Economy

(Reuters) -Startup Character.AI said on Friday it has signed an agreement with Alphabet (NASDAQ:GOOGL)’s Google that grants the search engine giant a non-exclusive license to the chatbot maker’s large language model technology.The deal, echoing ones struck by Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) in the past few months, will see Character.AI co-founders Noam Shazeer and Daniel De Freitas rejoin Google, where they were formerly employees.Those other deals are being scrutinized by regulators, reflecting growing concern in both the U.S. and Europe about how AI deals are put together by tech giants who are funneling billions into bolstering their AI infrastructure and hiring the best researchers from startups.Character.AI will get more funding as part of the deal with Google, the startup said in a blog, without disclosing the amount. Dominic Perella, Character.AI’s general counsel, will become its interim CEO, effective immediately.”We’re particularly thrilled to welcome back Noam, a preeminent researcher in machine learning, who is joining Google DeepMind’s research team, along with a small number of his colleagues,” a Google spokesperson said in an email.In March, Microsoft paid $650 million to bring on the cofounders and dozens of staff from AI startup Inflection. In June, Amazon hired several cofounders and employees from Adept, another AI startup.Character.AI previously raised $193 million in venture capital from investors including Andreessen Horowitz. It was in talks to raise hundreds from millions from Google, Reuters reported in November.Inflection and Adept raised $1.3 billion and $415 million, respectively.Law firm Sullivan & Cromwell advised Character.AI on the deal. More

(Reuters) -Worries over tech earnings and a slowing U.S. economy slammed the Nasdaq Composite index on Friday as it extended recent declines to fall 10% below its record high, confirming it was in correction territory.The tech-heavy index fell 2.4% on Friday after a softer-than-expected jobs report spurred worries over whether the Federal Reserve will need to deliver hefty interest rate cuts at its next meeting to prevent the U.S. economy from falling into recession. Disappointing earnings from Amazon (NASDAQ:AMZN) and Intel (NASDAQ:INTC) also have spooked investors. The Nasdaq has dropped 10% from its record close of 18,647.45 points on July 10. An index or stock is widely considered to be in a correction when it closes 10% or more below its previous record closing high. “This is an old-fashioned correction going on,” said Tom Plumb, chief executive and portfolio manager at Plumb Funds. “We passed the economic torch from the perception of growth to the perception of needing government intervention with lower interest rates to stabilize the economy.”Over the past 44 years, the index has slipped into correction territory after hitting a new high 24 times, or about once every two years, according to a Reuters analysis of LSEG data. In two-thirds of these cases, the index traded higher a month after entering correction territory, data showed.The last time the index marked a correction after scaling a new high was on Jan. 19, 2022. The index then extended losses to fall 36% from its high before bottoming out in December of that year.The Nasdaq is still up 11.8% year-to-date. The S&P 500, which has lost about 6% from its high, is up 12.1% for the year.The Nasdaq’s tumble comes as investors turn more wary of the highly valued tech stocks that have led the charge higher for most of the year, driven by excitement over the potential of artificial intelligence. Stocks are also heading into what is typically a seasonally rocky period.September and October tend to be volatile months for U.S. shares. The Cboe Volatility index – Wall Street’s most watched gauge of investor anxiety – averages 21.8 in October, the highest for any month, according to LSEG data going back to 1992.”This isn’t an unusual seasonality pattern. We had a similar selloff in August 2023, although perhaps this is more forceful,” said James St. Aubin, chief investment officer at Ocean Park Asset Management.”I would look at this as the correction a lot of people were expecting to see coming into the summer. All kinds of things are piling on top of each other to make the market nervous,” St. Aubin added.Lackluster results from Tesla (NASDAQ:TSLA) and Alphabet (NASDAQ:GOOGL) last month compounded worries about stretched valuations. At the same time, there may be concern that weaker-than-expected results reflect a broader softness in the economy. “The focus of the market is no longer simply about earnings, but instead, what earnings are saying about the economy overall,” JJ Kinahan, CEO IG North America & president of Tastytrade, said in a note.”Surging bond prices and falling yields are signs investors are seeking safe havens. All of that is an indication that the economy is slowing globally, and it’s giving investors cause for concern,” Kinahan added. More

NEW YORK (Reuters) -Economic fears are roiling Wall Street, as worries grow that the Federal Reserve may have left interest rates elevated for too long, allowing them to hurt U.S. growth. Alarming economic data in recent days have deepened those concerns. U.S. job growth slowed more than expected in July, a Friday report showed, while the unemployment rate increased to 4.3%, heightening fears that a deteriorating labor market could make the economy vulnerable to a recession.The jobs report exacerbated a selloff in stocks that began on Thursday, when data showing weakness in the labor market and manufacturing sector pushed investors to dump everything from chip stocks to industrials while piling into defensive plays.Richly valued tech stocks tumbled further on Friday, extending losses in the Nasdaq Composite to more than 10% from a record closing high reached in July. The benchmark S&P 500 index has slid 5.7% from its July peak.“This is what a growth scare looks like,” said Wasif Latif, president and chief investment officer at Sarmaya Partners. “The market is now realizing that the economy is indeed slowing.”For months, investors had been heartened by cooling inflation and gradually slowing employment, believing they bolstered the case for the Fed to begin cutting interest rates. That optimism drove big gains in stocks: the S&P 500 remains up 12% this year, despite recent losses; the Nasdaq has gained nearly 12%.Now that a September rate cut has come into view following a Fed meeting this week, investors are fretting that elevated borrowing costs may already be hurting economic growth. Corporate earnings results, which saw disappointments from companies such as Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL) and Intel (NASDAQ:INTC), are adding to their concerns.“We’re witnessing the fallout from the curse of high expectations,” said James St. Aubin, chief investment officer at Ocean Park Asset Management. “So much had been invested around the scenario of a soft landing, that anything that even suggests something different is difficult.”Next week brings earnings from industrial bellwether Caterpillar (NYSE:CAT) and media and entertainment giant Walt Disney (NYSE:DIS), which will give more insight into the health of the consumer and manufacturing, as well as reports from healthcare heavyweights such as weight-loss drugmaker Eli Lilly (NYSE:LLY).Bets in the futures markets on Friday suggested growing unease about the economy. Fed fund futures reflected traders pricing an over-70% chance of a 50-basis point cut at the central bank’s September meeting, compared to 22% the day before, according to CME FedWatch. Futures priced a total of 116 basis points in rate cuts in 2024, compared to just over 60 basis points priced in on Wednesday.Broader markets also showed signs of unease. The Cboe Volatility index – known as Wall Street’s fear gauge – hit its highest since March 2023 on Friday as demand for options protection against a stock market selloff rose. Meanwhile, investors have rushed into safe haven bonds and other defensive areas of the market. U.S. 10-year yields – which move inversely to bond prices – on Friday dropped as low as 3.79%, the lowest since December.Sectors that are often popular during times of economic uncertainty are also drawing investors. Options data for the Health Care Select Sector SPDR Fund showed the average daily balance between put and call contracts over the last month at its most bullish in about three years, according to a Reuters analysis of Trade Alert data.Trading in the options on Utilities Select Sector SPDR Fund also shows a pullback in defensive positioning, highlighting traders’ expectations for strength for the sector. The healthcare sector is up 4% in the past month, while utilities are up over 9%. By contrast, the Philadelphia SE Semiconductor index is down nearly 17% in that period amid sharp losses in investor favorites such as Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO).To be sure, some investors said the data could just be a reason to lock in profits after the market’s overall strong run in 2024.“This is a good excuse for investors to sell after a huge year to date rally,” said Michael Purves, CEO of Tallbacken Capital Advisors. “Investors should be prepared for some major volatility, particularly in the big tech stocks. But it will probably be short-lived.” More

Wall Street was jolted by rising economic uncertainty on Friday, and stocks skidded, capping off a turbulent week with a sharp decline.Friday’s drop followed a report on U.S. hiring in July that was far weaker than expected, startling investors into worrying that the Federal Reserve has been too slow to cut interest rates. Traders were already growing uneasy about the state of the economy, as well as the prospects for the big technology stocks that had underpinned a market rally for much of the year, but the jobs report intensified the focus on the risks.The S&P 500 fell 1.8 percent, while the tech-heavy Nasdaq dropped 2.4 percent. Small stocks, yields on government bonds, and oil prices, all of which are sensitive to expectations for the economy, dropped too.Employers in the U.S. added 114,000 jobs in July, on a seasonally adjusted basis, much fewer than economists had expected and a significant drop from the average of 215,000 jobs added over the previous 12 months, the Labor Department said. The unemployment rate rose to 4.3 percent, the highest level since October 2021.“That all-important macro data we have been hammering for months is finally starting to turn in an ominous direction,” said Alex McGrath, chief investment officer at NorthEnd Private Wealth.Investors are reassessing how aggressive the Fed may have to be as it starts to cut interest rates — if weakening economic conditions justify a bigger rate cut than the central bank has indicated so far. The central bank raised rates to a two-decade high as it tried to wrestle inflation under control, but policymakers now have to decide when to cut, and by how much, in order to forestall a recession.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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“We never want to overreact to any one month’s numbers,” Goolsbee said in a Bloomberg TV interview. Even so, he said, “Our absolute goal now is we want to settle at something like full employment, not blow through normal and deteriorate.” The U.S. Labor Department reported earlier on Friday that employers slowed hiring sharply in July, and the unemployment rate rose to 4.3%. That’s above the 4.1% rate that Fed policymakers’ estimate is consistent with full employment, Goolsbee said. Fed policy is restrictive and tight, he said, and he noted that inflation has come down and the labor market has cooled in the year that the Fed has kept its policy rate steady, suggesting that he remains supportive of easing policy. He declined to say when or by how much the Fed should cut rates, repeating his view that he does not want to tie his hands on policy ahead of any given Fed meeting. More

(Reuters) – The disappointing U.S. employment report for July unleashed a “Freakout Friday” moment in financial markets and triggered a wholesale resetting of expectations for how much the Federal Reserve might cut interest rates next month.There was much to grimace about in the Bureau of Labor Statistics report card on the job market, including a jump in the unemployment rate to a post-pandemic high and the weakest pace of private-sector hiring in 16 months.That said, the report was not without its bright spots like a second straight month of hefty workforce growth and came with some fat caveats, including a big debate underway about the weather.Here are four reasons to take a breath and accept that the report may not signal the end is near.BIG BAD BERYLThe BLS added a big footnote to the first page of Friday’s release to say Hurricane Beryl – which slammed into Texas during the employment report survey week and left some 2.7 million homes and businesses in the Houston area without power for days – “had no discernible effect” on the month’s data.A number of economists said: “Whoa!”For one thing, they said, just look at the number of people who reported not being at work due to bad weather: 436,000 nonfarm workers and 461,000 with agriculture workers included.That is not just a record for the month of July, it was more than 10 times the July average dating back to 1976 when BLS started tracking the metric. And more than 1 million others could only work part time due to the weather, also a record for the month.”We are not sure that we absolve Beryl of any responsibility for the weakness in this data,” Jefferies U.S. economist Thomas Simons wrote.TEMPORARY LAYOFFSThe number of people who said their job loss was temporary was the highest in about three years last month and accounted for more than half of the overall increase in the number of unemployed of 352,000.If their temporary layoffs last only a few weeks or don’t become permanent, economists expect most of those people will report as employed in the report for August that will come out next month.Again, Beryl may be a culprit here.”We think some of those layoffs may have been related to Hurricane Beryl,” Oxford Economics Lead U.S. Economist Nancy Vanden Houten wrote.CONSTRUCTION JOBS STILL HUMMINGConstruction work, often a leading indicator of coming shifts in the economy, especially for sectors like home building, continued growing last month at roughly the pace of the last year. The 25,000 new jobs was also somewhat above the roughly 20,000 construction jobs added on average each month of the five years prior to the pandemic, a period Fed officials often reminisce about.That could augur for a recovery in housing starts, which have been sluggish for months.PRIME-AGED PRIME TIMEEconomists keep close track of so-called “prime-aged workers” – those between 25 and 54 years old – because they account for such a big chunk of the U.S. workforce.And those prime-agers are trundling back to the labor force in sizeable numbers.The prime-aged labor force participation rate rose in July to 84%, the highest since 2001.For prime-aged men, their rate ticked up to 90% – the first nine-handle since the 2007-2009 financial crisis.And for prime-aged women, it was back to record territory. At 78.1% last month, the rate matched a record high first set in May. More

BARCELONA (Reuters) – Grassroots members of Catalonia’s separatist ERC party supported on Friday a regional government deal with Spain’s ruling Socialists that could patch up Madrid’s uneasy relations with the region but also impact Spain’s entire fiscal system. A narrow majority of ERC members voted in favour of the agreement to name Socialist Salvador Illa as new head of the regional government, according to party sources.The northeastern region, one of Spain’s wealthiest, has been governed by separatists since 2010. The peak of the independence drive came in 2017, when the Catalan government called a referendum to secede from Spain, deemed illegal by courts and resulting in a short-lived declaration of independence.The nationalist movement’s influence has since ebbed, failing to garner sufficient backing to form a government in May’s regional election, won by the centre-left Socialists without a working majority. The only way to avoid a repeat election lay through an agreement between the winning party and the left-wing, separatist ERC, to support Illa.After the ERC’s members’ approval, an investiture vote could be held as soon as next week.Under a preliminary deal agreed on Monday, Catalonia would become autonomous in collecting and managing taxes that could clash with the Spain-wide fiscal systems where poorer regions receive a portion of the more affluent regions’ revenues and prompt other regions to demand similar privileges.Such a shift would still have to be approved by a highly- fragmented Spanish parliament. Much of the opposition and even some regional Socialist leaders have criticised the proposal that stipulates that Catalonia will continue to demonstrate “solidarity” with the rest of Spain, albeit without providing specific details. Juan Perez, a researcher at the IVIE economic think-tank, warned that this ambiguity threatens the national fiscal system’s fairness where “Madrid, Catalonia and the Balearic Islands have very wealthy taxpayers who aid other regions such as Extremadura and Castille-La Mancha”.Prime Minister Pedro Sanchez has called the deal “a step towards federalisation” and “good news” for Spain. Sanchez is no stranger to risky gambles involving Catalan separatists after granting an amnesty to their convicted leaders in exchange for crucial support of his latest term as premier last year. More