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  • Pentagon says it is tracking suspected Chinese spy balloon over U.S.

    Pentagon says it is tracking suspected Chinese spy balloon over U.S.

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    WASHINGTON — The U.S. is tracking a suspected Chinese surveillance balloon that has been spotted over U.S. airspace for a couple days, but the Pentagon decided not to shoot it down due to risks of harm for people on the ground, officials said Thursday. The discovery of the balloon puts a further strain on U.S.-China relations at a time of heightened tensions.

    A senior defense official told Pentagon reporters that the U.S. has “very high confidence” it is a Chinese high-altitude balloon and it was flying over sensitive sites to collect information. One of the places the balloon was spotted was Montana, which is home to one of the nation’s three nuclear missile silo fields at Malmstrom Air Force Base. The official spoke on condition of anonymity to discuss sensitive information.

    Brig. Gen. Patrick Ryder, Pentagon press secretary, provided a brief statement on the issue, saying the government continues to track the balloon. He said it is “currently traveling at an altitude well above commercial air traffic and does not present a military or physical threat to people on the ground.”

    He said similar balloon activity has been seen in the past several years. He added that the U.S. took steps to ensure it did not collect sensitive information.

    The defense official said the U.S. has “engaged” Chinese officials through multiple channels and communicated the seriousness of the matter.

    The incident comes as Secretary of State Antony Blinken was supposed to make his first trip to Beijing, expected this weekend, to try to find some common ground. Although the trip has not been formally announced, both Beijing and Washington have been talking about his imminent arrival.

    It was not immediately clear if the discovery of the balloon would impact Blinken’s travel plans.

    The senior defense official said the U.S. did get fighter jets, including F-22s, ready to shoot down the balloon if ordered to by the White House. The Pentagon ultimately recommended against it, noting that even as the balloon was over a sparsely populated area of Montana, its size would create a debris field large enough that it could have put people at risk.

    It was not clear what the military was doing to prevent it from collecting sensitive information or what will happen with the balloon if it isn’t shot down.

    The defense official said the spy balloon was trying to fly over the Montana missile fields, but the U.S. has assessed that the balloon has “limited” value in terms of providing China intelligence it couldn’t already collect by other means, such through spy satellites.

    The official would not specify the size of the balloon, but said it was large enough that despite its high altitude, commercial pilots could see it. All air traffic was halted at Montana’s Billings Logan International Airport from 1:30 p.m. to 3:30 p.m. Wednesday, as the military provided options to the White House.

    A photograph of a large white balloon lingering over the area was captured by The Billings Gazette, but the Pentagon would not confirm if that was the surveillance balloon. The balloon could be seen drifting in and out of clouds and had what appeared to be a solar array hanging from the bottom, said Gazette photographer Larry Mayer.

    The defense official said what concerned them about this launch was the altitude the balloon was flying at and the length of time it lingered over a location, without providing specifics.

    Montana Gov. Greg Gianforte said he was briefed Wednesday about the situation after the Montana National Guard was notified of an ongoing military operation taking place in Montana airspace, according to a statement from the Republican governor and spokesperson Brooke Stroyke.

    “From the spy balloon to the Chinese Communist Party spying on Americans through TikTok to CCP-linked companies buying American farmland, I’m deeply troubled by the constant stream of alarming developments for our national security,” Gianforte said in a statement.

    Tensions with China are particularly high on numerous issues, ranging from Taiwan and the South China Sea to human rights in China’s western Xinjiang region and the clampdown on democracy activists in Hong Kong. Not least on that list of irritants are China’s tacit support for Russia’s invasion of Ukraine, its refusal to rein in North Korea’s expanding ballistic missile program and ongoing disputes over trade and technology.

    On Tuesday, Taiwan scrambled fighter jets, put its navy on alert and activated missile systems in response to nearby operations by 34 Chinese military aircraft and nine warships that are part Beijing’s strategy to unsettle and intimidate the self-governing island democracy.

    Twenty of those aircraft crossed the central line in the Taiwan Strait that has long been an unofficial buffer zone between the two sides, which separated during a civil war in 1949.

    Beijing has also increased preparations for a potential blockade or military action against Taiwan, which has stirred increasing concern among military leaders, diplomats and elected officials in the U.S., Taiwan’s key ally.

    The surveillance balloon was first reported by NBC News.

    Some Montana residents reported seeing an unusual object in the sky around the time of the airport shutdown Wednesday, but it’s not clear that what they were seeing was the balloon.

    From an office window in Billings, Chase Doak said he saw a “big white circle in the sky” that he said was too small to be the moon.

    He took some photos, then ran home to get a camera with a stronger lens and took more photos and video. He could see it for about 45 minutes and it appeared stationary, but Doak said the video suggested it was slowly moving.

    “I thought maybe it was a legitimate UFO,” he said. “So I wanted to make sure I documented it and took as many photos as I could.”

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  • U.S. employment costs slow again, but they’re still rising too fast to comfort Fed as inflation battle rages

    U.S. employment costs slow again, but they’re still rising too fast to comfort Fed as inflation battle rages

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    The numbers: The employment cost index slowed at the end of 2022 for the third quarter in a row, but worker compensation still rose a sharp 1% and didn’t offer much comfort to the Federal Reserve as it fights to tame inflation.

    Economists polled by The Wall Street Journal had forecast a 1.1% increase in the ECI in the fourth quarter.

    Although trending in the right direction, labor costs are still rising far faster than the Fed would like.

    Compensation climbed at a 5.1% clip in the 12 months ended in December — up from 5% in the prior quarter — to leave the increase in worker pay near the highest level in 40 years.

    By contrast, wages and benefits rose an average of 2.7% a year from 2017 to 2019.

    Read: Workers love big raises. The Fed, not so much. Why pay has a big role in the inflation fight.

    Key details: Wages advanced 1% in the fourth quarter, but in a good sign, they slowed from 1.3% in the prior period.

    The increase in wages in the 12 months ended in December was flat at 5.1%, however.

    Benefits rose at a 0.8% pace in the last three months of 2022. The 12-month increase in benefits was unchanged at 4.9%.

    The ECI reflects how much companies, governments and nonprofit institutions pay employees in wages and benefits.  Wages make up about 70% of employment costs and benefits the rest.

    The big picture: Senior Fed officials want to see a tight labor market loosen up and wage growth decelerate further to help ensure inflation returns to pre-pandemic levels of 2% or so.

    The central bank on Wednesday is expected to raise a key interest again. It’s likely to keep raising rates — or keep them high for longer — until it sees more signs in the ECI or other wage trackers that labor costs are coming down.

    The increase in consumer prices slowed to 6.5% at the end of 2022 from a 40-year high of 9.1% last summer, but it’s still more than triple the Fed’s inflation goal.

    Looking ahead: “This result is a decent outcome for the Fed, as labor costs appear to be decelerating, but it would be premature to declare victory,” said chief economist Stephen Stanley of Amherst Pierpont Securities. “With the unemployment rate at a 50-year-plus low of 3.5%, it would be exceedingly optimistic to conclude that wage pressures have rolled over.”

    “Wage growth is slowing gradually,” said senior U.S. economist Andrew Hunter of Capital Economics said in a note to clients. “The Fed is still likely to keep raising interest rates at the next couple of meetings, but we expect a further slowdown in wage growth over the coming months to convince officials to pause the tightening cycle after the March meeting.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    -0.77%
    and S&P 500
    SPX,
    -1.30%
    were set to open higher in Tuesday trades. Stocks fell on Monday.

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  • S&P 500 nears first ‘golden cross’ in 2.5 years, but this doesn’t guarantee more gains ahead

    S&P 500 nears first ‘golden cross’ in 2.5 years, but this doesn’t guarantee more gains ahead

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    The S&P 500 is on the verge of achieving its first “golden cross” in two-and-a-half years, but that doesn’t mean stocks are destined for more gains over the coming year.

    The golden-cross indicator is used by technical analysts as a sign that a particular upward trend in markets or currencies is gaining momentum. Barring a massive selloff in stocks, the S&P 500’s 50-day moving average should cross its 200-day moving average in a matter of days.

    If it happens, it would mark the first such event since July, 2020, according to FactSet data. Data show it often does precede further gains for stocks over the following six months, or a year, but not always.

    The S&P 500 has seen 52 golden crosses since 1930, according to Dow Jones Market Data, which used back-tested data to account for the index’s performance prior to its creation in 1957. In that time, stocks were trading higher one year later 71% of the time.

    But there have been some notable exceptions during periods of heightened volatility.

    The S&P 500
    SPX,
    +0.25%
    declined during the 12 months that followed the golden cross that occurred on April 1, 2019, according to Dow Jones Market Data. This happened again in 1999 as the dot-com bubble burst, and also following a golden cross that occurred in1986, preceding the “Black Monday” crash.

    The Dow Jones Industrial Average
    DJIA,
    +0.08%
    achieved its most recent golden cross back in December and stocks have since moved higher.

    Technical analysts who spoke with MarketWatch said that while the golden cross can be a helpful sign that a given trend probably has more room to run, it helps to look for other signs as well.

    “The way we think about it is all big rallies start with a golden cross, but not all golden crosses lead to a big rally. It’s just one piece of the puzzle,” said Ari Wald, head of technical analysis at Oppenheimer.

    See: U.S. stocks flash rare bull-market signal for first time in nearly 3 years, but some have their doubts

    There have been some other encouraging signs that U.S. stocks could be headed for a lasting turnaround. One example Wald cited was the so-called advance-decline line, which recently reached a new cycle high.

    According to technical analysts, that’s a measure of market breadth which shows whether the major equity index’s gains are being powered by a broad range of stocks, or a handful.

    The advance-decline line hit 2.2 on Thursday, its highest level in nearly a year.

    The fact that cyclical sectors like technology and consumer discretionary are among the best performers since the start of the year is another encouraging sign, according to Wald.

    FactSet data show that communication services, consumer discretionary and information technology are the three best-performing sectors of the S&P 500 so far this year, with communications services up more than 15% since Jan. 1.

    However, with so much uncertainty about monetary policy and the macroeconomic outlook, some analysts doubt that the stock-market will simply return to business as usual so quickly, even as inflation has moderated over the past six months, taking some of the pressure off the Federal Reserve to continue to raise interest rates.

    One analysts warned that traders who are hungry for confirmation that the market sell-off of 2022 is indeed over should approach indicators like the golden cross with trepidation, despite its historical record.

    “In the past 20 years there have been more secular trends, and the golden crosses have worked,” said Will Tamplin, senior analyst at Fairlead Strategies. “But in an environment that’s a little more choppy, you can get the whipsaws. “

    The S&P 500 and SPDR S&P 500 exchange-traded fund
    SPY,
    +0.23%
    touched new intraday highs for the year on Friday, while the Nasdaq Composite
    COMP,
    +0.95%
    briefly traded at its highest level since September. The Dow Jones Industrial Average is on track for a weekly gain of more than 2.3%, what would be its best such performance since November.

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  • Biden taps Zients as White House chief of staff

    Biden taps Zients as White House chief of staff

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    President Joe Biden announced Jeff Zients on Friday as his next White House chief of staff, tapping an experienced technocrat who headed his administration’s response to the COVID-19 pandemic as Biden prepares for a reelection bid while facing an onslaught of investigations from a newly empowered House Republican majority.

    Zients succeeds Ron Klain, a longtime fixture in Biden’s political orbit who led the White House through its highs — passage of consequential legislation like the massive infrastructure bill and the Democrats’ climate, health care and tax law, as well as dozens of judges confirmed in the first two years — as well as its lows, such as the rocky withdrawal of U.S. troops from Afghanistan.

    The transition is the first major personnel change for an administration that has had minimal turnover at its highest ranks and throughout the Cabinet.

    “I’m confident that Jeff will continue Ron’s example of smart, steady leadership, as we continue to work hard every day for the people we were sent here to serve,” Biden said in a statement.

    Zients, 56, will be tasked with shepherding White House operations at Biden’s pivotal two-year mark, when the Democratic administration shifts from ambitious legislating to implementing those policies and fending off Republican efforts to defang the achievements.

    Zients is also charged with steering the White House at a time when it is struggling to contain the fallout from discoveries of classified documents at Biden’s home in Wilmington, Delaware, and at his former institute in Washington, which has triggered a special counsel investigation.

    Klain, in his resignation letter to Biden, said it was the “right time” for a transition.
    “The halfway point of your first term – with two successful years behind us, and key decisions on the next two years ahead — is the right time for this team to have fresh leadership,” he wrote.

    “I have served longer than eight of the last nine Chiefs of Staff, and have given this job my all; now it is time for someone else to take it on.”

    Zients, not known to be a political operative, is expected to focus on the task of governing as a separate circle of advisers take the lead on politics, such as senior adviser Anita Dunn and Jen O’Malley Dillon, a deputy chief of staff who managed Biden’s 2020 presidential campaign.

    Presidential counselor Steve Ricchetti, senior adviser Mike Donilon and deputy chief of staff Bruce Reed will continue in Biden’s inner circle, while Klain, a longtime Democratic operative, will continue to advise and be involved from the outside.

    Through both the Obama and Biden administrations, Zients has been the go-to person for significant operational challenges — such as a nationwide coronavirus vaccination campaign — or to repair bureaucratic messes such as the glitches and crashes that marked the launch of HealthCare.gov in fall 2013.

    Then-President Barack Obama also tapped Zients in 2009 to eliminate the backlog in applicants for the Cash for Clunkers program, which offered rebates to drivers who swapped old cars for fuel-efficient vehicles. Zients later took on a similar challenge to smooth sign-ups for an updated version of the GI Bill.

    Zients was vice chairman of Biden’s transition after he won in November 2020 and served as director of the National Economic Council during the Obama administration and acting director of the Office of Management and Budget.

    As COVID-19 coordinator, Zients led the effort that administered more than 220 million vaccinations in Biden’s first 100 days, while shoring up the nation’s supply of therapeutics and tests and distributing them.

    Zients gradually shifted the administration from a so-called “wartime” effort that grappled with COVID-19 at its most severe levels, to a strategy that would allow people to resume some normalcy with a virus that is likely to be endemic.

    Although Zients left the administration in April 2022, he quietly returned in recent months to ensure the remaining two years of Biden’s term would be adequately staffed, a prelude to his taking on the much broader managerial role.

    Senate Majority Leader Chuck Schumer, D-N.Y., said Biden’s first two years “would not have been nearly as successful without Ron Klain by the President’s side” and noted that he spoke with the outgoing chief of staff multiple times every day, knowing that his counsel and questions would be directly communicated to Biden.

    “I’ve known Jeff for many years and cannot think of a better person to help smoothly implement the transformational legislation Congress passed,” Schumer said.

    “Jeff is the epitome of what an outstanding chief of staff should be. He’s organized, focused and deliberate, exactly the right person to lead the Biden administration and ensure the American people see and feel the benefits of these new laws.”

    In the private sector, Zients served as top executive at the Advisory Board Co., a Washington consulting firm, and he maintains close relations with the business community. He’s worth between about $90 million and $400 million, according to the financial disclosure he filed when he entered the White House in 2021.

    “I respect him enormously,” Sen. Mitt Romney, R-Utah, who spoke regularly with Zients during his stint as COVID-19 response coordinator, said this week. “He’s a very bright guy. I expect to be able to communicate with him.”

    Yet those business ties have already spurred criticism of the Zients selection from some on the left, who have blasted the incoming chief of staff for his private-sector background.

    Progressives are anticipating a shift from Klain, who regularly tended to that ideological wing of the party and retained close ties with liberal lawmakers.

    Zients was also an initial investor in Call Your Mother, a local bagel shop, although he divested his shares before joining the administration in 2021. He has also served as chairman of the Children’s National Hospital in Washington.

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  • Inflation rate slows again to 15-month low, PCE shows, as U.S. economy weakens

    Inflation rate slows again to 15-month low, PCE shows, as U.S. economy weakens

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    The numbers: The cost of U.S. goods and services rose a scant 0.1% in December in yet another sign inflation is cooling off, opening the door for the Federal Reserve to stop raising interest rates soon.

    The rate of inflation, using the Fed’s preferred PCE index, has tapered off rapidly since last summer. Falling oil prices have played a big role, but inflation more broadly is easing.

    The annual increase in prices slowed to 5% in December from 5.5% in the prior month and a 40-year high of 7% last summer, according to fresh government data.

    That’s the smallest increase in 15 months, though still well above pre-pandemic levels of less than 2% annual inflation.

    Key details: The more closely followed core index rose a modest 0.3% last month, matching Wall Street’s forecast.

    The increase in the core rate of inflation in the past 12 months decelerated to 4.4% from 4.7%. That’s also the lowest level in 14 months.

    The PCE index is viewed by the Fed as the best predictor of future inflation trends, especially the core gauge that strips out volatile food and energy costs.

    Unlike it’s better-known cousin, the consumer price index, the PCE gauge takes into account how consumers change their buying habits due to rising prices.

    They might substitute cheaper goods such as chicken thighs for more expensive ones like boneless breasts to keep costs down, or buy generic medicines instead of brand names.

    The CPI showed inflation rising at a 6.5% yearly rate in December, but it’s also slowed sharply since the summer.

    Big picture: The Fed is trying to restore inflation to pre-pandemic levels of 2% or so, and it will keep raising interest rates until it is convinced the genie is back in the bottle. Higher rates reduce inflation by slowing the economy.

    Yet with inflation subsiding, Wall Street is raising questions about whether the Fed’s work is almost done. If rates go too high, the economy could sink into recession.

    Indeed, many economists think a downturn is likely this year. The central bank has jacked up a key U.S. interest rate to a 15-year high of 4.5% from near zero less than a year ago — and the effects of higher borrowing costs are just starting to bite.

    Looking ahead: “With higher interest rates evidently weighing heavily on demand now, we expect core inflation to continue moderating,” said chief North American economist Paul Ashworth of Capital Economics in a note to clients. That “will eventually persuade the Fed to begin cutting interest rates late this year.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.08%
    and S&P 500
    SPX,
    +0.25%
    were set to open slightly lower in Friday trades.

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  • U.S. economy gets off to weak start in 2023, S&P finds

    U.S. economy gets off to weak start in 2023, S&P finds

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    The numbers: The U.S. economy got off to a weak start in 2023. Business conditions contracted again in January as demand for goods and services fell for the fourth month in a row, S&P surveys showed.

    The S&P Global “flash” U.S. services sector index rose to a three-month high of 46.6 from 44.7 in December. The service side of the economy employs most Americans.

    The S&P Global U.S. manufacturing sector index, meanwhile, edged up to 46.7 from a 31-month low of 46.2 at the end of last year.

    Any number below 50 suggests a contracting economy, however.

    The S&P surveys are among the first indicators in each month to assess the health of the economy.

    Key details: New orders, a sign of future sales, have tailed off since October.

    The decline in demand has helped to ease inflation since the fall, S&P found, but the cost of labor and supplies both rose in January. Companies tried to limit price increases of their own, however, to retain market share.

    Employment levels were basically unchanged. Manufacturers created more jobs, but service-oriented firms cut staff for the first time in two and a half years.

    In a bit of surprise, executives expressed more confidence about how the economy would perform over the next year.

    Big picture: The economy was stung in 2022 by the highest inflation in 40 years. Now it’s getting slammed by rising interest rates as the Federal Reserve aims to bring inflation back down to pre-pandemic levels.

    Many economists believe the U.S could sink into recession this year.

    Looking ahead: “The U.S. economy has started 2023 on a disappointingly soft note,” said Chris Williamson, chief business economist at S&P Global. “Companies cite concerns over the ongoing impact of high prices and rising interest rates, as well as lingering worries over supply and labor shortages.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.02%
    and S&P 500
    SPX,
    -0.11%
    fell in Tuesday trades.

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  • Italy arrests Mafia boss after 30 years on the run

    Italy arrests Mafia boss after 30 years on the run

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    ROME (AP) — Italy’s No. 1 fugitive, convicted Mafia boss Matteo Messina Denaro, was arrested on Monday at a private clinic in Palermo, Sicily, after 30 years on the run, Italian paramilitary police said.

    Messina Denaro was captured at the clinic where he was receiving treatment for an undisclosed medical condition, said Carabinieri Gen. Pasquale Angelosanto, who heads the police force’s special operations squad.

    Messina Denaro was taken to a secret location by police immediately after the arrest, Italian state television reported.

    A young man when he went into hiding, he is now 60. Messina Denaro, who had a power base in the port city of Trapani, in western Sicily, was considered Sicily’s Cosa Nostra top boss even while a fugitive.

    He was the last of three longtime fugitive top-level Mafia bosses who had for decades eluded capture.

    Messina Denaro, who tried in absentia and convicted of dozens of murders, faces multiple life sentences.

    He is set to be imprisoned for are two bombings in Sicily in 1992 that murdered top anti-Mafia prosecutors, Giovanni Falcone and Paolo Borsellino. Among other grisly crimes he was convicted of is the murder of a Mafia turncoat’s young son, who was strangled and his body dissolved in a vat of acid.

    The arrest Monday came 30 years and a day after the capture of convicted “boss of bosses” Salvatore “Toto” Riina, in a Palermo apartment after 23 years on the run.

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  • U.S. stocks could fall 10% as ‘pain trade’ takes hold before bouncing back later in the year

    U.S. stocks could fall 10% as ‘pain trade’ takes hold before bouncing back later in the year

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    The year ahead is promising not to be an easy one for investors as a recession threat looms, but Bank of America is offering some advice on when things might get easier.

    The bad news is things might get harder first, even after global stocks have seen a strong start to the year.

    A team of strategists led by Michael Hartnett told clients in a note on Friday that U.S. stocks could fall 10% from current levels before rallying later this year as investors start to expect a less aggressive policy stance from the Federal Reserve.

    Stocks could slide as the U.S. economy slows and corporate earnings weaken. But there could be a light at the end of the tunnel.

    A “recession trade requires patience,” he said in a note to clients on Friday.

    He described the dynamic as a “pain trade,” meaning stock markets are at risk of losing ground until the Federal Reserve finally signals that it will start cutting interest rates.


    BofA Global Investment Strategy/Bloomberg

    The “pain trade is up ’til Fed rate forecasts, yields, credit spreads trough signal peak Goldilocks,” he said.

    Markets strategists sometimes use the term “goldilocks” to refer to a not-too-hot, not-too-cold economy that continues to grow without stoking intense bouts of inflation. Such an environment is typically ideal for risk assets, as investors experienced during the decade that followed the financial crisis.

    Following the economic data released Thursday, which showed the labor market chugging along as inflation continued to recede, Hartnett said it doesn’t get more “goldilocks” than that.

    Hartnett sees the S&P 500
    SPX,
    +0.27%
    positioned to trade between 3,600 and 4,200 but expects the former ahead of the latter. That’s actually the opposite of what Stifel Chief Equity Strategist Barry Bannister had to say earlier this week.

    Bannister sees a window for a stock-market rally in the first six months of this year, but then trouble in the latter half. Among his concerns are inflation turning back up later in the year, forcing the Fed to tighten financial conditions.

    And: The Fed has won its ‘war’ against inflation. Now it needs to stop hiking interest rates, JP Morgan analyst says

    A reminder that all really isn’t that rosy came from JPMorgan JPM CEO Jamie Dimon who rattled markets on Friday with his warning that geopolitical and inflation “headwinds” were real concerns and “they may not go away.”

    Read: JPMorgan, Wells Fargo, Bank of America and Citi beat earnings expectations, but worries about ‘headwinds’ remain

    Hartnett highlighted notable inflows to investment-grade bond funds and emerging-market bonds and stocks in his note as well. On the flip side, U.S. funds have seen outflows. European markets have outperformed the U.S. so far this year, with the Euro Stoxx 50
    FESX00,
    +0.26%
    up 6.2% in that time, compared with 3.5% for the S&P 500.

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  • Pentagon drops COVID-19 vaccine mandate for troops

    Pentagon drops COVID-19 vaccine mandate for troops

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    WASHINGTON — The Pentagon formally dropped its COVID-19 vaccination mandate Tuesday, but a new memo signed by Defense Secretary Lloyd Austin also gives commanders some discretion in how or whether to deploy troops who are not vaccinated.

    Austin’s memo has been widely anticipated ever since legislation signed into law on Dec. 23 gave him 30 days to rescind the mandate. The Defense Department had already stopped all related personnel actions, such as discharging troops who refused the shot.

    “The Department will continue to promote and encourage COVID-19 vaccination for all service members,” Austin said in the memo. “Vaccination enhances operational readiness and protects the force.”

    Austin said that commanders have the authority to maintain unit readiness and a healthy force. He added, however, that other department policies — including mandates for other vaccines — remain in place. That includes, he said, “the ability of commanders to consider, as appropriate, the individual immunization status of personnel in making deployment, assignment, and other operational decisions, including when vaccination is required for travel to, or entry into, a foreign nation.”

    The contentious political issue, which has divided America, forced more than 8,400 troops out of the military for refusing to obey a lawful order when they declined to get the vaccine. Thousands of others sought religious and medical exemptions. Austin’s memo ends those exemption requests.

    Austin, who instituted the mandate in August 2021 after the Pfizer vaccine was approved by the Food and Drug Administration and as the coronavirus pandemic raged, was staunch in his desire to maintain it insisting the vaccine was necessary to protect the health of the force. He and other defense leaders argued that for decades troops, particularly those deployed overseas, had been required to get as many as 17 different vaccines. No other vaccine mandates were affected by the new law.

    But Congress agreed to rescind the mandate, with opponents reluctantly saying that perhaps it had already succeeded in getting the bulk of the force vaccinated. Roughly 99% of active-duty troops in the Navy, Air Force and Marine Corps had gotten the vaccine, and 98% of the Army. The Guard and Reserve rates are lower, but generally are more than 90%.

    Austin’s memo was unapologetic in his continued support for the vaccine, and his belief that the mandate kept the force healthy and able to protect America. The Pentagon’s vaccine efforts, he said, “will leave a lasting legacy in the many lives we saved, the world-class force we have been able to field, and the high level of readiness we have maintained, amidst difficult public health conditions.”

    In addition to ending efforts to discharge troops who refuse the vaccine, Austin’s memo says that those who sought exemptions and were denied will have their records updated and any letters of reprimand will be removed.

    Those who were discharged for refusing to obey a lawful order to take the vaccine received either an honorable discharge or a general discharge under honorable conditions. Austin’s memo says that anyone who was discharged can petition their military service to request a change in the “characterization of their discharge” in their personnel records. It does not, however, say what possible corrections could be awarded.

    Austin’s decision leaves some discretion to commanders, allowing them to decide whether they can require vaccines in some circumstances, such as certain deployments overseas.

    Military officials vividly recall the overwhelming crisis of the USS Theodore Roosevelt, the Navy aircraft carrier that was knocked out of duty and sidelined in Guam for 10 weeks in early 2020 as the emerging virus swept through the ship. More than 1,000 crew members eventually became infected, and one sailor died.

    Military leaders worry that if troops begin to refuse the vaccine in large numbers, similar outbreaks could occur. The risk is particularly high on small ships or submarines where service members are jammed into close quarters for weeks or months at a time, or on critical combat missions, such as those involving special operations forces that deploy in small teams.

    According to data compiled by the military as of early December, the Marine Corps leads the services with 3,717 Marines discharged. There have been 2,041 discharged from the Navy, 1,841 from the Army and 834 from the Air Force. The Air Force data includes the Space Force.

    What’s not clear is if the services, who are facing recruiting challenges, will want — or be able to — allow any of those service members to return to duty, if they still meet all necessary fitness and other requirements.

    Lawmakers argued that ending the mandate would help with recruiting. Defense officials have pushed back by saying that while it may help a bit, a department survey during the first nine months of last year found that a large majority said the mandate did not change the likelihood they would consider enlisting.

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  • Kevin McCarthy speaker drama enters fourth day: Watch the House vote here.

    Kevin McCarthy speaker drama enters fourth day: Watch the House vote here.

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    Drama over who will be the next speaker of the U.S. House of Representatives entered a fourth day Friday, as California Republican Kevin McCarthy failed to win the gavel after 11 straight ballots but signs of a deal were reportedly emerging.

    Tune in here to watch all the action from the House floor:

    Watch live coverage of the Speaker of the House vote as Congress begins its 118th session.

    Also read: Fight over House speaker job offers ‘ominous portent of how the U.S. debt-ceiling fight will go,’ analyst says 

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  • Dow up 500 points as pace of jobs growth, wage gains cools in December

    Dow up 500 points as pace of jobs growth, wage gains cools in December

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    U.S. stocks advanced Friday, with the Dow rising 500 points, as monthly Labor Department data showed the pace of job creation cooled in December while wage gains slowed, fueling hopes that the Federal Reserve’s interest rate hikes are starting to have the desired effect.

    How are stocks trading
    • The S&P 500
      SPX,
      +1.85%
      gained 61 points, or 1.6%, to 3,869.

    • Dow Jones Industrial Average
      DJIA,
      +1.85%
      climbed 528 points, or 1.6%, to 33,458.

    • Nasdaq Composite
      COMP,
      +2.93%
      advanced 155 points, or 1.5%, to 10,460.

    After several sessions of choppy trade stocks finished lower on Thursday. However, thanks to Friday’s strong rebound, the S&P 500 is on track to finish the week in the green after four consecutive weekly declines.

    What’s driving markets

    Stock-market bulls cheered Friday’s jobs report, which showed that the pace of job creation and wage growth cooled last month, contradicting labor-market data released earlier in the week.

    The December nonfarm payrolls report showed 223,000 jobs were created in December, above expectations for 200,000 new jobs, though the pace of job creation slowed from 256,000 during November. Wages grew by just 0.3% in December, down from 0.4% a month earlier.

    See: U.S. adds 223,000 jobs in December and jobless rate matches 55-year low of 3.5%

    While stocks advanced in the wake of the data, it seems the labor market has continued to confound expectations for an imminent recession, market analysts said. While the pace of wage growth has slowed slightly, workers continued to command higher pay, even if wages have lagged headline inflation.

    “This is not going to push the Fed off its agenda one iota,” said Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., in commentary about Friday’s data.

    Numerous Fed officials have made clear that they want to see unemployment climb in order to help suppress inflation and engineer a return to the Fed’s 2% target. Senior Fed officials expect unemployment to rise by nearly a percentage point in 2023, according to projections released in December.

    “The release was a win-win from the Fed’s perspective, as it signaled that wage inflation is moderating while job growth remains steady,” said Peter Essele, Head of Portfolio Management, Commonwealth Financial Network. “Coupled with the fact that headline inflation continues to move in the right direction, there’s a growing chance the Fed may be able to navigate a soft landing in the economy. If it meets its target, 2023 could be one of the best years for markets given the amount of negative investor sentiment currently weighing on prices.”

    The S&P 500 index is down more than 19% from its 52-week high after the Fed raised interest rates by 4.25 percentage points in 2022 in an attempt to crush inflation that hit a four-decade high of 9.1% in June, according to the consumer-price index.

    Jobs data released earlier in the week painted a picture of a labor market that had remained robust despite the Fed’s best efforts, and it’s not clear whether Friday’s data have meaningfully changed this perception, market strategists said.

    JOLTS data released Tuesday showed more than 10 million jobs remained open. Analysts noted that the ADP private sector employment report released on Thursday was stronger than expected, which triggered a selloff in stocks.

    Later Friday morning in New York, the ISM services sector index for December turned negative for the first time since May 2020, indicating a slowdown in the all-important services sector. The ISM services index slowed to 49.6% in December from 56.5%, below forecast.

    The drumbeat of cautious Fedspeak continued on Friday, with Federal Reserve Governor Lisa Cook saying that inflation “remains far too high, despite some encouraging signs lately.” The pace of inflation has cooled in recent months, according to the consumer-price index.

    Atlanta Fed President Raphael Bostic said on CNBC Friday that the December jobs data “doesn’t really change my outlook at all.”

    A number of other Fed speakers are expected Friday, including Richmond Fed President Tom Barkin at 12:15 p.m. and Kansas City Fed President Esther George at 1 p.m.

    Single-stock movers
    • Technology stocks may be under pressure on Friday after Samsung Electronics KR:005930 said quarterly profits fell to an eight-year low as it saw weaker demand for chips and smartphones.

    • Southwest Airlines Co. 
      LUV,
      +2.51%
      shares are worth watching after the airline warned Friday that it expects to report a surprise net loss for the fourth quarter after canceling thousands of flights over the holidays.

    • Tesla Inc. shares are sinking lower after the electric vehicle maker cut prices in China again.

    • World Wrestling Entertainment 
      WWE,
      +22.56%
      shares soared as founder Vince McMahon returned to the company.

    • Shares of Bed Bath & Beyond Inc.
      BBBY,
      -21.60%
      slumped as the company said it was likely to file for bankruptcy.

    • Costco Wholesale Corp. 
      COST,
      +6.77%
      shares climbed on strong holiday sales. 

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  • U.S. adds robust 223,000 jobs in December, but wage growth slows in sign of ebbing inflation pressures

    U.S. adds robust 223,000 jobs in December, but wage growth slows in sign of ebbing inflation pressures

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    The numbers: The U.S. generated 223,000 new jobs in December to mark the smallest increase in two years, but the labor market still showed surprising vigor even as the economy faced rising headwinds.

    The unemployment rate, meanwhile, slipped to 3.5% from 3.6%, the government said Friday.

    The jobless rate has touched 3.5% several times since 2019. That matches the lowest rate since 1969.

    One good sign for Wall Street and the Federal Reserve. Hourly pay rose a modest 0.3% last month, suggesting wages are coming off a boil.

    The increase in wages over the past year also slowed to 4.6% from 4.8%, marking the smallest gain since the summer of 2021.

    U.S. stocks
    DJIA,
    -1.02%
     
    SPX,
    -1.16%
    rose in premarket trades and bond yields edged higher after the report.

    Economists polled by The Wall Street Journal had forecast a smaller increase in new jobs of 200,000.

    The resilient labor market is a double-edged sword for the Federal Reserve.

    For one thing, a scarcity of workers has driven up wages and threatens to prolong a bout of high inflation. The Fed wants the labor market to cool off further to ease the upward pressure on prices.

    Yet the strong labor market also offers the best hope for the Fed to avert a recession as it jacks up interest rates to the highest level in years. Higher rates reduce inflation by slowing the economy.

    James Bullard, president of the St. Louis Federal Reserve, said on Thursday the odds of so-called soft landing have gone up in part because of the sturdy labor market. He was referring to a Goldilocks scenario in which the central bank vanquishes inflation without causing a recession.

    Senior Fed officials still want to see the jobs market slacken some more, however. They are likely to keep raising rates — and keep them high — until demand for labor, goods and services ease up.

    Big picture: The U.S. economy has shown more fragility, especially in segments like housing and manufacturing that are sensitive to high interest rates. Many economists predict a recession is likely this year due to the higher cost of borrowing.

    The Fed, for its part, is trying to thread the needle: Bring down high inflation and keep the economy out of recession.

    Whatever the outcome, one thing is virtually certain: The unemployment rate is expected to rise as U.S. growth wanes. Whether it’s enough to help the Fed achieve is far from clear. 

    Key details: Health care providers, hotels and restaurants accounted for most of the increase in employment last month. They added a combined 150,000-plus jobs.

    Hiring was weaker in most other sectors, suggesting that the labor market is likely to soften further.

    High-tech has been hit particularly hard and is experiencing a wave of layoffs.

    Employment in so-called professional businesses, which includes some tech, fell by 6,000, largely reflecting fewer temps being hired. It was the only major category to post a decline.

    The share of working-age people in the labor force — known as the participation rate — rose a tick to 62.3%.. A lack of people looking for work is a chief source of the labor shortage.

    Hiring in November and October was little changed after government revisions. The economy added 256,000 jobs in November and 263,000 in October.

     Market reaction:  The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open higher in Friday trades.

    Investors worry a strong labor market will push the Fed to take sterner measures to slow the economy. The slowdown in hiring and wage growth is likely to be seen in a positive light.

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  • What happens while there’s no House speaker? Salaries in limbo, taxpayers’ requests turned away

    What happens while there’s no House speaker? Salaries in limbo, taxpayers’ requests turned away

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    If you’ve got a problem that you want your member of Congress to help solve, you may have a bigger problem at the moment: getting a response from their office.

    With business at a standstill in the House of Representatives as the chamber tries again, and again, to elect a speaker, the ramifications of half of Capitol Hill not functioning are spreading.

    From staffers’ salaries in limbo to the direct impact on the District of Columbia, here are a few key ways the failure to settle on a speaker is affecting life inside and outside Washington.

    Who’s getting paid — and when?

    House committee staffers are looking at a deadline of Jan. 13 for the speaker fight being wrapped up and a package of rules being passed, or face not getting paid.

    “Committees need to be aware that should a House Rules package not be adopted by end of business on January 13 no committee will be able to process payroll since the committee’s authority for the new Congress is not yet confirmed,” according to a memo sent out to House committees, as Politico reported.

    The pay period for members-elect began on Jan. 3, as CNN wrote, citing House precedents — but some members have questioned if they’ll see checks or healthcare.

    Who’s answering your calls?

    Former Republican Rep. Billy Long of Missouri on Tuesday tweeted a list of services that could be frozen as members-elect are waiting to be sworn in — including queries about passports, the Internal Revenue Service or immigration. By Thursday, reporters were tweeting about business grinding to a halt because newly elected members haven’t been officially seated.

    What about the District of Columbia?

    The District of Columbia — home to the Capitol building in which the speaker fight is playing out — is dependent on Congress for passing its own laws, since it’s not a state. With the House frozen, the District can’t make new laws.

    Can any bills be passed?

    No. Republicans won the House with promises to investigate the Biden administration, rein in the Internal Revenue Service and extend former President Donald Trump’s tax cuts. No work can start on any of that until a speaker is chosen.

    As of early Thursday afternoon, California Republican Kevin McCarthy had suffered a seventh defeat in his quest to become speaker, and an eighth tally was expected.

     

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  • House adjourns until Thursday as new rounds of voting keep failing to elect speaker

    House adjourns until Thursday as new rounds of voting keep failing to elect speaker

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    The U.S. House of Representatives voted on Wednesday night to adjourn until 12:30 p.m. Eastern on Thursday, with the move coming as lawmakers have been unable to elect a new speaker for a second day in a row.

    That vote came after House Republicans briefly reconvened at 8 p.m. Eastern following a flurry of meetings that attempted to find room for compromise.

    Top House Republican Kevin McCarthy keeps hitting resistance in his push to become speaker, falling short of a majority in three rounds of voting on Wednesday afternoon and three earlier rounds of voting on Tuesday.

    CNN and Axios reported Wednesday night that McCarthy offered significant concessions to the defecting Republicans but it was unclear if that would be enough to sway enough of their votes. “No deal yet,” McCarthy said after a closed-door meeting Wednesday night, according to the Associated Press, “But a lot of progress.”

    The House must kick off the new congressional session with the election of a speaker, and it’s required to keep voting until one is chosen. There hasn’t been a need for multiple votes for a speaker’s election since 1923, when nine rounds of voting were required. 

    McCarthy can handle no more than four GOP defections given his party’s 222-212 majority, but more than that number have repeatedly opposed the California congressman.

    In all three rounds of voting on Wednesday, 20 Republicans opposed him and voted instead for Rep. Byron Donalds of Florida, while Rep. Victoria Spartz of Indiana voted “present” after backing McCarthy on Tuesday.

    In Tuesday’s third vote, the number of Republican lawmakers voting against McCarthy rose to 20, up from 19 in the first two rounds. Those 20 backed GOP Rep. Jim Jordan of Ohio on Tuesday, even as Jordan gave a speech in support of McCarthy and didn’t vote for himself.

    Analysts have been warning that the tensions over what’s typically a ceremonial election could signal that the GOP-run House will be dysfunctional throughout 2023 —and that might affect markets eventually.

    “If the House deadlock continues for weeks — or longer — the markets may have to worry about fiscal policy uncertainty,” said Greg Valliere, chief U.S. policy strategist at AGF Investments, in a note.

    “If House Republicans can’t even elect a leader, how will they respond when a debt default crisis looms later this year?”

    Former President Donald Trump offered support for McCarthy in a post on Wednesday morning on Truth Social, his social network.

    “It’s now time for all of our GREAT Republican House Members to VOTE FOR KEVIN, CLOSE THE DEAL, TAKE THE VICTORY,” Trump wrote.

    “DO NOT TURN A GREAT TRIUMPH INTO A GIANT & EMBARRASSING DEFEAT. IT’S TIME TO CELEBRATE, YOU DESERVE IT. Kevin McCarthy will do a good job, and maybe even a GREAT JOB — JUST WATCH!”

    Betting market PredictIt on Wednesday evening was giving McCarthy around a 42% chance of becoming speaker, while No. 2 House Republican Steve Scalise’s chances were around 38%.

    Related: How betting markets got the midterms wrong, and why Biden’s a ‘great bet’ for 2024

    Republicans have taken control of the House thanks to wins in November’s midterm elections, returning to power in that chamber after four years in the minority.

    But the GOP’s hopes for a strong red wave two years into President Joe Biden’s term were dashed, as the party has claimed just a small House majority and Democrats have maintained their grip on the Senate.

    McCarthy has been drawing opposition from about 10% of his fellow House Republicans in large part because he’s viewed as not having done enough to oppose Democrats — as well as being part of the Washington establishment.

    From MarketWatch’s archives (November 2022): McCarthy’s House speaker bid may be in trouble due to Republican objections: ‘He’s not a true conservative’

    GOP Rep. Scott Perry of Pennsylvania, who heads the House Freedom Caucus, described voting against McCarthy as a vote against business as usual in Washington.

    “Everybody came here because they said to their constituents, “This town is broken, and I want to fix it,’” Perry said, as he gave a speech Wednesday on the House floor.

    “Well, how are you going to fix it, if you come to this town and just step right in line and keep doing the same things that everybody has done before?”

    The Freedom Caucus, known for helping to bring about former Speaker John Boehner’s departure from his post in 2015, is made up of several dozen of the chamber’s most conservative Republicans.

    U.S. stocks 
    SPX,
    +0.75%
     
    DJIA,
    +0.40%
    closed with gains on Wednesday. The main equity gauges finished lower on Tuesday in 2023’s first session, after the S&P 500 benchmark fell 19% in 2022, hit by the Federal Reserve’s interest-rate hikes as the central bank tries to rein in inflation.

    Now read: Isolated and humiliated, Russia is biggest geopolitical threat of 2023, analysts say

    Plus: Brace yourself: Your tax refund could shrink in 2023. Here’s why.

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  • U.S job openings stay high at 10.5 million and show labor market still very strong

    U.S job openings stay high at 10.5 million and show labor market still very strong

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    The numbers: Job openings in the U.S. fell slightly to 10.46 million in November, but workers were still quitting in droves in a sign the labor market remains quite strong — too strong for the Federal Reserve.

    Job listings declined from 10.51 million in October, the Labor Department said Wednesday. But openings in October were also revised higher.

    The number of job openings is seen as a cue on the health of the labor market and broader U.S. economy. Job postings have slowly receded since hitting an all-time high of 11.9 million last spring.

    The jobs market is still too hot for the Fed, however. The Fed is worried high inflation will persist unless hiring slows and a rapid increase in wages tapers off.

    There were 1.7 job openings for each unemployed worker in November, well above pre-pandemic levels of 1.2. The Fed is watching that ratio closely and wants to see if fall back to pre-pandemic norms.

    Key details: The number of people hired in November dipped to 6.06 million, marking the smallest increase since February 2021.

    Rising interest rates, a slowing economy and worries about recession have spurred businesses to fill fewer open jobs.

    Yet the number of job quitters edged up to 4.17 million. Quits have topped 4 million for a record 18 months in a row. People quit more often when they think it’s easy to get a better job.

    The so-called quits rate among private-sector workers rose to 3% from 2.9%. It peaked at 3.4% near the end of 2021.

    Big picture: The Fed is raising interest rates to slow the economy and reduce the demand for labor as part of a broader strategy to rein in the worst inflation in 40 years.

    Fed officials say the appetite for labor is still too strong and needs to slacken. The ratio of job openings to unemployed workers has slipped from a record 2.0 last spring, but that’s still too high for the central bank.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    -0.03%
    and S&P 500
    SPX,
    +0.13%
    fell after the job-openings report.

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  • Dow futures jump more than 300 points as traders start 2023 on a bullish note

    Dow futures jump more than 300 points as traders start 2023 on a bullish note

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    U.S. stock index futures rose Tuesday as investors returned from the festive break in a generally bullish mood.

    How are stock-index futures trading
    • S&P 500 futures
      ES00,
      +0.49%
      advanced 41 points, or 1.1%, to 3902

    • Dow Jones Industrial Average futures
      YM00,
      +0.42%
      gained 332 points, or 1%, to 33617

    • Nasdaq 100 futures
      NQ00,
      +0.67%
      climbed 122 points, or 1.1%, to 11144

    On Friday, the Dow Jones Industrial Average
    DJIA,
    -0.22%
    fell 74 points, or 0.22%, to 33147, the S&P 500
    SPX,
    -0.25%
    declined 10 points, or 0.25%, to 3840, and the Nasdaq Composite
    COMP,
    -0.11%
    dropped 12 points, or 0.11%, to 10466. The Nasdaq Composite fell 33.1% in 2022, the largest one year percentage decline since 2008.

    What’s driving markets

    After Wall Street’s S&P 500 benchmark dropped nearly 20% in 2022, equity investors appeared determined on Tuesday to start the new year of trading on a positive note.

    Activity in index futures was choppy, however, with the S&P 500 contract wobbling in a 55 point range in early-hours action.

    “The calendar year may have changed, but the themes remain the same as the U.S. and U.K. markets reopen for 2023,” said Richard Hunter, head of markets at Interactive Investor.

    “Recessionary concerns will again top the agenda, underpinned by high inflation and rising interest rates. This in turn could point to a troubled January as investors search for positive indications that the tightening policies of the central banks may begin to ease given weakening economic data,” Hunter added.

    Indeed, the International Monetary Fund greeted the new year with a warning that a third of the global economy will suffer recession in 2023, a downturn that will likely trim corporate profits.

    In addition, a burst of fresh strength in the U.S. dollar
    DXY,
    +1.16%
    on Tuesday – a common reaction to global economic slowdown worries – was likely to further crimp earnings of U.S. multinationals.

    Still, Julian Emanuel , strategist at Evercore ISI, reckoned that such concerns don’t necessarily mean stocks can’t rally.

    “Forecasting an earnings recession in 2023 to accompany the economic recession that now seems inevitable, along with a 2023 year end S&P 500 price target of 4,150, would seem impossible,” he said in a note to clients.

    “Yet not only is there a long history of earnings down/stocks up years (1970, 1982 and 1985 stand out, but there is also the tendency for strong stock/bond return years to follow historically forceful tightening cycles (1982, 1985) particularly in years (1995) following ‘havoc being wreaked’ on a 60/40 portfolio such as 2022’s declines.” Emanuel added.


    Source: Evercore ISI

    U.S. economic updates set for release on Tuesday include the December S&P U.S. manufacturing PMI at 9:45 a.m. and the November reading of construction spending at 10 a.m., both times Eastern.

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  • How a House speaker is elected — and how steep a hill Republican Kevin McCarthy will need to climb

    How a House speaker is elected — and how steep a hill Republican Kevin McCarthy will need to climb

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    WASHINGTON (AP) — Kevin McCarthy is set to face a case of déjà vu come Tuesday. The political future of the 57-year-old will once again be at stake as Republican lawmakers decide if he should become House speaker.

    It’s a journey the California lawmaker took once before in 2015, fruitlessly, facing the same opposition from the right flank of the party he is expected to meet this week. His first speakership run came when then–House Speaker John Boehner, a Republican from Ohio, resigned after an internal party battle with members of the ultraconservative House Freedom Caucus.

    More than seven years later, he is the party’s nominee for speaker after leading the Republican Party to a slim majority in the November midterm elections. He secured the support of most of the conference during a closed-door leadership vote shortly after and overcame a challenge from Rep. Andy Biggs of Arizona.

    While McCarthy is as of now facing no serious Republican challenger for the constitutionally mandated office, which would make him second in line to the presidency, his ascension to speaker is an open question — even as, according to an MSNBC report, he has already moved into the speaker’s opulent suite of offices. He is facing entrenched opposition from a small number of conservative lawmakers who in a 222-213 majority could well tank his nomination.

    It is believed his candidacy could absorb no more than four defections. Some 14 Republicans, in the wake of a Sunday letter signed by nine House Republicans, have publicly vowed or suggested continued opposition to a McCarthy speakership.

    House Democrat Eric Swalwell suggested those nine letter signers would ultimately return to the McCarthy fold, while the other five holdouts have characterized themselves as “never Kevin” Republicans.

    See: McCarthy’s longtime ambition of becoming House speaker to come to head on Day 1 of new Congress

    Here’s what you need to know about how the House elects a speaker:

    No speaker, no House

    Choosing a speaker will be the first vote the House will take before new and returning lawmakers are even sworn into office on Tuesday. As set out under the Constitution, the session will begin at noon on Jan. 3, with all the lawmakers seated on the House floor and members from both parties joining in the vote for speaker. It is not a secret ballot.

    The chamber cannot organize until it has a speaker since that person effectively serves as the House’s presiding officer and the institution’s administrative head.

    The House can elect a new speaker at any time if the person occupying that role dies, resigns or is removed from office. Barring that, a speaker is normally elected at the start of a new Congress.

    Lawmakers call out the name of their choice for speaker from the floor, a rare and time-consuming roll call that heightens the drama on the floor. Members often liven up the proceedings by shouting or standing when casting their vote.

    Who can be nominated for speaker?

    In the weeks after an election, the Republican conference and the Democratic caucus hold an informal vote among their members to decide who they want to nominate to lead their party in January. McCarthy won the majority of the Republican vote in a closed-door November meeting. Weeks later, Democrats unanimously chose Rep. Hakeem Jeffries, a New York Democrat, to become their leader as the party transitions into the minority.

    But, once Jan. 3 comes along, members are not obligated to vote for the party’s chosen candidate. While it has been the tradition for the speaker candidate to be a member of the House, it is not required. In past years, President Joe Biden, former President Donald Trump and even a senator, Republican Rand Paul of Kentucky, have received votes for House speaker.

    To be sure, none of them came close to a majority of the vote.

    Let the voting begin

    Once the House is in a quorum — meaning the minimum number of members are present to proceed — the speaker nominee from each party will be read aloud by the respective leaders before a roll call vote to elect a new speaker. The clerk then appoints lawmakers from each party as tellers to tally the votes.

    The candidate to become speaker needs a majority of the votes from House members who are present and voting.

    Historically, the magical number has been 218 out of the 435 members of the House. But many previous speakers, including outgoing Speaker Nancy Pelosi, have ascended to the dais with fewer votes than that, as some members voted present instead of calling out a name. Every lawmaker voting “present” lowers the overall tally needed to reach a majority.

    See: Nancy Pelosi portrait unveiling at Capitol reduces John Boehner to tears

    Also: House Democratic caucus confers ‘speaker emerita’ title on Pelosi as Jeffries takes up party leadership reins

    Many are skeptical that McCarthy will reach a majority to become speaker on the first ballot. Should he come up short, it is likely the clerk will repeat the roll call several times until he is able to garner a majority. McCarthy is expected to be making concessions and compromises with the holdouts until the moment he is able to grasp the gavel, telling reporters on Monday at the Capitol that he expected to “have a good day” on Tuesday.

    From the archives (July 2021): Trump and allies work to rebrand Jan. 6 rioters as patriots, heroes and martyrs

    Also (January 2022): Toeing of party line outweighs deliverables for constituents for many of today’s congressional Republicans

    Also (February 2021): Rep. Marjorie Taylor Greene removed from House committees; 11 Republicans cross aisle in vote

    Gavel passing

    Once a speaker candidate won a majority of the vote, the clerk will announce the results of the election.

    A bipartisan committee, usually consisting of members from the home state of the chosen candidate, will then escort the speaker-elect to the chair on the dais where the oath of office is administered. The oath is identical to the one new members will take once a speaker is chosen.

    The outgoing speaker will usually join the successor at the speaker’s chair, where they will pass the gavel as a nod to the peaceful transition of power from one party leader to another. This time around, that will be Pelosi, the California Democrat who has held the gavel for the last four years.

    MarketWatch contributed.

    Read on: U.S. Rep.–elect Santos should consider quitting over résumé lies, says veteran House Republican

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  • U.S. stocks fall on last trading day of 2022, booking monthly losses and worst year since 2008

    U.S. stocks fall on last trading day of 2022, booking monthly losses and worst year since 2008

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    U.S. stocks ended lower Friday, booking their worst annual losses since 2008, as tax-loss harvesting along with anxieties about the outlook for corporate profits and the U.S. consumer took their toll.

    How stock indexes traded
    • The Dow Jones Industrial Average
      DJIA,
      -0.22%
      slipped 73.55 points, or 0.2%, to 33,147.25.

    • The S&P 500
      SPX,
      -0.25%
      shed 9.78 points, or 0.3%, to 3,839.50.

    • The Nasdaq Composite dipped 11.61 points, or 0.1%, to 10,466.48.

    For the week, the Dow fell 0.2%, the S&P 500 slipped 0.1% and the Nasdaq slid 0.3%. The S&P 500 dropped for a fourth straight week, its longest losing streak since May, according to Dow Jones Market Data.

    All three major benchmarks suffered their worst year since 2008 based on percentage declines. The Dow dropped 8.8% in 2022, while the S&P 500 tumbled 19.4% and the technology-heavy Nasdaq plunged 33.1%.

    What drove markets

    U.S. stocks fell Friday, closing out the last trading session of 2022 with weekly and monthly losses.

    Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many had expected as it sought to crush the worst inflation in four decades. The S&P 500 ended 2022 with a loss of 19.4%, its worst annual performance since 2008 as the index snapped a three-year win streak, according to Dow Jones Market Data.

    “Investors have been on edge,” said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, in a phone interview Friday. “It seems as though the ability to drive down prices is probably a bit easier given just how crummy the year’s been.”

    Stock indexes have slumped in recent weeks as hopes for a Fed policy pivot faded after the central bank in December signaled that it would likely wait until 2024 to cut interest rates.

    On the final day of the trading year, markets were also being hit by selling to lock in losses that can be written off of tax bills, a practice known as tax-loss harvesting, according to Kim Forrest, chief investment officer at Bokeh Capital Partners.

    An uncertain outlook for 2023 was also taking its toll, as investors fretted about the strength of corporate profits, the economy and the U.S. consumer with fourth-quarter earnings season looming early next year, Forrest said.

    “I think the Fed, and then earnings in the middle of January — those are going to set the tone for the next six months. Until then, it’s anybody’s guess,” she added.

    The U.S. central bank has raised its benchmark rate by more than four percentage points since the beginning of the year, driving borrowing costs to their highest levels since 2007.

    The timing of the Fed’s first interest rate cut will likely have a major impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed has tried to signal that it plans to keep rates higher for longer.

    On the economic data front, the Chicago PMI for December, the last major data release of the year, came in stronger than expected, climbing to 44.9 from 37.2 a month prior. Readings below 50 indicate contraction territory.

    Next year, “we’re more likely to shift towards fears around economic growth as opposed to inflation,” said Heppenstall. “I think the decline in growth will eventually lead to a more meaningful decline in inflation.”

    Read: Stock-market investors face 3 recession scenarios in 2023

    Eric Sterner, CIO of Apollon Wealth Management, said in a phone interview Friday that he’s expecting the U.S. could fall into a recession next year and that the stock market could see a new bottom as companies potentially revise their earnings lower. “I think earnings expectations for 2023 are still too high,” he said.

    The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite booked modest weekly declines, adding to their December losses. For the month, the Dow fell 4.2%, while the S&P 500 dropped 5.9% and the Nasdaq sank 8.7%, FactSet data show.

    Read: Value stocks trounce growth equities in 2022 by historically wide margin

    As for bonds, the U.S. Treasury market was set to record its worst year since at least the 1970s.

    The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.879%
    has jumped 2.330 percentage points this year to 3.826%, its largest annual gain on record based on data going back to 1977, according to Dow Jones Market Data.

    Two-year Treasury yields
    TMUBMUSD02Y,
    4.423%
    soared 3.669 percentage points in 2022 to 4.399%, while the 30-year yield
    TMUBMUSD30Y,
    3.971%
    jumped 2.046 percentage points to end the year at 3.934%. That marked the largest calendar-year increases ever for each based on data going back to 1973, according to Dow Jones Market Data.

    Outside the U.S., European stocks capped off their biggest percentage drop for a calendar year since 2018, with the Stoxx Europe 600
    SXXP,
    -1.27%    ,
    an index of euro-denominated shares, falling 12.9%, according to Dow Jones Market Data.

    Read: Slumping U.S. stock market lags these international ETFs as 2022 comes to an end

    Companies in focus

    —Steve Goldstein contributed to this article.

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  • Trump warns sharing his tax returns will ‘lead to horrible things for so many people’

    Trump warns sharing his tax returns will ‘lead to horrible things for so many people’

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    “‘The Democrats should have never done it, the Supreme Court should have never approved it, and it’s going to lead to horrible things for so many people.’”

    That was former President Donald Trump’s reaction to his tax returns being made public.

    The Democratic-controlled U.S. House Ways and Means committee released six years of Trump’s tax returns on Friday, after several years of legal wrangling with Republicans opposed to the publication, in an effort to provide transparency and help improve tax laws. Experts will be looking closely at large business losses reported by Trump that significantly reduced his tax liability. 

    Read more: What could be learned from Trump’s tax returns

    And: Trump paid $0 taxes in 2020. He’s not alone

    In his statement following the release, Trump countered that America’s partisan divide “will now grow far worse.”

    “The radical, left Democrats have weaponized everything, but remember, that is a dangerous two-way street!” he added.

    What’s more, the real estate mogul and former reality TV star turned commander-in-chief suggested the returns will demonstrate his business savvy. Trump and his wife, Melania, paid $0 in income taxes for 2020, according to a previous  report released by the congressional Joint Committee on Taxation.

    “The ‘Trump’ tax returns once again show how proudly successful I have been,” he continued, “and how I have been able to use depreciation and various other tax deductions as an incentive for creating thousands of jobs and magnificent structures and enterprises.”

    So why were Trump’s tax documents released? House Ways and Means Committee Chairman Richard Neal (a Democrat from Massachusetts) said in his opening statement on Friday that, “A president is no ordinary taxpayer. They hold power and influence unlike any other American. And with great power comes even greater responsibility.”

    He added that, “Our work has always been to ensure our tax laws are administered fairly and without preference, because at times, even the power of a president can loom too large.”

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