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  • Editorial Roundup: United States

    Editorial Roundup: United States

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    Excerpts from recent editorials in the United States and abroad:

    Nov. 6

    The Washington Post on the humanitarian crisis in Haiti

    Haiti is in the throes of one of the most dire emergencies in its crisis-prone recent history, one increasingly likely to wash up on U.S. shores in the form of desperate migrants. Its government, which is integral to the problem, last month requested international military intervention, and United Nations Secretary General António Guterres agreed that “armed action” is urgently required. In response, the United States, Canada and other key powers have dithered — even as the Biden administration is reported to be preparing to house waves of Haitian refugees at the U.S. military base at Guantánamo Bay. The situation is untenable.

    In the absence of boots on the ground, there are few good means for halting a humanitarian and security meltdown in Haiti that has paralyzed fuel supplies, endangered fresh water and food delivery, triggered a cholera outbreak, and intensified what the United Nations has called “emergency” hunger threatening nearly one-fifth of the country’s 11.5 million people. Still, even without deploying police or soldiers, the Biden administration and its key allies have options for acting more forcefully and should move swiftly.

    The most immediate priority is to break an inland blockade by armed gangsters that for nearly two months has sealed off the country’s main fuel supply depot in Port-au-Prince, the capital. The cutoff, allegedly in protest of fuel price increases owing to the government slashing subsidies, has resulted in drastic consequences — shuttered gas stations, schools, hospitals and shops, as well as severe shortages of food and medicine. The United States and Canada have sent armored cars and other supplies to help Haiti’s police break the blockade, but those shipments have been inadequate.

    Washington could also flex its diplomatic muscle with Haitian authorities to encourage sustained negotiations between the unelected government of Prime Minister Ariel Henry and a broad opposition association of Haitian civic and nonprofit groups, known as the Montana Accord. The groups correctly argue that Mr. Henry’s administration is illegitimate and ineffectual. (Mr. Henry himself has been implicated in last year’s unsolved assassination of President Jovenel Moïse.)

    The Accord, named for a hotel in Port-au-Prince, has proposed a transitional period leading to elections, which are now impossible given the pandemonium that grips the nation. While the groups lack the means to organize elections, let alone confront the gangs, they at least enjoy a modicum of popular support, which the current government lacks. They deserve a role in determining Haiti’s future; Washington could give them that.

    Simultaneously, the United States should extend temporary protected status, set to expire in February, for tens of thousands of Haitians already living and working legally in the United States, thereby shielding them from the prospect of deportation to a country gripped by pandemonium.

    Without armed intervention, no prospective relief will be easy to achieve in a country that has dissolved into chaotic violence and florid dysfunction. However, to acquiesce to the status quo, as the Biden administration has done since the Moïse assassination, is to be morally complicit in an unfolding humanitarian tragedy. Washington cannot continue to pay lip service to resolving the crisis in Haiti. It can and should use its considerable influence to relieve the suffering of millions in the hemisphere’s poorest country.

    ONLINE: https://www.washingtonpost.com/opinions/2022/11/06/haiti-government-crisis-us-intervention/

    ———

    Nov. 3

    The New York Times on Democracy and political violence in the United States

    Over the past five years, incidents of political violence in the United States by right-wing extremists have soared. Few experts who track this type of violence believe things will get better anytime soon without concerted action. Domestic extremism is actually likely to worsen. The attack on Paul Pelosi, the husband of the speaker of the House of Representatives, was only the latest episode, and federal officials warn that the threat of violence could continue to escalate after the midterm elections.

    The embrace of conspiratorial and violent ideology and rhetoric by many Republican politicians during and after the Trump presidency, anti-government anger related to the pandemic, disinformation, cultural polarization, the ubiquity of guns and radicalized internet culture have all led to the current moment, and none of those trends are in retreat. Donald Trump was the first American president to rouse an armed mob that stormed the Capitol and threatened lawmakers. Taken together, these factors form a social scaffolding that allows for the kind of endemic political violence that can undo a democracy. Ours would not be the first.

    Yet the nation is not powerless to stop a slide toward deadly chaos. If institutions and individuals do more to make it unacceptable in American public life, organized violence in the service of political objectives can still be pushed to the fringes. When a faction of one of the country’s two main political parties embraces extremism, that makes thwarting it both more difficult and more necessary. A well-functioning democracy demands it.

    The legal tools to do so are already available and in many cases are written into state constitutions, in laws prohibiting private paramilitary activity. “I fear that the country is entering a phase of history with more organized domestic civil violence than we’ve seen in 100 years,” said Philip Zelikow, the former executive director of the 9/11 Commission, who pioneered legal strategies to go after violent extremists earlier in his career. “We have done it in the past and can do so again.”

    As the range of violence in recent years shows, the scourge of extremism in the United States is evident across the political spectrum. But the threat to the current order comes disproportionately from the right.

    Of the more than 440 extremism-related murders committed in the past decade, more than 75% were committed by right-wing extremists, white supremacists or anti-government extremists. The remaining quarter stemmed from a range of other motivations, according to a study by the Anti-Defamation League. There were 29 extremist-related homicides last year: 26 committed by right-wing extremists, two by Black nationalists and one by an Islamic extremist. The Department of Homeland Security has warned again and again that domestic extremism motivated by white supremacist and other right-wing ideologies is the country’s top terrorism threat … the threat of violence has begun to have a corrosive effect on many aspects of public life: the hounding of election workers until they are forced into hiding, harassment of school board officials, threats to judges, armed demonstrations at multiple statehouses, attacks on abortion clinics and anti-abortion pregnancy centers, bomb threats against hospitals that offer care to transgender children, assaults on flight attendants who try to enforce COVID rules and the armed intimidation of librarians over the books and ideas they choose to share.

    Meanwhile, threats against members of Congress are more than ‌10 times as numerous as they were just five years ago … There are four interrelated trends that the country needs to address: the impunity of organized paramilitary groups, the presence of extremists in law enforcement and the military, the global spread of extremist ideas and the growing number of G.O.P. politicians who are using the threat of political violence not just to intimidate their opponents on the left but also to wrest control of the party from those Republicans who are committed to democratic norms …. Preserving the health of our democracy is as much a matter of preventive care as it is the application of a tourniquet. A promising place to start combating political violence is with extremist paramilitary groups.

    While the majority of such violence in the United States comes at the hands of people not strictly affiliated with these groups — the man who is accused of attacking Mr. Pelosi, for example, echoed their hatred of Nancy Pelosi, but it’s not clear whether the man had links to any of them — they are nonetheless often the vanguard of violent episodes, such as the Jan. 6 attack on the Capitol, and they are active in spreading their brands of ideological extremism online.

    They go by many names: the Oath Keepers, the Proud Boys, the Boogaloo Bois, the Three Percenters, the Wolverine Watchmen. Some fancy themselves militias, but they aren’t, according to the law. These groups have been around in their modern incarnations since the end of the Vietnam War, and their popularity has waxed and waned. In fact, ‌political violence is as old as the nation itself; right-wing frustrations with democratic outcomes have birthed militia movements throughout American history. Most notably, the Ku Klux Klan has spent over a century and a half, from Reconstruction to the present day, terrorizing Black Americans and others in service of political ends.

    Today, levels of political violence are high and climbing. In 2020 the Center for Strategic and International Studies found that violence from all political ideologies reached its highest level since the group began collecting data in 1994. And extremist paramilitary groups have again become a common presence in American life, on college campuses, at public protests and at political rallies‌.

    ONLINE: https://www.nytimes.com/2022/11/03/opinion/political-violence-extremism.html

    ———

    Nov. 4

    The Wall Street Journal on the labor market

    The Labor Department reported Friday that the economy created 261,000 new jobs in October, which beat Wall Street’s expectations. Upward revisions for September added to the evidence that the job market is holding up despite rising interest rates.

    But hold the confetti. The labor market also showed the beginning of some cracks, as the unemployment rate rose to 3.7% from 3.5% and 328,000 fewer people were employed. The labor participation rate fell for the second month in a row, and unemployment ticked up for nearly every demographic group except teenagers. This evidence suggests that while employers are still hiring, the pace of hiring is slowing.

    The upshot is that the job market is headed for harder time as the Federal Reserve’s interest-rate increases continue. Companies are already reporting job freezes and in some cases layoffs, especially in the tech industry where stock prices have been hammered this year.

    Elon Musk sent sacking notices to 3,700 Twitter employees on Friday, about half the workforce. Amazon said it is pausing new hires for the corporate workforce, citing the “unusual macro-economic environment.” Lyft is laying off workers, as is CNN. The larger story is that companies are putting up the storm windows in case there’s a recession coming in 2023, which there may be.

    The mixed jobs news is unlikely to deter the Federal Reserve from its drive to restrain inflation. Average hourly earnings rose at a healthy 4.7% rate in the last year, which is good news for workers but not for inflation. Wage pressure continues across the economy, especially for workers who leave for new jobs. The Atlanta Fed’s tracker has wage growth growing at an annual rate of 6.3% in the three months through September. Workers should enjoy the gains while they can because there are rougher days ahead as the Fed moves to fix Washington’s great inflation mistake.

    ONLINE: https://www.wsj.com/articles/the-contradictory-labor-market-jobs-report-october-hiring-labor-force-participation-unemployment-11667600385

    ———

    Nov. 2

    China Daily on U.S. trade with China

    Australian Resources Minister Madeleine King hit the nail on the head in an interview on Tuesday when she described the hope of some Western countries that they could soon end their reliance on China for rare earths as a “pipe dream”.

    This is because China holds the world’s largest reserves of the mineral resources and accounts for around 80% of global production of rare earths, which are needed for a wide variety of products, ranging from smartphones to aerospace technology to wind turbines.

    Yet rather than calling for joint international efforts to ensure the safety and stability of the industry and supply chains for the good of all countries, King insinuated that Australia and the United States should cooperate to boost investments in the minerals in order to break China’s monopoly, as it is a country “that has seen this need coming and made the most of it.”

    But despite being the world’s largest trading and manufacturing country, China has never and will not seek to weaponize trade or its dominant position in certain fields such as rare earths’ production. Rather, it continues to advocate and uphold free trade and economic globalization as a means to counter protectionism and the “decoupling” trend initiated by Washington that hurts the interests of all nations.

    King’s remarks highlight the dilemma that Australia finds itself in when it comes to its economic and trade ties with China. On the one hand, China has long been Australia’s biggest trading partner for both the export and import of goods. On the other hand, Canberra is willingly playing the role of Washington’s vanguard in the Asia-Pacific in its strategy to contain China, which means it has to toe the U.S. line even at the expense of its own interests.

    In the latest move, the U.S. is reportedly preparing to deploy up to six nuclear-capable B-52 bombers in northern Australia to send “a strong message to adversaries.” Australia had earlier joined the U.S. in banning Chinese telecommunications giant Huawei citing national security concerns, and has had running spats with China on such issues as human rights and the South China Sea after Washington began hyping up its groundless allegations of human rights abuses and coercive behavior on the part of China.

    China is doing its best to play its part in keeping the world economy and international trade stable. Other countries likewise need to shoulder their due responsibilities to ensure the normal functioning of relevant trade and economic cooperation, rather than trying to use the economy and trade as political tools or weapons, which only destabilizes the global economic system to the detriment of all.

    ONLINE: https://www.chinadaily.com.cn/a/202211/02/WS6362583ca310fd2b29e7fee6.html

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  • Asian benchmarks advance as markets watch China, inflation

    Asian benchmarks advance as markets watch China, inflation

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    TOKYO — Asian stocks advanced Monday as investors weighed uncertainties such as the U.S. mid-term elections and China‘s possible moves to ease coronavirus restrictions.

    Oil prices fell and U.S. futures edged lower.

    China reported its trade shrank in October as global demand weakened and anti-virus controls weighed on domestic consumer spending. Exports declined 0.3% from a year earlier, down from September’s 5.7% growth, the customs agency reported Monday. Imports fell 0.7%, compared with the previous month’s 0.3% expansion.

    Speculation about a possible relaxation of China’s zero-COVID strategy has had a huge impact on markets. On Monday, Hong Kong’s Hang Seng index gained 2.8% to 16,612.61 and the Shanghai Composite rose 0.2% to 3,077.85.

    There has been no official confirmation in China of a major change.

    “Over the weekend, Beijing has dashed hopes of China re-opening in the horizon, by reasserting of zero-COVID policies. And this could induce fresh caution,” Tan Boon Heng at Mizuho Bank in Singapore said in a report.

    In the U.S., Tuesday’s election will decide control of Congress and key governorships. History suggests the party in power may suffer significant losses in the midterms, and decades-high inflation has become a significant issue for the Democrats.

    Analysts say regional markets may take a wait-and-see approach ahead of the U.S. mid-term vote.

    Japan’s benchmark Nikkei 225 jumped 1.2% to finish at 27,527.64. Australia’s S&P/ASX 200 gained 0.6% to 6,933.70. South Korea’s Kospi gained nearly 1.0% to 2,371.79.

    Shares rose in Taiwan and but edged lower in India.

    Wall Street stocks ended last week with a rally but only after yo-yoing several times. Market watchers had data on the U.S. jobs market to digest, considering what it might mean for interest rates and the odds of a recession.

    The S&P 500 recorded its first weekly loss in the last three, despite Friday’s gain 1.4% to 3,770.55. The Dow rose 1.3% to 32,403.22, and the Nasdaq climbed 1.3% to 10,475.25. Both also finished with losses for the week.

    The unemployment rate ticked higher in October, employers added fewer jobs than they had a month earlier and gains for workers’ wages slowed a touch. The slowdown was still more modest than economists expected. And so the Fed is expected to keep hiking rates.

    Fed Chair Jerome Powell has called out a still-hot jobs market as one of the reasons the central bank may ultimately have to raise rates higher than earlier thought. Such moves could cause a recession.

    The yield on the two-year Treasury fell to 4.68% from 4.72% late Thursday. The 10-year yield, which helps dictate rates for mortgages and other loans, edged higher to 4.16% from 4.15%.

    In energy trading, benchmark U.S. crude fell $1.26 to $91.54 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost $1.18 cents in London to $97.39 a barrel.

    In currency trading, the U.S. dollar edged up to 147.29 Japanese yen from 146.92 yen. The euro rose to 99.43 cents from 99.15 cents.

    ———

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

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  • Inflation puts tighter squeeze on already pricey kids sports

    Inflation puts tighter squeeze on already pricey kids sports

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    By EDDIE PELLS

    November 3, 2022 GMT

    It only took a few seconds for Rachel Kennedy to grab her phone after she left the checkout line at the sporting-goods store, where she had just finished buying a new glove, pants, belt, cleats and the rest of the equipment for her son, Liam’s, upcoming baseball season.

    “I texted his dad and asked him, ‘Did we really spend $350 on all this last year?’” Kennedy said.

    Sticker shock in youth sports is nothing new, but the onslaught of double-digit inflation across America this year has added a costly wrinkle on the path to the ballparks, swimming pools and dance studios across America. It has forced some families, like Kennedy’s, to scale back the number of seasons, or leagues, or sports that their kids can play in any given year, while motivating league organizers to become more creative in devising ways to keep prices down and participation up.

    (AP video: Justin Bickel/Production: Patrick Orsagos)

    Recent studies, conducted before inflation began impacting daily life across America, showed families spent around $700 a year on kids’ sports, with travel and equipment accounting for the biggest portion of the expense.

    Everyone from football coaches to swim-meet coordinators are struggling to to find less-expensive ways of keeping families coming through the doors. Costs of uniforms and equipment, along with facility rental, are shooting up — all products of the onslaught of supply-chain issues, hard-to-find staff, lack of coaches and rising gas and travel costs that were exacerbated, or sometimes caused, by the COVID-19 pandemic that disrupted and sometimes canceled seasons altogether. The annual inflation rate for the 12 months ending in September was 8.2%.

    Kennedy, who lives in Monroe, Ohio, and describes her family as “on the lower end of middle class,” opted Liam out of summer and fall ball, not so much because of the fees to join the leagues but because “those don’t include all the equipment you need.”

    “And gas prices have gotten to the point where we don’t have the bandwidth to drive one or two hours away” for the full slate of weekend games and tournaments that dot the typical youth baseball schedule each season. The Kennedys rarely stayed the night in hotels for multi-day tournaments.

    A study published by The Aspen Institute that was conducted before COVID-19 said on average across all sports, parents already spent more each year on travel ($196 per child, per sport) than any other facet of the sport: equipment, lessons, registration, etc. A number of reports say hotel prices in some cities are around 30% higher than last year, and about the same amount higher than in 2019, before the start of the pandemic.

    At the venues, it costs more to hire umpires to call the games, groundskeepers to keep fields ready, janitors to clean indoor venues and coaches to run practices. Even sports that are traditionally on the less-expensive end of the spectrum are running into issues.

    “You talk to people and you say ‘What do you mean you get $28 an hour to be a lifeguard?’” said Steve Roush, a former leader in the Olympic world who now serves as executive director of Southern California Swimming, which sanctions meets across one of America’s most expensive regions. “The going rate has just gone through the roof, and that’s if you can find somebody at all. And that accounts for part of the big gap” in prices for swimming meets today versus three years ago.

    One Denver-area dance studio director, who did not want her name used because of the competitive nature of her business, said she started looking for new uniform suppliers as a way of keeping costs down for families. Some destinations for the two out-of-state competitions that are typical in a given season have been shifted to cities that have more — and, so, less expensive — flight options. Some of those teams only make a third trip, this one to a major competition, if it receives a “paid” invitation.

    “The cost is just so much to ask them to travel a third time,” the director said. “And oftentimes you don’t know that you’re getting that bid until February or March and you have to turn around and travel to it in April, and that turnaround just makes it very hard from an expense standpoint.”

    At stake is the future of a youth-sports industry that generated around $20 billion, according to one estimate, before COVID-19 sharply curtailed spending in 2020.

    Also, inflation is giving some families a chance to revisit an issue that first came up when COVID-19 more or less canceled all youth leagues for a year or more.

    “There was some optimism that maybe families would be like, ‘OK, let’s maybe have a more balanced approach to how we’re going to participate in sports,’” said Jennifer Agans, an assistant professor at Penn State who studies the impact of youth sports. “But until this economic wave, everyone was so excited to go back to normal that we forgot the lessons we learned from slowing our lives down. Maybe this gives another chance to reevaluate that.”

    It’s a choice not everyone wants to make, but still one that is being imposed more on people in the middle and lower class. Another Aspen Institute report from before the pandemic concluded children from low-income families were half as likely to play sports as kids from upper-income families.

    Kennedy said she has long been fortunate to have a supportive family — including grandparents who chip in to defray some costs of Liam’s baseball. But some things had to go. A spot on a travel team can reach up to $1,200, and that’s before equipment and travel, “and we just don’t have that kind of money,” Kennedy said.

    Still, Liam loves baseball and sitting it out altogether wasn’t a real choice.

    “It’s the whole parental, ‘I’ll go hungry to make sure my kids get what they need’ situation,’” Kennedy said. “So if I give up my Starbucks, or some little extras for me, then it’s worth it to make sure he gets to play. But it’s certainly not getting any less expensive.”

    ___

    AP sports: https://apnews.com/hub/sports and https://twitter.com/AP_Sports

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  • Why Apple raised the price of the iPhone, but not in the U.S. and China

    Why Apple raised the price of the iPhone, but not in the U.S. and China

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    Customer inspects iPhone 14 Pro Max inside an Apple store in Marunouchi, Tokyo.

    Stanislav Kogiku | SOPA Images | Lightrocket | Getty Images

    Apple‘s newest iPhones, the series 14 models, come with better displays, cameras, and satellite messaging, among other features and updates. But depending on where you live, they also may come with a higher price tag.

    While some analysts projected that Apple might increase the price of its latest iPhones across the board due to continued supply chain challenges and inflation, potential buyers in the U.S. and China saw no increases compared to the series 13 models.

    But for consumers in markets like the U.K., Japan, Germany, and Australia, the newest models also came with significant price increases.

    For example, the base iPhone 14 model starts at $799 in the U.S., the same price that the company charged for the iPhone 13 at its release last year.

    In the U.K., the base iPhone 14 costs £849, or roughly $975. The base iPhone 13 was priced at £779, an increase of £70 or roughly $80.

    That price difference only increases with the more enhanced models. For example, the iPhone 14 Pro Max in the U.K. is £150 more expensive than the equivalent last year’s model.

    The reason Apple took the step to increase the price of phones in those markets has to do with currency fluctuations.

    “Essentially every currency around the world has weakened against the dollar,” Apple CFO Luca Maestri said on the company’s fourth-quarter earnings call with analysts last week. “The strong dollar makes it difficult in a number of areas. Obviously, our pricing in emerging markets makes it difficult, and the translation of that revenue back into dollars is affected.”

    While Apple reported that its revenue increased 8% in the quarter to $90.15 billion, Apple CEO Tim Cook told CNBC last week that the company would have grown “double-digits” if not for the strong dollar.

    “The foreign exchange headwinds were over 600 basis points for the quarter,” Cook told CNBC’s Steve Kovach. “So it was significant. We would have grown in double digits without the foreign exchange headwinds.” 

    Foreign currency exchange is “a very significant factor that is affecting our results, both revenue and gross margin,” Maestri said. Apple does hedge against its currency exposures “in as many places as possible around the world,” he said, but those sorts of protections do start to reduce as the company needs to continue to buy new contracts.

    But Apple also examines the foreign exchange landscape when it launches new products, Maestri said, which led to these most recent price increases.

    “In some cases, for example, customers in international markets had to … they saw some price increases when we launched the new products, which is not something that, for example, U.S. customers have seen,” he said. “And that’s unfortunately the situation that we’re in right now with the strong dollar.”

    While recent currency fluctuations versus the U.S. dollar are causing some international buyers to pay more for an iPhone, there have been instances where Apple instead absorbed those costs.

    In 2019, when the U.S. dollar also saw a rise in value compared to other currencies, Apple adjusted foreign prices in some markets and reset them to near or the same as they had been in local currencies a year prior.

    However, the reason Apple did that was due to a decline in sales as a result of the price increase. For example, in Turkey, where the local lira had fallen 33% against the dollar in 2019, Apple’s sales were down $700 million.

    “We’ve decided to go back to [iPhone prices] more commensurate with what our local prices were a year ago, in hopes of helping the sales in those areas,” Cook told Reuters in an interview at the time.

    But in 2022, Apple says it has not seen any drop off in demand in those markets. Maestri noted that it saw double-digit growth in India, Indonesia, Mexico, Vietnam, and other countries even in their respective reported currencies.

    “It’s important for us to look at how these markets perform in local currency because it really gives us a good sense for the customer response to our products, the engagement with our ecosystem, and in general, the strength of the brand,” Maestri said on the earnings call. “And I have to say, in that respect, we feel very, very good about the progress that we’re making in a lot of markets around the world.”

    The U.S dollar has also risen steadily against the Chinese yuan over the six months, but there have been some signs that demand for the new Apple iPhones in the country might be weakening. While Maestri said Apple saw new September quarter records in Greater China, a recent report from Jeffries said that China sales of the four new iPhone 14 models over their first 38 days of being sold are down by 28% compared to the iPhone 13 models over the same period of time.

    Here are some other comparisons of the prices of the base iPhone model between the 14 and 13 series:

    Australia:

    • iPhone 13: 1,349 Australian dollars
    • iPhone 14: 1,399 Australian dollars

    Japan:

    • iPhone 13: 98,800 Japanese yen
    • iPhone 14: 119,800 Japanese yen

    Germany:

    • iPhone 13: 899 euros
    • iPhone 14: 999 euros

    Companies feeling impact of strong dollar

    Apple isn’t the only company acknowledging the impact that currency headwinds are having on its business and pricing decisions.

    McDonald’s reported that currency dragged down its revenue by 7 percentage points, accounting for its 5% year-over-year decline in sales – which would have increased by 2% without the currency impact. With 60% of its sales coming from outside of the U.S., “Obviously, we’re translating those sales back into less U.S. dollars,” CFO Ian Borden said on the company’s earnings call last week.

    At P&G, the currency hit keeps getting bigger. The consumer products company reported a 6% decline in net sales due to “unfavorable foreign exchange,” which followed 3% and 4% negative currency impacts in each of its previous two quarters. The company had to raise its forecast for the exchange rate impact this year to $1.3 billion, with CFO Andre Schulten saying on the company’s earnings call last week, “Foreign exchange has continued its strong move against us.”

    James Quincey, CEO of Coca-Cola, which makes approximately 80% of its earnings outside the U.S., said the dollar has been a high single-digit headwind this year. “It’s likely to be a big headwind like that next year,” Quincey said on CNBC’s “Squawk on the Street” last week.

    Coca-Cola, like Apple, has looked to offset some of the currency headwinds by raising prices, something it said it expects to continue to do as the U.S. dollar shows little signs of waning. “We are expecting pricing to be ahead of normal next year on top of what’s happened this year,” Quincey said.

    So far, Coca-Cola has not reported demand dropping as a result of the higher prices, but Quincey did say there are some potential consumer concerns on the horizon.

    “We do see our consumers are beginning to respond in a traditional way they would in a recession; delaying discretionary and high-ticket discretionary items and perhaps going to more private label or discount dollar channels,” Quincey said, noting “some effects of reduction of purchasing power out there in the marketplace.”

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  • The unemployment rate for Black men fell in October, but so did labor force participation

    The unemployment rate for Black men fell in October, but so did labor force participation

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    A Now Hiring sign at a Dunkin’ restaurant on September 21, 2021 in Hallandale, Florida.

    Joe Raedle | Getty Images

    The unemployment rate for Black men ticked down in October while it rose for most other groups, but that may be because workers are dropping out of the labor force.

    The October nonfarm payrolls print showed that the U.S. economy added 261,000 jobs in the month and that the unemployment rate for all workers increased to 3.7% from 3.5%.

    For Black men, unemployment fell to 5.3% from 5.8% a month earlier on a seasonally adjusted basis. White unemployment rose to 3.2% overall up from 3.1% a month earlier.  

    “It went in the right direction for the wrong reasons,” said Bill Spriggs, an economics professor at Howard University and chief economist for the AFL-CIO.

    The wrong reasons

    The downward motion in unemployment for Black men is likely due to the labor force participation rate, which dipped slightly to 67.2% in October, just below the previous month’s reading of 68%.

    In addition, the employment-to-population ratio for Black men fell to 63.6% from 64.1% in September, which could indicate that workers have stopped looking for jobs, sending unemployment lower.

    Unemployment for Hispanic workers also jumped in October, outpacing the uptick for Black and white workers. It jumped to 4.2% from 3.8% in September.

    “It’s showing this continued frustration that workers of color are having in the labor market,” said Spriggs. Though overall there is strength in the labor market, “this is not the tight labor market where people can just walk in and get a job no matter who they are.”

    Overall Black unemployment ticked up led by Black women. In October, the unemployment rate for Black women jumped to 5.8% from 5.4% in September.

    “This is concerning because throughout both the pandemic and the economic recovery from the pandemic crisis, Black women have been lagging behind,” said Kate Bahn, director of economic policy and chief economist at the Washington Center for Equitable Growth, a non-profit

    On the brighter side, the employment to population ratio for Black women didn’t change, though labor market participation ticked up during the month. That could be a sign that more Black women are returning to the labor force and are looking for jobs but haven’t yet found employment, noted Valerie Wilson, director of the program on race, ethnicity and the economy at the Economic Policy Institute.

    “It doesn’t suggest that there’s a huge number of people losing jobs,” she said.

    Going forward

    Of course, one month of data does not make a trend, so it’s important to look at the longer-term picture for workers of color.

    Generally, the unemployment rate for workers of color has stepped down in recent months in-line with white counterparts, and labor force participation and the employment to population ratio have mostly held steady, said Wilson.

    Still, there may be cause for concern going forward depending on how the Federal Reserve reads the October report. The labor market has remained strong amid historic interest rate hikes meant to tame high inflation, and the central bank is poised to continue its path of raising rates.

    If the Fed goes too far and pushed the U.S. economy into a recession, that could have the worst impact on workers of color.

    “If we throw the economy into a recession, that impact at least historically is more likely to hit harder in communities of color,” said Wilson.

    — CNBC’s Gabriel Cortes contributed reporting.

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  • Stocks end lower as the Fed continues to fight inflation

    Stocks end lower as the Fed continues to fight inflation

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    NEW YORK — Stocks racked up more losses on Wall Street and Treasury yields again rose to multiyear highs Thursday as investors looked ahead to a closely watched job market report from the government that could influence the Federal Reserve’s next move in its fight to bring down inflation.

    Technology stocks led the market pullback, which came a day after the central bank raised its benchmark rate for the sixth time this year and signaled that it may need to keep hiking rates for some time before its can successfully squash the highest inflation in decades.

    The S&P 500 fell 1.1%, while the Dow Jones Industrial Average dropped 0.5%. The tech-heavy Nasdaq composite closed 1.7% lower. The declines extended the major indexes’ losing streak to a fourth day. They’re each on pace for a weekly loss.

    Expectations of higher rates helped push up Treasury yields, weighing on stocks. The two-year Treasury note, which tends to track expectations for future Fed moves, rose to 4.72% from 4.61% late Wednesday and is now at its highest level since 2007, according to Tradeweb.

    The yield on the 10-year Treasury rose to 4.15% from 4.09% late Wednesday. The rise in the 10-year Treasury yield has prompted mortgage rates to more than double this year and it continues putting pressure on stocks.

    The Fed on Wednesday added another jumbo rate increase and suggested that the pace of rate hikes may slow. The central bank also indicated that interest rates might need to ultimately go even higher than previously thought in order to tame the worst inflation in decades.

    The central bank’s latest three-quarters of a percentage point raise brings short-term interest rates to a range of 3.75% to 4%, its highest level in 15 years. Wall Street is evenly split on whether the central bank ultimately raises rates to a range of 5% to 5.25% or 5.25% to 5.50% next year.

    Higher rates not only slow the economy by discouraging borrowing, they also make stocks look less appealing compared to lower-risk assets like bonds and CDs.

    Stubbornly hot inflation has been prompting central banks around the world to also raise interest rates. On Thursday, the Bank of England announced its biggest interest rate increase in three decades. The increase is the Bank of England’s eighth in a row and the biggest since 1992.

    European and Asian markets closed mostly lower.

    In the U.S., the S&P 500 fell 39.80 points to 3,719.89. The Dow lost 146.51 points to close at 32,001.25. The Nasdaq slid 181.86 points to 10,342.94. Smaller company stocks also lost ground. The Russell 2000 fell 9.41 points, or 0.5%, to 1,779.73.

    Technology and communication services stocks were among the biggest weights on the market. Apple fell 4.2% and Warner Bros. Discovery slid 5.6%.

    Those losses kept gains in industrial, energy and other sectors in check. Boeing jumped 6.3% and Marathon Petroleum rose 3%.

    Investors had been hoping for economic data signaling that the Fed might ease up on rate increases. The fear is that the Fed will go too far in slowing the economy and bring on a recession.

    Hotter-than-expected data from the employment sector this week has so far signaled that the Fed has to remain aggressive. On Friday, Wall Street will get a broader update from the U.S. government’s October jobs report.

    So far, hiring and wage growth have not fallen fast enough for the Fed to slow its inflation-fighting efforts. If the October data shows a stronger-than-expected rise in hiring or wages, that could put pressure on the Fed to keep raising interest rates.

    The Labor Department is expected to report that nonfarm employers added 200,000 jobs last month. That would be the worst showing since December 2020, when the economy lost 115,000 jobs.

    Investors will also be looking ahead to the latest data on inflation at the consumer level. That report, the consumer price index, is due out next week.

    “The next two or three quarters are incredibly important in assessing how far the Federal Reserve will need to go to achieve their objective of bringing down inflation,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “Why the CPI data is so important, why the labor report is so important, is because they feed into that next six-month cycle.”

    Wall Street has also been closely watching the latest company earnings reports. The reports have been mixed and many companies have warned that inflation will likely continue pressuring operations.

    Booking Holdings rose 2.7% after reporting strong third-quarter financial results. Robinhood Markets climbed 8.2% after the investing app operator reported third-quarter earnings that topped Wall Street’s forecasts. Chipmaker Qualcomm fell 7.7% after giving investors a weak profit and revenue forecast.

    ——

    Joe McDonald and Matt Ott contributed to this report.

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  • Turkey’s inflation tops 85% as Erdogan continues to rule out interest rate hikes

    Turkey’s inflation tops 85% as Erdogan continues to rule out interest rate hikes

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    Russians tourists to Europe decreased dramatically over the summer, but rose in several other destinations, including Turkey (here).

    Onur Dogman | Sopa Images | Lightrocket | Getty Images

    Inflation in Turkey rose for the 17th consecutive month in October, hitting 85.5% year-on-year as food and energy prices continued to climb, according to official figures.

    Food prices were 99% higher than the same period last year, housing rose by 85% and transport was up 117%, the Turkish Statistical Institute reported Thursday.

    The domestic producer price index shows a 157.69% increase annually and was up 7.83% on a monthly basis. The monthly rise in consumer prices was 3.54%.

    The dramatic rise in living costs for the country of 85 million has continued unabated for nearly two years, in tandem with significant devaluation of Turkey’s currency, the lira.

    Controversially, Turkish President Recep Tayyip Erdogan refuses to raise interest rates, insisting that it would harm the economy. Economists and critics say his policies have continued to hurt the lira and push inflation up, fomenting a currency crisis.

    Turkey’s central bank on Oct. 20 slashed its key interest rate by 150 basis points for the third consecutive month of cuts, from 12% to 10.5% — despite Turkish inflation at more than 83% at the time.

    Erdogan says the cuts are pro-growth, and that they will continue. The president remains determined to get the country’s interest rate down to single digits by the end of this year.

    “My biggest battle is against interest. My biggest enemy is interest. We lowered the interest rate to 12%,” the president said during an event in late September. “Is that enough? It is not enough. This needs to come down further.”  

    Turkey’s central bank “will remain under pressure from President Erdogan for looser policy,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in an analyst note after the data was released.

    He added that “although the CBRT [Central Bank of the Republic of Turkey] said it will deliver one more 150bp interest rate cut at its meeting later this month, there is a risk of further easing beyond that, adding more downward pressure onto the lira.”

    The lira was trading roughly flat on the day at 18.61 to the dollar. It’s lost more than 28% of its value against the greenback year-to-date and nearly 50% in the last full year.

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  • Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead

    Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead

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    The Federal Reserve on Wednesday approved a fourth consecutive three-quarter point interest rate increase and signaled a potential change in how it will approach monetary policy to bring down inflation.

    In a well-telegraphed move that markets had been expecting for weeks, the central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.

    The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.

    Along with anticipating the rate hike, markets also had been looking for language indicating that this could be the last 0.75-point, or 75 basis point, move.

    The new statement hinted at that policy change, saying when determining future hikes, the Fed “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

    Economists are hoping this is the much talked about “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.

    Changes in policy path

    This week’s statement also expanded on previous language simply declaring that “ongoing increases in the target range will be appropriate.”

    The new language read, “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”

    Stocks initially rose following the announcement, but turned negative during Chairman Jerome Powell‘s news conference as the market tried to gauge whether the Fed thinks it can implement a less restrictive policy that would include a slower pace of rate hikes to achieve its inflation goals.

    On balance, Powell dismissed the idea that the Fed may be pausing soon though he said he expects a discussion at the next meeting or two about slowing the pace of tightening.

    He also reiterated that it may take resolve and patience to get inflation down.

    “We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said.

    Still, Powell repeated the idea that there may come a time to slow the pace of rate increases. He has said this at recent news conferences

    “So that time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made,” he said.

    Soft-landing path narrows

    The chairman also expressed some pessimism about the future. He noted that he now expects the “terminal rate,” or the point when the Fed stops raising rates, to be higher than it was at the September meeting. With the higher rates also comes the prospect that the Fed will not be able to achieve the “soft landing” that Powell has spoken of in the past.

    “Has it narrowed? Yes,” he said in response to a question about whether the path has narrowed to a place where the economy doesn’t enter a pronounced contraction. “Is it still possible? Yes.”

    However, he said the need for still-higher rates makes the job more difficult.

    “Policy needs to be more restrictive, and that narrows the path to a soft landing,” Powell said.

    Along with the tweak in the statement, the Federal Open Market Committee again categorized growth in spending and production as “modest” and noted that “job gains have been robust in recent months” while inflation is “elevated.” The statement also reiterated language that the committee is “highly attentive to inflation risks.”

    The rate increase comes as recent inflation readings show prices remain near 40-year highs. A historically tight jobs market in which there are nearly two openings for every unemployed worker is pushing up wages, a trend the Fed is seeking to head off as it tightens money supply.

    Concerns are rising that the Fed, in its efforts to bring down the cost of living, also will pull the economy into recession. Powell has said he still sees a path to a “soft landing” in which there is not a severe contraction, but the U.S. economy this year has shown virtually no growth even as the full impact from the rate hikes has yet to kick in.

    At the same time, the Fed’s preferred inflation measure showed the cost of living rose 6.2% in September from a year ago – 5.1% even excluding food and energy costs. GDP declined in both the first and second quarters, meeting a common definition of recession, though it rebounded to 2.6% in the third quarter largely because of an unusual rise in exports. At the same time, housing demand has plunged as 30-year mortgage rates have soared past 7% in recent days.

    On Wall Street, markets have been rallying in anticipation that the Fed soon might start to ease back as worries grow over the longer-term impact of higher rates.

    The Dow Jones Industrial Average has gained more than 13% over the past month, in part because of an earnings season that wasn’t as bad as feared but also due to growing hopes for a recalibration of Fed policy. Treasury yields also have come off their highest levels since the early days of the financial crisis, though they remain elevated. The benchmark 10-year note most recently was around 4.09%.

    There is little if any expectation that the rate hikes will halt anytime soon, so the anticipation is just for a slower pace. Futures traders are pricing a near coin-flip chance of a half-point increase in December, against another three-quarter point move.

    Current market pricing also indicates the fed funds rate will top out near 5% before the rate hikes cease.

    The fed funds rate sets the level that banks charge each other for overnight loans, but spills over into multiple other consumer debt instruments such as adjustable-rate mortgages, auto loans and credit cards.

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  • Here’s what the Federal Reserve’s fourth 0.75 percentage point interest rate hike means for you

    Here’s what the Federal Reserve’s fourth 0.75 percentage point interest rate hike means for you

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    The Federal Reserve raised the target federal funds rate by 0.75 percentage point for the fourth time in a row on Wednesday, marking an unprecedented pace of rate hikes.

    The U.S. central bank has raised the benchmark short-term borrowing rate a total of six times this year, including 75 basis point increases in June, July and September, in an effort to cool down inflation, which is still near 40-year highs and causing most consumers to feel increasingly cash strapped. A basis point is equal to 0.01 of a percentage point.

    A policy statement after the announcement noted that the Fed is considering the “cumulative” impact of its hikes so far when determining future rate increases. Economists are hoping this signals plans to “step-down” the pace of increases going forward, which could mean a half point hike at the December meeting and then a few smaller raises in 2023. Still, stocks tumbled after Federal Reserve Chair Jerome Powell said there were more rate hikes ahead.

    “Americans are under greater financial strain, there’s no question,” said Chester Spatt, professor of finance at Carnegie Mellon University’s Tepper School of Business and former chief economist of the Securities and Exchange Commission.

    More from Personal Finance:
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    However, “as the Fed tightens, this also has adverse effects on everyday Americans,” he added.

    What the federal funds rate means to you

    The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and saving rates they see every day.

    By raising rates, the Fed makes it costlier to take out a loan, causing people to borrow and spend less, effectively pumping the brakes on the economy and slowing down the pace of price increases. 

    Inflation hit a new high since 1981. What is inflation and what causes it?

    “Unfortunately, the economy will slow much faster than inflation, so we’ll feel the pain well before we see any gain,” said Greg McBride, Bankrate.com’s chief financial analyst.

    Already, “mortgage rates have rocketed to 16-year highs, home equity lines of credit are the highest in 14 years, and car loan rates are at 11-year highs,” he said.

    How higher rates affect borrowers

    • Mortgage rates are already higher. Even though 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, anyone shopping for a home has lost considerable purchasing power, in part because of inflation and the Fed’s policy moves.

    Along with the central bank’s vow to stay tough on inflation, the average interest rate on the 30-year fixed-rate mortgage hit 7%, up from below 4% back in March.

    On a $300,000 loan, a 30-year, fixed-rate mortgage at December’s rate of 3.11% would have meant a monthly payment of about $1,283. Today’s rate of 7.08% brings the monthly payment to $2,012. That’s an extra $729 a month or $8,748 more a year, and $262,440 more over the lifetime of the loan, according to LendingTree.

    The increase in mortgage rates since the start of 2022 has the same impact on affordability as a 35% increase in home prices, according to McBride’s analysis. “If you had been approved for a $300,000 mortgage in the beginning of the year, that’s the equivalent of less than $200,000 today.”

    For home buyers, “adjustable-rate mortgages may continue to be more popular among consumers seeking lower monthly payments in the short term,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. “And consumers looking to tap into available home equity may continue to look towards HELOCs,” she added, rather than refinancing.

    Yet adjustable-rate mortgages and home equity lines of credit are pegged to the prime rate, so those will also increase. Most ARMs adjust once a year, but a HELOC adjusts right away. Already, the average rate for a HELOC is up to 7.3% from 4.24% earlier in the year.

    • Credit card rates are rising. Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. As the federal funds rate rises, the prime rate does as well, and your credit card rate follows suit within one or two billing cycles.

    That means anyone who carries a balance on their credit card will soon have to shell out even more just to cover the interest charges. “This latest interest rate hike will most acutely impact those consumers who do not pay off their credit card balances in full through higher minimum monthly payments,” Raneri said.

    Because of this rate hike, consumers with credit card debt will spend an additional $5.1 billion on interest, according to an analysis by WalletHub. Factoring in the rate hikes from March, May, June, July, September and November, credit card users will wind up paying around $25.6 billion more in 2022 than they would have otherwise, WalletHub found.

    Already credit card rates are near 19%, up from 16.34% in March. “That’s the highest since the Fed began tracking in 1994 and is more than a full percentage point higher than the previous record set back in 2019,” according to Matt Schulz, chief credit analyst at LendingTree. And rates are only going to continue to rise, he said. “We’ve still got a ways to go before those rates hit their peak.”

    The best thing you can do now is pay down high-cost debt — “0% balance transfer credit cards are still widely available, especially for those with good credit, and can help you avoid accruing interest on the transferred balance for up to 21 months,” Schulz said.

    “That can be an absolute godsend for folks struggling with card debt,” he added.

    Otherwise, consolidate and pay off high-interest credit cards with a lower-interest home equity loan or personal loan, Schulz advised.

    • Auto loans are more expensive. Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans, so if you are planning to buy a car, you’ll pay more in the months ahead.

    The average interest rate on a five-year new car loan is currently 5.63%, up from 3.86% at the beginning of the year and could surpass 6% with the central bank’s next moves, although consumers with higher credit scores may be able to secure better loan terms.

    Paying an annual percentage rate of 6% instead of 5% would cost consumers $1,348 more in interest over the course of a $40,000, 72-month car loan, according to data from Edmunds.

    Still, it’s not the interest rate but the sticker price of the vehicle that’s causing an affordability problem, McBride said. “Rising rates doesn’t help, certainly.”

    • Student loans vary by type. Federal student loan rates are also fixed, so most borrowers won’t be affected immediately. But if you are about to borrow money for college, the interest rate on federal student loans taken out for the 2022-2023 academic year are up to 4.99%, from 3.73% last year and 2.75% in 2020-2021.

    If you have a private loan, those loans may be fixed or have a variable rate tied to the Libor, prime or T-bill rates, which means that as the Fed raises rates, borrowers will likely pay more in interest, although how much more will vary by the benchmark.

    Currently, average private student loan fixed rates can range from 3.22% to 14.96%, and from 2.52% to 12.99% for variable rates, according to Bankrate. As with auto loans, they vary widely based on your credit score.

    Of course, anyone with existing education debt should see where they stand with federal student loan forgiveness.

    How higher rates affect savers

    • Only some savings account rates are higher. The silver lining is that the interest rates on savings accounts are finally higher after several consecutive rate hikes.

    While the Fed has no direct influence on deposit rates, they tend to be correlated to changes in the target federal funds rate, and the savings account rates at some of the largest retail banks, which have been near rock bottom during most of the Covid-19 pandemic, are currently up to 0.21%, on average.

    Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are as high as 3.5%, according to Bankrate, much higher than the average rate from a traditional, brick-and-mortar bank.

    “Savers are seeing the best yields since 2009 — if they’re willing to shop around,” McBride said. Still, because the inflation rate is now higher than all of these rates, any money in savings loses purchasing power over time. 

    Now is the time to boost that emergency savings, McBride advised. “Not only will you be rewarded with higher rates but also nothing helps you sleep better at night than knowing you have some money tucked away just in case.”

    “More broadly, it makes sense to be more cautious,” Spatt added. “Recognize that employment is maybe less secure. It’s reasonable to expect we’ll see unemployment going up, but how much remains to be seen.”

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  • The Fed is expected to raise interest rates by three-quarters of a point and then signal it could slow the pace

    The Fed is expected to raise interest rates by three-quarters of a point and then signal it could slow the pace

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    The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point Wednesday and then signal that it could reduce the size of its rate hikes starting as soon as December.

    Markets are primed for the fourth 75-basis point hike in a row, and investors are anticipating the Fed will slow down its pace before winding down the rate-hiking cycle in March. A basis point is equal to 0.01 of a percentage point.

    “We think they hike just to get to the end point. We do think they hike by 75. We think they do open the door to a step down in rate hikes beginning in December,” said Michael Gapen, chief U.S. economist at Bank of America.

    Gapen said he expects Fed Chair Jerome Powell to indicate during his press briefing that the Fed discussed slowing the pace of rate hikes but did not commit to it. He expects the Fed would then raise interest rates by a half percentage point in December.

    U.S. Federal Reserve Board Chairman Jerome Powell takes questions from reporters after the Federal Reserve raised its target interest rate by three-quarters of a percentage point to stem a disruptive surge in inflation, during a news conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, June 15, 2022.

    Elizabeth Frantz | Reuters

    “The November meeting isn’t really about November. It’s about December,” Gapen said. He expects the Fed to raise rates to a level of 4.75% to 5% by spring, and that would be its terminal rate — or end point. The 75 basis point hike Wednesday would take the fed funds rate range to 3.75% to 4%, from a range of zero to 0.25% in March.

    “The market is very fixated on the fact there’s going to be 75 in November, 50 [basis points] in December, 25 on Feb. 1 and then probably another 25 in March,” said Julian Emanuel, head of equity, derivatives and quantitative strategy at Evercore ISI. “So in reality, the market already thinks this is happening, and from my point of view, there’s no way the outcome of his press conference is going to be more dovish than that.”

    The stock market has already rallied on expectations of a slowdown in rate hikes by the Fed, after a final 75 basis point hike Wednesday afternoon. But strategists also say the market’s reaction could be violent if the Fed disappoints. The challenge for Powell will be to walk a fine line between signaling less-aggressive hikes are possible and upholding the Fed’s pledge to battle inflation.

    Stock picks and investing trends from CNBC Pro:

    For that reason, market pros expect the Fed chair to sound hawkish, and that could rattle stocks and send bond yields higher. Yields move opposite price.

    “I think he’s going to try to execute the fine art of getting off the 75 [basis points] without creating euphoria and influencing financial conditions too easy,” said Rick Rieder, BlackRock chief investment officer of global fixed income. “I think the way the market is pricing, I think that’s what they’re going to do, but I think he’s really got to thread the needle on not getting people too excited about the direction of travel. Fighting inflation is their primary objective.”

    As the Fed has raised interest rates, the economy is beginning to show signs of slowing. The housing market is slumping, as some mortgage rates have nearly doubled. The 30-year fixed rate mortgage was at 7.08% in the week of Oct. 28, up from 3.85% in March, according to Freddie Mac.

    “I think [Powell] will say that four 75-basis point hikes is an awful lot and with this long and variable lag, you need to step back and see the impact. You’re seeing it in housing. You’re starting to see it in autos,” said Rieder. “You’re seeing it in some of the retailer slowdowns, and you’re certainly seeing it in the surveys. I think the idea that you’re slowing, it’s important how he describes it.”

    The Fed should be dependent on incoming data, and while inflation is coming down, the pace of decline is unclear, Rieder said.

    “If inflation continues to be surpisingly high, he shouldn’t shut off his options,” he said.

    Consumer inflation in September ran at a hot 8.2% annual basis.

    Gapen expects the economy to dip into a shallow recession in the first quarter. He said the equity market would be concerned if inflation were to stay so high the Fed would have to raise rates even more sharply than expected, threatening the economy even more.

    “The markets want to be relieved, particualy the equity maket,” said Rieder. “I think what happens to the equity market and the bond market are different because of the technicals and the leverage. … But I think the market wants to believe that the Fed, they’re going to get to 5% and stay there for awhile. People are tired of getting bludgeoned, and I think they want to believe the bludgeoning is over.”

    Interest rates are surging — here's how to protect your money

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  • Stocks end lower as hot jobs data signals aggressive Fed

    Stocks end lower as hot jobs data signals aggressive Fed

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    NEW YORK — Stocks gave up early gains and ended lower on Wall Street after an unexpectedly strong report on the job market raised concerns that the Federal Reserve will need to keep the pressure on inflation with aggressive interest rate increases. Those high rates are intended to slow the economy, and the fear is the Fed may go too far and cause a recession. Several companies rose after reporting solid earnings or outlooks, including Pfizer and Uber. The S&P 500 fell 0.4% Tuesday. Long-term Treasury yields reversed course from an early slide and rose back near multiyear highs.

    THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

    Stocks on Wall Street gave up early gains and turned lower in afternoon trading Tuesday after an unexpectedly strong report on the job market raised concerns that the Federal Reserve will need to keep the pressure on inflation with aggressive interest rate increases.

    The S&P 500 fell 0.4% as of 3:31 p.m. Eastern. It had been up as much as 1% shortly after trading opened. The Dow Jones Industrial Average fell 72 points, or 0.2%, to 32,660 and the Nasdaq fell 0.8%.

    Big technology stocks were the biggest weights on the market. The companies, with their big valuations, have more heft in pushing the broader market up or down. Also, rising interest rates tend to make the sector look less attractive because of its those high valuations. Apple fell 1.6%.

    Small company stocks held up better than the rest of the market. The Russell 2000 rose 0.4%.

    The Labor Department reported that U.S. job openings rose unexpectedly in September, suggesting that the labor market is not cooling as fast as the Fed hoped for as it tries to slow economic growth.

    The latest jobs data, which comes ahead of a broader employment report on Friday, is disappointing for investors who are looking for signs that inflation is easing and that the Fed might consider tempering its interest rate increases.

    “That really fuels the expectation that the Fed has to do more hiking,” said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management. “The labor market is still too tight for the Fed.”

    Wall Street is concerned that the central bank is being too aggressive in slowing the economy, running the risk that it could bring on a recession.

    Long-term Treasury yields turned higher after the report in job openings came out and rose back near multiyear highs. Those high rates have helped push mortgage rates above 7% this year.

    The yield on the 10-year Treasury rose to 4.06% from 3.93% earlier in the morning.

    The yield on the two-year Treasury, which tends to reflect market expectations of future moves by the Federal Reserve, rose to 4.53% from 4.40%.

    “The issue for investors is figuring out how long the hiking cycle will last,” Draho said. “(Fed Chair Jerome) Powell will want to leave all options on the table.”

    Stocks are coming off a strong rally in October that resulted in big monthly gains for some of the major indexes. Even so, they remain in the red for the year, including the S&P 500, which is down 19%.

    Several big companies made solid gains following encouraging earnings reports and forecasts.

    Pfizer rose 3.3% after reporting strong results and raising its profit forecast for the year. Uber surged 12.4% after giving investors a strong forecast for future bookings. Rival Lyft rose 4.5%.

    Earnings remain a big focus for investors this week. CVS reports its results on Wednesday and Starbucks reports earnings on Thursday.

    Outside of earnings, Abiomed surged 50.1% after health care giant Johnson & Johnson said it will pay $16.6 billion for the heart pump maker. Johnson & Johnson fell 0.1%.

    The Fed is beginning a two-day policy meeting that’s expected to result in its sixth interest rate increase of the year as the central bank fights the worst inflation in four decades. The widespread expectation is for the Fed to push through another increase that’s triple the usual size, or three-quarters of a percentage point.

    For its final policy meeting of the year, in December, opinions are currently split among investors as to whether the Fed will make another three-quarters point move or dial back to a half-point increase.

    “The big focus is not so much on what the rate hike is going to be, but really what the comments are coming out of this week’s meeting in terms of any indications of whether there’ll be a little bit of softening as we move into early next year,” said Greg Bassuk, CEO at AXS Investments.

    ———

    AP Business writers Joe McDonald, Elaine Kurtenbach and Matt Ott contributed to this report.

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  • Just 10% of voters under 40 ‘strongly approve’ of Biden in new poll, inflation remains a top concern ahead of the midterm elections

    Just 10% of voters under 40 ‘strongly approve’ of Biden in new poll, inflation remains a top concern ahead of the midterm elections

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    University of Pittsburgh students with Biden/Harris signs and stickers. On the University of Pittsburgh campus many students organizing get out the vote campaigns through signs, stickers, and text messaging their friends during the United States Election Day.

    Aaron Jackendoff | LightRocket | Getty Images

    Only 10% of American adults under 40 strongly approve of President Joe Biden’s job performance in a new online poll; the number drops to 7% for Americans between the ages of 18 and 26.

    One quarter of all respondents under 40 strongly disapproved of Biden’s performance.

    The results are from an survey conducted by University of Chicago’s Gen Forward Survey Project. The online poll surveyed 2,294 Americans between the ages of 18 and 40 and has a margin of error of 3.55 percentage points.

    Twenty-six percent of respondents said they “approve somewhat” of Biden’s performance and an additional 22% neither approve or disapprove.

    “The Biden approval numbers are low but higher than Democratic or Republican Party favorability. We’re seeing low support across the board,” said Kumar Ramanathan, a Gen Forward research fellow. “We find that young adults express disaffection with the political system, but among the four entities that we asked about support and favorability — the president, the Democratic Party, the Republican Party and the Supreme Court — Biden has the highest approval, though his overall approval numbers are low.”

    The Supreme Court’s approval rating was even more dismal with 21% of respondents saying they had a “somewhat favorable” impression of the high court and just 7% of adults under 40 saying they had a “very favorable” view. Some 20% of respondents said they had a “very unfavorable” impression of the court.

    “There’s overwhelming disagreement with the Supreme Court’s decision to overturn Roe v. Wade and we find the Supreme Court is highly unpopular among young adults,” Ramanathan said.

    Inflation topped the list of concerns for young Americans, just as it has for months in polls of all demographics. Inflation was the only issue listed that received double digit support at 24% when asked what the most important problem facing the country is.

    Consumers have been somewhat constrained by prices rising at close to their fastest pace in more than 40 years. The latest New York Fed Survey of Consumer Expectations shows that consumers expect the inflation rate a year from now to be 5.4%, the lowest number in a year and a decline from 5.75% in August.

    Economic growth, income inequality and the environment and climate change all tied for second at 6% each. Inflation also topped the list of concerns when voters were asked what the greatest issue facing their community is.

    Notably, when asked what the most important issue in the midterms, 25% said inflation and 11% said abortion and reproductive rights. When asked how the Supreme Court’s decision overturning Roe v. Wade impacted their vote, 32% said it made them more likely to support Democrats, 13% said Republicans and 32% said it did not impact their decision.

    “Inflation is the most salient issue among young adults — specifically inflation, rather than general economic concerns,” Ramanathan said, noting that it’s increased from previous surveys. “More young adults say inflation makes them more likely to support Republicans than Democrats, but the plurality, about a third, say it won’t impact their vote.”

    Nearly 90% of respondents agreed with the statement “inflation is having an impact on me and/or my family.” Three in ten projected that inflation will “go up a lot” and 39% projected it would “go up a little” in the next six months. Only 11% thought it would decrease. Eighty-five percent said it was likely there would be a recession in the next year with 34% saying it was “very likely” and 51% saying it was “somewhat likely.”

    When asked how inflation impacted their vote, the results were more evenly split with 32% saying it did not impact their decision to vote, 24% saying it makes them more likely to support Republicans and 21% saying so for Democrats.

    A majority of voters under 40 reported having little to no confidence in the government or the American public to make the right decisions: 49% said they have “not very much” trust or confidence in the American populous with 15% reporting they have “none at all.” Three-quarters of respondents said they can trust the government to do what is right “some of the time” or “never,” 55% said they can trust the government “some of the time” and 20% reported “never.”

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  • Job openings hit 10.7M despite Fed attempts to cool economy

    Job openings hit 10.7M despite Fed attempts to cool economy

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    WASHINGTON — U.S. job openings rose unexpectedly in September, suggesting that the American labor market is not cooling as fast as the inflation fighters at the Federal Reserve hoped.

    Employers posted 10.7 million job vacancies in September, up from 10.3 million in August, the Labor Department said Tuesday. Economists had expected the number of job openings to drop below 10 million for the first time since June 2021.

    For the past two years, as the economy rebounded from 2020’s COVID-19 recession, employers have complained they can’t find enough workers. With so many jobs available, workers can afford to resign and seek employment that pays more or offers better perks or flexibility. So companies have been forced to raise wages to attract and keep staff. Higher pay has contributed to inflation that has hit 40-year highs in 2022.

    In another sign the labor market remains tight and employers unwilling to let workers go, layoffs dropped in September to 1.3 million, fewest since April. But the number of people quitting their jobs slipped in September to just below 4.1 million, still high by historical standards.

    To combat higher prices, the Federal Reserve has hiked its benchmark interest rate five times this year and is expected to deliver another increase Wednesday and again at its meeting in December. The central bank is aiming for a so-called soft landing — raising rates just enough to slow economic growth and bring inflation down without causing a recession.

    Fed Chair Jerome Powell has expressed hope that inflationary pressure can be relieved by employers cutting job openings, not jobs.

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  • Oil giant Saudi Aramco has $42.4B profit in third quarter

    Oil giant Saudi Aramco has $42.4B profit in third quarter

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    DUBAI, United Arab Emirates — Oil giant Saudi Aramco on Tuesday reported a $42.4 billion profit in the third quarter of this year, buoyed by the higher global energy prices that have filled the kingdom’s coffers but helped fuel inflation worldwide.

    The oil firm’s profits will help fund the kingdom’s assertive Crown Prince Mohammed bin Salman’s plans for a futuristic city on the Red Sea coast, but also comes as the U.S. grows increasingly frustrated by higher prices at the pump chewing into American consumer’s wallets.

    Those tensions yet again have chilled relations between Riyadh and Washington before the Nov. 8 midterm elections.

    In a note to investors, the predominantly state-owned oil company said its average barrel of crude sold for $101.70 in the third quarter — up from $72.80 at the same point last year. It’s Aramco’s second-largest quarterly profit in its history, just before its second-quarter results this year saw a profit of $48.4 billion.

    It put its profits so far in 2022 at $130.3 billion, compared to $77.6 billion in 2021.

    “While global crude oil prices during this period were affected by continued economic uncertainty, our long-term view is that oil demand will continue to grow for the rest of the decade given the world’s need for more affordable and reliable energy,” Aramco CEO Amin H. Nasser said in a statement.

    Aramco will keep its dividend this quarter at $18.8 billion, the world’s highest.

    Benchmark Brent crude traded just shy of $95 a barrel Tuesday. The sliver of Aramco that the kingdom has put on Riyadh’s Tadawul stock market stood at $9.29 a share before trading Tuesday — putting its valuation at just over $2 trillion. Only Apple’s valuation, at $2.44 trillion, is higher.

    OPEC and a loose confederation of other countries led by Russia agreed in early October to cut its production by 2 million barrels of oil a day, beginning in November.

    OPEC, led by Saudi Arabia, has insisted its decision came from concerns about the global economy. Analysts in the U.S. and Europe warn a recession looms in the West from inflation and subsequent interest rate hikes, as well as food and oil supplies being affected by Russia’s war on Ukraine.

    In Washington, anger has grown with Saudi Arabia, particularly from President Joe Biden, who traveled to the kingdom in July and shared a fist bump with Crown Prince Mohammed. Biden recently warned the kingdom that “there’s going to be some consequences for what they’ve done.”

    Saudi Arabia lashed back, publicly claiming the Biden administration sought a one-month delay in the OPEC cuts that could have helped reduce the risk of a spike in gas prices ahead of the U.S. midterm elections.

    Biden on Monday separately accused oil companies of “war profiteering” as he raised the possibility of imposing a windfall tax on American energy companies if they don’t boost domestic production.

    ———

    Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellAP.

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  • Euro zone inflation hits record high of 10.7% as growth slows sharply

    Euro zone inflation hits record high of 10.7% as growth slows sharply

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    Inflation in the euro zone remains extremely high. Protestors in Italy used empty shopping trolleys to demonstrate the cost-of-living crisis.

    Stefano Montesi – Corbis | Corbis News | Getty Images

    Euro zone inflation rose above the 10% level in the month of October, highlighting the severity of the cost-of-living crisis in the region and adding more pressure on the European Central Bank.

    Preliminary data on Monday from Europe’s statistics office showed headline inflation came in at an annual 10.7% last month. This represents the highest ever monthly reading since the euro zone’s formation. The 19-member bloc has faced higher prices, particularly on energy and food, for the past 12 months. But the increases have been accentuated by Russia’s invasion of Ukraine in late February.

    This proved to be the case once again, with energy costs expected to have had the highest annual rise in October, at 41.9% from 40.7% in September. Food, alcohol and tobacco prices also rose in the same period, jumping 13.1% from 11.8% in the previous month.

    Monday’s data comes after individual countries reported flash estimates last week. In Italy, headline inflation came in above analysts’ expectations at 12.8% year-on-year. Germany also said inflation jumped to 11.6% and in France the number reached 7.1%. The different values reflect measures taken by national governments, as well as the level of dependency that there nations have, or had, on Russian hydrocarbons.

    There are, however, euro nations where inflation rose by more than 20%. This includes Estonia, Latvia and Lithuania.

    The European Central Bank — whose primary target is to control inflation — on Thursday confirmed further rate hikes in the coming months in an attempt to bring prices down. It said in a statement that it had made “substantial progress” in normalizing rates in the region, but it “expects to raise interest rates further, to ensure the timely return of inflation to its 2% medium-term inflation target.”

    The ECB decided to raise rates by 75 basis points for a second consecutive time last week.

    Speaking at a subsequent press conference, ECB President Christine Lagarde said the likelihood of a recession in the euro zone had intensified.

    Growth figures released Monday showed a GDP (gross domestic product) figure of 0.2% for the euro area in October. This is after the region grew at a rate of 0.8% in the second quarter. Only Belgium, Latvia and Austria registered GDP rates below zero.

    So far, the 19-member bloc has dodged a recession but an economic slowdown is evident. Several economists predict there will be a contraction in GDP during the current quarter.

    The euro traded below parity against the U.S. dollar in early European trading hours Monday and ahead of the new data releases, and barely moved after the new figures. The euro has been weaker against the greenback and that’s also something the ECB has been concerned about with concerns that this will push up inflation in the euro zone even further.

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  • A key US inflation gauge stayed at a high 6.2% in September

    A key US inflation gauge stayed at a high 6.2% in September

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    WASHINGTON — A measure of inflation that is closely monitored by the Federal Reserve remained painfully high last month, the latest sign that prices for most goods and services in the United States are still rising steadily.

    Friday’s report from the Commerce Department showed that prices rose 6.2% in September from 12 months earlier, the same year-over-year rate as in August.

    Excluding volatile food and energy costs, so-called core prices rose 5.1% last month from a year earlier. That’s also faster than the 4.9% annual increase in August, though below a four-decade high of 5.4% reached in February.

    The report also showed that consumers spent more last month, even after adjusting for inflation, a sign of Americans’ willingness to keep spending in the face of high prices. Consumer spending increased 0.6% from August to September, or 0.3% after accounting for price increases.

    The latest figures come just as Americans have begun voting in midterm elections in which Democrats’ control of Congress is at stake and inflation has shot to the top of voters’ concerns. Republicans have heaped blame on President Joe Biden and congressional Democrats for the skyrocketing prices that have buffeted households across the country.

    The persistence of high inflation, near the worst in four decades, has intensified pressure on the Federal Reserve to keep aggressively raising its key short-term interest rate to try to wrestle rising prices under control. Last month, the Fed raised its key rate by a substantial three-quarters of a point for a third straight time, and next week it’s expected to do so for a fourth time.

    The central bank’s latest rate hikes far exceed the quarter-point increases that it typically used in the past when it sought to tighten credit to fight inflation. But after being caught off guard beginning late last year, when prices accelerated far more than the Fed’s policymakers had anticipated, the officials have been raising their benchmark rate at the fastest pace in four decades. In doing so, they are raising the risk of a recession — something that many economists expect to occur sometime next year as a result.

    The Fed’s hikes have led to much higher loan rates for businesses and consumers, particularly for mortgages. The average 30-year fixed mortgage rate surged past 7% this week, according to Freddie Mac, the highest level in two decades and more than twice what it was a year ago.

    The rapid run-up in borrowing costs has crushed the housing market. Sales of existing homes have dropped for eight straight months and are down nearly 25% in the past year. New-home sales and construction are also falling.

    A weaker housing market has slowed the economy, as fewer home purchases also drag down sales of furniture, appliances, and home improvement gear.

    Home prices, which rocketed during the pandemic, have started to fall as a result. The S&P Case-Shiller home price index fell from July to August for a second straight month, according to the latest data available,

    But those declines have yet to show up in the government’s measures of housing costs, which include rents, which are still rising for many people as they renew their leases. It could take until late spring or summer before falling home prices work their way into the government’s inflation indexes. That delay could keep official measures of inflation from falling much over the next few months.

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  • Auto prices finally begin to creep down from inflated highs

    Auto prices finally begin to creep down from inflated highs

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    DETROIT — All summer long, Aleen Hudson kept looking for a new minivan or SUV for her growing passenger shuttle service.

    She had a good credit rating and enough cash for a down payment. Yet dealerships in the Detroit area didn’t have any suitable vehicles. Or they’d demand she pay $3,000 to $6,000 above the sticker price. Months of frustration left her despondent.

    “I was depressed,” Hudson said. “I was angry, too.”

    A breakthrough arrived in late September, when a dealer called about a 2022 Chrysler Pacifica. At $41,000, it was hardly a bargain. And it wasn’t quite what Hudson wanted. Yet the dealer was asking only slightly above sticker price, and Hudson felt in no position to walk away. She’s back in business with her own van.

    It could have been worse. Hudson made her purchase just as the prices of both new and used vehicles have been inching down from their eye-watering record highs and more vehicles are gradually becoming available at dealerships. Hudson’s van likely would have cost even more a few months ago.

    Not that anyone should expect prices to fall anywhere near where they were before the pandemic recession struck in early 2020. The swift recovery from the recession left automakers short of parts and vehicles to meet demand. Price skyrocketed, and they’ve scarcely budged since.

    Prices on new and used vehicles remain 30% to 50% above where they were when the pandemic erupted. The average used auto cost nearly $31,000 last month. The average new? $47,000. With higher prices and loan rates combining to push average monthly payments on a new vehicle above $700, millions of buyers have been priced out of the new-vehicle market and are now confined to used vehicles.

    The high prices are yielding substantial profits for most automakers despite sluggish sales. On Tuesday, for example, General Motors reported that its third-quarter net profit jumped more than 36%, thanks in part to sales of pricey pickup trucks and large SUVs.

    Still, as Hudson discovered, many vehicles are becoming slightly more affordable. Signs first emerged weeks ago in the 40-million-sales-a-year used market. As demand waned and inventories rose, prices eased from their springtime heights.

    CarMax said it sold nearly 15,000 fewer vehicles last quarter than it had a year earlier. The CEO of the used-vehicle company, based in Richmond, Virginia, pointed to inflation, higher borrowing rates and diminished consumer confidence.

    A “buyer’s strike” is how Adam Jonas, an auto analyst at Morgan Stanley, characterized the sales drops — a dynamic that typically foretells lower prices. And indeed, the average used vehicle price in September was down 1% from its May peak, according to Edmunds.com.

    At AutoNation, the nation’s largest dealership chain, sales of used vehicles and profit-per-vehicle both dropped last quarter. CEO Mike Manley noted that while the supply of vehicles remains low, used-auto prices are declining.

    “Our analysis shows that we are coming off the high values that we saw before,” Manley told analysts Thursday.

    Ivan Drury, director of insights at Edmunds cautioned that it will take years for used prices to fall close to their pre-pandemic levels. Since 2020, automakers haven’t been leasing as many cars, thereby choking off one key source of late-model used vehicles.

    Similarly, rental companies haven’t been able to buy many new vehicles. So eventually, they are selling fewer autos into the used market. That’s crimped another source of vehicles. And because used cars aren’t sitting long on dealer lots, demand remains strong enough to prop up prices.

    When auto prices first soared two years ago, lower-income buyers were elbowed out of the new-vehicle market. Eventually, many of them couldn’t afford even used autos. People with subprime credit scores (620 or below) bought only 5% of new vehicles last month, down from nearly 9% before the pandemic. That indicated that many lower-income households could no longer afford vehicles, said J.D. Power Vice President Tyson Jominy.

    Higher borrowing rates have compounded the problem. In January 2020, shortly before the pandemic hit, used-vehicle buyers paid an average of 8.4% annual interest, according to Edmunds. Monthly payments averaged $412. By last month, the average rate had reached 9.2%. And because prices had risen for over two years, the average payment had jumped to $567.

    The 1% average drop in used prices will help financially secure buyers with solid credit scores who can qualify for lower loan rates. But for those with poor credit and lower incomes, any price drop will be wiped out by higher borrowing costs.

    The new-vehicle market, by contrast, has become an option mainly for affluent buyers. Automakers are increasingly deploying scarce computer chips to make costly, loaded-out versions of pickups, SUVs and other outsize vehicles, typically with relatively low gas mileage. Last month, the average price of a new vehicle was down slightly from August but remained more than $11,000 above its level in January 2020.

    Glenn Mears, who runs five dealerships south of Canton, Ohio, says the Federal Reserve’s interest rate hikes, by contributing to pricier auto loans, are slowing his showroom traffic.

    “We can feel some pullback,” he said.

    Analysts generally say that with shortages of computer chips and other parts still hobbling factories, new-vehicle prices won’t likely fall substantially. But further modest price drops may be likely. The availability of vehicles on U.S. dealer lots improved to nearly 1.4 million vehicles last month, up from 1 million for most of the year, Cox Automotive reported.

    Before the pandemic, normal supply was far higher — around 4 million. So historically speaking, inventory remains tight and demand still high. Like Hudson, many buyers are still stuck paying sticker price or above.

    “It’s extraordinarily expensive these days,” said Jominy, who estimates that there are still 5 million U.S. customers waiting to buy new vehicles.

    Despite recent stock market declines, many such buyers have built up wealth, especially in their homes, and are rewarding themselves with high-end autos. In the San Francisco Bay area, for example, notes Inder Dosanjh, who runs a 20-dealership group that includes General Motors, Ford, Acura, Volkswagen and Stellantis brands, many people have received substantial pay raises.

    “There’s just a lot of money out there,” he said.

    In its earnings report Tuesday, GM noted that its customer demand is holding up. Though GM and other automakers would like to produce more vehicles, at the moment they are benefiting from slower production, which typically means higher prices and profits.

    John Lawler, Ford’s chief financial officer, noted Wednesday that near-record new-vehicle prices were starting to decline. And consumer appetites are starting to change: Demand for midrange vehicles, he said, has begun to outpace more profitable autos loaded with options.

    Next year could be a turning point, suggested Jeff Windau, an analyst at Edward Jones. With the economy likely to weaken and possibly enter a recession, prices could fall “as consumers become more focused on their financial situation and what they’re willing to bite off from a payment perspective.”

    ————

    This story has been corrected to show that 9% of new-vehicle buyers had subprime credit scores, and that has since dropped to 5%.

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  • Energy stocks get oil price support as recession looms

    Energy stocks get oil price support as recession looms

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    NEW YORK (AP) — Surging oil prices charged energy stocks through 2022 and could keep supporting the sector despite a looming recession and stubbornly hot inflation squeezing consumers.

    The sector’s 50% gain is a standout in the S&P 500 this year while every other sector has lost ground. Big names like Exxon Mobil are up even more, with gains of nearly 75%. It’s a stark contrast to the benchmark index’s 20% slide.

    The sector’s sharp gains were kicked off earlier this year after Russia’s invasion of Ukraine raised worries about the oil supply, with inflation already squeezing global economies. U.S. crude oil prices are up 13% for the year, around $85 per barrel. The U.S. government expects prices to hit $95 per barrel next year, which could potentially support energy stocks even through a recession.

    Oil prices got another boost this month when the OPEC+ alliance of oil-exporting countries decided to sharply cut production to support prices. Longer-term trends, such as the shift to renewables, have also kept companies from ramping up drilling. That’s helped maintain a disconnect between still high demand and low supplies.

    “Producers are getting signals to stay disciplined,” said John LaForge, head of real asset strategy at Wells Fargo Investment Institute. “They see the future, and drilling and completion of wells are built on a 10-year timeframe and producers see it will be structurally different in 10 years.”

    That long-term view has helped maintain a disconnect between still high demand and low supplies.

    “A recession takes a backseat to the longer-term secular trend of structurally undersupplied oil,” LaForge said.

    Analysts and economists have been warning about a likely recession ahead. Meanwhile major companies have raised the alarm about weakening demand heading into 2023. The Federal Reserve, the International Monetary Fund and others have all warned that economies are in for more pain from inflation.

    The U.S. economy contracted in the first half of the year, and consumer confidence and spending are slipping. Inflation remains extremely hot and the Fed is expected to continue raising interest rates in an effort to tame high prices.

    That’s raised the risk of inducing a recession by slamming the brakes too hard on the economy. The severity of any recession will also have an impact on the energy sector. A light recession might not change habits too much, analysts have said, while a more severe recession could crimp spending on fuel and other essentials.

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  • Asian shares mostly lower as Japan preps massive stimulus

    Asian shares mostly lower as Japan preps massive stimulus

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    Shares were mostly lower in Asia on Friday after a mixed session on Wall Street, where tech sector losses offset gains in other parts of the market.

    Tokyo’s benchmark slipped as the government was preparing about $490 billion in stimulus spending to help the world’s No. 3 economy cope with inflation. As expected, the Bank of Japan wrapped up a policy meeting by keeping its ultra-lax monetary policy unchanged even as it forecast higher inflation.

    The Nikkei 225 index lost 0.5% to 27,210.03 while the Hang Seng in Hong Kong sank 2.3% to 15,069.69. The Shanghai Composite index shed 0.8% to 2,958.25.

    The Kospi in Seoul declined 0.4% to 2,278.64. Australia’s S&P/ASX 200 dropped 0.8% to 6,788.00.

    The economic stimulus package due for approval Friday includes government funding of about 29 trillion yen ($200 billion) in subsidies and other measures to help soften the burden of costs from rising utility rates and food prices. It is also designed to help shore up support for Prime Minister Fumio Kishida, whose popularity has taken a beating due to a scandal over ties between the ruling Liberal Democratic Party and the South Korea-based Unification church.

    Thursday on Wall Street, the S&P 500 fell 0.6%, with about 44% of stocks within the benchmark index losing ground. It closed at 3,807.30.

    The tech-heavy Nasdaq fell 1.6% to 10,792.67, while the Dow Jones Industrial Average rose 0.6% to 32,033.28.

    Smaller company stocks held up better than the broader market. The Russell 2000 index added 0.1% to 1,806.32.

    Facebook’s parent company, Meta Platforms, plummeted 24.6% for the biggest drop in the S&P 500 after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. It joined other tech and communications stocks, such as Google’s parent company, Alphabet, and Microsoft, in reporting weak results and worrisome forecasts over advertising demand. Alphabet fell 2.9% and Microsoft slid 2%.

    Amazon slid 19% in after-hours trading after the retail giant issued an estimate for sales in the last quarter of the year came in well below analysts’ forecasts. The stock fell 4.1% in regular trading before the release of its latest quarterly results.

    Construction equipment maker Caterpillar jumped 7.7% after it handily beat analysts’ third-quarter profit forecasts. The big gain helped boost the 30-company Dow.

    Another pullback in long-term Treasury yields helped support stocks in companies that weren’t reporting quarterly results. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.91% from 4.01% late Wednesday. The two-year yield fell to 4.30% from 4.42%.

    Excluding the Nasdaq, the major indexes are on pace for weekly gains. And the S&P 500 remains solidly on track to end October in the green.

    Markets got some encouraging economic news Thursday as the government reported the U.S. economy returned to growth last quarter, expanding 2.6%. That marks a turnaround after the economy contracted during the first half of the year.

    The economy has been under pressure from stubbornly hot inflation and the Federal Reserve’s efforts to raise interest rates in order to cool prices. The central bank is trying to slow economic growth through rate increases, but the strategy risks going too far and brining on a recession.

    The rising interest rates have made borrowing more difficult, particularly with mortgage rates. Average long-term U.S. mortgage rates topped 7% for the first time in more than two decades this week.

    Central banks around the world also have been raising interest rates in an effort to tame inflation. The European Central Bank piled on another outsized interest rate hike on Thursday. Markets in Europe were mixed.

    Wall Street has more earnings to review Friday, including Exxon Mobil, Chevron and Charter Communications.

    Meanwhile, S&P Dow Jones Indices said Thursday that insurer Arch Capital Group will replace Twitter in the S&P 500 index before the opening of trading on Tuesday. The move comes ahead of Elon Musk’s acquisition of Twitter in a transaction expected to close Friday.

    In other trading, the dollar fell to 146.20 yen from 136.31 late Thursday. The euro

    ___

    AP Business Writers Damian J. Troise and Alex Veiga contributed.

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

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

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

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

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

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

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

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

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

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

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

    ————

    WHY DO MANY ECONOMISTS FORESEE A RECESSION?

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

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

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

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

    ———

    WHAT ARE SOME SIGNS THAT A RECESSION MAY HAVE BEGUN?

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

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

    ———

    ANY OTHER SIGNALS TO WATCH FOR?

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

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

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

    ———

    WHO DECIDES WHEN A RECESSION HAS STARTED?

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

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

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

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

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

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

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    DOES HIGH INFLATION TYPICALLY LEAD TO A RECESSION?

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

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

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

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

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