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Maybe I won’t set up that factory. These companies — the small, private enterprises that are responsible for roughly half the private-sector employment in the country — are already having to pay much more for debt. They fund their operations using cash from sales, business credit cards and private loans — all of which are generally more expensive options for financing payrolls and operations. Now, they’re paying 10 percent interest on short-term loans. Hiring within these firms has slowed, and their credit card balances are higher than they were before the pandemic, even as spending has slowed.

Persons: Ms, Sheth Organizations: National Federation of Independent Business, Bank of America Locations: ”

☆ Stocks Rally as Inflation Report Cements View the Fed Is Done With Raising Rates
▼ + stars: | 2023-11-14 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: +1 min

Stocks soared on Tuesday, with the S&P 500 on course for its best day of the year, after an inflation reading raised hopes that the Federal Reserve’s campaign to slow inflation may have reached its limits. The S&P 500 rose roughly 2 percent by midday on Tuesday, a gain it has failed to maintain for an entire trading day yet in 2023. The Russell 2000 index of smaller companies’ stocks, which are more exposed to the ups and downs of the economy, also rose sharply, climbing 4.5 percent. The stock gains reflected expectations that the Fed may not need to raise interest rates again, after new data showed consumer price inflation slowed in October. But Tuesday’s report helped cement a view in financial markets that the Fed’s efforts are working.

Persons: Stocks, Russell, — Organizations: Federal

The report is also expected to find that gains in average hourly earnings were solid but decelerated to 4 percent from a year earlier. The September report showed an unexpectedly strong gain of 336,000 jobs — a figure that will be revised Friday — and a year-over-year wage gain of 4.2 percent. has reached tentative contract agreements with the three major U.S. automakers and told striking members to return to their jobs. “We expect the October employment report to show a large deceleration in job growth, although the moderation will be overstated by the impact of striking autoworkers,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics, said in a note. “Excluding those workers,” she added, “job growth will still be relatively robust, although narrowly based.”Since early 2022, the benchmark interest rate set by the Federal Reserve has surged from near zero to more than 5 percent.

Persons: Nancy Vanden Houten, Jerome H, Powell, Mr, “, ” Organizations: Bloomberg, United Automobile Workers, Oxford Economics, Federal Reserve

Persons: Nancy Vanden Houten, Jerome H, Powell, Mr, “, ” Organizations: Bloomberg, United Automobile Workers, Oxford Economics, Federal Reserve

☆ Huge Reversal in Bonds and Rally in Stocks Cap Wild Week for Markets
▼ + stars: | 2023-11-03 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: 1 min

Stocks and bonds rallied on Friday, extending a sharp reversal after fresh data about the health of the U.S. labor market capped a tumultuous week for investors. The 10-year government bond yield, which underpin rates on everything from mortgages to business loans, dropped more than 0.1 percentage points on Friday, another large decline for a market in which daily moves are often measured in hundredths of a point. Yields move inversely to prices. That helped to lift the stock market, which had sold off as rates rose in recent months. The S&P 500 was set to end the week almost 6 percent higher, on course for its best week of the year.

Organizations: Federal Reserve Locations: U.S

☆ Why Wall Street Is So Worried About ‘Refunding’
▼ + stars: | 2023-11-01 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: +1 min

Investors this week have fixated on a routine quarterly announcement of how the government plans to finance itself, a sign of how sensitive Wall Street has become to a rapid run-up in interest rates. On Wednesday, the Treasury Department said in its latest “refunding” announcement that it would issue an elevated amount of short-term debt later this month. It had earlier announced that it plans to borrow $776 billion in the last three months of the year, more than it ever has in the fourth quarter, to keep up with government spending and rising interest payments. The outsized attention on the Treasury Department’s announcement comes as a sharp rise in rates has pushed up the cost of government debt. The benchmark 10-year Treasury yield, indicative of what the government pays to borrow money for a decade, has risen by three-quarters of a percentage point since early August, the last time the Treasury Department updated the markets on its borrowing plans.

Organizations: Treasury Department, Treasury

The people who work the levers of Japan’s economy are in a bind: The country’s low interest rates, which they have long used to goose growth, are now well out of step with other big economies. The yen is at a near-record low against the U.S. dollar, threatening to inflict prolonged inflation on Japan, which for years suffered the opposite problem. On Tuesday, the central bank, the Bank of Japan, tried to thread the needle, announcing a policy that aims to nudge bond yields higher. Decisions by the Bank of Japan, led by Governor Kazuo Ueda, reverberate around the world, especially in American markets. Interest rates in the United States are well above Japan’s — yields on 10-year U.S. Treasury notes briefly pushed above 5 percent in September, a level not seen since 2007.

Persons: Kazuo Ueda Organizations: U.S ., Bank of Japan, Treasury Locations: Japan, Tokyo, reverberate, United States

☆ What’s Happening in the Bond Market?
▼ + stars: | 2023-10-26 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: +1 min

The interest rates on mortgages, credit cards and business loans have shot up in recent months, even as the Federal Reserve has left its key rate unchanged since July. The focal point has been on the 10-year U.S. Treasury yield, which underpins many other borrowing costs. The 10-year yield has risen a full percentage point in less than three months, briefly pushing above 5 percent for the first time since 2007. Strong growth and stubborn inflationInitially, when the Fed first began to fight inflation, it was short-term market rates — like the yield on two-year notes — that rose sharply. Those increases closely tracked the increases in the Fed’s overnight lending rate, which rose from near zero to above 5 percent in about 18 months.

Persons: ”, Subadra Rajappa, — Organizations: Federal Reserve, Treasury, Fed

☆ Investors Fret as Daunting Bond Market Milestone Comes Into View
▼ + stars: | 2023-10-20 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: +1 min

One of the most important interest rates in the world this week flirted with a level it hadn’t reached in more than 16 years, putting pressure on the economy and the stock market. The 10-year Treasury yield, a measure of how much it costs the U.S. government to borrow that is widely used as a benchmark for all types of lending, brushed against 5 percent for the first time since mid-2007. The steep rise in the 10-year yield in recent months has captured the attention of investors, economists and policymakers. This “sudden, rapid increase” has shaken faith in the continued resilience of the economy, said economists at the rating agency Moody’s, threatening “to knock the U.S. economic expansion off course.”The Federal Reserve controls short-term interest rates, which ripple through the economy via market-based rates like Treasury yields and to borrowing costs on longer-term debt like mortgages and company bonds.

Organizations: Treasury, Federal Reserve

PinnedFederal Reserve officials are expected to leave interest rates unchanged at their meeting on Wednesday, buying themselves more time to assess whether borrowing costs are high enough to weigh down the economy and wrestle inflation under control. Central bankers have already raised interest rates to a range of 5.25 to 5.5 percent, the highest level in 22 years. At least a few officials might stop expecting another quarter-point rate move this year, predicting instead that interest rates have already reached their peak. If, on the other hand, officials expect to lower rates by less in 2024, it could be a signal that policymakers expect inflation to prove more stubborn. Fed officials will release fresh economic forecasts.

Persons: Jerome H, Powell, ”, Antúlio Bomfim, Powell’s, “, William English Organizations: Federal Reserve, Fed, Trust Asset Management, United Auto Workers, Yale Locations: America, Panama

Aides said that President Biden urged both sides of the dispute to stay at the negotiating table. Just before the strike vote, Mr. Biden called Shawn Fain, the president of the U.A.W. How Mr. Biden navigates the situation could have a significant impact on his hopes for re-election. Mr. Biden won the state over former President Donald J. Trump with just over 50 percent of the vote. “They talk about labor, but they don’t say ‘union.’ It’s ‘union.’ I’m one of the — I’m proud to say ‘union.’ I’m proud to be the most pro-union president.”

Persons: Biden, Biden’s, “, ” Mr, “ You’ve, ”, Eddie Vale, You’ve, Vale, Shawn Fain, Donald J, ’ ”, ’ It’s, ’ Organizations: United Auto Workers, Republican, White, Democratic, AFL, CNN, Trump, Labor Locations: Michigan, America, United States, Philadelphia

☆ A Sudden Bond Binge on Wall St. Reflects Rising Optimism
▼ + stars: | 2023-09-08 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: +1 min

Despite the parallels in sentiment, the wave of bond issuance itself weighed on stocks this week. The bumper bond supply pushed bond prices lower, which raises yields. Stock prices are sensitive to increases in interest rates, such as bond yields, because it can raise costs for companies. The S&P 500 is set for a decline this week but is still up more than 16 percent this year. This week, analysts at Goldman Sachs lowered their forecast probability of a recession in the United States to just 15 percent.

Persons: it’s, ”, Andrew Brenner, Goldman Sachs Organizations: National Alliance Securities, Goldman, Bank of America Locations: China, Europe, United States

☆ August Jobs Report U.S. Job Growth Expected to Cool
▼ + stars: | 2023-09-01 | by ( Lydia Depillis | Joe Rennison | ) www.nytimes.com time to read: +2 min

Forecasters believe that trend continued in August, estimating that the Labor Department’s monthly report on Friday will show the addition of 170,000 jobs. That would be a decrease from the 218,000-job average over the previous three months, and closer to the number needed to employ the approximately 140,000 people who enter the labor force each month. But analysts say the Federal Reserve’s push to cool rapid inflation by ratcheting up borrowing costs — and the impact on hiring — has a ways to go. Immigrants work at higher rates than the American-born population, in which labor force participation is declining as people age into retirement. Already, Americans are feeling the difference: In the Conference Board’s reading of consumer sentiment for August, the share of workers saying jobs were “hard to get” increased sharply, while the share saying jobs were “plentiful” fell.

Persons: —, ’ ”, Stephen Juneau, Bank of America Merrill Lynch, “ There’s, we’ve Organizations: Labor, Bank of America Locations: American, ”

When Jerome H. Powell spoke at the Federal Reserve Bank of Kansas City’s annual conference in Jackson Hole, Wyo., last year, inflation had recently topped 9 percent and the Fed was raising rates at a breakneck pace to wrestle down price increases. Mr. Powell used the platform to offer a stern warning that central bankers would keep at it until the job was done. Higher rates have cooled the housing market and, together with healing supply chains and cheaper gas prices, lowered inflation notably — to 3.2 percent in July. Instead of warning that the central bank is prepared to push the economy into a recession if that is necessary to calm rapid inflation, Fed officials today are increasingly suggesting that they might pull off what once seemed unlikely: cooling the economy without tanking it. But many economists and investors think that he may be able to strike a slightly less aggressive tone than he did last year.

Persons: Jerome H, Powell Organizations: Federal Reserve Bank of Locations: Federal Reserve Bank of Kansas, Jackson

☆ Wall St. Weighs the Effect of Weaker China and Stronger U.S.
▼ + stars: | 2023-08-15 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: +1 min

The world’s two largest economies — China and the United States — are moving in sharply different directions. Investors are wary of China’s weakening growth, deflation and precarious real estate market, but they have largely shrugged off these concerns so far. Investors are, however, flinching at signs that the U.S. economy is unexpectedly strong, which could prompt a stronger response by the Federal Reserve as it tries to rein in inflation. The S&P 500 stumbled on Tuesday, falling about 1 percent, extending the decline recorded this month to more than 3 percent. The move on Tuesday came amid several signs of weakness in China.

Organizations: United, Investors, Federal Reserve Locations: China, United States, U.S

The downgrade of the United States’ debt by a major ratings firm is a damning indictment of the country’s fractious politics and a blot on its financial record that is unlikely to be quickly erased. But many investors and analysts say it won’t affect the government’s ability to keep borrowing money. On Tuesday, Fitch Ratings lowered the credit rating of the United States one notch to AA+ from a pristine AAA. The firm, citing a “deterioration in governance” along with America’s mounting debt load, suggested that it could be a long time before that decision was reversed. The United States came within days of defaulting on its debt this spring as Republican lawmakers refused to lift the cap unless President Biden made concessions on spending.

Persons: ”, Richard Francis, “, Biden Organizations: United, Fitch, AAA, P, Treasury Department Locations: United States, Americas

☆ Wall St. Pessimists Are Getting Used to Being Wrong
▼ + stars: | 2023-07-28 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: +1 min

Beaten as they might be by the stock market’s rally, worriers on Wall Street still question how long it can last. After starting the year with dour warnings about the economy, many investors and analysts have changed their minds. Marquee earnings from some large tech companies, like Meta and Alphabet, helped drive stock prices higher. Consumer-facing companies like Coca-Cola and Unilever that are dependent on households continuing to spend also posted bumper financial results. The benchmark sits roughly 5 percent away from the record it reached in January 2022.

Persons: Jerome H, Powell Organizations: Consumer, Cola, Unilever, Federal Reserve

☆ Markets Trade Cautiously Ahead of Pivotal Fed Meeting
▼ + stars: | 2023-07-26 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: 1 min

Stock markets slipped on Wednesday morning, as cautious investors parsed mixed earnings reports and prepared for the Federal Reserve to resume raising interest rates. The S&P 500 fell 0.2 percent ahead of the Fed’s announcement. The index has gained nearly 20 percent since the start of the year, but the rally has slowed this month from its earlier breakneck pace. The Dow Jones industrial average, a collection of 30 stocks that are intended to track the broader economy, was on course for a 13th consecutive day of gains, posting a small gain in early trading Wednesday. Stock markets often exhibit caution ahead of major events like Fed meetings, waiting until there is clarity over the central bank’s next move.

Organizations: Federal Reserve, Dow, Stock

“Most of us have been wrong on the timing of things going bad, and right now there is really not much of a problem. That means it can be years before a company needs to refinance those bonds at higher interest rates. The longer inflation remains elevated, the longer interest rates will also stay high, meaning that an increasing number of companies could be forced to shoulder higher borrowing costs. Their latest economic projections suggested that interest rates could be hovering near 4.6 percent at the end of 2024. That would be lower than where they are now, but still a big change after years of near-zero interest rates.

Persons: “, ”, John McClain Organizations: Brandywine Global Investment Management

As Russia resumes its blockade of ships carrying food from Ukraine, its military bombarded Odesa and an adjoining port late Tuesday and early Wednesday — specifically targeting the ability to export grain, Ukrainian officials said. Hours later, Russia’s Ministry of Defense issued a warning to ship operators and other nations suggesting that any attempt to bypass the blockade might be seen as an act of war. As of midnight, “all ships en route to Ukrainian ports in the Black Sea will be considered as potential carriers of military cargo,” it said in a statement. “Accordingly, the flag countries of such vessels will be considered involved in the Ukrainian conflict on the side of the Kyiv regime.” The ministry added that even parts of the Black Sea in international waters “have been declared temporarily dangerous for navigation.”Ukrainian officials accused Russia of using food as leverage in the war, in an attempt to extend Ukraine’s pain to the rest of the globe.

Organizations: Russia’s Ministry of Defense Locations: Russia, Ukraine, Odesa, Kyiv

Carvana, the troubled used-car retailer, on Wednesday announced that it had reached a debt restructuring agreement with most of its bondholders in an effort to lower interest payments over at least the next two years and put its business on more solid financial footing. But Carvana took on a lot of debt, made a big acquisition and was unprepared for falling used car prices and rising interest rates. Carvana said its restructuring agreement covered more than $5 billion of senior, unsecured bonds and included the participation of Apollo Global Management, its largest bondholder. The interest on that new debt will be paid in kind for the next two years, meaning the principal Carvana owes will increase but the company won’t have to make about $430 million in interest payments in cash. The new debt will also come due later than the old notes.

Persons: Carvana Organizations: Wednesday, Apollo Global Management

As companies prepare to open their books to investors over the coming weeks, in the quarterly ritual known as earnings season, market watchers are balancing relatively weak estimates for past profits with brighter forecasts for future performance. Stock prices tend to follow expectations of earnings to come rather than react to details about the past, and markets have risen in step with investors’ improved outlook for the economy. The S&P 500 index has gained more than 20 percent since October. But much of that decline is concentrated in a few sectors, like energy, that recorded outsize profits last year, making for difficult comparisons to this year. And corporate executives also have a habit of lowering investors’ expectations ahead of earnings announcements, so that they can beat projections.

Persons: ”, Binky Chadha Organizations: Companies, Deutsche Bank

PinnedInflation data released on Wednesday showed a pronounced cooling and offered some of the most hopeful news since the Federal Reserve began trying to tame rapid price increases 16 months ago. But Federal Reserve officials are still trying to assess whether the cool down is likely to be quick and complete. Officials have signaled in recent weeks that they are likely to raise interest rates at their July 25-26 meeting. For one thing, the cost of housing as measured by the Consumer Price Index — which relies on rent prices — is coming down sharply. Interest rates increases work partly by slowing the job market and cooling wage increases, so the Fed’s fight against inflation and the strength of the labor market are closely tied.

Persons: ”, Laura Rosner, Warburton, it’s, . Rosner, Airfares, “, Beth Weaver, Loretta Mester, ” Julia Pollak Organizations: Federal Reserve, Federal, Consumer, Buick GMC, Fed, Federal Reserve Bank of Cleveland, ZipRecruiter Locations: Erie, Pa

PinnedInflation data released on Wednesday showed a pronounced cooling and offered some of the most hopeful news since the Federal Reserve began trying to tame rapid price increases 16 months ago. Officials have signaled in recent weeks that they are likely to raise interest rates at their July 25-26 meeting. For one thing, the cost of housing as measured by the Consumer Price Index — which relies on rent prices — is coming down sharply. The Fed officially targets 2 percent inflation on average over time, though it defines that goal using a separate inflation measure, the Personal Consumption Expenditures index. Interest rates increases work partly by slowing the job market and cooling wage increases, so the Fed’s fight against inflation and the strength of the labor market are closely tied.

☆ Wall Street’s Recession Warning Is Flashing. Some Wonder if it’s Wrong.
▼ + stars: | 2023-07-12 | by ( Joe Rennison | More About Joe Rennison | ) www.nytimes.com time to read: +1 min

Some investors believe that a recession warning that has been flashing on Wall Street for the past several months is wrong and that the Federal Reserve will be able to tame inflation and still escape a deep downturn. The signal — called the yield curve — began suggesting last year that the economy was headed for a slump. Typically, investors expect to be paid more interest for lending for longer periods of time, creating an upward sloping curve. The inversion suggests that investors expect interest rates over time will fall from their current high level. And that usually only happens when the economy needs propping up and the Fed decides to help by lowering interest rates.

Organizations: Federal Reserve, Fed

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