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Delta Airlines is hiking checked-baggage fees 17% following similar moves by United and American 2024-03-05 20:16:28+00:00 - SAN FRANCISCO (AP) — In case you needed yet another incentive to cram all your travel items into a carry-on, Delta Airlines just boosted the cost of your first checked bag by 17%. The increase adds $5 to the previous, and not-exactly-insignificant, $30 fee for domestic flights. Delta is the third major U.S. carrier to hike bag fees in the past several weeks. Its move follows similar increases that American Airlines and United Airlines announced in February, three days apart; those high fees themselves followed fee hikes by smaller carriers Alaska Airlines and JetBlue Airways. Major U.S. carriers often copy one another’s pricing changes, a move that behavior analysts sometimes refer to as herd instinct. Delta said Tuesday that the first bag checked on a domestic flight will now incur a $35 fee. The charge for a second bag rose from $40 to $45. Delta last raised bag fees for domestic flights in 2018. The airline said the increase will help it keep up with unspecified rising industry costs. Customers with status perks can still check their first bag for free; those with first class tickets can check two free bags. Bag fees have become a dependable source of revenue for airlines since American introduced them in 2008, when jet fuel prices were surging. In 2022, the last full year for which statistics are available, U.S. airlines took in $6.8 billion in checked-bag fees, led by American at $1.4 billion and United at $1.1 billion. Delta was in third place with $979.4 million.
Business groups hit back at Biden administration's effort to cap credit card late fees 2024-03-05 20:07:00+00:00 - The Biden administration is seeking to impose a new limit on the typical credit card late fee, but the consumer credit and banking industry is warning the change could ultimately impact other consumers in the form of higher interest rates. In a release Tuesday, the Consumer Financial Protection Bureau said a proposed $8 cap for a typical late fee would help save consumers a cumulative $10 billion. “For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers,” said CFPB Director Rohit Chopra. “Today’s rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines. President Joe Biden has made targeting "junk" fees a major focus of his administration. Earlier Tuesday, he announced the formation of a task force targeting unfair and illegal pricing schemes. But the credit card industry and other financial associations are already hitting out at the CFPB's proposed new rule, saying it could lead to unintended consequences for consumers. In a statement, Rob Nichols, the president and CEO of the American Bankers Association, called the proposal "flawed," arguing it could actually result in more late payments and ultimately lower credit scores. It could also have a knock-on effect for card users who do pay what they owe on time, Nichols said. "The Bureau’s misguided decision to cap credit card late fees at a level far below banks’ actual costs will force card issuers to reduce credit lines, tighten standards for new accounts and raise APRs for all consumers — even those who pay on time," Nichols said. The Consumer Bankers Association, another trade group, echoed those concerns. “The rule’s policy goals are, at best, consumer redistribution, not consumer protection,” the organization's president and chief executive, Lindsey Johnson, said in a statement. Later Tuesday afternoon, the U.S. Chamber of Commerce announced it was suing over the proposed new CFPB rule. “Once again, the Consumer Financial Protection Bureau has exceeded its authority," the business group said in a statement. The agency’s final credit card late fee rule punishes Americans who pay their credit card bills on time by forcing them to pay for those who don’t. This will result in fewer card offerings and limit access to affordable credit for many consumers." The proposed rule only applies to large credit card companies. Currently, credit card companies can charge as much as $30 for a first late payment under a law enacted in the wake of the 2008-2009 financial crisis. The CFPB said it had reviewed market data to arrive at the new $8 late fee it is proposing. As part of the new rule, the CFPB will nevertheless allow banks to charge a higher late fee under a "show your work" provision. The ABA’s Nichols said the $8 level is "far below" banks’ actual cost of managing late fees, and that the association is likely to challenge it. "We will closely review this final rule and consider all options to fight the harmful consumer policy coming out of Director Chopra’s CFPB," Nichols said, adding: "This rule should not be allowed to go into effect.”
Investors rush to snap up bonds before the Fed starts cutting rates 2024-03-05 20:05:00+00:00 - More investors have been flocking to bonds in 2024 to capture today’s higher bond yields before the Federal Reserve starts cutting interest rates. When rate cuts come, earning 5% by sitting in cash and cash-like investments can quickly evaporate, especially if the Fed ends up responding to a crisis by deeply cutting its short-term policy rate. “There is a lot of money out there looking for income over the longer term,” said Robert Tipp, chief investment strategist at PGIM Fixed Income, in a phone interview Tuesday. “The flows have turned positive, and strongly so.” Investors poured an estimated $113 billion into bonds globally this year through Feb. 28, roughly half the $234 billion that flowed into money-market accounts, but well above the $84 billion that went into equities, according to BofA Global and EPFR data. “With central banks being at their peaks for this cycle, the big-picture idea that investors have is that we should be in bonds right now,” Tipp said. When looking regionally, U.S. bond funds have seen significant inflows in 2024, outpacing last year’s volumes for the same stretch. U.S. bond funds are attracting significant inflows in 2024, outpacing last year’s volumes. EPFR, Barclays Research Last week saw notable outflows from short-term government funds and short-term corporate funds, but continued strong inflows into long-term bond funds, according to Barclays Research. The moves into long-term bonds signal investors may be heeding the advice of notable bond investors to add duration before the Fed pivots to rate cuts. Atlanta Fed President Raphael Bostic said Monday that the central bank has the “luxury of making policy” without the urgency of a weak labor market or economy. U.S. stocks were pulling back sharply Tuesday, after hitting a series of record highs, lifted by enthusiasm for the future of artificial intelligence, resilient corporate earnings and an economy that has long avoided a recession, even with the Fed keeping its policy rate at a 22-year high, in a range of 5.25% to 5.5%, since July. The Dow Jones Industrial Average DJIA was down about 450 points, or 1.2%, at last check, while the S&P 500 SPX was 1.3% lower and the Nasdaq Composite Index COMP was down 2%, according to FactSet. Benchmark 10-year Treasury yields BX:TMUBMUSD10Y were down 8 basis points to 4.14%. “Typically, the end of a Fed hiking cycle is an ideal long-term buying opportunity for fixed income,” said Brian Quigley, head of MBS, agencies, and volatility at Vanguard, in a Monday client note. “In the past four hiking cycles, returns for U.S. bonds exceeded that of cash over the one- and three-year periods following the Fed’s final rate hike.”
Arizona's Senate race just got a whole lot less interesting following Kyrsten Sinema's decision to retire 2024-03-05 20:03:00+00:00 - By clicking “Sign Up”, you accept our Terms of Service and Privacy Policy . You can opt-out at any time. Access your favorite topics in a personalized feed while you're on the go. download the app Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily. Read preview Sen. Kyrsten Sinema is not running for reelection — denying the political world the opportunity to see what would've been one of the most fascinating Senate races in recent memory. When the mercurial senator announced her decision to leave the Democratic Party at the end of 2022, many believed that it was a calculated political move to boost her chances of reelection, especially considering that she would remain a part of the Democratic majority in the Senate. This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. A message for Arizonans from Senator Kyrsten Sinema pic.twitter.com/1XWFSWgGdh — Kyrsten Sinema (@SenatorSinema) March 5, 2024 After all, she had angered most of her party over her opposition to aspects of President Joe Biden's domestic agenda and her resistance to changing the Senate's 60-vote filibuster rule. She was also likely to lose the Democratic primary to Rep. Ruben Gallego of Arizona. Since then, Sinema had stubbornly refused to say whether she would seek reelection, even as her campaign touted the more than $10 million she had to spend. Advertisement Her announcement on Tuesday guarantees that the Arizona Senate race will feature a head-to-head matchup between Gallego and Kari Lake, a former broadcast journalist and staunch ally of former President Donald Trump who has refused to concede her loss in the 2022 gubernatorial race. In other words, it will be a race that pits a progressive-leaning Democrat against a fire-breathing MAGA acolyte. Many such cases. Sinema's exit may give Lake a bit more of an opening than she had before, given that polling showed that the independent senator drew much of her dwindling support from Republican voters in the state. Sen. Steve Daines of Montana, the chair of Senate Republicans' campaign arm, said in a statement that Sinema's retirement "improves Kari Lake's opportunity to flip this seat." Advertisement Yet Lake couldn't pull it off in 2022, despite widespread perceptions that she was favored in that year's governor's race. And as far as GOP candidates go, Lake tends more toward the extreme, vocally embracing Trump's lies about a stolen 2020 election and calling for the imprisonment of her opponent during the 2022 race. Lake has since sought to moderate her image, including by telling NBC News in a recent interview that she opposed a federal abortion ban, despite previously endorsing a state-level abortion ban in Arizona that left no exceptions for rape or incest. That's not to say Gallego has it in the bag — he's more openly progressive than other Democrats who've won statewide office in Arizona in recent years, and polling has shown him roughly even with Lake in a hypothetical matchup. But while Lake and Gallego duke it out, Sinema can plan for a cushy retirement. Advertisement She once told Sen. Mitt Romney, a recently published biography of the Utah Republican said, that she didn't care if her stances cost her reelection. "I don't care. I can go on any board I want to. I can be a college president. I can do anything," the book quoted Sinema as saying. "I saved the Senate filibuster by myself. I saved the Senate by myself. That's good enough for me." A spokesperson for Sinema told Business Insider last year that those remarks were "misconstrued and mistaken" during a "game of telephone."
Opinion: Roubini: Trump policies risk higher inflation, slower growth and market downturn 2024-03-05 20:01:00+00:00 - We have entered a period of intensifying geopolitical rivalries and conflicts. Russia’s war on Ukraine is now in its third year, the Israel-Hamas conflict could still become a regional war, and the deepening cold war between the United States and China may yet turn hot over Taiwan sometime this decade. If Donald Trump wins the U.S. presidential election in November, the world will be even further destabilized. Yet these risks have had only a limited effect on economies and markets so far. Might that soon change? While the Russia-Ukraine war remains as brutal as ever, its global effects are likely to be more modest. The risks of direct NATO involvement or the use of tactical nuclear weapons by Russia are lower today than they were at earlier points in the war. Equally, while the war initially produced a spike in energy, food, fertilizer and industrial-metal prices, even Europe — the most heavily affected region — has absorbed the shock with only a modest growth slowdown (or a stall in some cases), and not the severe recession many analysts feared. Russian hydrocarbons have been replaced with increased imports from the U.S. and Middle Eastern countries. The impact on food prices has been reduced since Ukraine managed to reopen a Black Sea corridor for its grain exports. The Israel-Hamas war has also had only a limited regional and global economic impact so far. True, Israel’s GDP contracted sharply in the fourth quarter of 2023 and will likely remain weak as long as the conflict continues. The economic damage to Gaza, obviously, is even more severe, and Egypt’s revenues from the Suez Canal — a major source of foreign-currency receipts — have fallen, owing to the Yemeni Houthis’ attacks on freight shipping through the Red Sea. Nonetheless, if the conflict remains contained along its current lines, the global economic and market impact will remain limited, too. After all, it would take a major regional escalation — such as an outright war between Israel and Hezbollah in Lebanon, or signs that Israel (and possibly the U.S.) is on the path to war with Iran — to raise expectations of a more severe global fallout. A full-scale war between Israel and Iran would drastically reduce energy production and exports from the Gulf, causing an energy-price spike akin to the global stagflationary shocks that followed the 1973 Yom Kippur War and the 1979 Iranian Revolution. Fortunately, the probability of a sharp regional escalation remains low for the time being. While the cold war — or strategic competition — between the U.S. and China is likely to continue worsening over time, relations may not deteriorate much this year. U.S. President Joe Biden and his Chinese counterpart, Xi Jinping, agreed to a tactical thaw late last year, and China’s reaction to an undesirable outcome in Taiwan’s presidential election has been relatively restrained. Though the Taiwan issue could come to a boil later this decade, that is not likely to happen this year or next. China’s economic weaknesses and fragilities may lead it to be less confrontational with the U.S. and the West. Read: Nervous about the U.S. market at all-time highs? Buy China stocks. At the same time, the West’s derisking, reshoring, friend-shoring and restriction of trade in goods, services, capital and technologies will not intensify much over the short term. As long as the strategic competition remains managed, the global economic impact will be modest. The biggest geopolitical risk to growth and markets is the U.S. election. But here, it is important to recognize that Trump and Biden share some foreign-policy priorities. Democrats and Republicans alike are hawkish on China, and will remain so. Biden and Trump have both been strong supporters of Israel, but they also recognize that the desired normalization of relations between Israel and Saudi Arabia may require some recognition of an eventual two-state solution. “The biggest way a second Trump administration would affect markets is through its economic policies.” The biggest difference between Trump and Biden is on the issues of NATO, Europe and the Russia-Ukraine conflict. Some worry that Trump would abandon Ukraine and let Russia win the war. But since he is likely to remain hawkish on China, he may worry about the signal it would send (regarding Taiwan) to let Russia take over Ukraine. Moreover, what Trump really wants is for European NATO members to spend more on defense. If they do that, he may recognize the alliance’s value as it pivots to Asia to deter China. The biggest way that a second Trump administration would affect markets is through its economic policies. There is no doubt that U.S. protectionist policies would become more severe. Trump has already said he would impose a 10% tariff on all imports coming to the U.S. (the average tariff rate is currently about 2%), and presumably even higher tariffs on imports from China. This would spark new trade wars, not only with strategic rivals like China, but also with America’s allies in Europe and Asia, such as Japan and South Korea. A global trade war would reduce growth and increase inflation, making it the largest geopolitical risk that markets should consider in the months ahead. In this scenario, deglobalization, decoupling, fragmentation, protectionism, the balkanization of global supply chains and de-dollarization would become even greater risks to economic growth and financial markets. Additional Trump-related stagflationary risks include his denialist attitude toward climate change and the likelihood that he would try to replace U.S. Federal Reserve Chair Jerome Powell with a more dovish, pliant figure. “ Trump’s fiscal policies would increase deficits that are already too high.” Finally, Trump’s fiscal policies would increase deficits that are already too high. Tax cuts that are poised to expire would be extended, as would higher spending on defense and entitlements. The risk of bond vigilantes eventually shocking bond markets with much higher yields would increase. With private and public debts high and rising, that would introduce the specter of a financial crisis. As the saying goes, “It’s the economy, stupid.” Trump’s proposed economic-policy agenda is now the greatest threat to economies and markets around the world. Nouriel Roubini is professor emeritus of economics at New York University’s Stern School of Business and chief economist and co-founder of Atlas Capital Team. He is the author of “Megathreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them” (Little, Brown and Company, 2022). This commentary was published with the permission of Project Syndicate — Trump and the Global Economic Risk Picture More: Biden gets the blame for U.S. inflation staying higher for longer, but he shouldn’t Also read: Why the bull market in stocks may need some bad economic news to keep climbing
New Federal Rule Caps Most Credit Card Late Fees at $8 2024-03-05 19:48:45.414000+00:00 - Millions of Americans could soon see lower credit card bills after a federal rule that caps late fees at $8 a month was finalized on Tuesday by the Consumer Financial Protection Bureau, which estimates that the change will save households $10 billion a year. Late fees have become a major profit source for credit card issuers, generating more than $14 billion in 2022, according to bureau data. A 2010 rule imposed by the Federal Reserve aimed to cap the charges, but allowed adjustments for inflation — a provision card issues have used to raise their fees far beyond the actual costs they incur when payments arrive late, the bureau said. That allowed credit card companies to “harvest billions of dollars in junk fees from American consumers,” said Rohit Chopra, the bureau’s director. “Today’s rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.” The new restriction limits issuers to an $8 fee, unless they can prove they need to charge more to cover their actual collection costs. It applies only to large issuers that have more than one million open accounts, but the agency estimates that the rule will cover 95 percent of outstanding credit card balances.
Assumable mortgages are easier to find in these cities — but the lower-rate home loans come with strings attached 2024-03-05 19:39:00+00:00 - Assumable mortgages, or home loans that pass on their mortgage rate from a home seller to a buyer, are considered an attractive option these days: They effectively allow buyers to inherit a far lower interest rate at a time when mortgage rates are higher than 7%. And while these loans are relatively hard to find overall, prospective home buyers are most likely to find them in real-estate markets where there is a substantial military presence, according to a new report. The report, from Realtor.com, found that out of all active U.S. listings to date this year, only 0.4% of for-sale listings were advertised with an assumable loan. But “some areas, especially those with a large military presence, saw a higher share of homes advertising this appealing loan strategy,” said Hannah Jones, the author of the report. The markets with the biggest share of listings boasting an assumable mortgage include the following: Honolulu, at 3.3% of listings New Orleans-Metairie, La., at 2.83% Ogden-Clearfield, Utah, at 1.57% Tucson, Ariz., at 1.39% Augusta-Richmond County, which straddles Georgia and South Carolina, at 1.25% “Not all sellers may be open to this option, but some are not only open to the option, they also are advertising it as a differentiator to attract buyers,” Jones wrote. Many aspiring homeowners are finding it too expensive to buy a home right now, with mortgage rates around 7% and home prices continuing to rise. To buy a median-priced $397,000 home at a rate of 7%, a person would need to make at least $108,000 per year. The vast majority of respondents to a recent Realtor.com survey said they would jump at the opportunity to buy a home if the 30-year-mortgage rate fell below 4%. About nine in 10 homeowners have a mortgage rate below 6%, while 23% have a rate below 3%, according to the real-estate brokerage Redfin. Realtor.com is operated by Move Inc., a News Corp subsidiary. MarketWatch publisher Dow Jones is also owned by News Corp. Most government mortgages, such as mortgages backed by the Federal Housing Administration, the Department of Veterans Affairs and the Department of Agriculture, are assumable. About 8% of U.S. home loans over the last five years were VA loans and 15% were FHA loans, Jones estimated. But these mortgages come with a catch: They aren’t easy to assume. Assumable mortgages come with strings attached Assumable loans come with conditions and potentially costly delays. A buyer who assumes a mortgage would still need to pay the difference between the remaining loan amount and the home’s sale price. That could necessitate taking on another mortgage — in effect, holding two mortgages with different interest rates. Mortgage lenders also see little incentive to process assumable loans, since the lenders make less money doing that than they do by originating a new loan. Servicers can charge up to $900 to work on a loan assumption, but the direct and indirect costs to do so can total $2,500, according to a 2022 analysis by the Urban Institute’s Ted Tozer, a former president of Ginnie Mae, which securitizes all FHA, VA and USDA mortgages for the secondary market. When asked whether the FHA had any plans to promote the use of assumable loans, an agency spokesperson told MarketWatch that it is “actively evaluating its current policies governing assumptions and could decide as early as this spring whether to pursue updates.” Some home buyers, in complaints submitted to the Consumer Financial Protection Bureau, have alleged that hiccups during the assumption process put them in housing limbo. One person said that when they were going through the process of assuming the mortgage, their lender ghosted them. “No one will respond to phone calls or emails,” wrote the buyer, a Michigan service member assuming a VA loan. “The seller is losing money, we are losing money.” Another buyer also complained about delays. “We could lose out on this house,” the Virginia buyer wrote.
Facebook and Instagram: Meta services hit by widespread outages 2024-03-05 19:36:00+00:00 - Facebook and Instagram experienced severe issues around the world on Tuesday, with the services refusing login attempts and feeds stalling. The outages were first reported at about 3.30pm GMT and began to clear at about 5pm. Meta said in a statement on its newest social network, Threads, just after 7pm GMT: “Earlier today, a technical issue caused people to have difficulty accessing some of our services. We resolved the issue as quickly as possible and we apologize for any inconvenience.” The problem chiefly affected Facebook login, according to the company. Threads also went down during the outage. The White House said it was monitoring the outage, which coincided with Super Tuesday when millions of Americans vote in presidential primary elections. A senior US cybersecurity and infrastructure security agency official said on a press call: “We are aware of the incident and at this time we are not aware of any specific election nexus or any specific malicious cyber activity.” Unusually, the issues coincided with login problems on Google’s platform, suggesting a common cause between the outages at two tech conglomerates that largely control their own infrastructure. Meta’s business status page reported a number of disruptions, including “major disruptions” for the group’s admin centre, as well as for Facebook login, the service that allows users to log in to third-party services using their Facebook details. That, in turn, led to some reporting outages at a variety of other sites. At 4pm GMT, Meta updated the entire status page to report “unknown” status for all services other than Messenger API for Instagram. Some Meta services, such as WhatsApp and the Facebook ads transparency page, were apparently still working. At 4.15pm, the Meta status page stopped working. In his first post on X in a week, the Meta spokesperson Andy Stone said: “We’re aware people are having trouble accessing our services. We are working on this now.” Google’s ads status page reported a disruption to the company’s Ad Manager beginning at about 3.30pm GMT. The company said it was investigating reports of other issues. But the company’s hiccups were more contained than those of Meta, with most consumer-facing services, including search and YouTube, still working as usual. Problems with the company’s login service, however, affected some business customers, including the Guardian. A systemic internet issue is likely to be the root cause, with sporadic issues also being reported by users of sites including X and Microsoft’s Teams. skip past newsletter promotion Sign up to TechScape Free weekly newsletter Alex Hern's weekly dive in to how technology is shaping our lives Enter your email address Sign up Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Privacy Policy . We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply. after newsletter promotion The outages are unlikely to be as severe as Facebook’s 2021 outage, when a configuration error in a little-known protocol called BGP led to the company accidentally deleting its own address from the systems that allow servers to talk to each other on the internet. Although that error was spotted immediately, it took several hours for the fix to be enacted and take effect – in part because the company’s engineers could no longer gain remote access to their own servers to fix the problem; nor could they use their corporate passes to get through the electronic locks to gain physical access. Google has been contacted for comment.
Arizona’s Kyrsten Sinema announces she won’t run for re-election 2024-03-05 19:33:57+00:00 - About a month ago, Sen. Kyrsten Sinema appeared on CBS’s “Face the Nation,” and host Margaret Brennan asked the senator about her re-election plans. The Arizona independent, seemingly indifferent to a rapidly approaching filing deadline, replied that she hasn’t been focused on electoral considerations. Evidently, she’s had time to think about her future — and that future does not involve a second term. NBC News reported: Independent Sen. Kyrsten Sinema announced Tuesday that she will not run for re-election this year, leaving the Senate after one term that saw her paint Arizona blue, leave the Democratic Party and play a key role in numerous legislative negotiations in a tightly divided Senate. “I will leave the Senate at the end of this year,” Sinema said in a video posted on her X account. The outgoing senator, whose plans have been murky for months, elaborated on her perspective in a three-minute, direct-to-camera video released via social media this afternoon. By any fair measure, Sinema wasn’t left with much of a choice: Recent polling in Arizona showed her struggling badly against Democratic Rep. Ruben Gallego and Republican conspiracy theorist Kari Lake. Had she decided to seek a second term, the incumbent faced likely defeat. Voters in the Grand Canyon State will now have a two-person race instead of a three-person race. To hear Sinema tell it, she’s stepping down after one term in large part because her work wasn’t as appreciated as it should be. “[D]espite modernizing our infrastructure, ensuring clean water, delivering good jobs and safer communities, Americans still choose to retreat farther to their partisan corners,” the Arizonan said. “These solutions are considered failures either because they are too much, or not nearly enough. It’s all or nothing. The outcome, less important than beating the other guy. “The only political victories that matter these days are symbolic, attacking your opponents on cable news or social media. Compromise is a dirty word. We’ve arrived at that crossroad, and we chose anger and division.” After referencing a series of bills she worked on, Sinema added, “[I]t’s not what America wants right now.” In other words, the independent senator believes her unpopularity can and should be attributed to misplaced partisanship and an unhealthy political discourse, which prevented voters from appreciating her greatness. That’s certainly one way of looking at the political landscape — though there is another way. Sinema began her political trajectory as a Green Party state legislative candidate. She finished fifth — out of five — before becoming a Democrat, moderating her views, and advancing her career. As we discussed a couple of years ago, Sinema has long recognized her home state as a Republican stronghold — for good reason. Before her own Senate victory in 2018, Arizona had elected a grand total of one Democratic U.S. senator in her lifetime. What’s more, between 1976 and 2016, there were 11 presidential elections, and the GOP ticket carried the Grand Canyon State in 10 of them. The lesson for the ambitious politician seemed obvious: Sinema wasn’t going to get ahead in Arizona as a progressive. She’d need to appeal to a broader electorate in the Land of Goldwater and McCain. So, she followed what seemed like a sensible course, keeping her distance from the left, emphasizing bipartisanship, and cultivating a reputation as a relative centrist, even picking up some notable praise from the likes of Senate Minority Leader Mitch McConnell. And that might very well have worked for the senator if she’d taken greater care to remember the voters and the values that got her elected in the first place. Instead, Sinema decided to champion ineffective Republican tax breaks that she’d previously opposed. She was needlessly unconstructive on key priorities such as prescription drug costs, which she’d prioritized as a candidate. She pushed genuinely weird arguments in support of filibusters, going so far as to manufacture historical falsehoods. With Arizona’s recent partisan history in mind, Sinema very likely thought she was doing what she had to do. After all, the theory went, red state Democrats can’t very well govern the same way blue state Democrats do. If she expected to remain effective while maintaining a base of statewide support, she had no choice but to occasionally impress Republicans and their corporate donors. If that meant breaking party ranks from time to time, and frustrating her ostensible allies, it was a price Sinema was willing to pay in order to remain in office in a state where Democrats tend to lose. But how reliable were those assumptions? Arizona has gradually become bluer during her term, electing Sen. Mark Kelly in 2020, while simultaneously backing President Joe Biden’s ticket. Two years later, Kelly — running as a relatively conventional Democrat, to Sinema’s left — won by an even wider margin than two years earlier. Simultaneously, other Arizona Democrats — none of whom felt the need to move to the right or abandon their party affiliation — won the state’s gubernatorial race, secretary of state race, and state attorney general race. Sinema, in other words, went further than she needed to. She could’ve annoyed Democratic leaders and Democratic voters far less, and won re-election anyway. When assessing how and why the retiring senator’s career went wrong, her flawed instincts matter more than the toxic political climate. This post updates our related earlier coverage.
Is Crypto Back? What to Know About Bitcoin’s Surge. 2024-03-05 19:29:31+00:00 - Cryptocurrency enthusiasts celebrated on Tuesday, as the price of Bitcoin reached a record high of more than $69,000. For believers, it was a moment of vindication after a 2022 industry downturn that sent several major companies into bankruptcy and tainted crypto’s reputation. But is crypto really back from the dead? While the numbers suggest the industry is starting to thrive again, there are major differences between this bull run and the euphoria that drove crypto prices to previous highs. Here’s what to know about the new crypto surge. Why did cryptocurrencies collapse in the past? The last time Bitcoin hit a record was November 2021, as cryptocurrencies became a cultural phenomenon. Crypto executives hung out with celebrities, and their companies conducted giant marketing campaigns featuring Super Bowl commercials. Prices crashed in the spring of 2022 as some of the most prominent crypto firms were exposed as frauds. People who had poured their savings into crypto lost everything. The decline culminated in November 2022 when the FTX crypto exchange, founded by Sam Bankman-Fried, collapsed after the equivalent of a bank run, costing customers $8 billion.
5 key moments from the 2024 presidential primaries ahead of Super Tuesday 2024-03-05 19:28:52+00:00 - Presidential primaries are not usually this predictable. But there have been few surprises on either the Democratic or Republican sides heading into Super Tuesday, which will likely end with Donald Trump and Joe Biden moving closer to their parties' nominations. But that doesn't mean that the primaries didn't matter. In fact, there have been five moments over the last two months that may prove to be decisive in terms of how the November election turns out. Here's a closer look at those revealing days. Jan. 23: Trump shows weakness The New Hampshire Republican primary revealed Trump’s biggest vulnerability coming out of primary season — his inability to garner a commanding majority of Republican votes in key contests. As a former president, Trump is the de facto Republican incumbent. To lose more than 40% of the vote, as he did to Haley in both New Hampshire and South Carolina — or even 27% in Michigan — shows real weakness. To be fair, some number of those Haley voters are independents or possibly even Democrats crossing over to weaken Trump. Still, a vote against Trump is a vote against Trump, no matter the voter’s party affiliation, and that spells trouble for the former president in the fall. Jan. 23: Anti-Biden efforts falter If there was any energy in the party to try and replace Biden as the nominee, it should have shown itself in New Hampshire. For Biden, the New Hampshire Democratic primary showed that — despite lots of polling showing that Democrats are unhappy with Biden as the nominee — there is no meaningful anti-Biden movement in the party. Biden’s name was not on the New Hampshire ballot and his main Democratic opponent, Dean Phillips, spent close to $3 million trying to rally New Hampshire voters who were mortally offended that the president killed the state's “first in the nation” primary status. If there was any energy in the party to try and replace Biden as the nominee, it should have shown itself in New Hampshire with a big vote for Dean Phillips. Instead, Biden won 65% of the vote as a write-in candidate. This win was also an impressive showing for the Biden-Harris campaign’s ground game. Getting New Hampshire voters — who spent the last two years being furious at Biden — to write your name on a ballot is not an easy endeavor to pull off, but the president’s campaign did it. Feb. 8: A rough spot for Biden Special counsel Robert Hur’s report concluded that Biden had not broken the law in his mishandling of classified documents while making dramatic and inappropriate claims about the president’s age. It sparked a five-alarm freakout among Democrats and prompted a round of stories and essays suggesting that Biden should be replaced as the Democratic nominee. It was a rough week for the White House, but going through this crucible forced the broader anti-Trump political ecosystem (including yours truly) to come to terms with the president’s relative vulnerabilities and strengths as a candidate and come out on the other side embracing him, particularly as an alternative to Trump. Better to go through this reckoning in February than in the fall. Feb. 16: Alabama targets IVF Republicans are now trying to backpedal and show support for IVF protection, but the Alabama decision revealed a fundamental truth. I believe that Biden will win in November and, when he does, we will look back at the Alabama Supreme Court’s ruling that embryos are children as the most consequential development of the primary season. Abortion, including Trump’s reported support for a national abortion ban and his love for taking credit for the overturning of Roe v Wade, was always going to be a motivating issue for Democrats. But for the Alabama court to rule, as Vice President Kamala Harris described it, that women don’t have “the right to end an unwanted pregnancy or….start a family” was like throwing gasoline on an already raging dumpster fire. Republicans are now trying to backpedal and show support for IVF protection, but the Alabama decision revealed a fundamental truth — overturning Roe v Wade has left women’s rights to the whims of extremist judges and politicians and Republicans will pay a heavy price for that in presidential, gubernatorial and congressional elections. Feb. 28: The Supreme Court opts for delay With its decision to delay Trump’s immunity appeal until late April, the Supreme Court made clear what I have always believed — it will be up to voters and not the courts to hold Trump accountable. While it is gravely disappointing that the Supreme Court did not act expeditiously on this critical question, the decision represents a breakthrough for the Biden campaign as it continues to battle doubts about the president’s age and and Trump critics continue to hope for an outside event that will remove him as a threat to democracy. We can now end the primary season with more clarity on how this will play out. There’s only one way to stop Trump: vote for Biden. Sign up for MSNBC’s new How to Win 2024 newsletter and get Jennifer’s election insights delivered to your inbox weekly.
While the tech rally loses stream, this stock-market breadth indicator is at its strongest level in years 2024-03-05 19:28:00+00:00 - A handful of megacap technology names were responsible for most of the S&P 500’s gains over the past year — but that has started to change in 2024, according to Bespoke Investment Group. While the so-called Magnificent Seven stocks — a group of top-performing tech companies that includes chip maker Nvidia Corp. NVDA, +0.86% — have continued to lead the S&P 500’s SPX rally since the start of 2024, data indicate the rest of the market has begun to catch up. More than 60% of stocks in the large-cap benchmark index have notched year-to-date gains, a sign that the stock market’s breadth has finally improved, said Bespoke analysts in a client note viewed by MarketWatch on Tuesday. Another signal of strong breadth is found in the percentage of stocks that have hit 52-week highs. On Monday, 106 S&P 500 components, or 21.2% of the stocks in the index, hit new 52-week intraday highs. That was the highest single-day reading since May 10, 2021, according to Dow Jones Market Data. Meanwhile, the S&P 500 on Monday extended its streak of sessions when more stocks in the index hit 52-week highs than 52-week lows, to 85 trading days, according to Bespoke data. Hitting a 52-week high is often considered a significant bullish signal in the stock market as it may indicate positive momentum or strong investor confidence, while also suggesting that the price of the underlying security has been consistently rising over the past year. See: U.S. stocks are off to their best start to a year since 2019 — and the rally is not just about the ‘Magnificent Seven’ When looking at individual sectors driving these new highs, the S&P 500’s industrials XX:SP500.20 and materials XX:SP500.15 sectors have seen a “steady widening” in the number of stocks reaching 52-week highs so far in 2024. On Monday, 42% of stocks in the industrials sector and 30% of stocks in the materials sector traded at their highest levels in at least a year, the Bespoke analysts noted (see charts below). SOURCE: BESPOKE INVESTMENT GROUP SOURCE: BESPOKE INVESTMENT GROUP Last month, the industrials and materials sectors each outpaced the information-technology sector by less than 1%, according to FactSet data. The two cyclical sectors have continued to outperform technology stocks in March and are up 0.3% and 1.1%, respectively, this month to date — compared with declines of 2.1%, 1.6% and 0.7% for the consumer-discretionary XX:SP500.25, communication-services XX:SP500.50 and information-technology XX:SP500.45 sectors, respectively, over the same period, per FactSet data. The seemingly relentless rally in “Magnificent Seven” stocks has led some investors to voice concern about heavy market concentration, but there are signs that this group of stocks is finally starting to pass the baton, said analysts at Bespoke. While nearly 30% of stocks in the S&P 500’s information-technology sector hit 52-week highs on Monday, that reading was lower than Friday’s level of 34%. Meanwhile, only 23% of stocks in the consumer-discretionary sector saw new highs on Monday. That number was also lower than the percentage of new highs the sector notched in mid-December, according to data compiled by Bespoke. U.S. stocks were falling on Tuesday afternoon, as tech shares struggled after a rally that has spurred concern about their high valuations last week. The S&P 500 was down 0.9%, to 5,085 points, while the Nasdaq Composite COMP was tumbling 1.7% and the Dow Jones Industrial Average DJIA was off 0.8%, according to FactSet data.
Independent Sen. Kyrsten Sinema will not run for re-election in Arizona 2024-03-05 19:25:00+00:00 - Independent Sen. Kyrsten Sinema announced Tuesday that she will not run for re-election this year, leaving the Senate after one term that saw her paint Arizona blue, leave the Democratic Party and play a key role in numerous legislative negotiations in a tightly divided Senate. “Because I choose civility, understanding, listening, working together to get stuff done, I will leave the Senate at the end of this year,” Sinema said in a video posted on her X account. Sinema’s decision paves the way for a tough and expensive fight for her seat — though it will be more straightforward than the messy three-way contest she would have prompted by staying in. The leading Republican, 2022 gubernatorial candidate Kari Lake, and the leading Democrat, Rep. Ruben Gallego, are already running hard to replace Sinema. In her video, Sinema said partisan warfare has carried the day. “Compromise is a dirty word. We’ve arrived at that crossroad, and we chose anger and division. I believe in my approach, but it’s not what America wants right now,” Sinema said. Sinema’s decision comes as her prospects of victory appeared dim if she ran. Polling on the race is sparse, but surveys have consistently shown Sinema in third place in a hypothetical three-way contest featuring Gallego and Lake. It was unclear which candidate she would have pulled more support from. Notably, Sinema believed she was stronger with Arizona Republicans than with her former party. In a prospectus reported by NBC News last September, Sinema told donors her path to victory was to attract 10% to 20% of Democrats, 60% to 70% of independents and 25% to 35% of Republicans. Gallego praised Sinema on news of her departure. “As we look ahead, Arizona is at a crossroads. Protecting abortion access, tackling housing affordability, securing our water supply, defending our democracy — all of this and more is on the line," he said in a statement. "I welcome all Arizonans, including Senator Sinema, to join me in that mission.” Lake also praised Sinema in a statement: "We may not agree on everything, but I know she shares my love for Arizona. Senator Sinema had the courage to stand tall against the far left in defense of the filibuster — despite the overwhelming pressure from the radicals in her party like Ruben Gallego who called on her to burn it all down." Republicans, who are hoping to flip the Senate back into their control this year, are eyeing Arizona as a potential pickup opportunity. Democrats hold a slim majority in the Senate, and the GOP needs a net gain of two seats to win the chamber outright or one seat plus the tie-breaking vice presidency. Sinema’s political arc has been extraordinary, from Green Party organizer to the GOP’s erstwhile favorite Democrat in the U.S. Senate. In 2004 she became a Democrat and was elected to the Arizona Legislature. At a 2011 progressive gathering, she labeled Arizona the “meth lab of democracy” while criticizing legislation that state Republicans were advancing. She ran and won an election in 2012 to the U.S. House, where her voting record showed some centrist bona fides. She used that moderate approach to get elected to the Senate in 2018, ending a losing streak for Democrats statewide. Kyrsten Sinema during an interview on Capitol Hill, on May 18, 2023. Al Drago / Bloomberg via Getty Images file Sinema was a pivotal vote during Biden’s first two years in the 50-50 Senate, using her clout to shape his signature Inflation Reduction Act and single-handedly nix provisions she opposed, like tax rate increases on corporations and the wealthy, and to pare back a provision aimed at lowering prescription drug prices. She was at the center of multiple successful bipartisan negotiations, including on infrastructure and gun safety. Sinema left her party to become an independent in 2022, while still helping Democrats maintain control of the Senate. That came after an irreparable rift between Sinema and Arizona Democrats, as she stood in the way of some legislation proposed by Biden and voted to block Democratic efforts to undo the Senate filibuster to advance voting-rights legislation. Previous key allies, like EMILY’s List, said they would no longer support Sinema, and there was talk of Gallego challenging her in a Democratic primary. She announced in December 2022 that she would leave the Democratic Party and become an independent, but Sinema did not tip her hand about whether she’d run for re-election. Sinema’s influence has waned since Republicans took control of the House and Democrats gained one seat in the Senate in 2023. The Arizona senator negotiated a border security deal with Democrats and Republicans earlier this year, but it was blocked by Republicans. “What I’ve demonstrated in my five years in the United States Senate, is that I have a proven track record of bringing disparate interests and groups together, finding common ground and moving forward with bipartisan solutions,” Sinema told NBC News in December in the midst of the border bill negotiations. And as she often did, she shrugged off a question then about her re-election plans, casting it as a sideshow compared to her legislative work: “I’m 100% focused on delivering a real result,” Sinema continued. Arizona’s tilt to becoming a purple state was confirmed in 2020, when Biden narrowly carried the state against then-President Donald Trump. In 2022, Arizona’s other senator, Democrat Mark Kelly, won his re-election race by 5 percentage points, but in another statewide race, now-Gov. Katie Hobbs, a Democrat, beat Lake by less than 1 point. Other key 2024 battleground races include Democratic Sens. Jon Tester of Montana and Sherrod Brown of Ohio, both running for re-election, while in West Virginia, Democratic Sen. Joe Manchin is not running for another term.
TikTok faces fresh threat of U.S. ban under new House bill 2024-03-05 19:16:00+00:00 - TikTok could be banned in the U.S. if China’s ByteDance does not divest it, under proposed legislation unveiled Tuesday. It’s the latest effort by congressional lawmakers to target the popular short-video app. The measure is being introduced by Rep. Mike Gallagher, the Wisconsin Republican who leads the House Select Committee on the Chinese Communist Party, and the panel’s top Democrat, Rep. Raja Krishnamoorthi of Illinois. It is co-sponsored by a bipartisan group of more than 15 House lawmakers.
Boeing Wants to Buy Its Supplier on Recent Drama, Here’s Why 2024-03-05 19:10:00+00:00 - Key Points Boeing's recent drama surrounding Alaska Air Group has opened a path for a new potential investment. By drilling down into what's actually happening, you will land into the industry's biggest supplier, a new buy target. In a speculative scenario for a buyout, you could find yourself with double to triple-digit upside. 5 stocks we like better than Alaska Air Group Upgrade Now This premium article is available to MarketBeat All Access subscribers only. Log in to your account or sign up below. Upgrade Now See Benefits Already have an account? Log in here. Before you consider Alaska Air Group, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Alaska Air Group wasn't on the list. While Alaska Air Group currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here
Stocks with strongest demand for bullish options keep outperforming the S&P 500 2024-03-05 18:56:00+00:00 - Surging demand for options contracts has accompanied a rally for stocks this year as both professional and retail traders have piled into bullish bets on individual stocks at the fastest pace since the meme-stock craze, according to data from Cboe Global Markets. To illustrate the relationship between heavy call buying and stock-market returns, a team of equity strategists at Citigroup found that a group of 50 companies with the heaviest demand for bullish options has outperformed the S&P 500 since the advent of the COVID-19 pandemic. In fact, since December 2018, the group of the most popular options plays has outperformed the S&P 500 by 7 percentage points, according to Citi’s data, featured in the chart below. CITIGROUP A call option gives the holder the right, but not the obligation, to buy the underlying asset at a set price by a set time. A put confers the right to sell. While both instruments can be used to hedge market trades, calls are a popular way to place bullish bets, while puts can be used to bet on a price decline. The trend isn’t evidence that demand for bullish options conclusively drives outperformance, the Citi team said, but they did find the relationship noteworthy. “An important characteristic of financial markets in the postpandemic era was the significant increase in options trading activity, particularly by retail investors,” wrote a team of strategists led by Stuart Kaiser, Citi’s head of U.S. equity trading strategy. “These flows were skewed towards calls, and were largely concentrated in a select group of stocks. We find these stocks with high call volumes notably outperformed the broad market in the early years of the pandemic.” “While it is hard to accurately determine the causality of this relationship, we believe it to be an important metric for investors in the context of the uptick in options volumes,” the team added. February was a particularly busy month for options traders, as investors piled into bullish bets ahead of Nvidia Corp.’s NVDA, +0.86% latest earnings report. Demand for options on individual stocks rose to its highest level since January 2022 last month, according to Citigroup. CITIGROUP See: Nvidia is now the king of the U.S. options market U.S. stocks were trading lower on Tuesday, with the S&P 500 SPX down 0.9% at 5,086, while the Nasdaq Composite COMP is off by 1.5% at 15960. Nvidia Corp., whose options rank as the most heavily traded based on the total value of the underlying shares each contract controls, was down 0.1% in recent trade at $852 per share.
Emmitt Smith urges Black athletes to fight for diversity programs at the University of Florida 2024-03-05 18:25:53+00:00 - As Republicans across multiple states follow through on vows to ban and restrict diversity, equity and inclusion programs, Black DEI-backers have homed in on one point of leverage that can be used in the immediate term: college athletics. NFL Hall of Famer Emmitt Smith, a University of Florida alum, released a scathing letter on Sunday that denounced his alma mater’s recent firing of all its DEI employees. “To the MANY minority athletes at HF, please be aware and vocal about this decision by the University who is now closing the doors on other minorities without any oversight." Smith’s comments came a little more than a week after Birmingham Mayor Randall Woodfin said he’d encourage Black athletes and their parents to avoid Alabama schools if state Republicans succeed in their push to ban DEI programs. In a social media post, Mayor Woodfin wrote: To the leadership, athletic directors and coaches at University of Alabama Athletics, Auburn University and UAB — The University of Alabama at Birmingham: Do you support this prohibition of diversity and inclusion? To the parents of minority athletes who are helping their children decide if they want to play sports at those institutions: Would you be cool with your child playing at schools where diversity among staff is actively being discouraged? Although I’m the biggest Bama fan, I have no problem organizing Black parents and athletes to attend other institutions outside of the state where diversity and inclusion are prioritized. College athletes and their families shouldn’t — and won’t — be the only people using their voices and talents as leverage to punish states with racist anti-DEI policies. Rest assured, the fight to reprioritize diversity will be all-hands-on-deck, as civil rights activists, lawyers, businesses and scores of others exert pressure on lawmakers to end and correct their crusade against DEI. But Smith and Woodfin have both keyed in on the reality that college athletics continue to be a major source of revenue for many state universities, particularly Southern states, where right-wingers are looking to impose their ahistorical whitewashing. A ranking compiled by Business Insider in January, relying on the most recent revenue data on large universities' athletics programs, put the University of Alabama (ranked 4th, with an average annual revenue of $180 million) and the University of Florida (ranked 12th, with $147 million) both in the top 15 schools when it comes to average annual revenue generated from athletics. Business Insider notes that most of this revenue is generated by basketball and football programs. That's a lot of money being made for public universities, largely on the backs of Black athletes. And a lot of money that could be at risk as states seek to outlaw DEI policies. Today's college athletes have more freedom than others in recent memory. Rule changes in the NCAA have made it easier for athletes to transfer schools, and "name, image, and likeness" rules that allow athletes to profit from their reputations has made recruitment more cutthroat, igniting bidding wars to attract top athletes. Needless to say, schools that ban (or are forced to ban) diversity programs could find attracting some of those athletes, particularly Black ones, mighty difficult. That's certainly what Emmett Smith and Mayor Woodfin are hoping for. I'm right there with them.
Dartmouth men’s basketball team votes to unionize, though steps remain before forming labor union 2024-03-05 18:10:39+00:00 - HANOVER, N.H. (AP) — The Dartmouth men’s basketball team voted to unionize Tuesday in an unprecedented step toward forming the first labor union for college athletes and another attack on the NCAA’s deteriorating amateur business model. In an election supervised by the National Labor Relations Board in the school’s Human Resources offices, the players voted 13-2 to join Service Employees International Union Local 560, which already represents some Dartmouth workers. Every player on the roster participated. “Today is a big day for our team,” players Cade Haskins and Romeo Myrthil said in a statement. “We stuck together all season and won this election. It is self-evident that we, as students, can also be both campus workers and union members. Dartmouth seems to be stuck in the past. It’s time for the age of amateurism to end.” The school has five business days to file an objection to the NLRB and could also take the matter to federal court. That could delay negotiations over a collective bargaining agreement until long after the current members of the basketball team have graduated. Dartmouth pushed back on the decision — again — in a statement, saying it was supportive of the five unions it negotiates with on campus, including SEIU Local 560. “In this isolated circumstance, however, the students on the men’s basketball team are not in any way employed by Dartmouth,” the school said. “For Ivy League students who are varsity athletes, academics are of primary importance, and athletic pursuit is part of the educational experience. Classifying these students as employees simply because they play basketball is as unprecedented as it is inaccurate. We, therefore, do not believe unionization is appropriate.” Although the NCAA has long maintained that its players are “student-athletes” who were in school primarily to study, college sports has grown into a multibillion-dollar industry that richly rewards coaches and schools while the players remained unpaid amateurs. Recent court decisions have chipped away at that framework, with players now allowed to profit off their name, image and likeness and earn a still-limited stipend for living expenses beyond the cost of attendance. Last month’s decision by an NLRB that the Big Green players are employees of the school, with the right to form a union, threatens to upend the amateur model. “We will continue to talk to other athletes at Dartmouth and throughout the Ivy League about forming unions and working together to advocate for athletes’ rights and well-being,” Haskins and Myrthil said. A college athletes union would be unprecedented in American sports. A previous attempt to unionize the Northwestern football team failed because the teams Wildcats play in the Big Ten, which includes public schools that aren’t under the jurisdiction of the NLRB. That’s why one of the NCAA’s biggest threats isn’t coming in one of the big-money football programs like Alabama or Michigan, which are largely indistinguishable from professional sports teams. Instead, it is the academically oriented Ivy League, where players don’t receive athletic scholarships, teams play in sparsely filled gymnasiums and the games are streamed online instead of broadcast on network TV. Myrthil and Haskins have said they would like to form an Ivy League Players Association that would include athletes from other sports on campus and other schools in the conference. They said they understood that change could come too late to benefit them and their current teammates. The team includes four seniors, five juniors, three sophomores and three freshman. “We have teammates here that we all love and support,” Myrthil said after playing at Harvard last month in the Big Green’s first game after the NLRB official’s ruling. “And whoever comes into the Dartmouth family is part of our family. So, we’ll support them as much as we can.” Mary Kay Henry, the international president of the SEIU, said the players “will go down as one of the greatest basketball teams in all of history.” “The Ivy League is where the whole scandalous model of nearly free labor in college sports was born and that is where it is going to die,” she said. ___ Jimmy Golen covers sports and the law for The Associated Press. ___ AP college basketball: https://apnews.com/hub/ap-top-25-college-basketball-poll and https://apnews.com/hub/college-basketball
Record highs (nearly everywhere): it’s starting to feel frothy again | Nils Pratley 2024-03-05 18:00:00+00:00 - Bitcoin, gold, the US stock market, the German stock market, even the Japanese stock market after 34 long years. Is there anything not hitting all-times? Well, there’s the tech-lite FTSE 100 index, still plodding along 500 points below its high of early last year, but it’s an outlier. The rest of the investment world is feeling the adrenalin rush of interest rate cuts in the offing and talking about the revolution in artificial intelligence. At which point, it’s worth asking whether this is all getting a bit speculative. Isn’t excitement over the transformative effects of AI, which won’t happen overnight, already overdone? The S&P 500 index has been hitting new highs in most weeks this year and is up 27% over 12 months. As is well-known by now, by far the largest contribution has come from six of the so-called “Magnificent Seven” tech stocks – Alphabet (Google), Amazon, Apple, Meta (Facebook) Microsoft and, especially, chipmaker Nvidia. (Tesla, the other member of the group, is the laggard). New highs for stock market indices tell us little in themselves, of course. Schroders’ strategists recently crunched the numbers on the US market since 1926 and showed that all-times highs were seen in 30% of months. Yet Marko Kolanović, JP Morgan’s chief market strategist, was also expressing a widely-held worry on Tuesday when he wrote: “Stocks continuing to push to new record highs and Bitcoin surging over $60k may indicate accumulating froth in the market.” The phrase “accumulating froth” is nicely nuanced since it includes the possibility that current conditions could last a lot longer. But the concentration in the group of US leaders, which now make up 25% of the US market, is so extreme that we have, in effect, two markets. The Magnificent Seven have just produced a collective 56% increase in earnings in their latest reporting periods, noted Kolanović, while the rest of the S&P 500’s companies were down 2% in aggregate. “So currently, we have the uncomfortable choice of buying something already expensive, albeit with good earnings growth, or something cheap, perhaps justifiably so with negative earnings growth.” It’s not obviously an appealing choice. Within the group of Seven, Nvidia is a tale in itself. It’s up 75% this year – yes, since the start of January – after a 230% gain in 2023. Its market capitalisation is now over $2tn, so more than both Alphabet and Amazon. And it’s predicated on the thesis that Nvidia’s processing chips will be the essential ingredient for running generative AI models. Chief executive, Jensen Huang, spoke last month about AI hitting “a tipping point” with surging demand “across companies, industries and nations”. Few would quibble with the tipping point analysis: the AI revolution is clearly real, just as the internet-inspired transformation of the economy was 25 years ago. But the investment question – less discussed – is surely whether the current leaders will have the field to themselves. Terry Smith, manager of the Fundsmith fund, made an excellent point in his recent report to investors when he said it would be “a break with tradition” if the stock market has been able to identify the winners from AI in advance. He pointed to a long list of early leaders that tripped up last time in the dotcom era: AOL in internet service provision; Nokia in mobile phones; Yahoo in search engines; and Research In Motion, aka Blackberry, in smartphones. It is also possible, Smith suggested, that there won’t be a single winner, either in the provision of large language models or their use, because there’s no shortage of contenders. “The adoption of AI may lead to a situation where everyone has it, so no one has any advantage,” he argued. Yes, that is also possible. Such scepticism is not the mood of the market at the moment, however. We are at the stage where the only part of the story that resonates is the fact that the changes will be enormous. It’s a simple thesis, which is partly why it is compelling. Trying to call the top is a mug’s game, so there’s no point trying (Federal Reserve chairman Alan Greenspan made his famous remarks about “irrational exuberance” in December 1996, a full three years before the dotcom bubble finally burst). But, yes, it’s starting to feel frothy.
Gold scores another record finish. Here’s who isn’t buying. 2024-03-05 17:59:00+00:00 - Gold futures extended their rally on Tuesday and marked a third consecutive session at a record settlement, but don’t call it a gold rush, one analyst said. Weak U.S. economic data lifted expectations that the Federal Reserve will cut interest rates later this year and contributed to declines in the U.S. dollar and Treasury yields, raising safe-haven investment interest in the precious metal. Gold’s latest run to new record highs, however, has come on a “jump in speculative betting,” Adrian Ash, director of research at BullionVault, told MarketWatch. There is ”no gold rush among Western investors right now, not in physical bullion and not outside Comex futures and options,” he said. Gold exchange-traded funds continue to “shrink to prepandemic size; coin shops are slashing their premiums and buy-back prices to try clearing the flood of customer selling,” Ash said. There was no sign of that weakness in physical demand on Comex Tuesday. Gold for April delivery GC00, +0.48% GCJ24, +0.48% climbed $15.60, or 0.7%, to settle at $2,141.90 an ounce, with front-month prices topping Monday’s record-high settlement of $2,126.30. On an intraday basis, prices have yet to reach a fresh high, with Tuesday’s peak at $2,150.50 holding below the Dec. 4 record intraday high of $2,152.30. Record settlements Prices also reached a fresh record high on Friday, when the Institute for Supply Management said its manufacturing index dropped to 47.8 in February, “signifying economic contraction,” said Ryan McIntyre, managing partner at Sprott Asset Management. This has helped the price of gold, as the precious metal “typically does well in times of economic uncertainty” and economic contraction is more likely to “lead to decreases in interest rates, which lessens the opportunity cost for holding gold,” he told MarketWatch. On Tuesday, the ISM said its service-sector PMI fell more than expected, to 52.6% in February from 53.4% in the prior month. Following the data, the ICE U.S. Dollar index DXY edged lower and the yield on the 10-year Treasury BX:TMUBMUSD10Y fell by 6.9 basis points to 4.147% as markets awaited midweek testimony from Federal Reserve Chair Jerome Powell and Friday’s monthly U.S. jobs report. Precious-metals traders are “focusing on the prospects of easier monetary policies this year from the major central banks of the world,” said Jim Wyckoff, senior analyst at Kitco.com. “That would extrapolate into better consumer and commercial demand for metals and also theoretically pressure the U.S. dollar index and lower U.S. Treasury yields.” Vulnerability Still, because gold pays no income, these new all-time price highs could be “vulnerable to central banks,” said Ash. That may be led by the Fed holding interest rates higher for longer to try keeping a lid on inflation, he said. Read: Fed’s Williams said he’s ‘very focused’ on getting inflation back to target Even then, a pullback in gold prices “isn’t guaranteed,” Ash said. “Any dip could prove good opportunity to buy into the underlying strength in gold.” Central-bank demand for the precious metal “remains historically strong, and that’s clearly helping drive up the gold price as sovereign nations favor the precious metal as a safe haven against the worsening geopolitical outlook,” he said. Physical demand for gold from the key consumer markets of China and India also continues to “run hot,” Ash said. Meanwhile, bitcoin BTCUSD, -0.09% has reached record highs as well, with prices for the cryptocurrency surpassing $69,000 on Tuesday, leading some traders to question whether bitcoin’s rise will start to draw interest away from gold. But Martin Leinweber, digital assets product strategist at MarketVector Indexes, said we are not at the phase yet when people would sell their gold to buy bitcoin. Read: Why the launch of bitcoin ETFs threatens the market for gold Leinweber said he doesn’t think the two can substitute for each other, as investors still see bitcoin as a risky asset. It could just be a coincidence that bitcoin ETFs have seen inflows while gold ETFs have seen outflows this year, he said. ETF outflows McIntyre, who is also a senior portfolio manager at Sprott Asset Management, said gold ETFs have continued to experience outflows this year. Gold-backed ETFs in North America saw outflows of 36.2 metric tons this year, as of the week ended Feb. 23, according to data from the World Gold Council. That is compared with outflows of 17.1 metric tons in Europe and inflows of 3.1 metric tons in Asia. “Individuals and institutions seem to be content holding ‘risk assets,’” McIntyre said. “This could, however, change quickly given the dynamic financial and economic landscape.” For now, central banks also continue to be “strong purchasers of gold as they continue to diversify reserves and prepare for a new range of economic and geopolitical tensions,” he said. In the short term, in order for gold prices to move even higher, McIntyre said there would need to be some new data “highlighting a decelerating economy, lower inflation, increasing geopolitical tension, or some negative equity price action.” Frances Yue contributed.