BEIJING (AP) — U.S. Secretary of State Antony Blinken met with Chinese President Xi Jinping on Monday, as the top U.S. diplomat wrapped up a high-stakes two-day visit to Beijing aimed at easing soaring tensions between the countries.
The 35-minute meeting at the Great Hall of the People had been expected and was seen as key to the success of the trip, but neither side confirmed it would happen until a State Department official announced it just an hour beforehand.
In footage of the meeting released by state broadcaster CCTV, Xi is heard to say “The two sides have agreed to follow through on the common understandings President Biden and I have reached in Bali.”
In earlier meetings between Blinken and senior Chinese officials, the two sides expressed willingness to talk but showed little inclination to bend from hardened positions on disagreements ranging from trade, to Taiwan, to human rights conditions in China and Hong Kong, to Chinese military assertiveness in the South China Sea, to Russia’s war in Ukraine.
Xi said that they had made progress and reached agreements on “some specific issues” without elaborating. “This is very good,” Xi said.
“I hope that through this visit, Mr. Secretary, you will make more positive contributions to stabilizing China-US relation,” Xi added.
Despite Blinken’s presence in China, he and other U.S. officials had played down the prospects for any significant breakthroughs on the most vexing issues facing the planet’s two largest economies.
Instead, these officials have emphasized the importance of the two countries establishing and maintaining better lines of communication.
Blinken is the highest-level U.S. official to visit China since President Joe Biden took office, and the first secretary of state to make the trip in five years. His visit is expected to usher in a new round of visits by senior U.S. and Chinese officials, possibly including a meeting between Xi and Biden in the coming months.
Blinken met earlier Monday with China’s top diplomat Wang Yi for about three hours, according to a U.S. official.
China’s Ministry of Foreign Affairs wrote in a statement that Blinken’s visit “coincides with a critical juncture in China-U.S. relations, and it is necessary to make a choice between dialogue or confrontation, cooperation or conflict,” and blamed the “U.S. side’s erroneous perception of China, leading to incorrect policies towards China” for the current “low point” in relations.
It said the U.S. had a responsibility to halt “the spiraling decline of China-U.S. relations to push it back to a healthy and stable track” and that Wang had “demanded that the U.S. stop hyping up the ‘China threat theory’, lift illegal unilateral sanctions against China, abandon suppression of China’s technological development, and refrain from arbitrary interference in China’s internal affairs.”
The State Department said Blinken “underscored the importance of responsibly managing the competition between the United States and the PRC through open channels of communication to ensure competition does not veer into conflict.”
In the first round of talks on Sunday, Blinken met for nearly six hours with Chinese Foreign Minister Qin Gang after which both countries said they had agreed to continue high-level discussions. However, there was no sign that any of the most fractious issues between them were closer to resolution.
Both the U.S. and China said Qin had accepted an invitation from Blinken to visit Washington but Beijing made clear that “the China-U.S. relationship is at the lowest point since its establishment.” That sentiment is widely shared by U.S. officials.
Blinken’s visit comes after his initial plans to travel to China were postponed in February after the shootdown of a Chinese surveillance balloon over the U.S.
A snub by the Chinese leader would have been a major setback to the effort to restore and maintain communications at senior levels.
Biden and Xi had made commitments to improve communications “precisely so that we can make sure we are communicating as clearly as possible to avoid possible misunderstandings and miscommunications,” Blinken said before leaving for Beijing.
And Biden said over the weekend that he hoped to be able to meet with Xi in the coming months to take up the plethora of differences that divide them.
In his meetings on Sunday, Blinken also pressed the Chinese to release detained American citizens and to take steps to curb the production and export of fentanyl precursors that are fueling the opioid crisis in the United States.
Since the cancellation of Blinken’s trip in February, there have been some high-level engagements. CIA chief William Burns traveled to China in May, while China’s commerce minister traveled to the U.S. And Biden’s national security adviser Jake Sullivan met with senior Chinese foreign policy adviser Wang Yi in Vienna in May.
But those have been punctuated by bursts of angry rhetoric from both countries over the Taiwan Strait, their broader intentions in the Indo-Pacific, China’s refusal to condemn Russia for its war against Ukraine, and U.S. allegations from Washington that Beijing is attempting to boost its worldwide surveillance capabilities, including in Cuba.
And, earlier this month, China’s defense minister rebuffed a request from U.S. Defense Secretary Lloyd Austin for a meeting on the sidelines of a security symposium in Singapore, a sign of continuing discontent.
A would-be bull market driven by a surge in artificial-intelligence stock market plays still feels like it has much in common with the run-up to recent collapses, argued Bank of America strategist Michael Hartnett in a Friday note.
Hartnett said he sees maximum upside for the S&P 500 of 100 to 150 points versus 300 points downside between now and Labor Day in September.
He wrote, “we are not convinced we at start of brand, new shiny bull market…still feels more like combo of 2000 or 2008, big rally before big collapse.”
The S&P 500 SPX, -0.22%
last week ended more than 20% above its October closing low, meeting a widely used criterion for the start of a bull market. The large-cap benchmark ended Thursday at its highest since April 2022 as it extended a daily winning streak to a sixth session.
The Dow Jones Industrial Average DJIA, -0.18%
ended Thursday at its highest since December, while the tech-heavy Nasdaq Composite COMP, -0.51%
saw its highest finish since April 7, 2022. Stocks were mostly higher in early Friday trade, with the S&P 500 ticking up 0.1% and the Dow adding 0.2%.
The return to bull market territory comes as Wall Street analysts remain divided over the path ahead, reflected in a historically wide divergence between year-end S&P 500 targets.
Hartnett in February had forecast the S&P 500 to slide to 3,800 — a call that didn’t pan out as tech stocks took the lead to push the market higher. Last fall, Hartnett had
The strategist offered some humility, citing three reasons that bears like himself have been wrong in the first half of 2023: So far, neither an earnings nor an economic recession have occurred; the “credit crunch” threatened by the collapse of Silicon Valley Bank in March was “deftly averted” by the emergency liquidity response from the Federal Reserve and U.S. Treasury.
And third, the “unanticipated event” that shook markets in the first half wasn’t the collapse of SVB but the emergence of AI, he wrote.
Hartnett argued that SVB, like the collapse of hedge-fund Long Term Capital Management in 1998, “ caused Fed easing and liquidity routed into the new secular growth theme of AI,” much like the LTCM collapse routed into the internet theme (see chart below).
BofA Global Research
As the “Magnificent 7″ megacap tech stocks drove the S&P 500 from 3,00 to 4,200, investors were forced to play catch-up as risks of a hard landing evaporated, Hartnett said.
While he awaits a big collapse, Hartnett said stocks can remain elevated until the Fed “reintroduces fear” by communicating the fed-funds rate needs to go to 6% to crack embedded inflation; long-term Treasury yields top 4% and real, or inflation-adjusted rates, rise to 2% to signal a tightening of financial conditions; and the U.S. unemployment rate rises above 4%, signaling recession.
Until then, investors remain likely to chase the market higher, rotating from momentum stocks to contrarian plays, “from deflation to inflation assets, from [developed market to emerging market] stocks, from no-landing plays to hard-landing plays,” he wrote.
The numbers: U.S. consumer prices rose a scant 0.1% in May — held in check by cheaper gasoline — and could cement a decision by the Federal Reserve to “skip” an increase in interest rates this week.
The small rise in consumer prices matched the forecast of economists polled by the Wall Street Journal.
The Fed is meeting Tuesday and Wednesday to determine its next step in its fight against inflation. The central bank is widely expected to leave its benchmark U.S. interest rate unchanged at the end of its two-day meeting.
The yearly rate of inflation slowed to 4% from 4.9%, marking the lowest level since March 2021. Grocery and gas prices have been on the wane after helping drive up inflation last year.
Yet the so-called core rate of inflation that omits food and energy rose a stiffer 0.4% for the third month in a row, the government reported. Wall Street had forecast a 0.4% gain.
The Fed views the core rate as a better predictor of inflation trends. The increase in the core rate over the past 12 months slipped to 5.3% from 5.5%, the smallest gain since the fall of 2021.
These prices have fallen more slowly than the broader CPI, however, and suggest the fight against inflation is far from over.
Stock rose after the report. Treasury yields fell slightly.
Key details: A nearly 6% decline in seasonally adjusted gasoline prices was the chief reason for the low inflation reading in May.
The cost of groceries rose slightly in May after two declines in a row. Still, the yearly increase slowed to 5.8% last month from a peak of 13.5%.
What helped is a big drop in the cost of eggs. Prices sank 14% last month and have returned to normal. They spiked last year after a severe bout of avian flu.
The cost of eating out or getting takeout is still rising rapidly, however.
Housing, the single biggest category of the CPI, has become perhaps the biggest sore spot on the inflation front. Rents rose a sharply again and are up almost 9% in the past year.
Prices of used vehicles jumped for the second month in a row, but they’ve been on a downtrend over the past year.
Big picture:The doggedly high rate of inflation is far from the Fed’s 2% target and senior officials think it could take a few years to reach its goal.
The big question for the Fed is whether to raise interest rates again.
The Fed has jacked up a key short-term rate by 5 percentage points since the spring of 2022 from near zero. Now it wants to see how higher borrowing costs affect inflation and economic growth. That’s why many senior Fed officials appear to prefer to skip a rate hike this week.
If core inflation doesn’t subside more rapidly, however, the Fed might be forced to raise rates again and boost the odds of recession.
Looking ahead: “The largest risk to the economic outlook—that inflation would prove sticky, requiring the Fed to throw even more cold water on the economy—appears to have receded,” said chief economist Julia Pollack of ZipRecruiter.
“The drop in year-on-year inflation may give the Fed license to slow the pace of tightening, but not to pause long term unless participants are convinced inflation will slow further,” said chief economist Chris Low of FHN Financial.
Market reaction: The Dow Jones Industrial Average DJIA, +0.43%
and S&P 500 SPX, +0.69%
rose in Tuesday trades. The yield on the 10-year Treasury note TMUBMUSD10Y, 3.827%
increased slightly to 3.78%.
ROME (AP) — Silvio Berlusconi, the boastful billionaire media mogul who was Italy’s longest-serving premier despite scandals over his sex-fueled parties and allegations of corruption, died, Italian media reported Monday. He was 86.
Italian news agency LaPresse reported Berlusconi’s death after he was hospitalized on Friday for the second time in months for treatment of chronic leukemia.
Berlusconi was hospitalized in Milan on April 5 with a lung infection stemming from the disease, said Dr. Alberto Zangrillo, his personal physician. He also suffered over the years from heart ailments, prostate cancer and was hospitalized for COVID-19 in 2020.
A onetime cruise ship crooner, Berlusconi used his television networks and immense wealth to launch his long political career, inspiring both loyalty and loathing.
To admirers, the three-time premier was a capable and charismatic statesman who sought to elevate Italy on the world stage. To critics, he was a populist who threatened to undermine democracy by wielding political power as a tool to enrich himself and his businesses.
His Forza Italia political party was a coalition partner with current Premier Giorgia Meloni, a far-right leader who came to power last year, although he held no position in the government.
Silvio Berlusconi, Giorgia Meloni (C), Matteo Salvini and other members of right-wing coalition speak to the media on October 21, 2022 in Rome, Italy.
Getty Images
His friendship with Russian President Vladimir Putin put him at odds with Meloni, a staunch supporter of Ukraine. On his 86th birthday, while the war raged, Putin sent Berlusconi best wishes and vodka, and the Italian boasted he returned the favor by sending back Italian wine.
As Berlusconi aged, some derided his perpetual tan, hair transplants and live-in girlfriends who were decades younger. For many years, however, Berlusconi seemed untouchable despite the personal scandals.
Criminal cases were launched but ended in dismissals when statutes of limitations ran out in Italy’s slow-moving justice system, or he was victorious on appeal. Investigations targeted the tycoon’s steamy so-called “bunga bunga” parties involving young women and minors, or his businesses, which included the soccer team AC Milan, the country’s three biggest private TV networks, magazines and a daily newspaper, and advertising and film companies.
Karima El-Mahroug, a.k.a. Ruby (C), reacts as members of the media approach on February 15, 2023 at a Milan special courthouse, following a court decision acquitting Berlusconi of bribing witnesses to lie about his “bunga bunga” parties in an underage prostitution case.
AFP via Getty Images
Only one led to a conviction — a tax fraud case stemming from a sale of movie rights in his business empire. The conviction was upheld in 2013 by Italy’s top criminal court, but he was spared prison because of his age, 76, and was ordered to do community service by assisting Alzheimer’s patients.
He still was stripped of his Senate seat and banned from running or holding public office for six years, under anti-corruption laws.
He stayed at the helm of Forza Italia, the center-right party he created when he entered politics in the 1990s and named for a soccer cheer, “Let’s go, Italy.” With no groomed successor in sight, voters started to desert it.
He eventually held office again -– elected to the European Parliament at age 82 and then last year to the Italian Senate.
Berlusconi’s party was eclipsed as the dominant force on Italy’s political right: first by the League, led by anti-migrant populist Matteo Salvini, then by Meloni’s Brothers of Italy party, with its roots in neo-fascism. Following elections in 2022, Meloni formed a governing coalition with their help.
He suffered personal humiliations as well. Berlusconi lost his standing as Italy’s richest man, although his sprawling media holdings and luxury real estate still left him a billionaire several times over.
In 2013, guests at one of his parties included an under-age Moroccan dancer whom prosecutors alleged had sex with Berlusconi in exchange for cash and jewelry. After a trial spiced by lurid details, a Milan court initially convicted Berlusconi of paying for sex with a minor and using his office to try to cover it up. Both denied having sex with each other, and he was eventually acquitted.
The Catholic Church, at times sympathetic to his conservative politics, was scandalized by his antics, and his wife of nearly 20 years divorced him, but Berlusconi was unapologetic, declaring: “I’m no saint.”
Berlusconi insisted that voters were impressed by his brashness.
“The majority of Italians in their hearts would like to be like me and see themselves in me and in how I behave,” he said in 2009, during his third and final stint as premier.
His second term, from 2001-06, was perhaps his golden era, when he became Italy’s longest-serving head of government and boosted its global profile through his friendship with U.S. President George W. Bush. Bucking widespread sentiment at home and in Europe, Berlusconi backed the U.S.-led war in Iraq.
As a businessman who knew the power of images, Berlusconi introduced U.S.-style political campaigns — with big party conventions and slick advertising — that broke with the gray world of Italian politics, in which voters essentially chose parties and not candidates. His rivals had to adapt.
Berlusconi saw himself as Italy’s savior from what he described as the Communist menace — years after the Berlin Wall fell. From the start of his political career in 1994, he portrayed himself as the target of a judiciary he described as full of leftist sympathizers. He always proclaimed his innocence.
When the anti-establishment 5-Star Movement gained strength, Berlusconi branded it as a menace worse than Communism.
His close friendship with longtime Socialist leader and former Premier Bettino Craxi was widely credited for helping him become a media baron. Still, Berlusconi billed himself as a self-made man, saying, “My formula for success is to be found in four words: work, work and work.”
He boasted of his libido and entertained friends and world leaders at his villas. At one party, newspapers reported the women were dressed as “little Santas.” At another, photos showed topless women and a naked man lounging poolside.
“I love life! I love women!” an unrepentant Berlusconi said in 2010.
He occasionally selected TV starlets for posts in his Forza Italia party. “If I weren’t married, I would marry you immediately,” Berlusconi reportedly said in 2007 to Mara Carfagna, who later became a Cabinet minister. Berlusconi’s wife publicly demanded an apology.
Berlusconi was nicknamed “Papi” — or “Daddy” — by an aspiring model whose 18th birthday bash he attended, also to his wife’s irritation. Later, self-described escort Patrizia D’Addario said she spent the night with him on the evening that Barack Obama was elected U.S. president in 2008.
From his cruise ship entertainer days, Berlusconi loved to compose and sing Neapolitan songs. Like millions of Italians, he had a passion for soccer, and often was in the stands at AC Milan.
He delighted in flouting political etiquette. He sported a bandanna when hosting British Prime Minister Tony Blair at his estate on the Emerald Coast of Sardinia, and it was later revealed he was concealing hair transplants. He posed for photos at international summits making an Italian gesture — which can be offensive or superstitious, depending on circumstances — in which the index and pinkie fingers are extended like horns.
US President Barack Obama (R) speaks with Italy’s Prime Minister Silvio Berlusconi during a meeting at the G8 Summit at Deerhurst Resort in Huntsville, Ontario, on June 26, 2010.
AFP via Getty Images
He stirred anger after the Sept. 11, 2001, terrorist attacks in the United States by claiming Western civilization was superior to Islam.
When criticized in 2003 at the European Parliament by a German lawmaker, Berlusconi likened his adversary to a concentration camp guard. Years later, he drew outrage when he compared his family’s legal woes to what Jews must have encountered in Nazi Germany.
Berlusconi was born in Milan on Sept. 29, 1936, the son of a middle-class banker. He earned a law degree, writing his thesis on advertising. He started a construction company at 25 and built apartment complexes for middle-class families on Milan’s outskirts, part of a postwar boom.
But his astronomical wealth came from the media. In the late 1970s and 1980s, he circumvented Italy’s state TV monopoly RAI by creating a de facto network in which local stations all showed the same programming. RAI and his Mediaset network accounted for about 90% of the national market in 2006.
When the “Clean Hands” corruption scandals of the 1990s decimated the political establishment that had dominated postwar Italy, Berlusconi filled the void, founding Forza Italia in 1994.
His first government in 1994 collapsed after eight months when an ally who led an anti-immigrant party yanked support. But aided by an aggressive campaign that included mass mailings of glossy magazines recounting his success story, Berlusconi swept to victory in 2001.
Shuffling his Cabinet occasionally, he stayed in power for five years, setting a record for government longevity in Italy. It wasn’t easy.
A Group of Eight summit he hosted in Genoa in 2001 was marred by violent anti-globalization demonstrations and the death of a protester shot by a police officer. Berlusconi faced fierce domestic opposition and alienated some allies by sending 3,000 troops to Iraq after the ouster of Saddam Hussein in 2003. For a time, Italy was the third-largest contingent in the U.S. coalition.
At home, he constantly faced accusations of sponsoring laws aimed at protecting himself or his businesses, but he insisted he always acted in the interest of all Italians. Legislation passed when he was premier allowing officeholders to own media businesses but not run them was deemed by his critics to be tailor made for Berlusconi.
An admirer of U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher, Berlusconi passed reforms that partially liberalized the labor and pension systems, among Europe’s most inflexible. He also was chummy with Putin, who stayed at his Sardinian estate, and he visited the Russian leader, notably going to Crimea after Moscow illegally annexed the peninsula in 2014.
In 2006, as Italy was ridiculed as “the sick man of Europe,” with its economy mired in zero growth and its budget deficit rising, Berlusconi narrowly lost the general election to center-left leader Romano Prodi, who had been president of the European Union Commission.
In 2008, he bounced back for what would be his final term as premier. It ended abruptly in 2011, when financial markets lost faith in his ability to keep Italy from succumbing to the eurozone’s sovereign debt crisis. To the relief of economic powerhouse Germany, Berlusconi reluctantly stepped down.
Health concerns dogged him over the years. He underwent surgery for prostate cancer in 1997. In November 2006, he fainted during a speech, and the next month flew to the U.S., where he received a pacemaker at the Cleveland Clinic. He underwent more heart surgery in 2016.
During a political rally in 2009, a man threw a souvenir statuette of Milan’s cathedral at Berlusconi, fracturing his nose, cracking two teeth and cutting his lip.
Berlusconi was first married in 1965 to Carla Dall’Oglio, and their two children, Marina and Piersilvio, were groomed to hold top positions in his business empire. He married his second wife, Veronica Lario, in 1990, and they had three children, Barbara, Eleonora and Luigi.
The federal indictment of Donald Trump in a classified documents probe has been unsealed, a day after the former president was charged in the case.
Trump — currently the front-runner for the 2024 GOP presidential nomination — faces 37 criminal counts including charges of unauthorized retention of classified documents and obstructing justice.
The federal indictment of Donald Trump in a classified documents probe has been unsealed, a day after the former president was charged in the case.
Trump — currently the front-runner for the 2024 GOP presidential nomination — faces 37 criminal counts including charges of unauthorized retention of classified documents and obstructing justice.
Earlier Friday, Trump shook up his legal team in the wake of the indictment.
In a video on Truth Social Thursday night, Trump called the new probe a “hoax” and said he’s an “innocent man.” And in a fundraising pitch, Trump showed no signs of slowing his campaign, saying: “I only grow that much more confident that we WILL win back the White House and SAVE our country in 2024!” There is nothing in the U.S. Constitution to prevent Trump from running for president.
Trump’s valet, Walt Nauta, was also charged in the indictment. Nauta went to work at Trump’s Mar-a-Lago resort in Florida after leaving the White House.
The 49-page document accuses the former president of ignoring Justice Department demands to return documents he had taken from the White House to Mar-a-Lago and even directing aides to help him hide the records sought by the government. Nauta was seen on surveillance camera removing boxes at Mar-a-Lago.
Jack Smith, the special counsel leading the investigation, said in a rare public appearance on Friday that he was seeking a “speedy trial.”
“It is very important for me to note that the defendants in this case must be presumed innocent until proven guilty beyond a reasonable doubt in a court of law,” Smith said. He also invited the public to read the full indictment “to understand the scope and the gravity of the crimes charged.”
Trump has already been indicted in a separate case in New York and faces other investigations in Georgia and in Washington that could lead to criminal charges.
Trump’s rivals for the Republican nomination include Florida Gov. Ron DeSantis and former South Carolina Gov. Nikki Haley. Analysts are predicting that the indictment could help Trump in the GOP primary, but not in the November 2024 election vs. President Joe Biden. Biden, asked about the indictment on Friday, said he had no comment.
“We continue to think that indictments are a neutral to positive factor for Trump in a primary setting, while being a serious vulnerability when the general election rolls around,” Tobin Marcus, an Evercore ISI analyst, wrote in a note on Friday.
Meanwhile, shares of Digital World Acquisition Corp. DWAC, -0.70%,
the special-purpose acquisition company (SPAC) looking to take Trump’s Truth Social platform public, were down fractionally after climbing in morning trading Friday.
Victor Reklaitis and the Associated Press contributed.
Former President Donald Trump said Thursday he’s been indicted in the federal investigation into classified documents in his possession, and has been summoned to appear in federal court in Miami on Tuesday.
In a pair of posts late Thursday on his Truth Social platform, Trump said he was informed of the indictment by his attorneys. Shortly after, Trump sent a fundraising email to supporters, calling the investigation “witch hunt.”
There was no immediate confirmation from the U.S. Justice Department. The New York Times and Washington Post, among other media outlets, confirmed the indictment, citing unnamed sources.
In a four-minute video posted on Truth Social on Thursday night, Trump claimed “the whole thing is a hoax” and said “I’m an innocent man.” Later, during an interview on Fox News, Trump said he plans on pleading not guilty, “of course.”
The indictment is reportedly under seal and the exact charges are not yet clear. But Trump attorney James Trusty, appearing Thursday night on CNN’s “Anderson Cooper 360,” said Trump faces at least seven charges, including an Espionage Act charge — which he called “ludicrous”” — willful retention of documents, “several obstruction-based-type charges” and making false statements.
Reports this week had indicated an indictment was looming. On Wednesday, it was revealed that Trump was being investigated by a federal grand jury in Florida, in addition to one in Washington. That likely indicated Florida was a more appropriate venue for the charges, experts told the Associated Press.
Several media outlets had also reported Trump’s attorneys had been issued a target letter, which often precedes an indictment.
The investigation has centered around classified documents that were wrongly in Trump’s possession after he left office. After returning some documents to the National Archives, the FBI raided Trump’s Mar-a-Lago estate in Florida last year and recovered more than 100 additional documents that had been marked classified.
Special counsel Jack Smith has been leading the documents investigation, as well as a separate investigation into Trump’s efforts to overturn the results of the 2020 election.
In April, Trump — who was the first president to be impeached twice — became the first former president to be indicted, and pleaded not guilty in Manhattan court to 34 felony charges of falsifying records to cover up hush-money payments. He would also be the first former president to face federal charges.
Being indicted would not disqualify Trump, who has already entered the 2024 presidential race, from running for office. “Probably it will enhance my numbers,” Trump said of an indictment earlier this year.
Persistent inflation is likely to keep U.S. interest rates high through 2023 and leave the U.S. susceptible to recession, financial-industry economists say.
“The inflation picture is very complicated,” said Lindsey Piegza, chief economist of the brokerage Stifel. She is also chairwoman of the economic roundtable at the Securities Industry and Financial Markets Association.
The increases in prices have proven to be “quite sticky,” she said, and could leave inflation near 4% by the end of the year. That’s double the Federal Reserve’s 2% goal.
In its twice-a-year forecast, SIFMA predicted the U.S. economy would slow sharply by the end of the year due to higher interest rates. The Fed is expected to either raise rates again later in the year or keep them above the current 5% to 5.25% for some time.
The central bank is not expected to raise rates at its meeting next week, however. Financial-industry economists believe the Fed will skip a rate hike and reassess the economy at its July meeting.
Some 69% of the more than two dozen SIFMA economists surveyed see an upcoming recession, but that was down from 83.3% at the beginning of the year.
For inflation to decline further, economists believe the U.S. unemployment rate needs to rise to as high as 4.5% from the current 3.7% rate. That would ease the upward pressure on wages and make it easier for the Fed to get prices under control.
The cost of labor has become one of the biggest worries among economists in the fight against inflation. Wages have risen sharply and added to the price pressures.
The supply shortages that were a big source of inflation in 2021 and much of 2022 have largely evaporated, economists note.
Seaborne freight charges have fallen back to prepandemic levels, for example, and ships are no longer stuck outside ports.
The number of ships in the cue in Los Angeles-area ports has fallen to single digits from a peak of 107, Piegza noted.
The U.S. trade deficit jumped 23% in April to a six-month high of $74.6 billion, reflecting an increase in imports such as cell phones and foreign autos. Exports fell.
The trade gap rose $14 billion from $60.6 billion in March.
Larger deficits subtract from gross domestic product, the official scorecard for the U.S. economy. The trade deficit has bounced around sharply since last year and has had an unusually large impact on GDP.
Key details: Imports rose 1.5% to $323.6 billion in April. The biggest increases were in autos, parts and consumers goods such as cell phones.
Oil imports fell.
Exports fell 3.6% last month to $249 billion. The U.S. shipped less oil and fewer pharmaceutical drugs.
Big picture: The key trend in trade since last fall has been a broad decline in imports from a record high. They peaked at $348 billion a year ago and haven’t come close to that level since then.
Americans are buying relatively fewer goods and spending more on services, for one thing. And a slower U.S. economy has also reduced demand.
The increase in imports in April is unlikely to lead to a sustained reversal in those trends. High inflation and rising U.S. interest rates have dampened demand for consumer goods.
Looking ahead: “Trade was neutral for U.S. economic growth in the prior quarter but will likely be modestly negative for growth in the current quarter,” said senior economist Abbey Omodunbi of PNC Financial Services.
Market reaction: The Dow Jones Industrial Average DJIA, +0.27%
and S&P 500 SPX, -0.38%
rose in Wednesday trades.
The Turkish lira sank to new lows against the U.S. dollar on Wednesday, as concerns mounted over challenges facing the country’s new finance minister, and after a report that state lenders have stopped selling dollars to defend the currency.
The dollar USDTRY, +0.31%
climbed to 23.133 against the lira, a drop of 6.3%. That’s as investors continued to put money into Turkish stocks, in a bid to escape high inflation, with the BIST index XU100, +3.20%
up 3.2% and roughly 117% higher over the past 12 months.
The iShares MSCI Turkey ETF TUR, -4.90%,
which tracks several dozen Turkish equities, was down nearly 3% in premarket trading on Wednesday.
Citing traders, Bloomberg reported that state lenders were no longer trying to prop up the lira with dollar sales, which could be a sign of the new incoming finance minister’s promise of a more “rational economic policy,” and a more freely floating currency. The report noted that the country’s state banks don’t comment on market interventions.
The lira has continued to fall since the re-elected President Recep Tayyip Erdoğan and his recent appointment of largely respected Finance Minister Mehmet Şimşek, who held the post from 2015 to 2018. Many think a shift at the central bank will be required as well.
Erdoğan, who won a fierce election battle despite his widely criticized economic management and response to deadly earthquakes earlier this year, has pushed for deep cuts in borrowing costs in an unorthodox view that inflation relief would come.
The central bank has cut its policy rates from roughly 20% in 2021 to 8.5% currently, while inflation hovered at just under 40% in May, but was above 85% in October.
“Mr. Simsek is well-known and well-appreciated by the markets, and is now supposed to clean up the mess of the past year-and-a-half, and eventually restore investor confidence. But restoring confidence won’t be a piece of cake, of course,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, told clients in a note.
“In past years, Turkey didn’t lack talented finance ministers or smart central bankers. But each time sometime tried to do his/her job correctly – which in Turkey means raising the rates – he/she got rapidly sacked. Therefore, what investors want to see in Turkey is not how talented Mehmet Simsek is in finance, but how resistant he will be to the low-rate pressure from the presidential office,” she said.
In a tweet early Wednesday, Timur Kuran, professor of economics and political science at Duke University, blamed the 10% drop in the lira since the presidential runoff on a multitude of factors. Chiefly, the central bank can no longer defend the lira as foreign reserves have been drained, he said.
“Reason 2: The new Finance Minister, though incomparably more competent than his predecessor, is not a magician. The financial system’s lunatic distortions can’t be eliminated within weeks or months,” he said.
As well, it’s unclear how much authority Şimşek will have given Erdogan’s “whimsical decisions for momentary advantage,” while policies that clearly appear less than optimal for the economy provide “easy enrichment opportunities” to intermediaries and “cronies” of the president, said Kuran.
” Şimşek will need to fight the beneficiaries (and possibly the President himself) in, for instance, raising interest rates. By no means is it clear that Şimşek would win his battles that lie ahead,” he added.
KYIV, Ukraine (AP) — Ukraine on Tuesday accused Russian forces of blowing up a major dam and hydroelectric power station in a part of southern Ukraine they control, threatening a massive flood that could displace hundreds of thousands of people, and ordered residents downriver to evacuate.
Russian news agency Tass quoted an unspecified Russian government official as saying the dam had “collapsed” due to damage.
Ukrainian authorities have previously warned that the dam’s failure could unleash 18 million cubic meters (4.8 billion gallons) of water and flood Kherson and dozens of other areas where hundreds of thousands of people live, as well as threatening a meltdown at a nearby Russian-occupied nuclear power plant. President Volodymyr Zelenskyy called an emergency meeting to deal with the crisis.
The Ukrainian Interior Ministry wrote on Telegram that the Kakhovka dam, had been blown up, and called for residents of 10 villages on the river’s right bank and parts of the city of Kherson downriver to gather essential documents and pets, turn off appliances, and leave, while cautioning against possible disinformation.
Footage from what appeared to be a monitoring camera overlooking the dam that was circulating on social media purported to show a flash, explosion and breakage of the dam.
Oleksandr Prokudin, the head of the Kherson Regional Military Administration, said in a video posted to Telegram shortly before 7 a.m. that “the Russian army has committed yet another act of terror,” and warned that water will reach “critical levels” within five hours.
Zelenskyy moved to convene an emergency meeting of the country’s security and defense council following the dam explosion, the council’s secretary, Oleksiy Danilov, wrote on Twitter.
Ukraine and Russia have previously accused each other of targeting the dam with attacks, and last October Zelenskyy predicted that Russia would destroy the dam in order to cause a flood.
Authorities, experts and residents have for months expressed concerns about water flows through — and over — the Kakhovka dam.
In February, water levels were so low that many feared a meltdown at the Russian-occupied Zaporizhzhia nuclear power plant, whose cooling systems are supplied with water from the Kakhovka reservoir held up by the dam.
By mid-May, after heavy rains and snow melt, water levels rose beyond normal levels, flooding nearby villages. Satellite images showed water washing over damaged sluice gates.
Ukraine controls five of the six dams along the Dnipro River, which runs from its northern border with Belarus down to the Black Sea and is crucial for the entire country’s drinking water and power supply. The Kakhovka dam — the one furthest downstream in the Kherson region — is controlled by Russian forces.
With just two days to spare, President Joe Biden signed legislation on Saturday that lifts the nation’s debt ceiling, averting an unprecedented default on the federal government’s debt.
The Treasury Department had warned that the country would start running short of cash to pay all of its bills on Monday, which would have sent shockwaves through the U.S. and global economies.
Republicans refused to raise the country’s borrowing limit unless Democrats agreed to cut spending, leading to a standoff that was not resolved until weeks of intense negotiations between the White House and House Speaker Kevin McCarthy, R-Calif.
The final agreement, which was passed by the House on Wednesday and the Senate on Thursday, suspends the debt limit until 2025 — after the next presidential election — and restricts government spending.
Raising the nation’s debt limit, now at $31.4 trillion, will ensure that the government can borrow to pay debts already incurred.
“Passing this budget agreement was critical. The stakes could not have been higher,” Biden said from the Oval Office on Friday evening. “Nothing would have been more catastrophic,” he said, than defaulting on the country’s debt.
The agreement was hashed out by Biden and House Speaker Kevin McCarthy, giving Republicans some of their demanded federal spending cuts but holding the line on major Democratic priorities.
It raises the debt limit until 2025 — after the 2024 presidential election — and gives legislators budget targets for the next two years in hopes of assuring fiscal stability as the political season heats up.
“No one got everything they wanted but the American people got what they needed,” Biden said, highlighting the “compromise and consensus” in the deal. “We averted an economic crisis and an economic collapse.”
Biden used the opportunity to itemize the achievements of his first term as he runs for reelection, including support for high-tech manufacturing, infrastructure investments and financial incentives for fighting climate change.
He also highlighted ways he blunted Republican efforts to roll back his agenda and achieve deeper cuts.
“We’re cutting spending and bringing deficits down at the same time,” Biden said. “We’re protecting important priorities from Social Security to Medicare to Medicaid to veterans to our transformational investments in infrastructure and clean energy.”
Even as he pledged to continue working with Republicans, Biden also drew contrasts with the opposing party, particularly when it comes to raising taxes on the wealthy, something the Democratic president has sought.
It’s something he suggested may need to wait until a second term.
“I’m going to be coming back,” he said. “With your help, I’m going to win.”
Biden’s remarks were the most detailed comments from the Democratic president on the compromise he and his staff negotiated. He largely remained quiet publicly during the high-stakes talks, a decision that frustrated some members of his party but was intended to give space for both sides to reach a deal and for lawmakers to vote it to his desk.
Biden praised McCarthy and his negotiators for operating in good faith, and all congressional leaders for ensuring swift passage of the legislation. “They acted responsibly, and put the good of the country ahead of politics,” he said.
Overall, the 99-page bill restricts spending for the next two years and changes some policies, including imposing new work requirements for older Americans receiving food aid and greenlighting an Appalachian natural gas pipeline that many Democrats oppose.
Some environmental rules were modified to help streamline approvals for infrastructure and energy projects — a move long sought by moderates in Congress.
The Congressional Budget Office estimates it could actually expand total eligibility for federal food assistance, with the elimination of work requirements for veterans, homeless people and young people leaving foster care.
The legislation also bolsters funds for defense and veterans, cuts back some new money for the Internal Revenue Service and rejects Biden’s call to roll back Trump-era tax breaks on corporations and the wealthy to help cover the nation’s deficits. But the White House said the IRS’ plans to step up enforcement of tax laws for high-income earners and corporations would continue.
The agreement imposes an automatic overall 1% cut to spending programs if Congress fails to approve its annual spending bills — a measure designed to pressure lawmakers of both parties to reach consensus before the end of the fiscal year in September.
In both chambers, more Democrats backed the legislation than Republicans, but both parties were critical to its passage. In the Senate the tally was 63-36 including 46 Democrats and independents and 17 Republicans in favor, 31 Republicans along with four Democrats and one independent who caucuses with the Democrats opposed.
The numbers: The U.S. added a muscular 339,000 new jobs in May, underscoring the resilience of the economy in the face of rising borrowing costs.
Employment gains in April and March were also considerably higher than previously reported, the government reported Friday, in another sign the labor market remains unusually strong.
Uncredited
Wall Street had forecast a 190,000 increase in new jobs, based on the government’s survey of business establishments.
The robust demand for labor suggests a widely predicted recession is still far away, but it complicates the Federal Reserve’s efforts to bring high inflation to heel.
The economy has been adding so many jobs it’s created a shortage of workers and is pushing wages higher. Rising pay has added to price pressures and left inflation stuck in the 4% to 5% range — three times higher vs. pre-pandemic levels.
The central bank had been expected to skip an interest-rate hike at its June 13-14 meeting to give it more time to assess the effect of prior increases on the economy. Senior officials are worried they will cause a recession if they act too aggressively.
The unemployment rate, meanwhile, rose to 3.7% from 3.4%, the government said Friday. That’s the highest level since last October.
The jobless rate rose mostly because of a sharp increase in the number of people who said they were unemployed and partly because more people entered the labor force.
Some economists pointed to the rise in unemployment, drawn from a separate household survey, as a potential warning sign.
“Usually, economists put more stock in the establishment survey, because it is based on a larger sample and is less volatile,” Julia Pollack chief economist at ZipRecruiter, said. “But the household survey has been more sensitive to the start of economic downturns.”
Economists also saw the moderation in wage growth as a sign the labor market might not be as strong as it looks. Hourly wages rose 0.3% in May to $33.11.
The increase in wages over the past year slowed to 4.3% from 4.4% and a peak of 5.9% last year.
Wages were rising less than 3% a year before the pandemic, however.
Key details: The increase in hiring was broad-based. Professional businesses (64,000) led the way. Hiring was also strong in government (52,000), health care (52,000) and bars and restaurants (33,000).
Employment even rose by 25,000 in construction, a sector that has struggled to find workers.
The only notable decline in employment was in information services, a category that includes the media and some high tech.
The share of people working or looking for work was flat at a post-pandemic high of 62.6%.
Rising labor-force participation can also help to reduce inflation. When more people look for work, companies don’t have to raise wages as much to obtain labor.
Employment gains in April and March were a combined 93,000 higher than previously reported.
The economy averaged a robust 283,000 new jobs in the past three months, but that’s down from 344,000 in the same period in 2022.
Big picture: The economy has softened a bit and a torrid labor market has partly cooled off since last year. But both might be too strong to ease the upward pressure on inflation.
Workers, for their part, are caught in a vice. Rising wages help them to cope with high inflation, but it also fans the fires of inflation.
The Fed is caught in a vice, too. Even if the central bank skips a rate hike in June, many economists say the Fed may have to raise rates again this year to truly tame inflation.
The higher rates go, though, the greater the odds of a recession. The Fed has jacked up a key short-term rate to a top end of 5.25% from near zero just 15 months ago, marking the highest level in 16 years.
Looking ahead: “The continued strength in employment pushes back the start of a prospective recession but does not eliminate that likelihood,” said chief economist Kathy Bostjancic of Nationwide. “And if the economy remains too hot to meaningfully slow inflation, the Fed will simply raise rates higher, still a path towards a downturn.”
Market reaction: The Dow Jones Industrial Average DJIA, +2.12%
and S&P 500 SPX, +1.45%
were set to open higher before the jobs report. The yield on the 10-year Treasury BX:TMUBMUSD10Y rose slightly to 3.63%.
NEW YORK (AP) — Former New Jersey Gov. Chris Christie is expected to launch a Republican presidential campaign next week in New Hampshire.
Christie, who also ran in 2016, is planning to make the announcement at a town hall Tuesday evening at Saint Anselm College’s New Hampshire Institute of Politics, according to a person familiar with his thinking who spoke on condition of anonymity to confirm Christie’s plans.
The Democratic president and Republican speaker spoke with each other Sunday evening as negotiators rushed to draft the bill text so lawmakers can review compromises that neither the hard-right or left flank is likely to support. Instead, the leaders are working to gather backing from the political middle as Congress hurries toward votes before a June 5 deadline to avert a damaging federal default.
“Good news,” Biden declared Sunday evening at the White House.
“The agreement prevents the worst possible crisis, a default, for the first time in our nation’s history,” he said. “Takes the threat of a catastrophic default off the table.”
The president urged both parties in Congress to come together for swift passage. “The speaker and I made clear from the start that the only way forward was a bipartisan agreement,” he said.
The compromise announced late Saturday includes spending cuts but risks angering some lawmakers as they take a closer look at the concessions. Biden told reporters at the White House upon his return from Delaware that he was confident the plan will make it to his desk.
McCarthy, too, was confident in remarks at the Capitol: “At the end of the day, people can look together to be able to pass this.”
The days ahead will determine whether Washington is again able to narrowly avoid a default on U.S. debt, as it has done many times before, or whether the global economy enters a potential crisis.
In the United States, a default could cause financial markets to freeze up and spark an international financial crisis. Analysts say millions of jobs would vanish, borrowing and unemployment rates would jump, and a stock-market plunge could erase trillions of dollars in household wealth. It would all but shatter the $24 trillion market for Treasury debt.
Anxious retirees and others were already making contingency plans for missed checks, with the next Social Security payments due soon as the world watches American leadership at stake.
McCarthy and his negotiators portrayed the deal as delivering for Republicans though it fell well short of the sweeping spending cuts they sought. Top White House officials were briefing Democratic lawmakers and phoning some directly to try to shore up support.
As Sunday dragged on, negotiators labored to write the bill text and lawmakers raised questions.
McCarthy told reporters at the Capitol on Sunday that the agreement “doesn’t get everything everybody wanted,” but that was to be expected in a divided government. Privately, he told lawmakers on a conference call that Democrats “got nothing” they wanted.
A White House statement from the president, issued after Biden and McCarthy spoke by phone Saturday evening and an agreement in principle followed, said the deal “prevents what could have been a catastrophic default.”
Support from both parties will be needed to win congressional approval before a projected June 5 government default on U.S. debts. Lawmakers are not expected to return to work from the Memorial Day weekend before Tuesday, at the earliest, and McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting.
With the outlines of an agreement in place, the legislative package could be drafted and shared with lawmakers in time for House votes as soon as Wednesday, and later in the coming week in the Senate.
Central to the compromise is a two-year budget deal that would essentially hold spending flat for 2024, while boosting it for defense and veterans, and capping increases at 1% for 2025. That’s alongside raising the debt limit for two years, pushing the volatile political issue past the next presidential election.
Driving hard to impose tougher work requirements on government aid recipients, Republicans achieved some of what they wanted. It ensures people ages 49 to 54 with food stamp aid would have to meet work requirements if they are able-bodied and without dependents. Biden was able to secure waivers for veterans and homeless people.
The deal puts in place changes in the landmark National Environmental Policy Act designating “a single lead agency” to develop environmental reviews, in hopes of streamlining the process.
It halts some funds to hire new Internal Revenue Service agents as Republicans demanded, and rescinds some $30 billion for coronavirus relief, keeping $5 billion for developing the next generation of COVID-19 vaccines.
The deal came together after Treasury Secretary Janet Yellen told Congress that the United States could default on its debt obligations by June 5 — four days later than previously estimated — if lawmakers did not act in time. Lifting the nation’s debt limit, now at $31 trillion, allows more borrowing to pay bills already insurred.
McCarthy commands only a slim Republican majority in the House, where hard-right conservatives may resist any deal as insufficient as they try to slash spending. By compromising with Democrats, he risks losing support from his own members, setting up a career-challenging moment for the new speaker.
“I think you’re going to get a majority of Republicans voting for this bill,” McCarthy said on “Fox News Sunday,” adding that because Biden backed it, “I think there’s going to be a lot of Democrats that will vote for it, too.”
House Democratic leader Hakeem Jeffries of New York said on CBS’ “Face the Nation” that he expected there will be Democratic support but he declined to provide a number. Asked whether he could guarantee there would not be a default, he said, “Yes.”
A 100-strong group of moderates in the New Democratic Coalition gave a crucial nod of support on Sunday, saying in a statement it was confident that Biden and his team “delivered a viable, bipartisan solution to end this crisis” and were working to ensure the agreement would receive support from both parties.
The coalition could provide enough support for McCarthy to make up for members in the right flank of his party who have expressed opposition before the bill’s wording was even released.
It also takes pressure off Biden, facing criticism from progressives for giving into what they call hostage-taking by Republicans.
Democratic Rep. Pramila Jayapal of Washington state, who leads the Congressional Progressive Caucus, told CBS that the White House and Jeffries should worry about whether caucus members will support the agreement.
The Texas House of Representatives voted Saturday to impeach scandal-plagued Republican Attorney General Ken Paxton, triggering his immediate suspension from duties and setting up a trial that could permanently remove the state’s top lawyer from office.
The 121-23 vote constitutes an abrupt downfall for one of the GOP’s most prominent legal combatants, who in 2020 asked the U.S. Supreme Court to overturn President Joe Biden’s electoral defeat of Donald Trump. It makes Paxton only the third sitting official in Texas’ nearly 200-year history to have been impeached.
The historic vote came after a months-long House investigation into the three-term attorney general that resulted in 20 charges alleging sweeping abuses of power, including obstruction of justice, bribery and abuse of public trust.
Paxton, 60, is just the third sitting official to be impeached in the state’s nearly 200-year history.
The House is controlled by Republicans and the matter now moves to the Republican-controlled state Senate. A two-thirds vote by the 31-member Senate would be enough to remove him from office.
Paxton’s wife, two-term state Sen. Angela Paxton, could be among those casting a vote on her husband’s political future.
Paxton has criticized the impeachment effort as an attempt to “overthrow the will of the people and disenfranchise the voters of our state.” He has said the charges are based on “hearsay and gossip, parroting long-disproven claims.”
Texas’ Republican-led House of Representatives launched historic impeachment proceedings against Attorney General Ken Paxton earlier on Saturday as Donald Trump defended the scandal-plagued GOP official from a vote that could lead to his ouster.
The House convened in the afternoon to debate whether to impeach and suspend Paxton over allegations of bribery, abuse of public trust and that he is unfit for office — just some of the accusations that have trailed Texas’ top lawyer for most of his three terms.
The hearing set up what could be a remarkably sudden downfall for one of the GOP’s most prominent legal combatants, who in 2020 asked the U.S. Supreme Court to overturn President Joe Biden’s electoral defeat of Trump.
Paxton, 60, has decried what he called “political theater” based on “hearsay and gossip, parroting long-disproven claims,” and said it’s an attempt to disenfranchise voters who reelected him in November. It’s unclear where the attorney general was Saturday, but during the House proceeding he was sharing statements from supporters on Twitter.
“No one person should be above the law, least not the top law enforcement officer of the state of Texas,” Rep. David Spiller, a Republican member of the committee that investigated Paxton, said in opening statements.
Rep. Ann Johnson, a Democratic member, told lawmakers that Texas’ “top cop is on the take.” Rep. Charlie Geren, a Republican committee member, said without elaborating that Paxton had called lawmakers and threatened them with political “consequences.”
As the articles of impeachment were laid out, some of the lawmakers shook their heads.
Paxton has been under FBI investigation for years over accusations that he used his office to help a donor and was separately indicted on securities fraud charges in 2015, though he has yet to stand trial. Until this week, his fellow Republicans had taken a muted stance on the allegations.
Lawmakers allied with Paxton tried to discredit the investigation by noting that hired investigators, not panel members, interviewed witnesses. They also said several of the investigators had voted in Democratic primaries, tainting the impeachment, and that they had too little time to review evidence.
“I perceive it could be political weaponization,” said Rep. Tony Tinderholt, one of the House’s most conservative members. Republican Rep. John Smithee compared the proceeding to “a Saturday mob out for an afternoon lynching.”
Impeachment requires just a simple majority in the House.
Texas’ top elected Republicans had been notably quiet about Paxton this week. But on Saturday both Trump and U.S. Sen. Ted Cruz came to his defense, with the senator calling the impeachment process “a travesty” and saying the attorney general’s legal troubles should be left to the courts.
“Free Ken Paxton,” Trump wrote on his social media platform Truth Social, warning that if House Republicans proceeded with the process, “I will fight you.”
Abbott, who lauded Paxton while swearing him in for a third term in January, has remained silent. The governor spoke at a Memorial Day service in the House chamber about three hours before the impeachment proceedings began.
Republican House Speaker Dade Phelan also attended but the two appeared to exchange few words, and Abbott left without commenting to reporters.
In one sense, Paxton’s political peril arrived with dizzying speed: The House committee’s investigation came to light Tuesday, and by Thursday lawmakers issued 20 articles of impeachment.
But to Paxton’s detractors, the rebuke was years overdue.
In 2014, he admitted to violating Texas securities law, and a year later he was indicted on securities fraud charges in his hometown near Dallas, accused of defrauding investors in a tech startup. He pleaded not guilty to two felony counts carrying a potential sentence of five to 99 years.
He opened a legal defense fund and accepted $100,000 from an executive whose company was under investigation by Paxton’s office for Medicaid fraud.
An additional $50,000 was donated by an Arizona retiree whose son Paxton later hired to a high-ranking job but was soon fired after displaying child pornography in a meeting.
In 2020, Paxton intervened in a Colorado mountain community where a Texas donor and college classmate faced removal from his lakeside home under coronavirus orders.
But what ultimately unleased the impeachment push was Paxton’s relationship with Austin real estate developer Nate Paul.
In 2020, eight top aides told the FBI they were concerned Paxton was misusing his office to help Paul over the developer’s unproven claims that an elaborate conspiracy to steal $200 million of his properties was afoot.
The FBI searched Paul’s home in 2019, but he has not been charged and denies wrongdoing. Paxton also told staff members he had an affair with a woman who, it later emerged, worked for Paul.
The impeachment accuses Paxton of attempting to interfere in foreclosure lawsuits and issuing legal opinions to benefit Paul. Its bribery charges allege that Paul employed the woman with whom Paxton had an affair in exchange for legal help and that he paid for expensive renovations to the attorney general’s home.
A senior lawyer for Paxton’s office, Chris Hilton, said Friday that the attorney general paid for all repairs and renovations.
Other charges, including lying to investigators, date back to Paxton’s still-pending securities fraud indictment.
Four of the aides who reported Paxton to the FBI later sued under Texas’ whistleblower law, and in February he agreed to settle the case for $3.3 million. The House committee said it was Paxton seeking legislative approval for the payout that sparked their probe.
“But for Paxton’s own request for a taxpayer-funded settlement over his wrongful conduct, Paxton would not be facing impeachment,” the panel said.
U.S. stocks ended sharply higher Friday, with the technology-heavy Nasdaq Composite leading the way up, as hopes rose for a debt-ceiling deal in Congress.
The Nasdaq and S&P 500 also closed at their highest levels since August 2022.
How stock indexes traded
The Dow Jones Industrial Average DJIA, +1.00%
rose 328.69 points, or 1%, to close at 33,093.34, snapping a five-day losing streak.
The S&P 500 SPX, +1.30%
gained 54.17 points, or 1.3%, to finish at 4,205.45.
The Nasdaq Composite COMP, +2.19%
jumped 277.59 points, or 2.2%, to end at 12,975.69.
For the week, the Dow fell 1%, while the S&P 500 edged up 0.3% and the Nasdaq advanced 2.5%. The tech-heavy Nasdaq booked a fifth straight week of gains for its longest win streak since the stretch ending in early February, according to Dow Jones Market Data.
“It’s a little bit of a relief rally on the debt ceiling,” said Ryan Belanger, founder and managing principal at Claro Advisors, in a phone interview Friday.
While Treasury Secretary Janet Yellen says the U.S. could run out of money as soon as June 1 if the debt ceiling is not raised, other projections estimate the federal government may have until the middle of the month.
“I think we’ll all be able to exhale by mid-June, although it will likely be an increasingly volatile market environment between now and then,” said Kristina Hooper, chief global market strategist at Invesco. “Once that drama recedes, I think all eyes will be back on central banks.”
Belanger said that he’s expecting the Federal Reserve may raise its benchmark interest rate by another quarter percentage point in June to battle high inflation.
The Bureau of Economic Analysis said Friday that the personal-consumption-expenditures-price index showed core inflation, which excludes food and energy, rose 0.4% in April. That’s more than the 0.3% increase that economists had expected, as core inflation rose 4.7% year over year from a rate of 4.6% in March.
Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said inflation appeared to be moving “in the wrong direction” at the start of the second quarter.
Fed-funds-futures traders now see a 65.9% chance of the Fed hiking its rate by a quarter percentage point in June, and a 34.1% probability of a pause, according to the CME’s FedWatch Tool, at last check. In the bond market, two-year Treasury yields TMUBMUSD02Y, 4.563%
rose 7.9 basis points Friday to 4.587%, according to Dow Jones Market Data.
“The consumer is hanging in there,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments, in a phone interview Friday. “I don’t think we want to underestimate the ability of the consumer to continue spending, even if they’re spending a little bit less.”
Updated GDP data released earlier this week showed the U.S. economy grew at annual pace of 1.3% during the first quarter, above previous estimates.
For now, debt-ceiling optimism and enthusiasm surrounding artificial intelligence are outweighing concerns about the potential for another Fed rate hike, according to Fernandez. “I just don’t think there is the demand destruction that the Fed is looking for at this point in time,” she said, as the unemployment rate remains low.
Fernandez said she anticipates the Fed could pause its interest-rate hikes in June to asses the economy before potentially raising its policy rate again in July.
Technology stocks have helped propel gains this week in the U.S. equities markets, with Nvidia’s stock NVDA, +2.54%
surging Thursday on optimism surrounding its AI-fueled outlook for sales in the second quarter.
The tech-heavy Nasdaq Composite has soared 24% this year through Friday. “I would be taking profits on the Nasdaq,” said Belanger, suggesting some stocks in the index have become frothy amid the AI buzz.
Workday Inc. shares WDAY, +10.01% jumped 10% after the software company easily topped earnings expectations and brought on a new chief financial officer.
The numbers: The trade deficit in goods shot up 17% in April to a six-month high of $96.8 billion, reflecting a rebound in imports and a broad decline in American exports.
The trade gap in goods rose from $82.7 billion in March, the Census Bureau said.
Larger deficits subtract from gross domestic product, the official scorecard for the economy.
An advanced estimate of wholesale inventories, meanwhile, showed a 0.2% decline in April. Retail inventories rose 0.2% in the month, according to an early estimate.
Higher inventories add to GDP, but the mixed results suggest little impact.
Key details: Exports dropped 5.5% to $163.3 billion. U.S. companies shipped fewer cars, food, consumer goods, oil and other industrial supplies.
Imports of goods rose 1.8% to $260 billion in April, mostly because of higher oil prices and strong demand among consumers for new cars and trucks.
Big picture: The rebound in imports suggests more capacity for consumers to spend. Car sales this year have been particularly strong as more models become available and dealers offer more discounts.
Auto sales fell last year to the lowest level in 11 years owing to a shortage of vehicles and record prices.
The slowdown in inventory growth, however, indicates businesses are unsure about future demand. They are hedging their bets and don’t want to get caught with excess inventory like they did last year.
Market reaction: The Dow Jones Industrial Average DJIA, +1.00%
and S&P 500 SPX, +1.30%
rose in Friday trades.
— Kristalina Georgieva, managing director, International Monetary Fund
Don’t count International Monetary Fund Managing Director Kristalina Georgieva among the naysayers expecting the U.S. currency to lose its luster due to “de-dollarization.”
In remarks at an economic forum in Doha Wednesday, she argued that the U.S. dollar was likely to retain its status, Reuters reported.
“We don’t expect a rapid shift in [dollar] reserves because the reason the dollar is a reserve currency is because of the strength of the U.S. economy and the depth of its capital markets,” she said.
A debate over de-dollarization — countries moving away from the dollar as a reserve and medium of exchange — has raged this year. The question is whether a meaningful shift away from the dollar is under way that would have implications for the U.S. or global economy.
Skeptics of de-dollarization contend that moves to price some commodity transactions in units other than the dollar pose little threat to the currency’s dominant role in the financial system, while the greenback’s share of global forex reserves has always tended to ebb and flow.
The ICE U.S. Dollar Index DXY, +0.38%,
a measure of the currency against a basket of six major rivals, was little changed after hitting a roughly 2-month high on Tuesday. The index, which rose sharply in 2022, is little changed on the year.
On a more immediately pressing matter, Georgieva played down the risk of a default by the U.S. government as the White House and congressional Republicans continue to negotiate over lifting the debt ceiling. Such showdowns are a somewhat regular occurrence in the U.S., she noted.
“History tells us that the U.S. would wrestle with this notion of default … but come the 11th hour it gets resolved and I have confidence we will see that play again,” Georgieva said.
The Treasury Department has warned the U.S. could find itself unable to pay its bills as early as June 1 — the so-called X-date — unless the debt ceiling is raised or otherwise addressed. The White House and congressional negotiators continue to talk.
Stocks fell Tuesday, as an agreement remained elusive. Major indexes were down again Wednesday morning, with the Dow Jones Industrial Average DJIA, -0.77%
down around 192 points, or 0.6%, and the S&P 500 SPX, -0.73%
off 0.7%, though stock indexes remain near multimonth highs.
Greek stocks surged on Monday after an unexpectedly easy victory for the ruling conservative party.
The Greek Athex Composite GD, +6.09%
jumped 7%, following the landslide victory of the conservative party led by Prime Minister Kyriakos Mitsotakis. The U.S.-listed Global X MSCI Greece ETF GREK, +7.50%
rose 6% in premarket action.
Mitsotakis’s New Democracy was leading the left-leaning Syriza party by more than 20 percentage points. Even so, it doesn’t look like it will have an outright majority, though the winning party under Greek rules gets bonus seats in a second round, which is likely to be held in either late June or early July.
The victory was unexpectedly large following a railway disaster and a wiretap scandal.
The yield on the 10-year Greek government bond TMBMKGR-10Y, 3.876%
fell 20 basis points to 3.81%.
Greece is on the verge of obtaining an investment-grade rating and achieved a positive primary balance — that is, a budget minus interest costs — last year.
Thanks to the financial assistance it’s received, the weighted average maturity of Greek debt was 17.5 years, according to Greece’s public-debt management agency, making it less susceptible to the rise in European Central Bank interest rates than other countries.
According to Goldman Sachs, the Greek debt-to-GDP ratio will fall by almost 10 percentage points in the next three years.
