Finance

Democrats are aiming to reform the U.S. childcare system by raising pay for workers and offering subsidies to make care more affordable.
But some middle-class households wouldn’t be eligible for financial assistance as the program ramps up. They could be on the hook for higher costs, which some estimate to be thousands of dollars a year.
However, that’s not a foregone conclusion. Other aspects of the legislative package, like tax cuts, would likely defray any increase.

Photo by Mike Kline (notkalvin) | Moment | Getty Images

A package of social reforms Democrats are hashing out on Capitol Hill would pump federal money into the U.S. childcare system, with the aim of improving pay for workers and making care more accessible and affordable for all Americans.
While the program is poised to deliver free or low-cost care for poorer households with young kids, some fear its structure may inadvertently raise costs for many middle-class families, perhaps by thousands of dollars a year.

But that outcome isn’t guaranteed. Much depends on how lawmakers ultimately craft the legislation, which is still in flux, and other variables. Higher costs may also be defrayed by budget-saving aspects of Democrats’ plan — like a tax cut for families with childcare expenses and free universal preschool.

Why might there be higher costs?

The tension could arise from two policy levers: Higher wages for childcare workers, which providers may pass on to parents, and an inability of some families to get subsidies, which puts them on the hook for those higher costs.
The typical childcare worker made $12 an hour (about $25,000 a year) in 2020. Democrats would generally raise their wages to those of elementary school teachers (who made more than $60,000 a year on average in 2020, or nearly two-and-a-half times the salary of a childcare worker).
“People who care for children shouldn’t be living in poverty,” said Melissa Boteach, the vice president for childcare and early learning at the National Women’s Law Center.
This pay boost would also help increase the low supply of available childcare, proponents said.

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Meanwhile, the average family pays anywhere from roughly $11,000 to $16,000 a year on childcare, depending on a child’s age, according to the Center for American Progress, a left-leaning think tank. (That’s about 21% of median income, at the high end, for a family of three, the Center said.)
Democrats’ plan would offer subsidies and cap costs at up to 7% of a family’s income. As a result, working families may see costs fall between $5,000 and $6,500, according to Rasheed Malik, associate director of research for early childhood policy at the Center for American Progress.
But here’s where the tension arises: Subsidies would phase in over a three-year period, based on income.
Families ineligible for federal assistance during that period would be on the hook for cost increases. Matt Bruenig, the president of think tank the People’s Policy Project estimates their unsubsidized cost of quality infant care would rise about $13,000 a year, to almost $29,000. (That higher cost would be due to the wage increases for childcare workers.)

“I am open to the possibility that the number will be higher or lower than that,” Bruenig wrote of the analysis, signaling that many variables influence the figure. “But whatever the number, it’s clear that it’s higher than $0, and not by a little.”
Per the House bill, families would be ineligible for subsidies if they earn more than 100% of a state’s median income in 2022; more than 115% in 2023; and more than 130% in 2024. All families would be eligible in 2025. (For context, the median U.S. household income was $67,521 last year.)
“The costs have to be borne by someone, and that’s the parents,” Linda Smith, who directs the Bipartisan Policy Center’s early childhood initiative, said of expenses that aren’t paid by the federal government.
It may not just be in the early years, either. Senate Democrats may leave costs uncapped for households earning more than 150% or 200% of a state’s median income, depending on how negotiations shake out.
In most states, the 200% demarcation would equate to families making more than $180,000 a year, Malik said. And such a policy would still “guarantee free or affordable, quality childcare for more than 80% of young children,” he wrote.

Not a foregone conclusion

However, a dramatic price spike isn’t a likely or foregone conclusion, according to policy proponents.
For instance, required wage increases for childcare workers kick in after three years, meaning they may not rise dramatically in the short term. And that pay bump will likely vary significantly from state to state, and according to a worker’s credentials. Cost increases would also depend on how much the supply of childcare workers increases, too.
Malik called the notion of some households paying an extra $1,000 a month “completely outrageous.”
“I honestly don’t believe that will happen,” he said. “Providing care for [poorer households] and welcoming them into the system wouldn’t be a zero-sum loss for the middle class.”
Analyses showing dramatic cost jumps are “alarmist,” Boteach said.

Plus, childcare costs have been spiking for middle-class and other families despite Democrats’ proposed legislation, she said. Inflation-adjusted costs have risen more than 50% since 1993, according to Freddie Mac.
The Build Back Better legislation would also provide an enhanced child and dependent care tax credit to families. They would get a tax break on childcare costs of up to $4,000 for one kid and up to $8,000 for two or more. And, the enhanced credit would be fully refundable.
(The credit starts to fall in value for families who earn more than $125,000, and fully phases out beyond $500,000 of income.)
And, since the legislation is also poised to offer free, universal pre-K, families who pay for childcare for an infant would then would save money once the child enrolls in this program, Boteach said.

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Corporate charge card start-up Ramp is going after publicly-traded competitor Bill.com with a free invoice management and payment platform, CNBC has learned.
Ramp took a year to develop the feature, which involves using an artificial intelligence technique called optical character recognition to extract information from invoices and automatically fill out forms.
Ramp says that transaction volumes have jumped 50% in the two months since the company last raised funds at a $3.9 billion valuation.

Eric Glyman and Karim Atiyeh, cofounders of corporate card startup Ramp

Corporate charge card start-up Ramp is going after publicly-traded competitor Bill.com with a free invoice management and payments platform, CNBC has learned.
The start-up has grown rapidly this year by offering small and medium-sized businesses a cash back card paired with software that identifies ways clients can save money. Ramp says that transaction volumes have jumped 50% in the two months since the company last raised funds at a $3.9 billion valuation.

To keep that growth going, the New York-based start-up has set its sights on the clientele of Bill.com, a fintech company that automates the processing and payment of invoices, said Ramp CEO Eric Glyman. Paying invoices is a time consuming, hands-on and error-prone process for most businesses, he said.
“Our software takes what could be multiple minutes to enter and many more to actually make sure you’re doing the right things to a matter of seconds,” Glyman said. “Finance teams are tired of using three or four systems just to make payments and close their books.”

Arrows pointing outwards

Screenshot of corporate card startup Ramp’s new bill paying feature.
Source: Ramp

Ramp took a year to develop the feature, which involves using an artificial intelligence technique called optical character recognition to extract information from invoices and automatically fill out forms. Feedback from some of the hundreds of clients who have used bill pay in pilot has been positive, Glyman said.
While Glyman estimates that his competitor has a small fraction of the overall opportunity, Bill.com’s market capitalization has surged from less than $3 billion to about $30 billion in under two years. The company’s stock has climbed 120% this year amid investors’ enthusiasm for all things digital.
Ramp is giving away its software with the hope it will lead to new clients and deeper relationships with existing ones, Glyman said. About 20% of Ramp customers use Bill.com services, he said.
“The current plan is that at launch we want to make this fully free for anyone who signs up,” Glyman said. “I do think this is quite disruptive, but it’s great for customers.”

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Take a look at some of the biggest movers in the premarket:
Facebook (FB) – Facebook gained 1.9% in the premarket after reporting mixed results for the second quarter. Facebook beat estimates by 3 cents a share, with quarterly earnings of $3.22 per share. Revenue missed, however, as ad sales growth slowed in the face of Apple’s (AAPL) new privacy restrictions.

General Electric (GE) – GE beat estimates by 14 cents a share, with quarterly profit of 57 cents per share. Revenue came in below analysts’ forecasts, however. The company also reported better-than-expected free cash flow. Its shares rose 1.4% in premarket trading.
Tesla (TSLA) – Tesla remains on watch after the company passed the $1 trillion dollar mark in value during Monday’s trading. The stock has risen in 10 of 11 sessions, but Tesla shares fell 0.4% in premarket trading.
Polaris (PII) – The recreational vehicle maker’s stock tumbled 5.9% in premarket action after the company cut its full-year outlook, hurt by supply chain constraints. Polaris matched estimates with quarterly earnings of $1.98 per share. Revenue fell short of consensus.
United Parcel Service (UPS) – UPS rallied 5% in the premarket following better-than-expected results. UPS reported quarterly earnings of $2.71 per share, 16 cents a share above estimates. Revenue also topped forecasts on strong e-commerce demand.
Corning (GLW) – The glass and specialty materials maker fell 3.4% in the premarket after it reported that the automotive industry production slowdown impacted its quarterly results. Corning missed estimates by 2 cents a share, with quarterly earnings of 56 cents per share. Revenue also missed forecasts.

Eli Lilly (LLY) – The drugmaker’s shares gained 1% in premarket action despite a 4 cents a share quarterly earnings miss, with profit of $1.94 per share. Revenue beat forecasts, but Lilly spent more money during the quarter on research and development. The company also raised its full-year outlook.
3M (MMM) – 3M reported quarterly earnings of $2.45 per share, compared to a consensus estimate of $2.20 a share. Revenue exceeded Street forecasts. 3M saw increased demand during the quarter for both its consumer and industrial segments.
Hasbro (HAS) – Hasbro beat consensus forecasts by 27 cents a share, with quarterly earnings of $1.96 per share. The toy maker’s revenue matched analysts’ projections. Hasbro warned that supply chain bottlenecks would hit holiday sales.
The RealReal (REAL) – The online seller of secondhand luxury goods saw its stock jump 4.8% in the premarket after Raymond James upgraded the stock to “outperform” from “market perform.” Raymond James cites near-term revenue strength and the prospects for profitability growth.
Coinbase (COIN) – The cryptocurrency exchange operator gained 2% in premarket trading after Citi began coverage of the stock with a “buy/high-risk” rating. Citi said the risk stems from exposure to the volatile crypto market but said the company will benefit from increasing adoption.
CORRECTION: This article has been updated to correct the number of sessions Tesla’s stock rose.

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Stripe said it has agreed a strategic partnership with Klarna to offer the Swedish firm’s buy now, pay later payment method to its merchants.
The deal could be a way for Stripe to capitalize on the fast-growing BNPL trend as rivals like Square and PayPal make big moves in the space.
Stripe and Klarna are the world’s biggest private fintech companies, according to CB Insights data, worth $95 billion and $46 billion respectively.

The logo of Swedish payment provider Klarna.
Thomas Trutschel | Photothek | Getty Images

LONDON — Stripe and Klarna, two of the world’s biggest private fintech companies, are teaming up.
Stripe said Tuesday it has agreed a strategic partnership with Klarna to offer the Swedish firm’s buy now, pay later payment method to its merchants.

“Together with Stripe, we will be a true growth partner for our retailers of all sizes, allowing them to maximize their entrepreneurial success through our joint services,” said Koen Koppen, Klarna’s chief technology officer.
Stripe, which helps businesses accept payments online, said the tie-up would make it easier for retailers to add Klarna as a payment option on their website. Klarna typically partners with stores directly to embed its checkout button. The move could give Klarna a much wider reach of customers.
Founded in 2005, Klarna has become one of the biggest names in European tech recently thanks to the massive surge in demand for its buy now, pay later (BNPL) service, which lets users spread the cost of their purchases over a period of interest-free installments.
Klarna makes money from deals with retailers, which pay the company a small cut on each transaction processed through its platform. Stripe said early results showed merchants saw a 27% increase in sales on average after integrating with Klarna, while average order value climbed 41%.
Critics have accused BNPL companies of encouraging customers — particularly younger ones — to spend more than they can afford. In the U.K., the government has made proposals to regulate the nascent industry to protect consumers from potential harms.

Britain’s Treasury last week kicked off a consultation inviting views on the regulation.
Stripe’s deal with Klarna could be a way for the payments giant to capitalize on a fast-growing trend as rivals like Square and PayPal make big moves in the space. Square recently agreed to acquire Australia’s Afterpay for $29 billion, while PayPal has its own BNPL service and is buying Japanese rival Paidy for $2.7 billion.
As well as partnering globally, Stripe and Klarna said they were also strengthening their relationship in North America. Stripe is now used in about 90% of Klarna’s payment processing volume in the U.S. and Canada, the companies said.
Last valued at $95 billion, Stripe is the world’s largest privately-held fintech start-up, according to CB Insights data. Klarna is the second-biggest globally, with a market value of nearly $46 billion. Both companies are expected to go public in the near future.

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Economist David Rosenberg suggests hyperinflation warnings are irrational.
The longtime bear, known for his contrarian views, blames rising prices on Covid-19-induced supply side shocks. According to Rosenberg, it’s wrong to assume the impact will cripple the economy and feed into runaway inflation.

“I’m actually rolling my eyes over the suggestion,” the president of Rosenberg Research told CNBC’s “Trading Nation” on Monday. “It’s totally ridiculous.”
Twitter and Square CEO Jack Dorsey is one of the latest corporate executives to sound the alarm on runaway inflation. He pushed out the warning last Friday on Twitter.
“To say that they’re [inflation headwinds] not going to be resolved at some point, I think is actually absolving yourself of being respectful of what history tells you,” said Rosenberg, who served as Merrill Lynch’s chief North American economist from 2002 to 2009.
Rosenberg may be steering clear of the hyperinflation camp, but he’s still worried about the markets and economy. He just sees a different kind of problem facing the U.S. economy: deflation.
“What happens when monetary policy shifts and have the stock market and the housing market correcting at the same time? And, this is what’s going to be replacing the hyperinflation view in the next year,” he said. “People will be surprised as the Fed shifts course and liquidity conditions tighten up. … We’re going to end up having asset deflation, and that’s going to filter through into generalized deflation in the economy.”

He also warns stocks are too pricey right now based on valuations.
“The market has gone up way beyond what should be justified by even strong earnings, and that’s because of the Fed,” Rosenberg added. “Well, the Fed is about to shift course.”
On Monday, the Dow and S&P 500 closed at record highs. The Dow is up 96% since the pandemic low while the S&P 500 has surged 108%.
“As everybody chases the market, my advice is to start taking chips off the table at these levels,” Rosenberg said.
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Traders work on the floor of the New York Stock Exchange (NYSE), September 22, 2021.
Brendan McDermid | Reuters

U.S. stock futures were steady in overnight trading on Monday as investors await a slew of major technology earnings with the broader market at a record high.
Dow futures rose just 10 points. S&P 500 futures gained 0.1% and Nasdaq 100 futures rose 0.15%.

Shares of social media giant Facebook ticked 3% higher in after-hours trading on Monday after the company topped analysts’ earnings expectations. Facebook missed expectations for revenue and monthly active users.
The Dow Jones Industrial Average and S&P 500 closed at record highs on Monday. The Dow gained 64 points. The S&P 500 gained 0.5%, helped by a 12% rally in Tesla’s stock as the electric carmaker hit a $1 trillion market capitalization for the first time.
The Nasdaq Composite was the outperformer, rising 0.9%. The technology-focused average is about 1.1% from its record high.
Technology darlings Alphabet and Microsoft report earnings after the bell on Tuesday. Other key reports include 3M, Eli Lilly, General Electric, UPS and Visa. Microsoft bulls are expecting a strong quarter for Microsoft, bolstered by its key Azure business. Analysts are expecting Alphabet earnings to come in 43% higher year over year.
As of the close on Monday, 84% of the 117 companies in the S&P 500 that have reported earnings beat expectations, according to Refinitiv. S&P 500 companies are expected to grow profit by about 35% in the third quarter.

“Earnings season is off to another great start, but now the big test is will the big tech names step up? With stocks at all-time highs, the bar is indeed quite high and tech will need to impress to help justify stocks at current levels,” said Ryan Detrick, chief financial strategist at LPL Financial.
Twitter, Hasbro, JetBlue, Lockheed Martin, Novartis, PulteGroup, Advanced Micro Devices, Chubb and Robinhood also report quarterly earnings on Tuesday.
New home sales will be released at 10:00 a.m. ET on Tuesday. Economists polled by Dow Jones are expecting that home sales grew 760,000 in September, up from 740,000 in August.

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Pedestrians pass in front of Pinterest signage displayed outside of the New York Stock Exchange.
Michael Nagle | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
PayPal, Pinterest – Shares of PayPal climbed more than 3% as Pinterest shares tumbled more than 12% after PayPal addressed reports from last week that it’s in talks to purchase Pinterest, clarifying that it is not pursuing an acquisition of the social media giant “at this time.” Last week Pinterest shares surged on the reports, while PayPal shares dropped.

Tesla — Shares of the electric vehicle company jumped more than 9% to hit an all-time high following news that Hertz is ordering 100,000 vehicles to build out an EV rental fleet by the end of 2022. The deal, which will bring in a reported $4.2 billion for Tesla, is the largest ever purchase of electric vehicles. Morgan Stanley also raised its price target on the stock.
Kimberly-Clark — Shares of Kimberly-Clark dipped 3.2% after the consumer products company’s quarterly earnings came in at $1.62 per share, 3 cents lower than the Refinitiv consensus estimate. Kimberly-Clark said inflation and supply chain issues hurt earnings.
Restaurant Brands International — Shares of Restaurant Brands International fell 3.7% after the company reported quarterly earnings. The parent of Burger King and other chains topped earnings expectations by 2 cents per share while revenue came in slightly below expectations. The company said labor challenges impacted operations.
Exxon Mobil — Shares of energy stocks rose at oil prices climbed with U.S. benchmark WTI crude at its highest levels in seven years. Exxon gained 1.7%, ConocoPhillips added 1.4% and Chevron rose 1%.
Bakkt — Shares of Bakkt surged more than 75% after CNBC reported the newly public crypto firm would provide custodial services for Mastercard. Mastercard will soon allow banks and merchants to integrate crypto into their products, including bitcoin wallets, credit and debit cards that earn rewards in crypto and loyalty programs where points can be converted into bitcoin.

Carnival, Norwegian Cruise Line — Shares of Carnival retreated 1.8% after Citi downgraded the stock to neutral from buy. Meanwhile, Norwegian shares gained 0.9% after Citi initiated coverage of the stock with a buy rating. “Cruise lines are planning to have full fleets sailing by next summer and consumer interest, reflected in our web traffic data, is building, especially for high-end brands,” the Citi analysts said.
Otis Worldwide — The maker of elevators and escalators saw its shares dropping about 3% even after a better-than-expected quarterly report. Otis beat top and bottom lines for its third quarter earnings and revenue, according to FactSet. Shares have risen more than 23% this year.
Whirlpool — Shares of Whirlpool fell 1.3% after RBC downgraded the stock to underperform from sector perform. The firm said Whirlpool is losing market share and its margins look set to weaken.
Warby Parker – Shares of the eyewear brand jumped 4.7% after Goldman Sachs initiated the stock as a buy. In addition to the company’s brand strength, Goldman also cited its expanding brick and mortar footprint and market share capture.
— CNBC’s Yun Li and Tanaya Macheel contributed reporting

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Mastercard is preparing to announce that any of the thousands of banks and millions of merchants on its payments network can soon integrate crypto into their products, CNBC has learned.
That includes bitcoin wallets, credit and debit cards that earn rewards in crypto and enable digital assets to be spent, and loyalty programs where airline or hotel points can be converted into bitcoin.
To do so, the payments network is partnering with Bakkt, the crypto firm recently spun off by Intercontinental Exchange, which will be the behind-the-scenes provider of custodial services for those who sign up, executives at the two firms told CNBC.

Mastercard credit cards
Roberto Machado Noa/ LightRocket via Getty Images

The crypto economy is about to expand.
Mastercard is preparing to announce that any of the thousands of banks and millions of merchants on its payments network can soon integrate crypto into their products, CNBC has learned.

That includes bitcoin wallets, credit and debit cards that earn rewards in crypto and enable digital assets to be spent, and loyalty programs where airline or hotel points can be converted into bitcoin.
To do so, the payments network is partnering with Bakkt, the crypto firm recently spun off by Intercontinental Exchange, which will be the behind-the-scenes provider of custodial services for those who sign up, executives at the two firms told CNBC.
“We want to offer all of our partners the ability to more easily add crypto services to whatever it is they’re doing,” Sherri Haymond, Mastercard’s executive vice president of digital partnerships, said in an interview. “Our partners, be they banks, fintechs or merchants can offer their customers the ability to buy, sell and hold cryptocurrency through an integration with the Baktt platform.”
The announcement could lead to a significant expansion in the ways regular Americans earn and spend bitcoin and other cryptocurrencies. Mastercard runs one of the dominant global payments networks along with Visa and has relationships with more than 20,000 financial institutions around the world. There are 2.8 billion Mastercards in use, according to the company.

Gavin Michael, CEO of Bakkt rings a ceremonial bell on the floor of the New York Stock Exchange (NYSE) in New York City, October 18, 2021.
Brendan McDermid | Reuters

Interest in Bitcoin has remained high as the original cryptocurrency surged this year, hitting a record price above $60,000 this month. U.S. regulators have allowed the fund industry to offer bitcoin ETFs for the first time this month, while big institutional investors like bond giant Pimco have said they were considering trading crypto.

That interest has led Mastercard clients to ask the network for help in providing crypto services, according to Haymond. That way, banks can keep customers on their own platforms rather than seeing dollars migrate to crypto exchanges, she said.
Mastercard and Bakkt were set to announce their partnership later Monday at the annual Money20/20 conference in Las Vegas.
Besides providing crypto wallets and credit cards for banks, the partnership means that even merchants and restaurants can begin to offer rewards in bitcoin instead of traditional points, according to Bakkt CEO Gavin Michael. Existing points can be converted into crypto at rates set by the participating companies, giving customers the ability to earn a yield, he said.
“We’re lowering the barriers to entry, allowing people to take something like your rewards points and trade them into crypto,” Michael said in an interview. “It’s an easy way to get going because you’re not using cash, you’re putting something that’s an idle asset sitting on your balance sheet, and we’re allowing you to put in to work.”

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