories and M&T Bank, sank.

The S&P 500 shook off an early slump and was little changed as of 10:23 a.m. Eastern. The Dow Jones Industrial Average rose 56 points, or 0.2%, to 30,582 and the Nasdaq fell 0.1%. Smaller companies fell more than the rest of the market.

Stocks are coming off of two days of gains, but trading remains unsteady overall. Treasury yields rose back near multi-year highs. Crude oil prices rose slightly.

Homebuilders and other companies tied to the industry fell following a disappointing report on the housing industry. Construction on new homes declined more than expected in September. Homebuilder Lennar fell 4.4% and home-improvement retailer Lowe’s shed 5.1%.

The yield on the 10-year Treasury, which influences mortgage rates, rose to 4.08% from 4.02% late Tuesday. The yield on the two-year Treasury, which tends to track expectations for future Federal Reserve action, also rose to 4.52% from 4.43%.

U.S. crude oil prices rose 1.2% and energy stocks made gains. Exxon Mobil rose 2.2%. The White House plans to announce another release of oil from the U.S. strategic reserve.

Investors have been focusing on the latest round of corporate earnings this week. The latest results are being closely watched for clues about how companies are dealing with the hottest inflation in four decades and how they intend to operate through the rest of the year and into 2023.

Netflix soared 14.7% after the company said it picked up 2.4 million subscribers during the July-September period, a comeback from a loss of 1.2 million customers during the first half of the year.

United Airlines rose 7.2% after reporting strong third-quarter financial results. American Airlines will report its results on Thursday.

Household goods giant Procter & Gamble rose 2.2% after also reporting strong financial results. It joined a growing list of companies, including Hasbro and Johnson & Johnson, warning investors about a strong U.S. dollar cutting into revenue. A strong dollar decreases the value of overseas sales after converting the currency. The U.S. currency is now worth more than a euro for the first time in 20 years.

The U.S. dollar has gained strength versus currencies worldwide as inflation and recession concerns prompt investors to look for relatively stable investments. Central governments and banks worldwide are dealing with stubbornly hot inflation. British food prices rose at the fastest pace since 1980 last month, driving inflation back to a 40-year high.

The U.S. faces its own potential recession as high prices on everything from food to clothing barely budge and the Fed raises interest rates to temper inflation.

The Fed’s rate increases are meant to make borrowing more difficult and slow economic growth in an effort to tame inflation. The strategy risks stalling the already slowing U.S. economy and bringing on a recession.

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Joe McDonald and Matt Ott contributed to this report.

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October 19, 2022
Asian shares mixed as markets eye China meeting

TOKYO — Asian shares were mixed Monday as investors kept their eyes on the weeklong Communist Party congress in China.

Benchmarks dropped in Tokyo, Sydney and Hong Kong, but they recovered in afternoon trading in Seoul and Shanghai. Mumbai gained. Oil prices and U.S. futures rose.

The meeting in China, which opened Sunday, is expected to reappoint Xi Jinping as leader for the next five years, reaffirming his grip on power and stronger state control over the economy. Analyst expect no change to the “zero-COVID policy.”

“Fresh updates from China’s Party Congress are being scrutinized, with the emphasis on technological advancement and national security seemingly brought up as high priorities for China’s longer-term direction. Further de-coupling f rom U.S. technology seems to be the story,” said Yeap Jun Rong, market strategist at IG in Singapore.

Japan’s benchmark Nikkei 225 slipped 1.2% in afternoon trading to 26,775.79. Australia’s S&P/ASX 200 dipped 1.4% to 6,664.40. South Korea’s Kospi rebounded to gain 0.3% to 2,219.71. Hong Kong’s Hang Seng lost 0.2% to 16,561.97, while the Shanghai Composite rose 0.5% to 3,086.38. In Mumbai, the Sensex gained 0.5%.

Clifford Bennett, Chief Economist at ACY Securities, noted the U.S. dollar will likely continue to rise as interest rates are pushed higher to counter inflation.

“The outlook is grim. The economic horizon is dark,” he said of the American economy. “”The U.S. dollar will continue to strengthen for the moment, particularly against other Western currencies.”

In currency trading, the euro cost 97.37 cents, up from 97.21 cents.

The U.S. dollar rose to 148.74 Japanese yen from 148.63 yen. That’s a nearly 32-year low for the yen against the dollar.

Japan’s industrial production for August showed moderate signs of improvement, the government said. Industrial production rose 3.4% from the previous month, and 5.8% from the previous year, according to Ministry of Economy, Trade and Industry data released Monday.

Worries about inflation, though cooling in some parts of the economy around the world, remain overall. On Wall Street, stocks ended last week with a broad slide, wiping out earlier gains.

A report showing U.S. consumers’ expectations for inflation was another signal the Federal Reserve may keep aggressively raising interest rates, although that strategy raises the risks of a recession.

The S&P 500 fell 2.4% on Friday. The Dow Jones Industrial Average fell 1.3% and the Nasdaq composite ended 3.1% lower. Both indexes also turned lower after marching higher in early trading.

The Russell 2000 gave up 2.7%

The Fed has already raised its benchmark interest rate five times this year, with the last three increases by three-quarters of a percentage point. Wall Street expects another raise of three-quarters of a percentage point at its next meeting in November.

Investors have also been focusing on the latest earnings reports.

In energy trading, benchmark U.S. crude added 66 cents to $86.27 a barrel in electronic trading on the New York Mercantile Exchange. U.S. crude oil prices fell 3.9% on Friday. Brent crude, the international standard, added 78 cents to $92.41 a barrel.

———

Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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October 16, 2022
In drawn-out recovery, NYC inches out from COVID’s shadow

NEW YORK — As kids returned to school last month, people watching New York City pull itself out of COVID-19’s shadow wondered whether workers who fled Manhattan’s office towers during the pandemic would finally return in a rush, too.

More workers did return to their offices, at least part time, as the summer ended, limited data suggests. But the onset of autumn has also made it clearer than ever that the recovery will be drawn out, and that some aspects of the city’s economic ecosystem could be changed for good.

“We’re certainly entered a changed relationship between office workers and their offices,” said James Parrott, director of Economic and Fiscal Policies at the Center for New York City Affairs at The New School.

That’s meant hardship for New Yorkers who are part of the economy built around the commuting class.

They are the workers whose livelihoods can’t happen over an internet connection, who have depended on that serendipity of a customer being in the right place at the right time — the sudden impulse to buy a snack, pop into a store, throw some dollars into a street performer’s tip bucket.

They’re people like Emad Ahmed, 58, who for more than two decades has worked in lower Manhattan, running his food cart on a plaza near Wall Street and the World Trade Center.

The pandemic forced a pause, but as soon as he was able, Ahmed came back — and really wishes he could say the same for all the workers he relied on as customers, many of them still working at home and coming into Manhattan only a few days a week, at most.

“The pandemic (is) almost done, nobody uses a mask now, and you can go to the subway and the bus without masks, and people still don’t come,” he said. It’s “absolutely not like before.”

Some had looked to the Labor Day as a possible catalyst, a transition back to the way things were, and indeed, some data has shown momentum since then, including office occupancy in the metro area getting closer to the halfway mark.

Subway ridership is on an upswing, as well, with one day last week reaching almost 3.9 million riders. While that’s only about 64% of a comparable day pre-pandemic, the weekday totals have been inching up overall since the holiday.

A survey of Manhattan companies put out by the Partnership for New York City last month found that on an average day, just under half of Manhattan office workers were in their offices as of the beginning of September.

But when it comes to being back in the office full time, only 9% of workers were, with the largest group, 37%, in for three days a week. Sixteen percent of workers were still completely remote.

Looking ahead through the rest of the year to the beginning of 2023, the survey didn’t show those numbers changing drastically, despite city government and corporate leaders urging workers to come back.

“People have gotten used to the flexibility and the benefits of not having to commute to the office every day,” said Kathryn Wilde, president and CEO of the partnership. “They’re going to have to have good reasons to go back.”

Remote work has brought an upswing in jobs and liveliness to some neighborhoods in the outer boroughs, as people staying close to home have brought their coffee and other daily needs to their local outlets.

But that hasn’t made up for what’s been lost, said Jonathan Bowles, executive director of the Center for an Urban Future, a public policy think tank.

“In some ways, it’s almost miraculous how much the city’s economy has recovered since the depths of March 2020,” Bowles said.

New York City lost more than 970,000 jobs when the pandemic hit; as of August, just about 810,000 had come back, about 84%.

“But there are still really large pockets, particularly around the central business districts where entrepreneurs and small businesses are struggling left and right … seeing a fraction of their previous customers,” Bowles said.

Ahmed is among them. On his best days, midweek, he sees maybe 60% of what he would have before the pandemic. On the worst, even getting to 10-15% can be a challenge.

For some dependent on office life, the partial return has been enough. Denis Johnston, executive vice president of 32BJ Service Employees International Union, said almost all of the commercial office space cleaners represented by the union are back at work.

Whether companies have some or all of their employees back on a given day, the spaces need to be cleaned and maintained, so his members are needed, he said.

Some, like taxi driver Sukhdarshan Singh, have learned to adjust. While there are fewer commuters, he’s finding fares at other times.

“Office people are not back, but evenings and weekends, people are out,” said Singh, a cabbie for about 35 years.

But other sectors are suffering. Among retail outlets, food and beverage stores have seen only about 66% of jobs come back, while clothing stores have seen about 62%, according to the New York City Independent Budget Office.

If office workers are “not in the city, they’re not shopping in the city,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union.

“Stores are operating with fewer people because there are fewer customers,” he said.

The city’s unemployment rate was 6.6% in August, significantly higher than the national rate of 3.7%.

Office workers being slow to go back is “absolutely going to impact the bottom line for tons of … vendors, people that operate food trucks and so many more businesses that are really dependent on office workers providing a big chunk of their sales,” Bowles said.

“There are just going to be fewer of those chance encounters, where people pick up something to eat or drink or to bring home during their lunch hour, on their way to work and on the way home,” Bowles said. “And that’s a surprisingly huge part of the Manhattan economy.”

Ahmed worries about his own future, especially as winter approaches. Even prior to the pandemic, the cold weather was slow for business, and now he worries it will be a financial deep freeze.

He just holds out hope that the city streets will come back to the life they had before.

“Nothing else can help me,” he said. “Without people? That’s it.”

Source link

October 13, 2022
In drawn-out recovery, NYC inches out from COVID’s shadow

NEW YORK — As kids returned to school last month, people watching New York City pull itself out of COVID-19’s shadow wondered whether workers who fled Manhattan’s office towers during the pandemic would finally return in a rush, too.

More workers did return to their offices, at least part time, as the summer ended, limited data suggests. But the onset of autumn has also made it clearer than ever that the recovery will be drawn out, and that some aspects of the city’s economic ecosystem could be changed for good.

“We’re certainly entered a changed relationship between office workers and their offices,” said James Parrott, director of Economic and Fiscal Policies at the Center for New York City Affairs at The New School.

That’s meant hardship for New Yorkers who are part of the economy built around the commuting class.

They are the workers whose livelihoods can’t happen over an internet connection, who have depended on that serendipity of a customer being in the right place at the right time — the sudden impulse to buy a snack, pop into a store, throw some dollars into a street performer’s tip bucket.

They’re people like Emad Ahmed, 58, who for more than two decades has worked in lower Manhattan, running his food cart on a plaza near Wall Street and the World Trade Center.

The pandemic forced a pause, but as soon as he was able, Ahmed came back — and really wishes he could say the same for all the workers he relied on as customers, many of them still working at home and coming into Manhattan only a few days a week, at most.

“The pandemic (is) almost done, nobody uses a mask now, and you can go to the subway and the bus without masks, and people still don’t come,” he said. It’s “absolutely not like before.”

Some had looked to the Labor Day as a possible catalyst, a transition back to the way things were, and indeed, some data has shown momentum since then, including office occupancy in the metro area getting closer to the halfway mark.

Subway ridership is on an upswing, as well, with one day last week reaching almost 3.9 million riders. While that’s only about 64% of a comparable day pre-pandemic, the weekday totals have been inching up overall since the holiday.

A survey of Manhattan companies put out by the Partnership for New York City last month found that on an average day, just under half of Manhattan office workers were in their offices as of the beginning of September.

But when it comes to being back in the office full time, only 9% of workers were, with the largest group, 37%, in for three days a week. Sixteen percent of workers were still completely remote.

Looking ahead through the rest of the year to the beginning of 2023, the survey didn’t show those numbers changing drastically, despite city government and corporate leaders urging workers to come back.

“People have gotten used to the flexibility and the benefits of not having to commute to the office every day,” said Kathryn Wilde, president and CEO of the partnership. “They’re going to have to have good reasons to go back.”

Remote work has brought an upswing in jobs and liveliness to some neighborhoods in the outer boroughs, as people staying close to home have brought their coffee and other daily needs to their local outlets.

But that hasn’t made up for what’s been lost, said Jonathan Bowles, executive director of the Center for an Urban Future, a public policy think tank.

“In some ways, it’s almost miraculous how much the city’s economy has recovered since the depths of March 2020,” Bowles said.

New York City lost more than 970,000 jobs when the pandemic hit; as of August, just about 810,000 had come back, about 84%.

“But there are still really large pockets, particularly around the central business districts where entrepreneurs and small businesses are struggling left and right … seeing a fraction of their previous customers,” Bowles said.

Ahmed is among them. On his best days, midweek, he sees maybe 60% of what he would have before the pandemic. On the worst, even getting to 10-15% can be a challenge.

For some dependent on office life, the partial return has been enough. Denis Johnston, executive vice president of 32BJ Service Employees International Union, said almost all of the commercial office space cleaners represented by the union are back at work.

Whether companies have some or all of their employees back on a given day, the spaces need to be cleaned and maintained, so his members are needed, he said.

Some, like taxi driver Sukhdarshan Singh, have learned to adjust. While there are fewer commuters, he’s finding fares at other times.

“Office people are not back, but evenings and weekends, people are out,” said Singh, a cabbie for about 35 years.

But other sectors are suffering. Among retail outlets, food and beverage stores have seen only about 66% of jobs come back, while clothing stores have seen about 62%, according to the New York City Independent Budget Office.

If office workers are “not in the city, they’re not shopping in the city,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union.

“Stores are operating with fewer people because there are fewer customers,” he said.

The city’s unemployment rate was 6.6% in August, significantly higher than the national rate of 3.7%.

Office workers being slow to go back is “absolutely going to impact the bottom line for tons of … vendors, people that operate food trucks and so many more businesses that are really dependent on office workers providing a big chunk of their sales,” Bowles said.

“There are just going to be fewer of those chance encounters, where people pick up something to eat or drink or to bring home during their lunch hour, on their way to work and on the way home,” Bowles said. “And that’s a surprisingly huge part of the Manhattan economy.”

Ahmed worries about his own future, especially as winter approaches. Even prior to the pandemic, the cold weather was slow for business, and now he worries it will be a financial deep freeze.

He just holds out hope that the city streets will come back to the life they had before.

“Nothing else can help me,” he said. “Without people? That’s it.”

Source link

October 12, 2022
Asian shares extend losses as specter of recession looms

BANGKOK — Asian shares slipped on Monday, with Chinese markets logging moderate losses after they reopened from a weeklong holiday.

The declines followed yet another dismal end to the week on Wall Street as a strong U.S. jobs report added to worries the Federal Reserve might consider the higher-than-expected hiring data as proof the economy hasn’t slowed enough to get inflation under control. That might mean still more hefty rate hikes that could make a recession more likely.

A U.S. consumer prices report on Thursday will be one of the biggest factors for markets this week. Investors also are awaiting the latest updates on how companies are dealing with higher prices and interest rate hikes.

Markets were closed Monday in Tokyo, Taiwan and South Korea. The Hang Seng in Hong Kong fell 2.5% to 17,298.32 while the Shanghai Composite index shed 0.4% to 3,012.58. Bangkok’s SET lost 0.6% and India’s Sensex gave up 1.2%.

The dollar rose to 145.44 Japanese yen from 145.34 late Friday, adding to pressure on Japan’s central bank to counter the yen’s prolonged slide by adjusting its policy of keeping its benchmark interest rate below zero to fend off deflation.

Prices have been rising in Japan, pushed higher mainly by global inflation and surging costs for oil and gas, but the Bank of Japan has stuck to its ultra-loose monetary policy while the Fed has pressed ahead with sharp rate hikes. The higher expected returns have pushed the dollar higher against the yen.

On Friday, the S&P 500 fell 2.8% to 3,639.66. It ended with a 1.5% gain for the week, its first weekly gain in four weeks. The Dow Jones Industrial Average skidded 2.1% to 29,296.79. The Nasdaq tumbled 3.8% to 10,652.40. The Russell 2000 index fell 2.9%, to 1,702.15.

The government report showing employers hired more workers last month than economists expected might clear the way for the Fed to continue hiking interest rates aggressively, something that risks causing a recession if done too severely.

Employers added 263,000 jobs last month. That’s a slowdown from the hiring pace of 315,000 in July, but it’s still more than the 250,000 that economists expected.

Stocks have tumbled over 20% this year from record highs this year on worries about inflation, interest rates and the possibility of a recession.

The major indexes managed to notch a gain for the week, thanks to a powerful but short-lived rally Monday and Tuesday after some investors squinted hard enough at some weaker-than-expected economic data to suggest the Fed may take it easier on rate hikes. But Friday’s jobs report may have dashed such hopes for a “pivot” by the Fed. It’s a pattern that has been repeated several times this year.

By hiking interest rates, the Fed is hoping to starve inflation of the purchases needed to keep prices rising even further. The Fed has already seen some effects, with higher mortgage rates hurting the housing industry in particular. But if the rate hikes go too far, that could squeeze the economy into a recession. In the

Crude oil, meanwhile, had its biggest weekly gain since March. Benchmark U.S. crude jumped 4.7% to settle at $92.64 per barrel Friday. Brent crude, the international standard, rose 3.7% to settle at $97.92.

Oil prices have surged because big oil-producing countries have pledged to cut production in order to keep prices up. That should keep the pressure up on inflation, which is still near a four-decade high but hopefully moderating.

On Monday, the U.S. benchmark fell 97 cents to $91.67 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude gave up $1.02 to $96.90 a barrel.

Beyond higher interest rates, analysts say the next hammer to hit stocks could be a potential drop in corporate profits. Companies are contending with high inflation and interest rates eating into their earnings, while the economy slows.

The euro was unchanged at 97.36 U.S. cents.

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October 9, 2022
Global stocks mixed ahead of US employment update

BEIJING — Global stock markets were mixed Friday ahead of U.S. employment data investors hope will show the economy is weakening and persuade the Federal Reserve to ease off plans for more interest rate hikes.

London and Frankfurt opened higher. Tokyo and Hong Kong declined. Oil prices rose.

The future for Wall Street’s S&P 500 index was unchanged after the market benchmark fell Thursday following a private sector report that said U.S. employers hired slightly more workers than forecast in September. That gives ammunition to Fed officials who say more rate hikes are needed to cool the economy and rein in inflation that is at a four-decade high.

U.S. government data due out Friday are expected to show fewer people were hired compared with previous months. Investors hope that will help persuade the Fed five rate hikes this year are working and it can scale down plans for more.

“What the market seems to be crying out for is a Fed pivot,” said Robert Carnell of ING in a report. “For its part, the Fed is sticking to its ‘higher for longer’ mantra.”

In early trading, the FTSE 100 in London gained 0.1% to 7,007.32 and the DAX in Frankfurt added 0.1% to 12,487.27. The CAC 40 in Paris advanced 0.1% to 5,943.54.

On Wall Street, the future for the Dow Jones Industrial Average was up 0.1%.

On Thursday, the S&P 500 lost 0.2%. The index is up 4.4% for the week following its best two-day rally in 2 1/2 years. The Dow slid 1.1%. The Nasdaq composite gave up 0.7%.

In Asia, the Nikkei 225 in Tokyo sank 0.7% to 27,116.11 and Hong Kong’s Hang Seng tumbled 1.5% to 17,740.05.

The Kospi in Seoul shed 0.2% to 2,232.84 while Sydney’s S&P ASX 200 lost 0.8% to 6,762.80.

India’s Sensex lost less than 0.1% to 58,213.21. New Zealand and Southeast Asian markets declined.

The Fed and central banks around the world are focused on extinguishing inflation that is running at multi-decade highs, but investors worry the unusually large and rapid pace of their rate hikes might tip the global economy into recession.

Strong U.S. hiring is positive for job hunters but a sign of enduring economic strength, which might make the Fed think more rate hikes are needed.

U.S. government data showed the number of applications for unemployment benefits hit a four-month high last week. That suggests the job market might be cooling.

Forecasters expect the government to report the economy added 250,000 jobs last month, well below the past year’s monthly average of 487,000 but still a strong number despite inflation and two straight quarters of U.S. economic contraction.

In energy markets, benchmark U.S. crude gained 56 cents to $89.01 per barrel in electronic trading on the New York Mercantile Exchange. The contract advanced 69 cents on Thursday to $88.45. Brent crude, the price basis for trading international oils, advanced 45 cents to $94.87 per barrel in London. It rose $1.05 the previous session to $94.42.

The dollar declined to 144.84 yen from Thursday’s 145.07 yen. The euro gained to 98.06 cents from 97.94 cents.

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October 7, 2022
US job openings sink amid higher rates and slower growth

WASHINGTON — The number of available jobs in the U.S. plummeted in August compared with July, a sign that businesses may pull back further on hiring and potentially cool chronically high inflation.

There were 10.1 million advertised jobs on the last day of August, the government said Tuesday, down a huge 10% from 11.2 million openings in July. In March, job openings had hit a record of nearly 11.9 million.

Layoffs ticked up in August but remained at a historically low level. And slightly more people quit their jobs.

The sharp drop in job openings will be welcomed by the Federal Reserve. Fed officials have cited the high level of openings as a sign of strong labor demand that has compelled employers to steadily raise pay to attract and keep workers.

Smaller pay raises, if sustained, should ease inflationary pressures. In their effort to combat the worst inflation in 40 years, the central bank has raised its key short-term interest rate to a range of 3% to 3.25%, up sharply from nearly zero as recently as March.

Chair Jerome Powell and other Fed officials hope that their interest rate hikes — the fastest in roughly four decades — will cause employers to pull back on their efforts to hire more people. Fewer job openings, in turn, could reduce the pressure on companies to raise pay to attract and keep workers.

Tuesday’s figures arrive the same week that a key report on jobs and the unemployment rate is set to be released Friday. Economists forecast that it will show that employers added 250,000 jobs in September and that the unemployment rate remained 3.7% for a second straight month.

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October 4, 2022
Asian shares rise after ‘relief rally’ on Wall Street

TOKYO — Asian shares rose Tuesday, encouraged by a rally in U.S. shares after some weak economic data raised hopes that the Federal Reserve might ease away from aggressive interest rate hikes.

Japan’s benchmark Nikkei 225 added 2.8% in afternoon trading to 26,959.25. South Korea’s Kospi gained 2.5% to 2,209.98.

Australia’s S&P/ASX 200 jumped 3.8% to 6,699.30 after its central bank boosted its benchmark interest rate for a sixth consecutive month to a nine-year high of 2.6%. The Reserve Bank of Australia’s increase of a quarter percentage point to the cash rate was smaller than those at recent monthly meetings.

When the bank lifted the rate by a quarter percentage point at its board meeting in May, it was the first rate hike in more than 11 years. It’s now at its highest point since August 2013, when the bank cut the rate from 2.75% to 2.5%.

Markets in Hong Kong and Shanghai were closed for holidays.

“Asian equities were positive on Tuesday after a corrective session as traders eye potentially oversold market conditions,” Anderson Alves at ActivTrades said in a report.

On Monday, Wall Street soared to its best day in months in a widespread relief rally after some unexpectedly weak data on the economy raised the possibility that the Federal Reserve won’t have to be so aggressive about hiking interest rates.

The S&P 500’s leap of 2.6% to 3,678.43 was its biggest since July, the latest swing for a scattershot market that’s been mostly falling this year on worries about a possible global recession.

The Dow Jones Industrial Average jumped 2.7%, to 29,490.89, and the Nasdaq composite gained 2.3% to 10,815.43.

Stocks took their cue from the bond market, where yields fell to ease some of the pressure that’s been battering markets this year. The yield on the 10-year Treasury, which helps set rates for mortgages and many other kinds of loans, fell to 3.62% from 3.83% late Friday. It got as high as 4% last week after starting the year at just 1.51%.

A report on U.S. manufacturing came in weaker than expected, along with data showing a drop off in construction spending from July to August. That may seem discouraging, but could mean the Federal Reserve can ease off on raising interest rates to beat down the high inflation damaging households’ finances.

By raising rates, the Fed is making it more expensive to buy a house, a car or most anything else purchased on credit. The hope is to slow the economy just enough to starve inflation of the purchases needed to keep prices rising so quickly.

The Fed has already pulled its key overnight interest rate to a range of 3% to 3.25%, up from virtually zero as recently as March. Most traders expect it to be more than a full percentage point higher by early next year.

But stresses are building in financial markets and corporate profits have weakened as central banks around the world hike rates in concert.

The yield on the two-year Treasury, which more closely tracks expectations for Fed action, fell to 4.11% from 4.27% following the weaker-than-expected reports on the economy.

Besides stocks, lower rates also boost prices for everything from cryptocurrencies to gold, which can suddenly look a bit more attractive when bonds are paying less in income.

Stocks of high-growth companies and particularly risky or expensive investments have been the most affected by changes in rates. Bitcoin rallied Monday with the reprieve in yields, while technology stocks did the heaviest lifting to carry the S&P 500. Apple and Microsoft both rose more than 3%.

Monday’s rally came despite an 8.6% drop for Tesla, one of the most influential stocks on Wall Street because of its massive market value. The maker of electric vehicles delivered fewer vehicles from July through September than investors expected.

The latest update on the U.S. jobs market comes on Friday. Along with reports on inflation, the jobs report is one of the most highly anticipated pieces of data on Wall Street each month.

It will be the last jobs report before the Fed makes its next decision on interest rates, scheduled for Nov. 2. Continued strength would give the central bank more leeway to keep hiking. Traders say the likeliest move is a fourth straight increase of a whopping three-quarters of a percentage point, triple the usual move.

In energy trading, benchmark U.S. crude added 23 cents to $83.86 a barrel. It jumped Monday amid speculation big oil-producing countries could soon announce cuts to production. Shares of energy-producing companies made big gains. Exxon Mobil leaped 5.3%, and Chevron climbed 5.6%. Brent crude, the international standard, added 42 cents to $89.28 a barrel.

In currency trading, the U.S. dollar inched up to 144.84 Japanese yen from 144.81 yen. The euro cost 98.28 cents, inching down from 98.40 cents.

———

Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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October 3, 2022
Wall Street drifts near 2022 low as dismal week, month close

NEW YORK — Wall Street is drifting around its worst levels in almost two years Friday as the end nears for what’s been a miserable month for markets around the world.

The S&P 500 was virtually unchanged in midday trading after flipping between small losses and gains through the morning. It’s hovering around its lowest level since November 2020, and it’s on pace to close out its sixth weekly loss in the last seven, one of its worst months since the early 2020 coronavirus crash and its third straight losing quarter.

The Dow Jones Industrial Average was down 95 points, or 0.3%, at 29,130, as of noon Eastern time, and the Nasdaq composite was 0.4% higher.

The main reason for this year’s struggles for financial markets has been fear about a possible recession, as interest rates soar in hopes of beating down the high inflation that’s swept the world.

The Federal Reserve has been at the forefront of the global campaign to slow economic growth and hurt job markets just enough to undercut inflation but not so much that it causes a recession. More data arrived Friday to suggest the Fed will keep its foot firmly on the brakes on the economy, raising the risk of its going too far and causing a downturn.

The Fed’s preferred measure of inflation showed prices rising even faster than economists expected last month, while spending by consumers rebounded. That should keep the Fed on track to keep raising rates and hold them at high levels a while, as it’s loudly and repeatedly promised to do.

Vice Chair Lael Brainard was the latest Fed official on Friday to insist it won’t pull back on rates prematurely. That helped to keep snuffed out hopes on Wall Street for a “pivot” toward easier rates as the economy slows.

“At this point, it’s not a matter of if we’ll have a recession, but what type of recession it will be,” said Sean Sun, portfolio manager at Thornburg Investment Management.

Higher interest rates knock down one of the main levers that set prices for stocks. The other also looks to be under threat as the slowing economy, high interest rates and other factors weigh on corporate profits.

Nike slumped 11.8% in what could be its worst day in two decades after it said its profitability weakened during the summer because of discounts needed to clear suddenly overstuffed warehouses. The amount of shoes and gear in Nike’s inventories swelled by 44% from a year earlier. This year’s powerful surge for the U.S. dollar against other currencies also hurt the company. Its worldwide revenue rose only 4%, instead of the 10% it would have if currency values had remained the same.

Nike isn’t the only company to see its inventories balloon. So have several big-name retailers, and such bad news for businesses could actually mean some relief for shoppers if it leads to more discounts. It echoed some glimmers of encouragement buried within Friday’s report on the Fed’s preferred gauge of inflation. That showed some slowing of inflation for goods, even as price gains kept accelerating for services.

Another report on Friday also offered a glimmer of hope. A measure of consumer sentiment showed U.S. expectations for future inflation came down in September. That’s key for the Fed because expectations for higher inflation among households can create a debilitiating, self-reinforcing cycle that worsens it.

Treasury yields eased a bit on Friday, letting off some of the pressure that’s built on markets.

The yield on the 10-year Treasury fell to 3.73% from 3.79% late Thursday. The two-year yield, which more closely tracks expectations for Fed action, sank to 4.13% from 4.19%.

Still, a long list of other worries continues to hang over global markets, including increasing tensions between much of Europe and Russia following the invasion of Ukraine. A controversial plan to cut taxes by the U.K. government also sent bond markets spinning on fears it could make inflation even worse. Bond markets calmed a bit after the Bank of England pledged mid-week to buy however many U.K. government bonds are needed to bring yields back down.

The stunning and swift rise of the U.S. dollar against other currencies, meanwhile, raises the risk of creating so much stress that something cracks somwhere in global markets.

Stocks around the world were mixed after a report showed that inflation in the 19 countries that use Europe’s euro currency spiked to a record and data from China said that factory activity weakened there.

——

AP Business Writers Joe McDonald and Matt Ott contributed.

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September 30, 2022
Fewer people seek US unemployment aid amid solid hiring

WASHINGTON — The number of Americans filing for jobless benefits dropped last week, a sign that few companies are cutting jobs despite high inflation and a weak economy.

Applications for unemployment benefits for the week ending Sept. 24 fell by 16,000 to 193,000, the Labor Department reported Thursday. That is the lowest level of unemployment claims since April. Last week’s number was revised down by 4,000 to 209,000.

Jobless aid applications generally reflect layoffs. The current figures are very low historically and suggest Americans are benefiting from an unusually high level of job security. A year ago this week, 376,000 people applied for benefits.

The economy shrank in the first half of the year, the government said in a separate report Thursday on gross domestic product, the broadest measure of the economy’s output.

Yet employers, who have struggled to rehire after laying off 22 million workers at the height of the pandemic, are still looking to fill millions of open jobs. There are currently roughly two open positions for every unemployed worker, near a record high.

With companies desperate for workers, they are much more likely to hold onto their current staff.

Employers are also offering higher pay and benefits to attract and keep employees. Those higher salaries are contributing to inflation pressures.

The Federal Reserve is aiming to bring down inflation by rapidly raising its key interest rate, which is currently in a range of 3% to 3.25%. A little more than six months ago, that rate was near zero. The sharp rate hikes have pushed up mortgage rates and other borrowing costs. The Fed hopes that higher interest rates will slow borrowing and spending and drive inflation down towards its 2% target.

Fed officials are increasingly warning that the unemployment rate will likely have to rise as part of their fight against rising prices. If the number of unemployment claims drops, as it did last week, it suggests the Fed may have to raise rates even higher than it plans to slow the economy.

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This has been corrected to show that the level of unemployment benefits applications is the lowest since April, rather than May.

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September 29, 2022
Asian stocks follow Wall St higher after UK calms markets

BEIJING — Asian stock markets followed Wall Street higher Thursday after Britain’s central bank moved forcefully to stop a budding financial crisis.

Market benchmarks in Hong Kong, Seoul and Sydney added more than 1%. Shanghai and Tokyo also rose. Oil prices edged lower after jumping by more than $3 per barrel the previous day.

Wall Street’s benchmark S&P 500 index surged 2% on Wednesday for its biggest gain in seven weeks after the Bank of England announced it would buy as many government bonds as needed to restore order to financial markets.

That helped to calm investor fears that planned British tax cuts would push up already high inflation. That had caused the value of the British pound to fall to its lowest level since the 1970s and bond prices to plunge.

The Shanghai Composite Index rose 0.8% to 3,068.87 and the Nikkei 225 in Tokyo gained 0.6% to 26,341.76. The Hang Seng in Hong Kong jumped 1.3% to 17,477.97.

The Kospi in Seoul gained 1.1% to 2,193.82 and Sydney’s S&P ASX 200 rose 1.6% to 6,566.80.

New Zealand and Southeast Asian markets also advanced.

On Wall Street, the S&P 500 rose to 3,719.04 after the Bank of England said it would buy bonds over the next two weeks to stop a slide in prices. Investors were rattled by plans for 45 billion pounds ($48 billion) of tax cuts with no spending reductions.

The central bank earlier warned crumbling confidence in the economy posed a “material risk to U.K. financial stability.” The International Monetary Fund took the rare step of urging a member of the Group of Seven advanced economies to abandon its plan for tax cuts and more borrowing.

The Dow Jones Industrial Average rallied 1.9% to 29,683.74. The Nasdaq composite climbed 2.1% to 11,051.64.

Despite Wednesday’s gain, the S&P 500 is down more than 20% from its Jan. 3 record, which puts it in what traders call a bear market.

Forecasters see more turbulence ahead due to worries about a possible recession, higher interest rates and even higher inflation.

The yield on the 10-year U.S. Treasury, or the difference between its market price and the payout if held to maturity, briefly exceeded 4% on Wednesday, its highest level in a decade.

Investor fears are growing that aggressive interest rate hikes this year by the Federal Reserve and central banks in Europe and Asia to cool inflation that is at multi-decade highs might tip the global economy into recession.

The investment giant Vanguard puts the chance of a U.S. recession at 25% this year and at 65% next year if the Fed follows through on expectations it will raise rates again and keep them elevated through next year.

In energy markets, benchmark U.S. crude lost 32 cents to $81.83 per barrel in electronic trading on the New York Mercantile Exchange. The contract surged $3.65 on Wednesday to $82.15. Brent crude, the price basis for international oils, shed 30 cents to $87.75 per barrel in London. It gained $3.05 the previous session to $89.32.

The dollar gained to 144.32 yen from Wednesday’s 143.96 yen. The euro declined to 96.82 cents from 97.43 cents.

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September 29, 2022