Markets recoil as inflation report raises stakes for Fed
Stubbornly high inflation has loomed over the stock market for months, but some investors had started to think that the worst was over. They cited scattered signs of moderation in price increases and a belief that policymakers could rein them in without sinking the economy. A report Friday pierced that view, showing that inflation re-accelerated last month. The S&P 500 fell 2.9% after the Labor Department’s release, a drop that dragged the index to a weekly loss of just over 5%, its worst since January, and to its ninth weekly decline in the past 10 weeks.
Smithfield Foods to shutter California meat-packing plant
Meat-packing giant Smithfield Foods says it will close its only California plant next year, citing the escalating cost of doing business in the state. The Farmer John meat-packing plant in an industrial suburb south of Los Angeles is expected to shut in February. Its 1,800 workers will get severance pay, and some will have the option of relocating to other facilities owned by the Virginia-based Smithfield Foods Inc. A Smithfield executive says the costs of taxes, water and other utilities are much higher in California than elsewhere. Some operations will be moved to the Midwest.
Tesla proposes a 3-for-1 stock split; Ellison to leave Board
Tesla has proposed a three-for-one split of its stock. The split will make a single share of the electric car maker more accessible to investors but not affect the company’s overall market value. Tesla made the announcement Friday in its annual proxy statement, which also said Oracle co-founder Larry Ellison will not be standing for re-election to the company’s board. The company said in late March that was planning to split its stock for the second time in two years. At that time the stock was trading at over $1,000 a share. But Tesla shares are down about 39% since early April, shortly after its founder Elon Musk started raising the idea of buying Twitter.
US scrutinizes Swiss currency practices
The Treasury Department said Friday that it was concerned that some of America’s trading partners were taking actions to weaken their currencies and gain unfair trade advantages against the United States — but declined to label any country a currency manipulator. In its semiannual foreign exchange report, the department singled out Switzerland, which in 2020 was deemed a manipulator, as a worst offender and said it was closely watching the foreign exchange practices of Taiwan and Vietnam. Department officials have been involved in “enhanced bilateral engagement” with all three countries in recent months.
Yellen says US likely to avoid recession
Treasury Secretary Janet Yellen said Thursday that she expected the United States economy to slow as the Federal Reserve raised interest rates to tame inflation but that she did not anticipate a recession. Speaking The New York Times’ DealBook D.C. policy forum, Yellen said that the global economy faced an array of serious threats and that gas prices were unlikely to fall in the near term. However, she said that the U.S. economy remains strong despite rising prices and that a solid labor market and robust household finances should be able to continue to propel consumer spending.
Federal safety agency expands investigation of Tesla’s Autopilot system
The federal government’s top auto-safety agency is significantly expanding an investigation into Tesla and its Autopilot driver-assistance system to determine if the technology poses a safety risk. The agency, the National Highway Traffic Safety Administration, said Thursday that it was upgrading its preliminary evaluation of Autopilot to an engineering analysis, a more intensive level of scrutiny that is required before a recall can be ordered. The analysis will look at whether Autopilot fails to prevent drivers from diverting their attention from the road and engaging in other predictable and risky behavior while using the system.
Federal prosecutors open criminal inquiry of Wells Fargo’s hiring practices
Federal prosecutors in New York have opened a criminal investigation into whether Wells Fargo violated federal laws by conducting sham interviews of minority and female job candidates, according to two people with knowledge of the inquiry. The investigation was spurred by a May 19 report in The New York Times that centered on a whistleblower, Joe Bruno. Bruno, a former Wells Fargo employee, and others said bank managers were interviewing job applicants whom the bank deemed “diverse” — a catchall term for racial minorities, women and members of other disadvantaged groups — for roles that had already been promised to other people.
ECB will raise rates for first time in 11 years
The European Central Bank entered a new era Thursday, as policymakers clearly stated their plan to raise interest rates next month for the first time in 11 years to tackle inflation. The ECB confirmed that it would stop growing its bond-buying program this month. After eight years, the end of the bank’s negative interest rate policy and huge asset purchase program, which has scooped up trillions of euros of government debt, is in sight. The end of those programs, and the higher interest rates ahead, are a turnaround from years of policies that have tried to stoke lackluster inflation and economic growth.