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Tag: Stocks and bonds

  • Stock market today: Asian shares mostly lower, tracking Wall Street retreat

    Stock market today: Asian shares mostly lower, tracking Wall Street retreat

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    BANGKOK — Shares were mostly lower Wednesday in Asia after Wall Street benchmarks retreated following the S&P 500’s rise to its highest level since the spring of last year.

    U.S. futures were little changed and oil prices rose.

    Tokyo’s Nikkei 225 advanced 0.3% to 33,575.14, while the Hang Seng in Hong Kong sank 2% to 19,217.66. The Shanghai Composite index gave up 1.3% to 3,197.90 and the Kospi in Seoul slipped 0.9% to 2,582.63.

    In Australia, the S&P/ASX 200 shed 0.6% to 7,314.90. Bangkok’s SET lost 0.8% while India’s Sensex was up 0.3%.

    This week has few potentially market-moving events.

    Federal Reserve Chair Jerome Powell will testify before Congress on Wednesday and Thursday. Last week, the Fed held its benchmark lending rate steady, the first time in more than a year that it didn’t announce an increase. But it also warned it could raise rates twice more this year.

    The Bank of England will meet on interest-rate policy Thursday. Central banks around the world are heading in diverging directions as they battle inflation amid worries about a pressured global economy.

    “Investors are turning cautious ahead of another hefty dose of Fedspeak amidst a relatively light data docket,” Stephen Innes of SPI Asset Management said in a commentary.

    He added that “with central banks in the mood to dish out inflation pain these days, investors may need to see some positive inflation data convergence to narrow the wide disparity between the Federal Reserve and the market’s forward inflation expectations before breaking fresh higher ground on U.S. stocks.”

    On Tuesday as U.S. markets reopened after being closed in observance of the Juneteenth holiday, the S&P 500 fell 0.5% to 4,388.71. The Dow Jones Industrial Average dropped 0.7% to 34,053.87, and the Nasdaq composite lost 0.2%, to 13,667.29.

    The U.S. stock market took a step back following many steps forward on hopes the economy can avoid a recession and inflation is easing enough for the Fed to stop raising interest rates soon. A frenzy around artificial intelligence has also vaulted a select group of tech stocks to huge gains.

    Those hopes are battling against worries that the Fed will keep interest rates high for longer, which could grind down the economy. Some of the easiest improvements in year-over-year inflation will soon be passed, bringing tougher times for both the economy and financial markets.

    During the 70s, inflation remained high for much longer than hoped, forcing the Fed to ultimately drive the economy into a painful recession.

    In China, meanwhile, the world’s second-largest economy is stumbling in its recovery following the relaxation of anti-COVID restrictions

    Most of Wall Street fell, with four out of five stocks in the S&P 500 lower.

    Worries about the global economy dragged lower prices for crude oil and the stocks of companies that pull it from the ground. Energy stocks fell 2.3% for the largest loss among the 11 sectors that make up the S&P 500. Exxon Mobil fell 2.3%, and Chevron lost 2.3%.

    Homebuilders rose after a report showed that U.S. homebuilders broke ground on many more sites last month than economists expected. The number of building permits, an indication of future activity, also accelerated faster than expected.

    PulteGroup rose 1.9%, and D.R. Horton gained 1.6%.

    In other trading Wednesday, U.S. benchmark crude oil rose 20 cents to $71.39 per barrel in electronic trading on the New York Mercantile Exchange. It gave up 74 cents to $71.19 per barrel on Tuesday.

    Brent crude, the international standard, added 16 cents to $76.06 per barrel.

    The dollar rose to 142.14 Japanese yen from 141.43 yen. The euro was unchanged at $1.0922.

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  • Stock market today: Wall Street drifts ahead of Fed decision on rates

    Stock market today: Wall Street drifts ahead of Fed decision on rates

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    NEW YORK — Stocks are drifting Wednesday, as Wall Street waits to hear what the Federal Reserve’s latest economy-moving decision will be on interest rates.

    The S&P 500 was 0.2% higher in morning trading after riding a winning streak to its best level since April 2022. The Dow Jones Industrial Average was down 89 points, or 0.3%, at 34,123, as of 10:05 a.m. Eastern time, while the Nasdaq composite was 0.2% higher.

    Some stocks were making sharp moves, including drops for several health insurers after UnitedHealth Group flagged how many customers were getting knee procedures and other outpatient services done. That’s something that could raise costs for insurers, and UnitedHealth fell 6.9%. Humana dropped 11.6%.

    Stocks of companies that make products used in hip replacements and other health procedures, meanwhile, were at the front of the market. Stryker rose 4.8%, and Boston Scientific gained 3.9%.

    But the majority of Wall Street was quiet, with the main event coming later in the afternoon. That’s when the Federal Reserve will announce its latest move on interest rates after jacking them to their highest levels since 2007 in hopes of getting high inflation under control.

    The wide expectation on Wall Street is that the Fed will make no move, which would be the first time in more than a year where it hasn’t raised rates. Inflation has come down since its peak last summer, and a report Wednesday morning showed price gains at the wholesale level eased in May to the most modest inflation from year-earlier levels since 2020.

    Hikes to interest rates take a notoriously long time to take effect, and they can do so in unanticipated and damaging ways. Already, they’ve helped lead to three high-profile failures in the U.S. banking system, a monthslong contraction in the manufacturing industry and worries about a possible recession.

    But many on Wall Street don’t expect this to be the end to the Fed’s rate hikes. The widespread bet is that it will resume raising rates in July.

    Even if it’s come down, inflation is still too high for comfort. It’s hurting all kinds of households, particularly those with lower incomes. It’s also giving ammunition to the members of the Fed considered “hawks,” or the ones more inclined to keep raising rates, while “doves” favor a longer pause.

    That’s setting the stage for what Gargi Chaudhuri, head of iShares Investment Strategy Americas, calls a “hawkish skip” for the Fed this afternoon.

    She said that while easing inflation data “reduces the risk that the Fed may have to keep hiking into the 6% range, the data is not enough to conclude that the Fed will ease anytime soon.”

    The federal funds rate is currently in a range of 5% to 5.25%, up from virtually zero early last year.

    That could also be setting the stage for at least one dissent in the vote by the Fed’s policy making committee this afternoon. If that were to happen, it would be the first since last June, noted Brian Jacobsen, chief economist at Annex Wealth Management.

    In the bond market, the yield on the 10-year Treasury fell to 3.79% from 3.82% late Tuesday. It helps set rates for mortgages and other important loans.

    The two-year Treasury yield, which moves more on expectations for the Fed, fell to 4.62% from 4.67%.

    In stock markets abroad, indexes were modestly higher in Europe and mixed across Asia. Japan’s Nikkei 225 rose 1.5%, continuing a strong run where it’s already jumped more than 28% this year.

    ___

    AP Business Writers Matt Ott and Joe McDonald contributed.

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  • Bill to help finance a Las Vegas ballpark for Oakland A’s passes Nevada Senate, heads to Assembly

    Bill to help finance a Las Vegas ballpark for Oakland A’s passes Nevada Senate, heads to Assembly

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    CARSON CITY, Nev. — A stadium financing bill aimed at drawing the Oakland Athletics to Las Vegas cleared a major hurdle Tuesday after being approved by the Nevada Senate, but not before lawmakers amended the measure to strengthen its benefits for the community.

    The 13-8 Senate vote marks another step as the bill moves through the Democratic-controlled Legislature while reviving the national debate over public funding for private sports clubs. The bill, which has the support of Republican Gov. Joe Lombardo, must now be considered by the state Assembly.

    A’s representatives and some Nevada tourism officials have said the measure could add to Las Vegas’ growing sports scene and act as an economic engine. But a growing chorus of economists and some lawmakers have warned that such a project would bring minimal benefits when compared to the hefty public price tag.

    Senate approval came after days of closed-door negotiations and a contentious hearing about the bill, which calls for contributing $380 million in public funding for the proposed $1.5 billion stadium.

    Many lawmakers have criticized a lack of community benefits and the special session rush to consider the financing bill. But legislators several struck a more positive tone Tuesday, saying the amendments addressed much of their skepticism.

    “I assure every Nevadan, even those of you who have concerns about this bill — I assure you that if you see where the bill started and where it is now, that there’s not a single Nevadan that won’t say this bill was much better,” said Democratic Sen. Edgar Flores.

    Republican Sen. Ira Hansen was among a bipartisan group of senators still concerned about the amount of public funding that would be spend on the project.

    “Honestly, if it was my own money, it’s a good deal. I would probably vote yes. But it’s not my money,” Hansen said. “It’s the taxpayers’ money, and we should do all we can to ensure the private sector does these sorts of investments.”

    Amendments to the bill include diversity requirements for stadium and construction jobs as well as community service requirements for Athletics players. They also would accelerate the funneling of money generated from operations to a homelessness prevention account and make a larger share of $180 million in state transferable tax credits that are proposed for the stadium refundable to the state.

    Lawmakers also inserted changes unrelated to the stadium proposal but which mirror legislation Lombardo vetoed earlier this month.

    One would require all Nevada companies with at least 50 full-time employees to establish paid family and medical leave to qualify for certain tax abatements. Another would remove a provision that exempts railroad workers under state contracts from being paid the prevailing wage for similar work in the region.

    Last month, Lombardo’s office introduced the stadium financing bill with less than two weeks left in the legislative session. He called lawmakers into the special session after the bill failed to pass during the regular session.

    The $380 million in public funds for the stadium would mainly come from the $180 million in transferable tax credits and $120 million in county bonds. Backers have pledged that the creation of a special tax district around the proposed stadium would generate enough money to pay off those bonds and interest. The plan would not directly raise taxes unless the county cannot pay off its bonds, as is the case with other general obligation bonds.

    The A’s would not owe property taxes for the publicly-owned stadium. Clark County, which includes Las Vegas, would also contribute $25 million in credit toward infrastructure costs.

    The proposed 30,000-seat stadium would be the smallest in Major League Baseball.

    ___

    Stern is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service that places journalists in newsrooms. Follow Stern on Twitter: @gabestern326.

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  • Stock market today: Asian shares mixed as investors await Fed policy decision, price data

    Stock market today: Asian shares mixed as investors await Fed policy decision, price data

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    BANGKOK — Shares were mixed in Asia on Monday after the S&P 500 logged its fourth winning week in a row, while investors await another decision by the Federal Reserve on interest rates.

    Most observers expect no change in rates given recent data showing the U.S. economy slowing. This week also brings price data that might indicate whether the Fed is succeeding in snuffing inflation.

    Friday also will bring a policy meeting of the Bank of Japan, which has refrained from making any major changes to its minus 0.1% benchmark interest rate despite rising prices, citing a need to wait and see if the inflation is sustained.

    Tokyo’s benchmark NIkkei 225 added 0.3% to 32,362.58, while the Hang Seng in Hong Kong gave up 0.6% to 19,279.66. In Seoul, the Kospi declined 0.5% to 2,627.52.

    The Shanghai Composite index slipped 0.3% to 3,222.35. Shares rose in Taiwan and India but fell in Bangkok. Australian markets were closed for a holiday.

    Stocks inched higher Friday to close out a listless week for Wall Street, though the S&P 500 rose 0.1%, to 4,298.86, capping its fourth straight winning week. The Dow Jones Industrial Average added 0.1% to 33,876.78, and the Nasdaq composite gained 0.2% to 13,259.14.

    Tesla led the market, rallying 4.1% after announcing General Motors electric vehicles will be able to use much of its extensive charging network beginning early next year. GM rose 1.1%.

    Energy stocks fell along with the price of crude oil. Exxon Mobil slipped 0.7% and was one of the heavier weights on the market.

    On Monday, U.S. benchmark crude was down another 79 cents at $69.38 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.12 on Friday to $70.17 per barrel.

    Brent crude oil gave up 84 cents to $73.95 per barrel.

    The S&P 500 index’s return to a new bull market reflects growing hopes the economy might avoid a severe recession despite the sharp rise in interest rates as the Fed strived to bring inflation under control.

    “The S&P 500 is now at levels it has not seen since last September. The NASDAQ is up 26.68% year-to-date -– not bad for an economy that seems poised to slip into recession later this year,” ING Economics said in a commentary.

    The highest rates since 2007 have helped inflation come down some, but it’s still above everyone’s comfort level.

    Also Friday, Adobe rose another 3.4% to add to its 5% leap from the day before following its announcement of a new artificial-intelligence offering for businesses. It joined a frenzy around AI that has sent a select group of stocks soaring, such as a 165% surge for chipmaker Nvidia so far this year.

    Proponents say AI will be the next revolution to remake the economy, while critics say it’s inflating the next bubble.

    In the bond market, the yield on the 10-year Treasury rose to 3.75% from 3.74% late Friday. It helps set rates for mortgages and other important loans.

    In currency trading, the dollar slipped to 139.37 Japanese yen from 139.39 yen. The euro weakened to $1.0743 from $1.0750.

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  • General Motors, Braze rise; Vail Resorts, Argan fall, Friday, 6/9/2023

    General Motors, Braze rise; Vail Resorts, Argan fall, Friday, 6/9/2023

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    Stocks that traded heavily or had substantial prices changes on Wall Street Friday

    NEW YORK — Stocks traded heavily or had substantial prices changes on Wall Street Friday:

    General Motors Co., up 38 cents to $36.23.

    The automaker’s electric vehicles will be able to use much of Tesla’s extensive charging network beginning early next year.

    Vail Resorts Inc., down $18.38 to $239.66.

    The ski resort operator’s fiscal third-quarter earnings and revenue fell short of analysts’ forecasts.

    Braze Inc., up $5.49 to $39.43.

    The cloud-based software company reported encouraging financial results.

    Duckhorn Portfolio Inc., up 16 cents to $13.99.

    The wine company reported strong fiscal third-quarter earnings and revenue.

    Comtech Telecommunications Corp., down $1.94 to $9.38.

    The communications company reported a bigger fiscal third-quarter loss than analysts’ expected.

    Argan Inc., down $6.05 to $38.19.

    The builder of energy plants reported weak fiscal first-quarter financial results.

    Dish Network Corp., down 88 cents $6.55.

    The satellite television provider is reportedly seeking to sell assets to raise money.

    Netflix Inc., up $10.65 to $420.02.

    The streaming entertainment company reportedly notched subscriber gains after cracking down on password sharing.

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  • Stock market today: Asian shares slip following technology selloff on Wall Street

    Stock market today: Asian shares slip following technology selloff on Wall Street

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    TOKYO — Asian shares fell Thursday after heavy selling of big-name tech stocks pushed benchmarks lower on Wall Street.

    Stocks fell in Tokyo, Hong Kong, Seoul and Sydney but rose in Shanghai. U.S. futures were lower. Oil prices retreated.

    The declines came despite a sharp upward revision in Japan’s estimated economic growth rate for the January-March quarter, to 2.7%. That was above what analysts had expected.

    Japan’s benchmark Nikkei 225 sank 0.9% to 31,641.27. Australia’s S&P/ASX 200 shed 0.3% to 7,099.70. South Korea’s Kospi slipped 0.2% to 2,610.85.

    Hong Kong’s Hang Seng edged less than 0.1% lower to 19,242.26. The Shanghai Composite gained 0.4% to 3,211.44.

    Taiwan’s Taiex lost 1.1%, while India’s Sensex gave up 0.2%.

    On Wednesday, U.S. stocks drifted to a mixed close as declines for Microsoft and other tech stocks overshadowed gains for much of the rest of the market. It’s a reversal from much of this year, as excitement about artificial intelligence and hopes for an end to interest rate hikes have buoyed the tech sector.

    The Japanese economy has been recovering since restrictions related to the coronavirus pandemic were lifted. The nation has seen a return of tourists, as well as other economic activity.

    The focus is now on when Japan’s central bank may move away from the easy monetary policy it’s stuck to for years. In the past year, the U.S. Federal Reserve and the world’s other central banks have been raising interest rates. Japan’s benchmark rate is minus 0.1%.

    “While a higher growth reading may provide some room to consider a policy exit from the Bank of Japan, the central bank’s stance could remain unmoved for now, with recent comments from the Governor Kazuo Ueda pointing to more wait-and-see,” Yeap Jun Rong, a market analyst at IG said in a report.

    On Wall Street, the S&P 500 fell 0.4% to 4,267.52 even though the majority of stocks within the index rose. The Dow Jones Industrial Average gained 0.3% to 33,665.02, while the Nasdaq composite fell 1.3% to 13,104.89.

    Microsoft, Amazon, Nvidia and Alphabet all sank at least 3% and were the heaviest weights on the S&P 500. Because they’re some of Wall Street’s most valuable stocks, their movements pack extra punch on the index.

    The Russell 2000 index of smaller stocks jumped 1.8% to continue its hot streak since a stronger-than-expected report on hiring last week suggested a recession may be further off than feared.

    The market in general has climbed for months thanks to a resilient economy that’s managed to defy predictions for a recession. But the threat still looms, and Wall Street is questioning which will come first: a recession or inflation falling enough to get the Federal Reserve to cut interest rates?

    Most traders expect the Fed to leave rates steady next week. That would mark the first policy meeting in more than a year where it hasn’t hiked its benchmark rate, which is at its highest level since 2007. But the Fed may resume raising rates in July.

    The goal of higher interest rates is to squelch high inflation by slowing the entire economy and hurting prices for stocks, bonds and other investments. Pressure from high rates are squeezing the U.S. banking and manufacturing industries, though the job market has remained solid.

    In the bond market, the yield on the 10-year Treasury rose to 3.78% from 3.68% late Tuesday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.55% from 4.50%.

    In energy trading Thursday, benchmark U.S. crude fell 6 cents to $72.47 a barrel in electronic trading on the New York Mercantile Exchange. It gained 79 cents to $72.53 on Wednesday. Brent crude, the international standard, shed 9 cents to $76.86 a barrel.

    In currency trading, the U.S. dollar fell to 139.84 Japanese yen from 140.10 yen. The euro cost $1.0716, up from $1.0698.

    ——

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

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  • Stock market today: Asian shares slip following technology selloff on Wall Street

    Stock market today: Asian shares slip following technology selloff on Wall Street

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    TOKYO — Asian shares fell Thursday after heavy selling of big-name tech stocks pushed benchmarks lower on Wall Street.

    Stocks fell in Tokyo, Hong Kong, Seoul and Sydney but rose in Shanghai. U.S. futures were lower. Oil prices retreated.

    The declines came despite a sharp upward revision in Japan’s estimated economic growth rate for the January-March quarter, to 2.7%. That was above what analysts had expected.

    Japan’s benchmark Nikkei 225 sank 0.9% to 31,641.27. Australia’s S&P/ASX 200 shed 0.3% to 7,099.70. South Korea’s Kospi slipped 0.2% to 2,610.85.

    Hong Kong’s Hang Seng edged less than 0.1% lower to 19,242.26. The Shanghai Composite gained 0.4% to 3,211.44.

    Taiwan’s Taiex lost 1.1%, while India’s Sensex gave up 0.2%.

    On Wednesday, U.S. stocks drifted to a mixed close as declines for Microsoft and other tech stocks overshadowed gains for much of the rest of the market. It’s a reversal from much of this year, as excitement about artificial intelligence and hopes for an end to interest rate hikes have buoyed the tech sector.

    The Japanese economy has been recovering since restrictions related to the coronavirus pandemic were lifted. The nation has seen a return of tourists, as well as other economic activity.

    The focus is now on when Japan’s central bank may move away from the easy monetary policy it’s stuck to for years. In the past year, the U.S. Federal Reserve and the world’s other central banks have been raising interest rates. Japan’s benchmark rate is minus 0.1%.

    “While a higher growth reading may provide some room to consider a policy exit from the Bank of Japan, the central bank’s stance could remain unmoved for now, with recent comments from the Governor Kazuo Ueda pointing to more wait-and-see,” Yeap Jun Rong, a market analyst at IG said in a report.

    On Wall Street, the S&P 500 fell 0.4% to 4,267.52 even though the majority of stocks within the index rose. The Dow Jones Industrial Average gained 0.3% to 33,665.02, while the Nasdaq composite fell 1.3% to 13,104.89.

    Microsoft, Amazon, Nvidia and Alphabet all sank at least 3% and were the heaviest weights on the S&P 500. Because they’re some of Wall Street’s most valuable stocks, their movements pack extra punch on the index.

    The Russell 2000 index of smaller stocks jumped 1.8% to continue its hot streak since a stronger-than-expected report on hiring last week suggested a recession may be further off than feared.

    The market in general has climbed for months thanks to a resilient economy that’s managed to defy predictions for a recession. But the threat still looms, and Wall Street is questioning which will come first: a recession or inflation falling enough to get the Federal Reserve to cut interest rates?

    Most traders expect the Fed to leave rates steady next week. That would mark the first policy meeting in more than a year where it hasn’t hiked its benchmark rate, which is at its highest level since 2007. But the Fed may resume raising rates in July.

    The goal of higher interest rates is to squelch high inflation by slowing the entire economy and hurting prices for stocks, bonds and other investments. Pressure from high rates are squeezing the U.S. banking and manufacturing industries, though the job market has remained solid.

    In the bond market, the yield on the 10-year Treasury rose to 3.78% from 3.68% late Tuesday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.55% from 4.50%.

    In energy trading Thursday, benchmark U.S. crude fell 6 cents to $72.47 a barrel in electronic trading on the New York Mercantile Exchange. It gained 79 cents to $72.53 on Wednesday. Brent crude, the international standard, shed 9 cents to $76.86 a barrel.

    In currency trading, the U.S. dollar fell to 139.84 Japanese yen from 140.10 yen. The euro cost $1.0716, up from $1.0698.

    ——

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

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  • Stock market today: Asian stocks mixed as Wall St inches toward bull market

    Stock market today: Asian stocks mixed as Wall St inches toward bull market

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    BANGKOK — Asian shares were mixed Wednesday after a day of listless trading on Wall Street in the absence of market-moving data.

    China reported its exports fell 7.5% from a year earlier in May and imports were down 4.5%, adding to signs of a slowing of its economic recovery following the lifting in December of anti-virus controls that disrupted travel and commerce.

    The decline in exports was the first year-on-year drop in in three months, with export volumes falling below their levels at the start of the year. “And with the worst yet to come for many developed economies, we think exports will decline further before bottoming out later this year,” Julian Evans-Pritchard of Capital Economics said in a commentary.

    The Shanghai Composite index lost 0.1% to 3,192.41 while the Hang Seng in Hong Kong gained 0.7% to 19,232.94.

    Tokyo’s Nikkei 225 index lost 1.8%, the sharpest decline in 12 weeks, to 31,913.74. Analysts said investors were selling to lock in recent gains.

    In Seoul, the Kospi was nearly unchanged at 2,615.60, while Australia’s S&P/ASX 200 edged 0.2% lower to 7,118.00. Shares rose in Taiwan but fell in Bangkok.

    On Tuesday, the S&P 500 rose 0.2% to 4,283.85.That’s just 0.2% away from finishing 20% above where it was in mid-October, as a long-predicted recession has yet to hit and excitement around artificial intelligence has helped a select group of stocks to soar.

    The Dow Jones Industrial Average edged up by less than 0.1% to 33,573.28, while the Nasdaq composite rose 0.4%, to 13,276.42.

    Gitlab soared 31.2% after the software development platform gave a revenue forecast for the fiscal year that topped analysts’ expectations.

    Investors are watching to see which will happen first: a recession or inflation falling enough to get the Federal Reserve to start cutting interest rates, which have climbed so high they’ve hurt various parts of the economy.

    Next week, the U.S. government will publish its latest monthly updates on inflation, and the Federal Reserve will meet on interest-rate policy. The bet on Wall Street is that the Fed may hold off on hiking rates, which would be the first time that’s happened in more than a year, but could resume raising rates in July.

    Some of Tuesday’s strongest action was in the cryptocurrency world after the Securities and Exchange Commission charged Coinbase with operating its trading platform as an unregistered national securities exchange, broker and clearing agency.

    Shares of its parent, Coinbase Global, tumbled 12.1% after the SEC also accused it of being liable for some of Coinbase’s violations. Other charges focused on Coinbase’s staking-as-a-service program, where users get payments for their crypto almost like earning interest from a traditional bank savings account.

    Coinbase criticized the SEC’s approach to crypto, saying “the solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation.”

    A day earlier, the SEC filed 13 charges against another huge crypto trading platform, Binance, and its founder. Binance said it had been in discussions to reach a negotiated settlement to resolve the SEC’s investigations.

    The frenzy around AI has helped a handful of stocks soar to immense gains this year, including a 164.5% surge in chipmaker Nvidia. That’s helped drive much of the S&P 500’s gains in 2023, but it’s also caused critics to question whether a bubble is forming. They also say the furor around AI may be masking weakness beneath the S&P 500’s surface.

    Even though the S&P 500 is nearing a bull market, almost as many stocks within it are down this year as up as worries remain about falling corporate profits, still-high inflation and much higher interest rates than a year ago.

    In other trading Wednesday, a U.S. crude oil fell 49 cents to $71.25 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, it lost 41 cents to $71.74 a barrel. A barrel of Brent crude, the international standard, sank 51 cents to $75.78 a barrel.

    Both were close to $120 a year ago but have fallen amid worries about a strapped global economy’s need for fuel.

    The U.S. dollar bought 139.32 Japanese yen, down from 139.66 yen. The euro fell to $1.0677 from $1.0695.

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  • Stock market today: Asian markets mixed as US government debt talks push toward brink of default

    Stock market today: Asian markets mixed as US government debt talks push toward brink of default

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    Asian markets turned mostly higher Friday amid signs that Congress may reach a deal on the U.S. government debt that would forestall a potentially calamitous default.

    U.S. futures and oil prices also advanced.

    President Joe Biden and House Speaker Kevin McCarthy were narrowing in on a two-year budget deal that could unlock a vote for lifting the nation’s debt ceiling. The Democratic president and Republican speaker hope to strike a budget compromise this weekend.

    Biden and McCarthy both expressed optimism heading into the weekend that the gulf between their positions could be bridged. A two-year deal would raise the debt limit for that time, past the 2024 presidential election. As their price for raising the legal debt limit, Republicans have been demanding spending cuts the Democrats oppose.

    Markets have been whirling from various factors, and on Thursday, enthusiasm over artificial intelligence pushed share prices higher despite the potential crisis brewing in Washington.

    That carried over into Asia, where Tokyo’s Nikkei 225 gained 0.7% to 31,019.61. In Seoul, the Kospi climbed 0.2% to 2,558.81, helped by a 2.2% rise in the share price for Samsung Electronics, South Korea’s biggest company.

    The Shanghai Composite index added 0.4% to 3,212.50, while the S&P/ASX 200 in Sydney also was 0.2% higher, at 7,154.80.

    On Thursday, the S&P 500 rallied 0.9% to 4,151.28 after chipmaker Nvidia gave a monster forecast for upcoming sales as it benefits from the tech world’s rush into AI.

    The Nasdaq leaped 1.7% to 12,698.09, while the Dow Jones Industrial Average slipped 0.1% to 32,764.65.

    Because it’s one of Wall Street’s most valuable stocks, Nvidia’s 24.4% surge was the strongest force pushing upward on the S&P 500. Its forecast of roughly $11 billion in revenue for the current quarter blew past analysts’ expectations for less than $7.2 billion. Nvidia’s stock has already more than doubled this year, and its total value is approaching $1 trillion.

    Stocks of other chip makers also charged higher after Nvidia described a race by its customers to put AI “into every product, service and business process.” Advanced Micro Devices gained 11.2%.

    Some other Big Tech stocks rallied, adding to recent gains fueled by excitement about AI. The field has become so hot that critics warn of a possible bubble, while supporters say it could be the latest revolution to reshape the global economy. Microsoft gained 3.8%, and Google’s parent company, Alphabet, rose 2.1%.

    “Although no one questions the potential of AI, the valuations seem to have gone ahead of themselves and it could soon be time for correction,” Ipek Ozkardeskaya of Swissquote said in a commentary.

    The majority of stocks fell on worries that Washington could run out of cash to pay its bills as soon as June 1, unless Congress allows it to borrow more.

    The widespread expectation is for a compromise before it’s too late, as has happened dozens of times before, because a failure would likely be awful for the economy.

    Fitch said late Wednesday that it could downgrade the U.S. government’s “AAA” credit rating. It said it still expects a resolution before the U.S. Treasury runs out of cash, but it sees the risk of a mistake having risen.

    A report said fewer workers applied for unemployment benefits last week than expected, suggesting the job market remains strong even as manufacturing, housing and other areas of the economy slow under the weight of much higher interest rates.

    Another report estimated the U.S. economy grew at a 1.3% annual pace in the first three months of the year, stronger than the 1.1% earlier thought. That provides reassurance the economy might not fall into recession. But it might lead the Federal Reserve to raise interest rates again next month. Rates have been raised rapidly for the past year, helping to slow inflation to slow from its peak last summer, but they slow the entire economy and drag on prices for stocks, bonds and other investments.

    In other trading, benchmark U.S. crude oil reversed an early retreat, picking up 20 cents to $72.03 per barrel in electronic trading on the New York Mercantile Exchange. It sank $2.51 on Thursday to $71.83 per barrel.

    Brent crude, the international standard, rose 11 cents to $76.29 per barrel.

    The U.S. dollar fell to 139.74 Japanese yen from 140.07 yen. The euro rose to $1.0732 from $1.0726.

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  • Stock market today: AI frenzy pulls Wall Street higher despite DC debt woes

    Stock market today: AI frenzy pulls Wall Street higher despite DC debt woes

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    NEW YORK — Wall Street’s building mania around artificial intelligence helped lift the market, even as worries worsen about political rancor in Washington. The S&P 500 rose 0.9% Thursday after chipmaker Nvidia gave a monster forecast for upcoming sales as it benefits from the rush into AI. Because of its immense size, Nvidia is one of the most influential stocks on the market, and it helped push the Nasdaq up 1.7%. The Dow Jones Industrial Average slipped 0.1%, and the majority of stocks fell. Treasury yields rallied after reports suggested the U.S. economy is in better shape than feared.

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

    Wall Street’s building mania around artificial intelligence is helping to lift the stock market Thursday, even as worries worsen about political rancor in Washington.

    The S&P 500 was 0.8% higher in late trading after chipmaker Nvidia gave a monster forecast for upcoming sales as it benefits from the tech world’s rush into AI. It helped the Nasdaq composite leap 1.5%, while the Dow Jones Industrial Average was down 66 points, or 0.2%, at 32,733 with an hour left in trading.

    Because it’s one of Wall Street’s most valuable stocks, Nvidia’s 25.3% surge was the strongest force pushing upward on the S&P 500. Its forecast of roughly $11 billion in revenue for the current quarter blew past analysts’ expectations for less than $7.2 billion. Nvidia’s stock has already more than doubled this year, and its total value is approaching $1 trillion.

    Stocks of other chip makers also charged higher after Nvidia described a race by its customers to put AI “into every product, service and business process.” Advanced Micro Devices gained 9.9%.

    Big Tech stocks rallied, adding to recent gains fueled by excitement about AI. The field has become so hot that critics warn of a possible bubble, while supporters say it could be the latest revolution to reshape the global economy. Microsoft gained 3.5%, and Google’s parent company, Alphabet, rose 1.7%.

    They helped lift indexes even as the majority of stocks fell on worries about the U.S. government edging closer to a possible default on its debt. Washington could run out of cash to pay its bills as soon as June 1, unless Congress allows it to borrow more.

    The widespread expectation on Wall Street has been for Washington to come to a deal before it’s too late, as it has many times before, because a failure would likely be awful for the entire economy. But the bitter partisanship on Capitol Hill is hurting faith and trust in the government.

    Fitch said late Wednesday that it could downgrade the U.S. government’s “AAA” credit rating. It said it still expects a resolution before the U.S. Treasury runs out of cash, but it sees the risk of a mistake having risen.

    “The brinkmanship over the debt ceiling, failure of the U.S. authorities to meaningfully tackle medium-term fiscal challenges that will lead to rising budget deficits and a growing debt burden signal downside risks to U.S. creditworthiness,” Fitch said.

    In 2011, Standard & Poor’s cut its “AAA” credit rating for the United States following a similar political squabble about the debt limit.

    Another concern rests on exactly when the “X-date” deadline will hit for the U.S. Treasury to run out of cash.

    While Isaac Boltansky, BTIG director of policy research, said he sees an 11th hour deal happening, “Washington is still arguing over exactly when midnight hits, which remains our primary concern as deadlines are the only viable forcing mechanism in town.”

    On the losing end of Wall Street was Dollar Tree, which fell 10.2%. The retailer reported weaker profit for the latest quarter than analysts expected. It said its customers are shifting spending toward products that are less profitable for it. It’s also contending with worse-than-expected theft like other retailers.

    In the bond market, yields rallied after reports suggested the economy is in stronger shape than feared.

    One said fewer workers applied for unemployment benefits last week than expected. That’s a signal the job market remains remarkably solid, even as manufacturing and other areas of the economy slow under the weight of much higher interest rates.

    Another report estimated the U.S. economy grew at a 1.3% annual pace in the first three months of the year, stronger than the 1.1% earlier thought. That report also suggested inflation was a touch hotter during the start of 2023 than earlier thought.

    The stronger-than-expected data helped dampen fears built on Wall Street about a coming recession. But it could also convince the Federal Reserve to raise interest rates again next month. Traders are split on whether the Fed will take a pause in June after hiking rates at a furious pace for more than a year.

    Higher rates have helped inflation to slow from its peak last summer, but they do that by slowing the entire economy and dragging on prices for stocks, bonds and other investments.

    The yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 4.50% from 4.38% last Wednesday.

    The 10-year yield rose to 3.81% from 3.74%. It helps set rates for mortgages and other important loans.

    Stock markets abroad were mostly weaker, but the declines were milder than the prior day’s.

    Germany’s DAX lost 0.3% after data showed its economy shrank in the first three months of the year, the second straight quarter that’s occurred.

    Hong Kong’s Hang Seng fell 1.9% amid worries China’s economic recovery after the government relaxed pandemic restrictions late last year is losing steam. Stocks in Shanghai slipped 0.1%.

    ——

    AP Business Writers Elaine Kurtenbach and Matt Ott contributed.

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  • Stock market today: Wall Street drifts higher with yields

    Stock market today: Wall Street drifts higher with yields

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    NEW YORK — U.S. stocks are drifting higher Thursday after more companies reported better profits than expected, while yields climb after a Federal Reserve official cautioned the end to its interest-rate hikes may not come as soon as Wall Street hoped.

    The S&P 500 was 0.4% higher in morning trading, a day after rallying on hopes the U.S. government could avoid a disastrous default on its debt. The Dow Jones Industrial Average was up 14 points, or less than 0.1%, at 33,435, as of 10:30 a.m. Eastern time, while the Nasdaq composite was 0.8% higher.

    Helping to lift Wall Street was Walmart, which climbed 2.1% after reporting stronger results for the latest quarter than expected. It also raised its financial forecast for the full year, though it said it’s seeing shoppers remain cautious about spending.

    Bath & Body Works, another retailer, leaped 8.8% after reporting stronger revenue and earnings for the latest quarter.

    Much scrutiny has been on the retail industry because strong spending by U.S. households has been one of the main pillars keeping the slowing economy out of a recession.

    Video game maker Take-Two Interactive jumped 11.7% after it forecast a huge jump in revenue for fiscal 2025, stoking speculation that Grand Theft Auto VI is on the way.

    Stocks have remained remarkably resilient since early April despite a long list of worries. A major reason for that is hope the Fed would take it easier on its hikes to rates, which have slowed inflation at the expense of risking a recession and knocking down prices across financial markets.

    The widespread bet was that the Fed would take a pause at its next meeting in June. But Dallas Fed President Lorie Logan cooled some of those hopes in a prepared speech for the Texas Bankers Association.

    “The data in coming weeks could yet show that it is appropriate to skip a meeting,” Logan said. “As of today, though, we aren’t there yet.”

    Treasury yields climbed as traders increased bets that the Fed would raise rates again at its June meeting, though the majority are still forecasting a pause.

    The yield on the 10-year Treasury rose to 3.63% from 3.57% late Wednesday. The two-year yield, which moves more on expectations for the Fed, rose to 4.22% from 4.16%.

    Higher rates have already slowed swaths of the economy and helped lead to three of the largest U.S. bank failures in history since March. Reports on the economy Thursday came in mixed.

    One showed that fewer workers applied for unemployment benefits last week than expected. While that’s good news for workers and for a so-far solid job market, it could also result in some upward pressure on inflation. That’s what the Fed has been trying desperately to lower by cranking its benchmark interest rate to the highest level since 2007.

    A separate report said that manufacturing in the mid-Atlantic region is continuing to weaken, though not quite as badly as economists expected.

    Cisco Systems’ stock was swinging between small gains and losses after reporting stronger results for the latest quarter than expected and raising its forecast for the current quarter. Analysts said some investors may be disappointed because of worries about lower-than-expected growth in the following fiscal year. Its stock was most recently up 0.2%.

    The majority of companies in the S&P 500 have reported stronger profits for the first three months of the year than analysts expected. But they’re still on track to report a second straight quarter of weaker earnings than a year earlier, according to FactSet.

    In stock markets abroad, indexes rose in much of Europe and Asia after a big Wall Street rally from Wednesday spread westward. That lift came after President Joe Biden said he’s confident about reaching a deal with Republicans to allow the U.S. government to increase its credit limit and borrow more.

    That could avert a potential first-ever default on Washington’s debt. The government is scheduled to run out of cash to pay its bills as soon as June 1 unless a deal is made, and economists say a default could have catastrophic consequences across financial markets and the economy.

    In Asia, Japan’s Nikkei 225 rose 1.6% to continue a strong run, while Germany’s DAX in Europe returned 1.1%.

    ___

    AP Business Writers Matt Ott and Joe McDonald contributed

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  • CEO pay again in focus as the heads of failed banks appear before Senate panel

    CEO pay again in focus as the heads of failed banks appear before Senate panel

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    NEW YORK — The recent failures of a trio of midsize banks has once again raised questions about whether senior executives in the U.S. are being rewarded more for short-term gains — like rising stock prices — than for ensuring their companies’ long-term health.

    Executives at Silicon Valley Bank, Signature Bank and First Republic Bank were paid millions of dollars over their tenures up until their banks failed, the bulk of the compensation coming in the form company stock. That stock is now largely worthless but the CEOs still pocketed millions from the planned sales of their shares before the banks’ collapse.

    The heads of the two of the three failed banks will appear Tuesday in front of the Senate Banking Committee to respond to questions about why their banks went under and what regulators could have done to avoid the calamities. Executive compensation is almost certainly to come up as well, most likely raised by senators including Elizabeth Warren, D-Mass., who wrote letters to First Republic Bank about its compensation practices after the bank failed.

    Silicon Valley Bank’s former CEO Greg Becker received compensation valued at roughly $9.9 million in 2022, and also sold stock in the company only a few weeks before it failed. Joseph DePaolo, CEO of Signature Bank, also sold stock in the company in the years leading up to its collapse.

    DePaolo will not appear in front of the Senate on Tuesday, instead Signature’s co-founder and the bank’s president have agreed to testify.

    The anger over CEO pay echoes that of roughly 15 years ago, when the 2008 financial crisis led to taxpayer-funded bailouts of major banks. The CEOs and high-level bankers still received millions in pay and bonuses, most notably at nearly failed insurance conglomerate American International Group.

    “The recent bank failures prove yet again that banker compensation is at the core of causing banks to take too much risk, act irresponsibly if not recklessly, and blow themselves up,” said Dennis Kelleher, co-founder of Better Markets, which was founded after the Great Recession focused on financial industry reform.

    Clawing back CEO pay has gained bipartisan attention despite the fierce divisions between the two political parties.

    Four senators — two Democrats and two Republicans — have introduced legislation that would give the Federal Deposit Insurance Corporation authority to claw back any pay made to executives in the five years leading up to a bank’s failure.

    The bill is sponsored by Warren, Josh Hawley, R-Mo., Catherine Cortez Masto, D-Nev. and Mike Braun, R-Ind. The White House, while not endorsing the specific bill, has called on Congress to pass laws to reform how bank CEOs are paid in the event of a failure.

    “Bank executives who make risky investments with customers’ money shouldn’t be permitted to profit in the good times, and then avoid financial consequences when things go south,” Hawley said when the bill was introduced in late March.

    Kelleher said he supports the congressional efforts to claw back CEO pay following a bank failure.

    Executives at big companies also tend get most of their pay each year in company stock. That means CEOs and other insiders have much to gain if the company’s stock rises. And shareholders typically like it this way. The thought is that by tying a CEO’s compensation to the stock price, it better aligns their interests with shareholders.

    But the executives also have a lot to gain if they can sell their stock before the share price takes a steep dive.

    Since 2000, the Securities and Exchange Commission has given CEOs and other corporate insiders a way to defend themselves against charges that they bought or sold stock using information unavailable to others, an illegal practice known as insider trading.

    The method, known as the 10b5-1 rule, lets insiders enter into written plans to buy and sell stock in the future. The goal was to let insiders make trades, but not when they have their hands on material information not available to the public.

    In prepared remarks for the Senate, Becker says he believed that these plans were “the most ethical means to manage this part of my compensation” and that his selling of Silicon Valley Bank stock before the bank failed was preplanned.

    Over the years, complaints have risen about insiders abusing some loopholes in the 10b5-1 rule. In December, the SEC announced added amendments to close the loopholes.

    Key among them was a “cooling-off period.” That meant directors and officers have to wait at least 90 days in many cases after establishing or modifying a trading plan before any purchases or sales could be made. The changes also limit insiders’ ability to use multiple overlapping 10b5-1 plans.

    In March, the Justice Department announced the first insider trading prosecution based exclusively on the use of 10b5-1 trading plans. It charged the CEO of a health care company in California with securities fraud for allegedly avoiding more than $12.5 million in losses by entering into two 10b5-1 trading plans while knowing the company’s then-largest customer might be terminating its contract.

    The SEC also charged the CEO with insider trading after avoiding the 44% drop in the company’s stock price when it announced the customer had terminated the contract.

    _____

    AP Business Writer Stan Choe contributed to this report from New York.

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  • CEO pay again in focus as the heads of failed banks appear before Senate panel

    CEO pay again in focus as the heads of failed banks appear before Senate panel

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    NEW YORK — The recent failures of a trio of midsize banks has once again raised questions about whether senior executives in the U.S. are being rewarded more for short-term gains — like rising stock prices — than for ensuring their companies’ long-term health.

    Executives at Silicon Valley Bank, Signature Bank and First Republic Bank were paid millions of dollars over their tenures up until their banks failed, the bulk of the compensation coming in the form company stock. That stock is now largely worthless but the CEOs still pocketed millions from the planned sales of their shares before the banks’ collapse.

    The heads of the two of the three failed banks will appear Tuesday in front of the Senate Banking Committee to respond to questions about why their banks went under and what regulators could have done to avoid the calamities. Executive compensation is almost certainly to come up as well, most likely raised by senators including Elizabeth Warren, D-Mass., who wrote letters to First Republic Bank about its compensation practices after the bank failed.

    Silicon Valley Bank’s former CEO Greg Becker received compensation valued at roughly $9.9 million in 2022, and also sold stock in the company only a few weeks before it failed. Joseph DePaolo, CEO of Signature Bank, also sold stock in the company in the years leading up to its collapse.

    DePaolo will not appear in front of the Senate on Tuesday, instead Signature’s co-founder and the bank’s president have agreed to testify.

    The anger over CEO pay echoes that of roughly 15 years ago, when the 2008 financial crisis led to taxpayer-funded bailouts of major banks. The CEOs and high-level bankers still received millions in pay and bonuses, most notably at nearly failed insurance conglomerate American International Group.

    “The recent bank failures prove yet again that banker compensation is at the core of causing banks to take too much risk, act irresponsibly if not recklessly, and blow themselves up,” said Dennis Kelleher, co-founder of Better Markets, which was founded after the Great Recession focused on financial industry reform.

    Clawing back CEO pay has gained bipartisan attention despite the fierce divisions between the two political parties.

    Four senators — two Democrats and two Republicans — have introduced legislation that would give the Federal Deposit Insurance Corporation authority to claw back any pay made to executives in the five years leading up to a bank’s failure.

    The bill is sponsored by Warren, Josh Hawley, R-Mo., Catherine Cortez Masto, D-Nev. and Mike Braun, R-Ind. The White House, while not endorsing the specific bill, has called on Congress to pass laws to reform how bank CEOs are paid in the event of a failure.

    “Bank executives who make risky investments with customers’ money shouldn’t be permitted to profit in the good times, and then avoid financial consequences when things go south,” Hawley said when the bill was introduced in late March.

    Kelleher said he supports the congressional efforts to claw back CEO pay following a bank failure.

    Executives at big companies also tend get most of their pay each year in company stock. That means CEOs and other insiders have much to gain if the company’s stock rises. And shareholders typically like it this way. The thought is that by tying a CEO’s compensation to the stock price, it better aligns their interests with shareholders.

    But the executives also have a lot to gain if they can sell their stock before the share price takes a steep dive.

    Since 2000, the Securities and Exchange Commission has given CEOs and other corporate insiders a way to defend themselves against charges that they bought or sold stock using information unavailable to others, an illegal practice known as insider trading.

    The method, known as the 10b5-1 rule, lets insiders enter into written plans to buy and sell stock in the future. The goal was to let insiders make trades, but not when they have their hands on material information not available to the public.

    In prepared remarks for the Senate, Becker says he believed that these plans were “the most ethical means to manage this part of my compensation” and that his selling of Silicon Valley Bank stock before the bank failed was preplanned.

    Over the years, complaints have risen about insiders abusing some loopholes in the 10b5-1 rule. In December, the SEC announced added amendments to close the loopholes.

    Key among them was a “cooling-off period.” That meant directors and officers have to wait at least 90 days in many cases after establishing or modifying a trading plan before any purchases or sales could be made. The changes also limit insiders’ ability to use multiple overlapping 10b5-1 plans.

    In March, the Justice Department announced the first insider trading prosecution based exclusively on the use of 10b5-1 trading plans. It charged the CEO of a health care company in California with securities fraud for allegedly avoiding more than $12.5 million in losses by entering into two 10b5-1 trading plans while knowing the company’s then-largest customer might be terminating its contract.

    The SEC also charged the CEO with insider trading after avoiding the 44% drop in the company’s stock price when it announced the customer had terminated the contract.

    _____

    AP Business Writer Stan Choe contributed to this report from New York.

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  • Stock market today: Asian shares mixed in choppy trading after US inflation report

    Stock market today: Asian shares mixed in choppy trading after US inflation report

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    TOKYO — Asian shares were mixed in choppy trading Thursday after a report showed evidence that inflation in the United States was cooling, even if it remains too high.

    Japan’s benchmark Nikkei 225 dipped nearly 0.1% in afternoon trading to 29,102.25. Australia’s S&P/ASX 200 slipped 0.1% to 7,249.00. South Korea’s Kospi added 0.1% to 2,499.99. Hong Kong’s Hang Seng lost 0.4% to 19,693.89, while the Shanghai Composite was little changed, inching up less than 0.1% to 3,319.53.

    Concerns about the Chinese economy remain a major focus, especially for the Asian region, with the latest cause for worry coming from trade data released Tuesday.

    “China could be heading into a deflationary funk similar to the one that Japan is starting to emerge from,” said Stephen Innes, managing partner at SPI Asset Management.

    On Wall Street, the S&P 500 rose 0.2% to 4,129.20 after swinging between gains and losses through the day. The Dow Jones Industrial Average slipped 0.2% to 33,487.87, while the Nasdaq composite rallied 1% to 12,306.44.

    Bond prices climbed after the highly anticipated report said inflation at the consumer level edged down to 4.9% last month, its lowest level in two years. That was slightly better than economists expected, and other underlying measures of inflation also came in very close to forecasts.

    Because of that, Wall Street still sees the door open for the Federal Reserve to leave interest rates alone at its next meeting in June. That would be the first time it hasn’t raised rates at a meeting in more than a year, and a pause would offer some breathing room for the economy and financial markets.

    “The concern coming in was that it would be hotter than feared,” said Ross Mayfield, investment strategy analyst at Baird. “While not exactly an exciting report, I think there was enough good news baked in that it shouldn’t impact the Fed or the economic trajectory all that much.”

    The Fed has jacked up rates at a furious pace in hopes of driving down inflation. But high rates do that by slowing the entire economy and hitting investment prices broadly. They’ve already sent stock prices tumbling, caused turmoil in the banking system and dragged on the economy enough that many investors expect a recession to hit this year.

    Following the report, traders upped the probability they see of the Fed holding rates steady in June to nearly 94%, according to data from CME Group.

    Stocks that benefit the most from an easing of interest rates led the way on Wall Street, including Big Tech and other high-growth stocks. Amazon’s 3.3% rise and Microsoft’s 1.7% climb were the two biggest forces pushing the S&P 500 higher.

    Inflation still remains way above the Fed’s 2% target and continues to squeeze households across the economy, particularly those with the lowest incomes.

    The majority of companies in the S&P 500 have topped profit forecasts so far this reporting season, which is approaching its final stretch. But they’re still on pace to report an overall drop in earnings from a year earlier, which would be the second straight quarter that’s happened.

    In the bond market, increased hopes for a coming pause from the Fed on rates pushed yields lower.

    The yield on the 10-year Treasury fell to 3.43% from 3.52%. It helps set rates for mortgages and other important loans. The two-year Treasury yield, which moves more on expectations for Fed action, fell to 3.90% from 4.03%.

    Besides worries about interest rates and inflation, some corners of the bond market are also swinging on concerns about the U.S. government inching closer to a possible default on its debt. That’s never happened before, and economists warn a default could be catastrophic for the economy and financial markets.

    In energy trading, benchmark U.S. crude rose 70 cents to $73.26 a barrel. Brent crude, the international standard, added 75 cents to $77.16 a barrel.

    In currency trading, the U.S. dollar was little changed at 134.24 Japanese yen, down slightly from 134.28 yen. The euro cost $1.0980, down from $1.0984.

    ___

    AP Business Writer Stan Choe contributed from New York.

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  • Stock market today: Markets slip after latest Fed rate hike

    Stock market today: Markets slip after latest Fed rate hike

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    NEW YORK — Stocks are shifting lower Wednesday after the Federal Reserve announced its latest hike to interest rates but hinted the end to them may be near.

    The S&P 500 was down 0.7% in late trading, and it drifted between modest gains and losses immediately after the Fed’s announcement. The Dow Jones Industrial Average was down 249 points, or 0.7%, at 33,426, as of 3:42 p.m. Eastern time, while the Nasdaq composite was down 0.4%.

    The move was widely expected, and it’s supposed to slow the economy further in hopes of getting inflation under control. The hope on Wall Street is that this is the final increase following the Fed’s fastest flurry in decades. The central bank gave a nod toward the possibility in its statement, where it dropped a reference saying it “anticipates that some additional policy firming may be appropriate.”

    “That’s a meaningful change,” Fed Chair Jerome Powell said.

    But the Fed stopped short of declaring the end to rate hikes, which have already caused cracks in the U.S. banking system and sent stock prices well below their record heights. Powell also said that even though traders are hoping for cuts to rates later this year, which can act like steroids for markets, he doesn’t expect them to happen this year.

    The Fed’s next meeting is next month.

    Inflation remains well above the Fed’s 2% target, and it’s still hurting households trying to keep up. Lower-income households have been squeezed particularly hard. At the same time, high rates have also sharply raised worries about a recession hitting later this year because they act like a blunt hammer hitting the entire economy. Powell said he’s still hopeful the economy can avoid a recession.

    “People did talk about pausing, but not so much at this meeting,” Powell said about deliberations on interest rates at the Fed’s meeting. “There’s a sense that we’re much closer to the end of this than the beginning.”

    The banking system is feeling some of the fiercest pressure of high rates, and three of the four largest U.S. bank failures in history have come within the last two months. Investors have been hunting for other potential weak links, with the harshest scrutiny on small- and medium-sized banks that could see a sudden exodus of customers.

    Shares of PacWest Bancorp, Western Alliance Bancorp and other rivals were steadier Wednesday, a day after seeing trading of their stocks get halted amid steep slides. PacWest was up 0.3%, and Western Alliance fell 3.2% after losing an earlier gain.

    Eli Lilly was a big factor lifting the market, and it rose 7.1% after reporting encouraging results from a study of a treatment for Alzheimer’s disease.

    Some of the market’s sharpest action was among companies reporting their results for the first three months of the year. Kraft Heinz rallied 2.5% after beating analysts’ forecasts for profit and revenue.

    The majority of companies have been turning in better profits than feared so far. But expectations coming into this reporting season were low given the effects of much higher interest rates and a slowing economy. S&P 500 companies are still likely on the way to reporting a second straight quarter of profit drops.

    That’s why much attention has been on what companies say about upcoming trends.

    Advanced Micro Devices fell 9.2% despite reporting stronger profit and revenue than expected. It gave a forecast for revenue in the current quarter that fell short of some analysts’ expectations.

    Oil prices were sliding amid worries about how much fuel a slowing global economy will burn. Benchmark U.S. crude oil fell 4.3% to $68.60 per barrel and is only a few dollars above its lowest point since late 2021.

    Brent crude, the international standard, fell 4% to $72.33 per barrel. That sent energy stocks to the sharpest loss by far among the 11 sectors that make up the S&P 500. Devon Energy fell 2.8%, and Diamondback Energy dropped 4.1%.

    Reports on Wednesday, though, offered some potentially encouraging data on the U.S. economy. Growth in U.S. services industries accelerated last month by a bit more than expected, according to the Institute for Supply Management.

    A separate report also suggested the job market may be in better shape than expected. ADP said hiring among private employers accelerated much more last month than forecast. It could raise expectations for the federal government’s more comprehensive report on hiring, which will arrive Friday.

    The job market has been one of the strongest pillars supporting the economy recently, though some mixed data recently has suggested it may be softening. On one hand, the Fed sees that as helpful in bringing inflation closer to its goal of 2%. On the other, though, a drop-off would sharply raise the risk of a recession.

    In the bond market, the yield on the 10-year Treasury fell to 3.37% from 3.44% late Tuesday. It helps set rates for mortgages and other important loans.

    The two-year yield, which moves more on expectations for the Fed, fell to 3.91% from 3.99%.

    ___

    AP Business Writers Elaine Kurtenbach and Matt Ott contributed.

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  • How will we know if the US economy is in a recession?

    How will we know if the US economy is in a recession?

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    WASHINGTON — The government’s report Thursday that the economy grew at a 1.1% annual rate last quarter signaled that one of the most-anticipated recessions in recent U.S. history has yet to arrive. Many economists, though, still expect a recession to hit as soon as the current April-June quarter — or soon thereafter.

    The economy’s expansion in the first three months of the year was driven mostly by healthy consumer spending, yet shoppers turned more cautious toward the end of the quarter. Businesses also cut their spending on equipment, a trend that has continued.

    The list of obstacles the economy faces keeps growing. The Federal Reserve has raised its benchmark interest rate nine times in the past year to the highest level in 17 years, thereby elevating the cost of borrowing for consumers and businesses. Inflation has eased slowly but steadily in response. Yet price increases are still persistently high.

    And last month the collapse of two large banks resulted in a whole new threat: A pullback in lending by the financial system that could weaken growth even further. A report on business conditions by the Fed this month found that banks were tightening credit to preserve capital, which makes it harder for companies to borrow and expand. Fed economists are forecasting a “mild recession” for later this year.

    Still, there are reasons to expect that a recession, if it does come, will prove to be a comparatively mild one. Many employers, having struggled to hire after huge layoffs during the pandemic, may decide to retain most of their workforces even in a shrinking economy.

    Six months of economic decline are 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 last 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.

    Fed officials have made clear they’re willing to tip the economy into a recession if necessary to defeat high inflation, and most economists believe them.

    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 high inflation to overwhelm consumers and businesses, forcing them to significantly slow their spending and investment. Businesses will likely also have to cut jobs, causing spending to fall further.

    Consumers have so far proved resilient in the face of higher rates and rising prices. Still, there are signs that their sturdiness is starting to crack.

    Retail sales have dropped for two straight months. The Fed’s so-called beige book, a collection of anecdotal reports from businesses around the country, shows that retailers are increasingly seeing consumers resist higher prices.

    Credit card debt is also rising, evidence that Americans are having to borrow more to maintain their spending levels, a trend that probably isn’t sustainable.

    ___

    WHAT WOULD BE SOME SIGNS THAT A RECESSION MIGHT HAVE BEGUN?

    The clearest signal 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 signaled the start of a recession.

    Many economists monitor the number of people who seek unemployment benefits each week, a gauge that indicates whether layoffs are worsening. Weekly applications for jobless aid have been creeping higher as a range of companies, from Facebook’s parent company Meta to the industrial conglomerate 3M to the ride-hailing company Lyft, have announced layoffs.

    Still, employers added a solid 236,000 jobs in March, and the unemployment rate slipped to 3.5%, near a half-century low, from 3.6%.

    ___

    ANY OTHER SIGNALS TO WATCH FOR?

    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, like the three-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 last July, the yield on the two-year Treasury note has exceeded the 10-year yield, suggesting that markets expect a recession soon. And the three-month yield has also risen far 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. It also assesses many other data points, including gauges of income, employment, inflation-adjusted spending, retail sales and factory output. It assigns heavy weight to 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.

    ___

    DOES HIGH INFLATION TYPICALLY LEAD TO A RECESSION?

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

    But when inflation gets as high as it did last year — it reached a 40-year peak of 9.1% in June — a recession becomes increasingly likely.

    That’s for two reasons: First, the Fed will sharply raise borrowing costs when inflation gets that high. Higher rates then drag down the economy as consumers become 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 economic outlook. Many of them pull back on their expansion plans and stop hiring. This can lead to higher unemployment as some people choose to leave jobs and aren’t replaced.

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  • Stock market today: Asian shares rise despite banking fears

    Stock market today: Asian shares rise despite banking fears

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    TOKYO — Asian shares mostly rose Thursday, despite lingering worries about the U.S. banking sector and inflationary pressures that weighed on investor sentiment.

    Japan’s benchmark Nikkei 225 recouped morning losses to inch up nearly 0.1% to 28,436.84. Australia’s S&P/ASX 200 slipped 0.3% to 7,292.70. South Korea’s Kospi rose 0.4% to 2,495.29. Hong Kong’s Hang Seng added 0.4% to 19,827.02, while the Shanghai Composite added 0.6% to 3,282.94.

    Some benchmarks fell in morning trading but rebounded later as a wait-and-see mood prevailed ahead of the release of U.S. first quarter economic growth data later in the day.

    On Wall Street on Wednesday, the S&P 500 dropped 0.4% to 4,055.99. The Dow Jones Industrial Average fell 0.7%, to 33,301.87, while the Nasdaq composite led the market with a gain 0.5%, to 11,854.35.

    U.S. stocks were coming off their worst day in a month, hurt by concerns about the strength of U.S. banks. The spotlight has been harshest on First Republic Bank, which lost another 29.8% after nearly halving the day before after it disclosed how many customers bolted amid last month’s turmoil in the industry.

    The worry is that it and other smaller and mid-sized banks could suffer debilitating runs of deposits from customers, similar to the ones that caused last month’s failures of Silicon Valley Bank and Signature Bank. Even without more shutdowns, the industry’s struggles could cause a pullback in lending by banks that saps the economy.

    Activision Blizzard, meanwhile, tumbled 11.4% after U.K. regulators blocked its takeover by Microsoft on concerns it would hurt competition in the cloud gaming market.

    BIG TECH BLOOMS

    While the majority of stocks fell, gains for Microsoft and other Big Tech companies prevented a sharper slide for the market.

    Microsoft rose 7.2% after reporting stronger profit for the first three months of the year than analysts expected. It carries a huge weight on the S&P 500 as the second-largest stock in the index.

    Tech stocks have been some of the year’s best performers so far as they’ve laid off workers and made other cost cuts to improve their profitability. Hopes the Federal Reserve will back away from its barrage of interest rate hikes have helped.

    Google’s parent company, Alphabet, turned a bigger profit than expected but its stock slipped 0.2% after reporting its first back-to-back drops in advertising revenue from a year earlier since it became a publicly traded company in 2004.

    THE FED AND RATES

    All banks are contending with much higher interest rates, which have flown higher over the past year to tighten the screws on the economy and financial markets.

    The Federal Reserve’s key overnight interest rate is at its highest level since 2007. High rates slow the entire economy and hurt prices for investments.

    Apart from cracks in the banking system, high rates have slowed the housing, manufacturing and other industries. The job market, meanwhile, remains relatively solid.

    A report on Wednesday showed orders for long-lasting manufactured goods were stronger in March than expected.

    In the bond market, the yield on the 10-year Treasury rose to 3.43% from 3.40% late Tuesday. It helps set rates for mortgages and other loans. The two-year Treasury yield, which more closely tracks expectations for the Fed, fell to 3.92% from 3.95% late Tuesday.

    In energy trading, benchmark U.S. crude added 24 cents to $74.54 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 36 cents to $78.05 a barrel.

    In currency trading, the U.S. dollar inched up to 133.76 Japanese yen from 133.66 yen. The euro cost $1.1059, up from $1.1042.

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  • Bank rates are up. How to avoid leaving money on the table

    Bank rates are up. How to avoid leaving money on the table

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    NEW YORK — Moving your savings around by opening a new account and closing an old one can seem like a hassle. But it’s a use of time that can pay off.

    After years of paying low rates for savers, banks are finally offering better interest on deposits. Though the increases may seem small, compounding interest adds up over the years, and you don’t want to miss the moment.

    As the Federal Reserve has raised interest rates to try to cool inflation, some banks have improved their terms for savers as well. Even if you’re only keeping modest savings in your bank account, you could make more significant gains over the long term by finding an account with a better rate.

    Here’s what you should think about if you’re considering moving your money:

    WHAT KIND OF RATES ARE AVAILABLE?

    While the biggest national banks have yet to dramatically change the rates on their savings accounts (clocking in at an average of just 0.23%, according to Bankrate), some mid-size and smaller banks have made changes more in line with the Federal Reserve’s moves.

    Online banks in particular — which save money by not having brick-and-mortar branches and associated expenses — are now offering savings accounts with annual percentage yields of between 3% and 4%, or even higher, as well as 4% or higher on one-year Certificates of Deposit (CDs). Some promotional rates can reach as high as 5%.

    WHAT SHOULD I KNOW ABOUT OPENING A NEW ACCOUNT?

    Online banking has made moving money easier, so it’s fairly straightforward to keep your existing account while opening a new high-yield account at a different institution. Many have low minimums (as low as $1), so you can transfer the minimum amount required to begin the process while keeping your primary checking account open.

    WHAT ARE SOME REASONS PEOPLE DON’T MOVE THEIR MONEY TO HIGH YIELD SAVINGS ACCOUNTS?

    According to Bankrate’s Sarah Foster, many Americans simply don’t know about high-yield savings accounts and the significant benefits available with the now dramatically higher rates. The average relationship between a consumer and their bank is 17 years, she said, and trust in the largest banks means they’re “swimming in deposits” and don’t feel a need to offer better rates to attract customers.

    Some people don’t realize that most high-yield savings accounts are just as safe as traditional banks, she said, as long as they’re equivalently FDIC-insured up to $250,000. You can check at FDIC.gov.

    There’s a familiarity people have with traditional banks that can inspire a sense of security.

    If you have a longstanding relationship with your existing bank, you may simply be comfortable there, as well as aware of the rewards and perks of that institution, such as waiving ATM fees or account management fees, cash back, or other upsides. You likely also have direct deposit and auto-withdrawals set up when it comes to income, bills, and other regular expenses and payments.

    Setting up a new high yield savings account doesn’t mean you have to immediately switch over all of those auto-pay and deposit transfers, though, according to Ken Tumin, founder of DepositAccounts.Com.

    That can take time and energy, so you can do that more slowly, if you choose to do it at all. However, that could also be a chance to review your spending, cancel unwanted subscriptions, auto-payments and services, or negotiate down recurring bills and expenses where possible.

    “Some people also say they aren’t banking with an online bank because they prefer access to a local branch and the in-person services that come along with that,” Foster said.

    WHAT DO THOSE INTEREST RATES ADD UP TO, IN REAL NUMBERS?

    Let’s say you invest $500 at one of big five banks that have an interest rate of 0.23%. After one year, if you don’t touch it and add nothing, you’ll have earned $1.15. After five years, with compound interest, you’ll have earned $5.78. After 10, $11.62. After 25, $29.56.

    If you deposit the same $500 in a high-yield savings account with an interest rate of 4%, then, after one year, you’ll earn $20. After five, $108.33. After 10, $240.12. And after 25, $832.92.

    With $1,000, it works out to the following: At .23% — after one year, $2.33. After five, $11.55. After ten, $23.24. And after twenty five, $59.12.

    And at 4%: After one year, $40. After five, $216.65. After 10, $480.24. And after 25, $1,665.84.

    In both cases, that assumes you don’t add to the account each year, but a best practice would be contribute even small amounts from each paycheck biweekly, monthly, or yearly.

    To make your own calculations, factoring in yearly contributions and changing rates, you can use the SEC’s compound interest calculator.

    DO YOU PAY TAXES ON EARNED INTEREST?

    Yes. Since you’ve already paid taxes on the deposit balance of the high yield savings account, you only pay additional taxes on the interest you earn each year. That interest is taxed at your earned income rate — so, the same rate your income is taxed at in that year.

    COULD THE SAVINGS RATES ON THESE ACCOUNTS CHANGE?

    Yes. Banks may advertise one rate for these accounts and then adjust that rate depending on other factors, such as the Federal Reserve’s own changing rate. To avoid such changes, and to lock in a guaranteed rate, you could opt for a Certificate of Deposit instead, assuming you don’t need to access that money right away. Treasury securities also offer competitive rates.

    HOW DOES A CERTIFICATE OF DEPOSIT WORK?

    A Certificate of Deposit pays a guaranteed rate for a fixed period, such as one month, six months or a year. CDs can be purchased through most banks, and many run special offers. Those offered rates can be comparable to those at a high yield savings account. However, you typically face a penalty if you want access to the money before the chosen term has ended.

    WHAT ABOUT INVESTING IN TREASURIES?

    The U.S. Department of the Treasury sells Treasury bills, notes, bonds, Treasury Inflation-Protected Securities (TIPS), and savings bonds through TreasuryDirect.gov. All of these securities are all backed by the full faith and credit of the U.S. government, with varying rates over varying terms. The minimum investment is $100, and some of the rates and yields on these investments are as competitive and safe as the CD’s and high yield savings accounts listed above.

    Currently, one rate for I bonds, for example — which are savings bonds designed to protect you from inflation — is 6.89%. With an I bond, you earn both a fixed rate of interest and a rate that changes with inflation. Twice a year, the Treasury Department sets the inflation rate for the next six months. You can cash in the bond anytime after twelve months, though you’ll lose certain portions of interest if you redeem it in less than five years.

    HOW DO I COMPARE BANK RATES FOR DEPOSIT ACCOUNTS?

    Trusted sites like DepositAccounts.com, founded by Tumin, can help you comparison shop, ranking banks and accounts by rates and other factors. Other resources include Bankrate.com, NerdWallet, and MyCreditUnion.gov.

    Tumin says that if you want to check for yourself that an online bank is insured by the FDIC, you can go to FDIC.gov and search to make sure.

    “In addition to finding the highest rate, it also makes sense to make sure these banks have a history of offering a competitive rate on that account for multiple years,” he added. “There are a lot of new banks now offering higher rates, but they haven’t been around long. If they don’t have much history, they may not stay competitive.”

    ___

    You can see all of AP’s Financial Wellness coverage at: https://apnews.com/hub/financial-wellness

    ___

    The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

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  • Stock market today: Stocks close quiet week with small gains

    Stock market today: Stocks close quiet week with small gains

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    Stocks capped a listless day of trading Friday with slight gains for the major stock indexes, closing out a quiet week on Wall Street highlighted by a batch of mostly mixed corporate earnings reports.

    The S&P 500, Dow Jones Industrial Average and Nasdaq composite all gained 0.1% after drifting between small gains and losses for most of the day. The indexes each posted a slight loss for the week.

    Health care companies and a range of consumer product makers gained ground, tempering losses in banks, technology stocks and elsewhere. Truist Financial and KeyCorp, two of the larger regional banks, were among the biggest decliners in the S&P 500. Truist fell 6% and KeyCorp ended 3.7% lower.

    Bond yields held relatively steady. The yield on the 10-year Treasury, which influences mortgage rates and other loans, rose to 3.56% from 3.54% late Thursday.

    Trading was muted as investors focused on the latest corporate earnings reports and forecasts in a bid to get a better sense of how companies are handling high inflation, a slowing economy and fears about a recession.

    “You have a market that’s in waiting mode,” said Quincy Krosby, chief global strategist for LPL Financial. “It’s waiting for a sense of what we’re going to hear from companies.”

    Investors reviewed a handful of earnings reports Friday. Hospital operator HCA Healthcare rose 3.9% after the company topped estimates for the first quarter and raised its full-year profit forecast. Procter & Gamble, the maker of Charmin toilet paper and other iconic consumer products, rose 3.5% after beating estimates thanks to price increases.

    Information technology services company PC Connection fell 4.9% after giving investors a disappointing financial update. Regional bank Regions Financial fell 2.8% after reporting discouraging earnings.

    Companies have so far been beating Wall Street forecasts this earnings period. Analysts had forecast this would mark the sharpest drop in S&P 500 earnings per share since the pandemic stunned the economy in 2020. Analysts polled by FactSet expect profits to contract by 6.3% for companies in the S&P 500.

    Several big companies are on deck to report earnings next week, giving investors another heavy few days of corporate updates. Coca-Cola reports its latest results on Monday, followed by McDonald’s and Google’s parent company, Alphabet, on Tuesday.

    Airplane maker Boeing and Meta Platforms, Facebook’s parent, will report results on Wednesday. Investors will get more details on the health of the airline industry when American Airlines and Southwest Airlines report financial results on Thursday, along with internet retail giant Amazon.

    The busy week of earnings reports could help provide more direction for investors as recession worries linger, Krosby said.

    “There’s a tug of war between what the economic data is saying and the message from equity markets,” she said.

    The latest earnings come as investors worry about the potential for a recession amid the Federal Reserve’s fight against inflation. The central bank aggressively raised interest rates through 2022 and into 2023. The rate hikes have weighed on economic growth and while inflation has eased it remains high and is still squeezing consumers.

    The Fed will meet again in early May and is expected to raise its benchmark interest rate by another quarter point. Wall Street is betting that the Fed will take a break from raising interest rates after that meeting.

    The yield on the two-year Treasury, which more closely tracks expectations for the Fed, rose to 4.17% from 4.16% late Thursday.

    Wall Street is anticipating more economic data next week that could provide greater insight into inflation’s impact and the economy’s path. The reports will included consumer confidence for April, first-quarter gross domestic product and another government update on prices and inflation.

    All told, the S&P 500 rose 3.73 points to 4,133.52. The Dow added 22.34 points to close at 33,808.96. The Nasdaq rose 12.90 points to 12,072.46. Decliners held a slight edge over gainers on the New York Stock Exchange.

    Markets in Europe also ended with small gains Friday, while exchanges in Asia declined overnight.

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  • Credit Suisse investors sue after facing billions in losses

    Credit Suisse investors sue after facing billions in losses

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    LONDON — A group of Credit Suisse investors have sued Swiss financial regulators after a government-engineered takeover of the struggling bank by rival UBS left them with billions in losses.

    The investors are contesting an order by the Swiss Financial Market Supervisory Authority, or FINMA, that wiped out about 16 billion Swiss francs ($17.3 billion) in higher-risk Credit Suisse bonds as part of an emergency rescue last month, lawyers said Friday.

    The hastily arranged, $3.25 billion deal prevented the downfall of Switzerland’s second-largest bank after its stock plunged and customers rushed to pull out their money amid fears about long-running troubles at Credit Suisse and upheaval in the global financial system after the collapse of two U.S. banks.

    “FINMA’s decision undermines international confidence in the legal certainty and reliability of the Swiss financial center,” said Thomas Werlen, managing partner in Switzerland for law firm Quinn Emanuel Urquhart & Sullivan.

    The firm filed the complaint in Swiss federal court Wednesday on behalf of investors holding more than 4.5 billion Swiss francs ($5 billion) in the higher-risk bonds.

    “We are committed to rectifying this decision, which is not only in the interests of our clients but will also strengthen Switzerland’s position as a key jurisdiction in the global financial system,” Werlen said in a prepared statement Friday.

    FINMA declined to comment but has defended the decision to wipe out bondholders. Typically, shareholders face losses before those holding bonds if a bank goes under.

    Following the 2008 financial crisis, European financial regulators use a special type of bond that is designed to provide a capital cushion to banks in times of distress. But those bonds are designed to be wiped out if a bank’s capital falls below a certain level.

    Swiss regulators say contracts for these so-called Additional Tier 1, or AT1, bonds issued by Credit Suisse show that they could be written down in a “viability event,” particularly if the government offers extraordinary support.

    That happened after the Swiss executive branch passed emergency measures that provided billions in guarantees for the deal and allowed regulators to order a writedown of the bonds, FINMA said.

    The emergency rescue plan allowed the government to push through the deal without shareholder approval.

    Regulators also have called the takeover “the best option” that offered the least risk of fanning a wider crisis and damaging Switzerland’s standing as a financial center.

    The lower house of Swiss parliament, in a symbolic vote last week, rebuked the rescue after the central bank and government splashed out more than 200 billion Swiss francs in guarantees.

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