Economy

(Reuters) – Federal Reserve Bank of Dallas President Lorie Logan on Saturday warned that the U.S. central bank may need to resume raising its short-term policy rate to keep a recent decline in long-term bond yields from rekindling inflation.”If we don’t maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up and reverse the progress we’ve made,” Logan said in remarks prepared for delivery at an American Economic Association conference in San Antonio, Texas. “In light of the easing in financial conditions in recent months, we shouldn’t take the possibility of another rate increase off the table just yet.”The Fed raised its benchmark policy rate agressively in 2022 and the first part of 2023 to bring down what had been 40-year-high inflation, but since last July has kept it steady in the 5.25%-5.5% range. Policymakers last month signaled they had seen enough progress on inflation to likely be done with rate hikes and to turn to interest-rate cuts this year. Financial markets responded by betting big on steep rate reductions this year.Logan’s view marks a pushback on those bets. With the effects of the Fed’s past rate hikes mostly behind us, Logan said, the decline in the yield on the benchmark 10-year Treasury note — from around 5% in mid-October to around 4% now — could set the stage for a pickup in demand that could undo progress on inflation. “Restrictive financial conditions have played an important role in bringing demand into line with supply and keeping inflation expectations well-anchored,” she said, noting that inflation has come down closer to the Fed’s 2% target and the labor market, while still tight, is rebalancing. “We can’t count on sustaining price stability if we don’t maintain sufficiently restrictive financial conditions.” Her remarks are notable particularly because she was among the first of Fed policymakers, last October, to suggest that the rise in long-term bond yields was doing some of the Fed’s work for it, and meant the Fed could leave the policy rate where it was. Logan also signaled she feels it is time to start thinking about slowing the process of shrinking the Fed’s balance sheet. “I think it’s appropriate to consider the parameters that will guide a decision to slow the runoff of our assets,” she said. “In my view, we should slow the pace of runoff” as overnight reverse repurchase agreement balances approach a low level. More

Several large investors believe that BP should target the appointment of an external candidate as its CEO, according to the report. It is unclear whether Woodburn had been formally approached by BP, according to Sky, adding he had been sounded out in recent weeks.”Charles is chief executive of BAE Systems and we have no comment on BP personnel matters,” a BAE Systems spokesperson said.BP was thrown into turmoil after Chief Executive Bernard Looney resigned on Sept. 12 for failing to disclose relationships with employees, leaving no clear succession plan in place.BP’s board has short-listed interim CEO Murray Auchincloss and two senior female executives as internal candidates to replace Looney, three company and industry sources told Reuters last month.”The process to appoint BP’s next CEO is ongoing. We won’t comment on speculation regarding potential candidates,” a spokesperson for BP said when asked about the Sky report. More

The central bank has underscored the importance of an improved credit structure that supports technological innovation and contributes to the reduction of carbon emissions, aligning with China’s broader environmental goals. Furthermore, the PBOC has confirmed its plans to increase the financial market opening-up. This strategic move includes enhancing the participation of foreign investors in China’s bond market, which is expected to foster a more globally integrated financial environment.In addition to market liberalization efforts, the PBOC is concentrating on the internationalization of the yuan. This initiative aims to elevate the Chinese currency’s role in the global financial system and is part of a broader strategy to improve financial services for both domestic and overseas market participants.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

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Harris will speak on the anniversary of the deadly attacks, after Biden offered scathing criticism of Republican frontrunner Donald Trump’s actions that day in a speech near Valley Forge, Pennsylvania on Friday.The vice president will visit Myrtle Beach, South Carolina, to deliver the keynote address at the 7th Episcopal District AME Church Women’s Missionary Society annual retreat. “Three years ago today, on January 6, 2021, a mob invaded the United States Capitol. They used violence and fear to try to overturn the results of a free and fair election, and to overrule the votes of millions of Americans,” Harris plans to say, according to excerpts from her remarks released by her office.”On that day, we saw violence, chaos, and lawlessness, even though some so-called leaders still say it was a peaceful protest led by, quote, ‘great patriots,'” the remarks say.Biden credits South Carolina with catapulting him to the White House in 2020, and the state was moved to the top spot in the party’s nominating calendar, ahead of Iowa and New Hampshire.The AME, or African Methodist Episcopal church, formed in response to racial discrimination in an American Methodist church in the late 1700s, has thousands of congregations worldwide and several million members. Biden will speak at the Mother Emanuel AME in South Carolina on Monday, where nine members were killed by a white supremacist in 2015. Although Biden is not facing serious competition for the Democratic presidential nomination, polls show he has lost some support from Black voters nationwide. A strong primary turnout in a state where the majority of Democratic voters are Black would calm fears about his electability among the party.“Let us not throw up our hands. Instead, let us roll up our sleeves. We were born for a time such as this. We love our country,” Harris says in the excerpts.”We believe in the principles upon which we were founded. And guided by our faith, we are prepared to fight for those principles. With hope, with optimism, and with faith. When we fight, we win,” she says in the remarks. More

SAN FRANCISCO (Reuters) – (This Jan. 4 story has been corrected to say that Bosch is scheduled to speak at CES on AI and cybersecurity, not that Bosch is expected to showcase a gun-detection system, in paragraph 9 and fixes executive’s name to Aakash Arora in paragraph 11) OpenAI boss Sam Altman will not appear at the CES trade show in Las Vegas next week. But the generative artificial-intelligence fever his startup set off last year will be on full display as gadget makers race to find consumer uses for the technology.In devices for the visually impaired, and safety systems involving guns at schools, to facial-recognition software that can assess vitals, and cabin-monitoring systems inside autonomous cars, dozens of companies have planned announcements for the show about how they are building AI into their gadgets.CES 2024, formerly known as the Consumer Electronics Show, runs Jan. 9-12. OpenAI’s influence at the show despite Altman’s physical absence is reminiscent of Apple (NASDAQ:AAPL) and its founder Steve Jobs, whose clout was felt despite him avoiding the show, with many firms jockeying to display gadgets compatible with the company’s sleek products.Altman is widely regarded as the poster child for the AI frenzy that has gripped the tech industry for the past year. He made headlines in November when he was briefly ousted by the ChatGPT maker’s board, and reinstated days later after more than 700 employees threatened to quit and join OpenAI investor Microsoft (NASDAQ:MSFT) in solidarity.Among other projects, OpenAI is working on a secretive AI hardware project with famed former Apple designer Jony Ive, according to media reports.Funding for generative AI projects exploded last year, surging more than fivefold to $23.78 billion through the beginning of December from 2022, according to PitchBook data.”It’s the year of AI in everything,” said Maribel Lopez, tech analyst at Lopez Research. “If you don’t have AI in your product, don’t show up, it’s not worth talking about.”Germany’s Bosch, which recently won a CES award for a near-invisible gun-detection system that pairs video and audio AI for proactive security involving firearms at schools, is scheduled to speak on AI and cybersecurity at a panel in the show. Japan’s NEC will unveil AI software that enables mobile devices to analyze face patterns and pupil conditions to estimate human vitals and mental state.A slew of companies is expected to show off how using AI in vehicles is making them smoother and safer for drivers through better in-vehicle virtual assistants and cabin monitors.The new focus area for automakers after years of investment into autonomous technology that used AI is technology that allows a “hyper personalized” experience while buying and driving cars, said Aakash Arora, a managing director at Boston Consulting Group.”They’re trying to figure out ‘if I could get to this level of customer experience it can really differentiate me in the market,'” he said of companies in the auto industry.For instance, Cerence (NASDAQ:CRNC), which makes AI-powered virtual assistants, is set to announce a partnership with Volkswagen (ETR:VOWG_p), and Israel-based Cipia is expected to unveil a system that monitors signs of distraction and drowsiness in drivers.Many automakers are also adopting AI in various stages of production to reduce costs, said Wendy Bauer, vice president of automotive and manufacturing at Amazon (NASDAQ:AMZN) Web Services, which counts BMW (ETR:BMWG) and Toyota (NYSE:TM) as customers. AI can help carmakers save money by speeding up vehicle development and ensuring better quality checks during manufacturing, she said.PC and smartphone makers are also likely to showcase how their products use AI, which chipmakers including Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD) are betting will offer a new revenue stream. Microsoft said on Thursday that PCs with a new AI button on the Windows keyboard will be on display at the show.But it is not clear whether consumers will pay extra for AI capabilities on their computers because these developments perform less obvious tasks than OpenAI’s ChatGPT bot.”Consumers love ChatGPT, but the consumer benefit of having it on a device isn’t clear,” said Jay Goldberg, chief executive of D2D Advisory. “That’s why everyone is going to talk about it – because everyone is scrambling for the consumer utility.” More

NEW YORK (Reuters) – Investors’ hopes are running high to start 2024, which could set up U.S. stocks for a rocky stretch if some expectations are not met. Despite a shaky start to the year, the S&P 500 stands only around 2% below a fresh record high. Most investors have maintained a rosy view on everything from the U.S. economy and corporate profits to the Federal Reserve’s monetary policy trajectory. For example, the narrative of resilient growth and gradually cooling inflation that helped boost the S&P 500 to a 24% gain last year has become the consensus view among investors. The latest BofA Global Research survey, released last month, showed 66% of fund managers believed the economy will achieve a soft landing in 2024. Only 15% of fund managers expected a recession in the next 12 months, BofA’s data showed, a sharp contrast from a year earlier, when 68% of investors expected a recession. Bets on easier monetary policy have gone hand-in-hand with the soft-landing outlook. Futures tied to the Fed’s policy rates show investors pricing in around 140 basis points of interest rate cuts this year, nearly twice what the central bank itself has projected. Not surprisingly, many investors have a positive outlook on stocks. Bullish sentiment rose to 48.6% in the latest week — a notch down from its recent peak in December, but well above the historic average of 37.5%, the American Association of Individual Investors survey showed. Those views have been shaped in large part by tangible evidence of cooling inflation, a comparatively strong economy and the Fed’s own guidance, after policymakers surprised markets with a dovish pivot last month. With stocks near historical highs and at elevated valuations, however, some investors worry the market’s sunny outlook leaves more room for disappointment if any of those scenarios do not materialize. “Anything that throws off the current economic narrative or market narrative – the risk of that disappointment flowing through to prices in equities is higher,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management.One test of investors’ optimism comes with next week’s consumer price data, which could show whether recent bets on ebbing inflation have been premature. Expectations for a cooling economy that could set the stage for Fed rate cuts took a hit on Friday, after jobs data showed employers hired more workers than expected in December while raising wages at a solid clip. The S&P 500 fell 1.54% this week, the biggest weekly decline since late October. Major banks including JPMorgan Chase (NYSE:JPM) and Citigroup kick off earnings season next week, testing elevated expectations for corporate profits. Analysts expect S&P 500 earnings to rise by 11% in 2024 after increasing just 3% in 2023, according to LSEG data. Pressure to meet higher earnings targets may be more intense than a year ago, as the market’s overall valuation has climbed. The S&P 500 trades at a forward price-to-earnings ratio of 19.5 compared with about 17 times at the start of 2023, LSEG Datastream data showed. “We don’t expect multiples to expand significantly from here because valuations are stretched a bit, so it’s going to come down to where the earnings come in,” said James Ragan, director of wealth management research at D.A. Davidson. Ragan puts fair value for the S&P 500 at 4,700, roughly where it is trading now.Looking further ahead, investors will parse the message from the Fed at the end of its Jan. 30-31 policy meeting. Markets expect the central bank to leave rates unchanged this month, and bets on a cut at the March meeting have been pared back. Futures markets on Friday priced a roughly 62% chance that the Fed cuts rates by 25 basis points in March, from around 73% a week ago, CME’s FedWatch Tool showed. Still, stocks have historically responded well to rate cuts. Over the past 12 easing cycles since 1970, the S&P 500 has tended to rally for the six or seven months after the first rate cut with an average gain of about 12%, according to Ned Davis Research. Keith Lerner, co-chief investment officer at Truist Advisory Services, said in a recent note that the bar for positive surprises has risen and he expects a “digestion period” for the market after its strong run. He still believes, however, that stocks are likely to rise in 2024. “Stick with the underlying positive market trend and be prepared to use pullbacks as opportunities,” Lerner said. More

WASHINGTON (Reuters) -Two groups representing auto dealers said on Friday they had filed a legal challenge to the Federal Trade Commission’s new sweeping consumer protection regulations finalized last month.The FTC said the new rules will ban bait-and-switch advertising tactics, prohibit charging for add-on costs that do not benefit consumers and require dealers to make key disclosures to consumers, including accurate pricing disclosures in advertising and sales communications.The rules were first proposed in 2022 and will take effect on July 30. They also require dealers to keep records of certain advertisements and customer transactions. The National Automobile Dealers Association (NADA) and Texas Automobile Dealers Association late Thursday asked the Fifth Circuit Court of Appeals to block the new rules that “comprehensively regulates the advertising, sales, and financing of vehicles by auto dealers” saying they are “arbitrary, capricious (and) an abuse of discretion.”The FTC declined to comment.The NADA said previously the FTC proposal would “upend the sales process for tens of millions of consumers annually and thousands of small businesses.”The FTC said the new rules would bar junk fees like a service contract for an oil change for an electric vehicle said it is expected to save consumers more than $3.4 billion and an estimated 72 million hours annually shopping for vehicles. Dealers will also be required to obtain consent for any charges they add to a vehicle’s price and barred from charging for add-ons that are useless to the buyer, such as selling nitrogen-filled tires that contain no more nitrogen than normal air.The Alliance for Automotive Innovation, representing General Motors (NYSE:GM), Toyota Motor (NYSE:TM), Volkswagen (ETR:VOWG_p) and other major automakers, previously raised concerns about the FTC plan, warning of “excessive regulation and micromanagement of the sales experience.”In November, a U.S. House committee said it was investigating the FTC’s consumer protection rules, arguing the regulation “threatens harm to consumers and small businesses by making car purchases more difficult and inhibiting innovation in the industry.”A group of 17 Democratic lawmakers in June urged the FTC to “adopt strong regulatory protections for car buyers,” arguing that “unfair and deceptive practices involving motor vehicle dealers have widespread consequences.” More