Stocks and Bonds

More stories

  • 113 Shares129 Views

    in Economy

    S&P and Nasdaq Drop as Jobs Report Shakes Market

    by

    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

  • 125 Shares99 Views

    in Economy

    Small Banks Say Their Commercial Real Estate Loans Are Fine

    by

    Community banks are big commercial real-estate lenders. But they say their loans are to sturdy local businesses, not those facing vacant office space.Small banks are feeling misunderstood.They see themselves as integral to neighborhoods across the country: backers of local dry cleaners, dentists and sandwich shops. Investors worry that those banks could be a crisis waiting to happen.The pride and the anxiety both reflect the fact that community banks are big lenders in the commercial real-estate market, which has been rocked by falling property values as large office buildings sit empty.But executives at these firms — which number about 4,100 in total — say there is an important distinction, and some industry analysts concur. They caution that small banks are being lumped in with lenders to the owners of half-empty towers in Manhattan, San Francisco and Chicago, which are in the most trouble.Instead, a majority of commercial building loans by community banks are for smaller buildings — like those housing doctors and local businesses — that tend to be fully leased. And while there are concerns about financial pressure on apartment building landlords if interest rates remain high, missed payments on those types of mortgages have not risen substantially.“The focus has been on office as that is the weak category,” said John Buran, the chief executive officer of Flushing Financial, based in Uniondale, N.Y., which operates branches as Flushing Bank in Queens, Manhattan and Brooklyn and on Long Island. “Most community banks don’t have the type of exposure.”All of Flushing Financial’s loans are performing well, said John Buran, the firm’s chief executive.Graham Dickie/The New York TimesWe 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

  • 125 Shares99 Views

    in Economy

    Investors Bet on Rate Cuts as Recent Data Suggests Slowdown

    by

    Investors are poised for a report on Friday to show a slowdown in the pace of hiring in June, building on weak services and manufacturing data, and to firm up their expectations of interest rate cuts starting as soon as September.Signs of lower rates in the near future, which would make it cheaper for consumers and companies to borrow, have typically been accompanied by market rallies.Stock indexes tracking larger companies have been buoyed in recent weeks. The S&P 500 has repeatedly set fresh records and is up more than 16 percent this year. However, the Russell 2000 index, which tracks smaller companies that are more sensitive to the ebb and flow of the economy, has largely flatlined, with weaker economic data this week nudging the index 0.5 percent lower ahead of the Independence Day holiday.Economists are forecasting that the June jobs report will show a healthy labor market, albeit with fewer jobs added and an easing in wage growth. Earlier this week, widely watched surveys of manufacturing and services activity both came in lower than forecast.Coupled with signs of cooling inflation, a deceleration in economic growth would give the Federal Reserve a justification for cutting rates, which have been held at high levels for months.Jerome H. Powell, the Fed chair, said at a conference this week that if the economic data continued to come in as it has recently, the Fed could consider cutting interest rates.“We’ve made quite a bit of progress in bringing inflation back down to our target, while the labor market has remained strong and growth has continued,” Mr. Powell said. “We want that process to continue.”Mr. Powell didn’t specify when the Fed would start to cut rates but investors are forecasting that it will take action in September, with roughly two quarter-point cuts expected for the year. Those bets have increased from the start of the week, when a cut in September was seen as more of a 50/50 proposition.The data has come in “a bit weaker than expected,” noted analysts at Deutsche Bank, “and it all added to the theme that the economy was losing momentum as we arrive in the second half of the year.” More

  • 113 Shares99 Views

    in Economy

    Dilemma on Wall Street: Short-Term Gain or Climate Benefit?

    by

    A team of economists recently analyzed 20 years of peer-reviewed research on the social cost of carbon, an estimate of the damage from climate change. They concluded that the average cost, adjusted for improved methods, is substantially higher than even the U.S. government’s most up-to-date figure.That means greenhouse gas emissions, over time, will take a larger toll than regulators are accounting for. As tools for measuring the links between weather patterns and economic output evolve — and the interactions between weather and the economy magnify the costs in unpredictable ways — the damage estimates have only risen.It’s the kind of data that one might expect to set off alarm bells across the financial industry, which closely tracks economic developments that might affect portfolios of stocks and loans. But it was hard to detect even a ripple.In fact, the news from Wall Street lately has mostly been about retreat from climate goals, rather than recommitment. Banks and asset managers are withdrawing from international climate alliances and chafing at their rules. Regional banks are stepping up lending to fossil fuel producers. Sustainable investment funds have sustained crippling outflows, and many have collapsed.So what explains this apparent disconnect? In some cases, it’s a classic prisoner’s dilemma: If firms collectively shift to cleaner energy, a cooler climate benefits everyone more in the future. But in the short term, each firm has an individual incentive to cash in on fossil fuels, making the transition much harder to achieve.And when it comes to avoiding climate damage to their own operations, the financial industry is genuinely struggling to comprehend what a warming future will mean.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

  • 125 Shares109 Views

    in Economy

    New Questions on How a Key Agency Shared Inflation Data

    by

    A government economist had regular contact with “super users” in finance, records show, at a time when such information keenly interests investors.The Bureau of Labor Statistics shared more information about inflation with Wall Street “super users” than previously disclosed, emails from the agency show. The revelation is likely to prompt further scrutiny of the way the government shares economic data at a time when such information keenly interests investors.An economist at the agency set off a firestorm in February when he sent an email to a group of data users explaining how a methodological tweak could have contributed to an unexpected jump in housing costs in the Consumer Price Index the previous month. The email, addressed to “Super Users,” circulated rapidly around Wall Street, where every detail of inflation data can affect the bond market.At the time, the Bureau of Labor Statistics said the email had been an isolated “mistake” and denied that it maintained a list of users who received special access to information.But emails obtained through a Freedom of Information Act request show that the agency — or at least the economist who sent the original email, a longtime but relatively low-ranking employee — was in regular communication with data users in the finance industry, apparently including analysts at major hedge funds. And they suggest that there was a list of super users, contrary to the agency’s denials.“Would it be possible to be on the super user email list?” one user asked in mid-February.“Yes I can add you to the list,” the employee replied minutes later.A reporter’s efforts to reach the employee, whose identity the bureau confirmed, were unsuccessful.Emily Liddel, an associate commissioner at the Bureau of Labor Statistics, said that the agency did not maintain an official list of super users and that the employee appeared to have created the list on his own.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

  • 138 Shares129 Views

    in Economy

    Email ‘Mistake’ on Inflation Data Prompts Questions on What Is Shared

    by

    Traders are closely watching once-obscure economic data, prompting more scrutiny of how widely the government distributes the information.One afternoon in late February, an employee at the Bureau of Labor Statistics sent an email about an obscure detail in the way the government calculates inflation — and set off an unlikely firestorm.Economists on Wall Street had spent two weeks puzzling over an unexpected jump in housing costs in the Consumer Price Index. Several had contacted the Bureau of Labor Statistics, which produces the numbers, to inquire. Now, an economist inside the bureau thought he had solved the mystery.In an email addressed to “Super Users,” the economist explained a technical change in the calculation of the housing figures. Then, departing from the bureaucratic language typically used by statistical agencies, he added, “All of you searching for the source of the divergence have found it.”To the inflation obsessives who received the email — and other forecasters who quickly heard about it — the implication was clear: The pop in housing prices in January might have been not a fluke but rather a result of a shift in methodology that could keep inflation elevated longer than economists and Federal Reserve officials had expected. That could, in turn, make the Fed more cautious about cutting interest rates.“I nearly fell off my chair when I saw that,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, a forecasting firm.Huge swaths of Wall Street trade securities are tied to inflation or rates. But the universe of people receiving the email was tiny — about 50 people, the Bureau of Labor Statistics later said.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

  • 113 Shares129 Views

    in Economy

    Nature Has Value. Could We Literally Invest in It?

    by

    “Natural asset companies” would put a market price on improving ecosystems, rather than on destroying them.Picture this: You own a few hundred acres near a growing town that your family has been farming for generations. Turning a profit has gotten harder, and none of your children want to take it over. You don’t want to sell the land; you love the open space, the flora and fauna it hosts. But offers from developers who would turn it into subdivisions or strip malls seem increasingly tempting.One day, a land broker mentions an idea. How about granting a long-term lease to a company that values your property for the same reasons you do: long walks through tall grass, the calls of migrating birds, the way it keeps the air and water clean.It sounds like a scam. Or charity. In fact, it’s an approach backed by hardheaded investors who think nature has an intrinsic value that can provide them with a return down the road — and in the meantime, they would be happy to hold shares of the new company on their balance sheets.Such a company doesn’t yet exist. But the idea has gained traction among environmentalists, money managers and philanthropists who believe that nature won’t be adequately protected unless it is assigned a value in the market — whether or not that asset generates dividends through a monetizable use.The concept almost hit the big time when the Securities and Exchange Commission was considering a proposal from the New York Stock Exchange to list these “natural asset companies” for public trading. But after a wave of fierce opposition from right-wing groups and Republican politicians, and even conservationists wary of Wall Street, in mid-January the exchange pulled the plug.That doesn’t mean natural asset companies are going away; their proponents are working on prototypes in the private markets to build out the model. And even if this concept doesn’t take off, it’s part of a larger movement motivated by the belief that if natural riches are to be preserved, they must have a price.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

  • 113 Shares159 Views

    in Economy

    U.S. Economy Grew at 3.3% Rate in Latest Quarter

    by

    The increase in gross domestic product, while slower than in the previous period, showed the resilience of the recovery from the pandemic’s upheaval.The U.S. economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled and a widely predicted recession never materialized.Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said on Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval.The latest reading is preliminary and may be revised in the months ahead.Forecasters entered 2023 expecting the Federal Reserve’s aggressive campaign of interest-rate increases to push the economy into reverse. Instead, growth accelerated: For the full year, measured from the end of 2022 to the end of 2023, G.D.P. grew 3.1 percent, up from less than 1 percent the year before and faster than the average for the five years preceding the pandemic. (A different measure, based on average output over the full year, showed annual growth of 2.5 percent in 2023.)“Stunning and spectacular,” Diane Swonk, chief economist at KPMG, said of the latest data. “We’ll take the win.” More