The Dow Jones Industrial Average topped 27,000 for the first time on Thursday as the top three equity benchmarks traded higher on Wall Street after Federal Reserve Chairman Jerome Powell signaled the central bank was still moving towards an interest rate cut due to trade uncertainties.
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Following several days of uneven trading activity over concerns that the Federal Reserve would withhold moving forward on the expected cuts, investors were optimistic after Powell’s remarks that the central bank’s outlook for the U.S. economy is weighed down by trade tensions.
Many Federal Open Markets Committee participants “saw that the case for a somewhat more accommodative monetary policy had strengthened," he said in prepared testimony for the House Financial Services Committee.
Powell is back on Capitol Hill for a second round of testimony, this time before the Senate.
Powell also said a strong June jobs report did not change the central bank's economic outlook or policy on interest rates. He is scheduled to testify in front of a Senate panel on Thursday.
In economic news, initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 209,000 for the week ended July 6, the lowest level since April, the Labor Department said.
Shares of technology companies will be active after the French government on Thursday approved a new tax on those firms amid a probe into the measure by the U.S. government. The 3 percent tax on companies with roughly $845 million in global revenue and $281 million in digital sales in France will take effect retroactively to the start of 2019.
Meanwhile, investors are eagerly awaiting a July 31 policy meeting to see if the Federal Reserve moves forward with the rate cuts.
In company earnings news, shares of Delta Air Lines surged on better-than-expected results for the second quarter. Profits at the Atlanta-based carrier rose 32 percent to $2.35 per share, as revenue grew to $12.5 billion.
Top White House officials had “constructive” talks with Chinese Vice Premier Liu He and Minister Zhong Shan earlier this week and a face-to-face meeting is possible.
The Dow Jones Industrial Average topped 27,000 for the first time on Thursday as the top three equity benchmarks traded higher on Wall Street after Federal Reserve Chairman Jerome Powell signaled the central bank was still moving towards an interest rate cut due to trade uncertainties.
Continue Reading Below
MORE FROM FOXBUSINESS.COM...
Following several days of uneven trading activity over concerns that the Federal Reserve would withhold moving forward on the expected cuts, investors were optimistic after Powell’s remarks that the central bank’s outlook for the U.S. economy is weighed down by trade tensions.
Many Federal Open Markets Committee participants “saw that the case for a somewhat more accommodative monetary policy had strengthened," he said in prepared testimony for the House Financial Services Committee.
Powell is back on Capitol Hill for a second round of testimony, this time before the Senate.
Powell also said a strong June jobs report did not change the central bank's economic outlook or policy on interest rates. He is scheduled to testify in front of a Senate panel on Thursday.
In economic news, initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 209,000 for the week ended July 6, the lowest level since April, the Labor Department said.
Shares of technology companies will be active after the French government on Thursday approved a new tax on those firms amid a probe into the measure by the U.S. government. The 3 percent tax on companies with roughly $845 million in global revenue and $281 million in digital sales in France will take effect retroactively to the start of 2019.
Meanwhile, investors are eagerly awaiting a July 31 policy meeting to see if the Federal Reserve moves forward with the rate cuts.
In company earnings news, shares of Delta Air Lines surged on better-than-expected results for the second quarter. Profits at the Atlanta-based carrier rose 32 percent to $2.35 per share, as revenue grew to $12.5 billion.
Top White House officials had “constructive” talks with Chinese Vice Premier Liu He and Minister Zhong Shan earlier this week and a face-to-face meeting is possible.
U.S. underlying consumer prices increased by the most in nearly 1-1/2 years in June amid solid gains in the costs of a range of goods and services, but will probably not change expectations the Federal Reserve will cut interest rates this month.
The Labor Department said on Thursday its consumer price index excluding the volatile food and energy components rose 0.3% last month. That as the largest increase since January 2018 and followed four straight monthly gains of 0.1%. The so-called core CPI was boosted by strong increases in the prices for apparel, used cars and trucks, as well as household furnishings.
There were also increases in the cost of healthcare and rents. In the 12 months through June, the core CPI climbed 2.1% after advancing 2.0% in May.
The overall CPI edged up 0.1% last month, held back by cheaper gasoline and food prices. The CPI rose 0.1% in May. It increased 1.6% year-on-year in June after rising 1.8% in May.
Economists polled by Reuters had forecast the CPI unchanged in June and rising 1.6% year-on-year.
The Fed, which has a 2% inflation target, tracks the core personal consumption expenditures (PCE) price index for monetary policy. The core PCE price index increased 1.5 percent year-on-year in May and has undershot its target this year.
Fed Chairman Jerome Powell on Wednesday told lawmakers the U.S. central bank would "act as appropriate" to protect the economy from rising risks such as trade tensions and slowing global growth. Powell also said "there is a risk that weak inflation will be even more persistent than we currently anticipate."
Policymakers from the U.S. central bank are scheduled to meet on July 30-31. The Fed last month downgraded its inflation projection for 2019 to 1.5% from the 1.8% projected in March.
In June, gasoline prices dropped 3.6% after falling 0.5% in May. Food prices were unchanged last month after rebounding 0.3% in May. Food consumed at home fell 0.2%.
Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3% in June, matching May's gain. Healthcare costs increased 0.3%, after a similar advance in May.
Apparel prices surged 1.1% after being unchanged in May. Prices for these goods tumbled in March and April after the government introduced a new method and data to calculate their cost. Used motor vehicles and trucks prices jumped 1.6% in June after declining for four straight months.
The price of household furnishings and operations rose 0.8%, the biggest gain since 1991, driven by rising costs for gardening and lawncare services.
The training, which will be voluntary, expands upon Amazon's existing programs and initiatives. The idea is to help Amazon(AMZN) employees progress into more advanced jobs or even new positions outside of the company. It will be available to 100,000 workers by 2025, according to the report.
Under the plan, workers could use the training to transfer between positions they might not have been qualified for. For example, warehouse workers in fulfillment centers could be trained for technical roles in IT and nontechnical workers could be retrained as software engineers.
"While many of our employees want to build their careers here, for others it might be a stepping stone to different aspirations," said Beth Galetti, Amazon's head of HR, in a prepared statement. "We think it's important to invest in our employees, and to help them gain new skills and create more professional options for themselves."
Amazon's initiative comes as robots and artificial intelligence are advancing and more capable of replacing human jobs.
Machines are expected to displace about 20 million manufacturing jobs across the world over the next decade, according to a recent report from Oxford Economics, a global forecasting and quantitative analysis firm. That amounts to 8.5% of the global manufacturing workforce being displaced by robots
The company is also dealing growing internal displeasure among from some fulfillment workers.
Recently, the company's plan to spend $800 million to speed up deliveries for Prime members sparked tension between the company and the leader of a major workers' union. They said the new shipping initiative could be dangers for workers and are struggling to keep up with demand.
Amazon was also criticized last April after it revealed the median pay for its global workforce, including part-timers, was $28,446 in 2017. The company said in October that it would raise its minimum wage to $15 per hour for US employees.
Stocks Climb on Rate-Cut Bets; Dollar Declines: Markets Wrap
(Bloomberg) -- U.S. equity futures climbed alongside stocks in Europe and Asia as investors cheered fresh signs from central bankers that rates are headed lower. Treasuries were steady, while the dollar declined.
Contracts on the main U.S. gauges gained a day after the S&P 500 briefly topped 3,000 for the first time on signals that Federal Reserve Chairman Jerome Powell is willing to lower rates, citing a slowing global economy and trade issues. The Stoxx Europe 600 Index headed for the first advance in five days, spurred by energy companies as crude rallied. Shares rose across most of Asia with the South Korean and Hong Kong markets outperforming and stocks in China edging higher.
Emerging-market stocks climbed along with currencies, while the pound continued its rebound from a two-year low. European government bonds were mixed.
This year’s rallies across stocks, bonds and credit got a fresh jolt on Wednesday thanks to comments from Fed Chairman Powell that persuaded investors rates are headed lower by at least a quarter-point in July. Minutes from the central bank’s last meeting further cemented expectations for a cut in borrowing costs. Traders will be eyeing ECB minutes and Powell’s testimony before the Senate Banking Committee on Thursday for further clues.
“There has been a total shift in monetary policy -- quantitative tightening is off the table and we’re back to some mild form of quantitative easing or stable central bank balance sheets,” said Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs. “That’s very supportive for equities.”
Elsewhere, oil extended gains on crude output cuts ahead of a potential hurricane in the Gulf of Mexico.
Here are some key events coming up:
Powell testifies to Senate Banking Committee on Thursday.ECB minutes are due on Thursday.A key measure of U.S. inflation -- the core consumer price index, due Thursday -- is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.U.S. producer prices are due on Friday.
Here are the main moves in markets:
Stocks
Futures on the S&P 500 Index gained 0.2% as of 7:24 a.m. New York time, the highest on record.The Stoxx Europe 600 Index rose 0.2%, the first advance in a week and the biggest advance in more than a week.The Shanghai Composite Index climbed 0.1%.The MSCI Emerging Market Index gained 0.7%, the biggest rise in more than a week.
Currencies
The Bloomberg Dollar Spot Index declined 0.2%, the lowest in a week.The euro increased 0.2% to $1.1269, the strongest in a week.The British pound increased 0.4% to $1.2558, the strongest in a week on the largest climb in three weeks.The onshore yuan climbed 0.1% to 6.865 per dollar, the strongest in more than a week.The Japanese yen rose 0.3% to 108.14 per dollar, the strongest in a week.
Bonds
The yield on 10-year Treasuries decreased less than one basis point to 2.06%.The yield on two-year Treasuries declined two basis points to 1.81%, the lowest in a week.
Commodities
West Texas Intermediate crude gained 0.3% to $60.60 a barrel, reaching the highest in seven weeks on its sixth straight advance.Iron ore fell 1.4% to $113.07 per metric ton.Gold decreased less than 0.05% to $1,418.91 an ounce.
--With assistance from Ruth Carson, Chester Yung, Cormac Mullen and Gregor Stuart Hunter.
To contact the reporter on this story: Laura Curtis in London at lcurtis7@bloomberg.net
To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Yakob Peterseil
For more articles like this, please visit us at bloomberg.com
CHICAGO/WASHINGTON (Reuters) - In the wake of the U.S. housing meltdown of the late 2000s, JPMorgan Chase & Co hunted for new ways to expand its loan business beyond the troubled mortgage sector.
A dairy cow is seen grazing at the family farm, God Green Acres in Mayville, Wisconsin, U.S., June 24, 2019. Picture taken June 24, 2019. REUTERS/Darren Hauck
The nation’s largest bank found enticing new opportunities in the rural Midwest - lending to U.S. farmers who had plenty of income and collateral as prices for grain and farmland surged.
JPMorgan grew its farm-loan portfolio by 76 percent, to $1.1 billion, between 2008 and 2015, according to year-end figures, as other Wall Street players piled into the sector. Total U.S. farm debt is on track to rise to $427 billion this year, up from an inflation-adjusted $317 billion a decade earlier and approaching levels seen in the 1980s farm crisis, according to the U.S. Department of Agriculture.
But now - after years of falling farm income and an intensifying U.S.-China trade war - JPMorgan and other Wall Street banks are heading for the exits, according to a Reuters analysis of the farm-loan holdings they reported to the Federal Deposit Insurance Corporation (FDIC).
The agricultural loan portfolios of the nation’s top 30 banks fell by $3.9 billion, to $18.3 billion, between their peak in December 2015 and March 2019, the analysis showed. That’s a 17.5% decline.
Reuters identified the largest banks by their quarterly filings of loan performance metrics with the FDIC and grouped together banks owned by the same holding company. The banks were ranked by total assets in the first quarter of this year.
The retreat from agricultural lending by the nation’s biggest banks, which has not been previously reported, comes as shrinking cash flow is pushing some farmers to retire early and others to declare bankruptcy, according to farm economists, legal experts, and a review of hundreds of lawsuits filed in federal and state courts.
Sales of many U.S. farm products - including soybeans, the nation’s most valuable agricultural export - have fallen sharply since China and Mexico last year imposed tariffs in retaliation for U.S. duties on their goods. The trade-war losses further strained an agricultural economy already reeling from years over global oversupply and low commodity prices.
Chapter 12 federal court filings, a type of bankruptcy protection largely for small farmers, increased from 361 filings in 2014 to 498 in 2018, according to federal court records.
“My phone is ringing constantly. It’s all farmers,” said Minneapolis-St. Paul area bankruptcy attorney Barbara May. “Their banks are calling in the loans and cutting them off.”
Surveys show demand for farm credit continues to grow, particularly among Midwest grain and soybean producers, said regulators at the Federal Reserve Banks of Chicago, St. Louis, Minneapolis and Kansas City. U.S. farmers rely on loans to buy or refinance land and to pay for operational expenses such as equipment, seeds and pesticides.
Fewer loan options can threaten a farm’s survival, particularly in an era when farm incomes have been cut nearly in half since 2013.
Gordon Giese, a 66-year-old dairy and corn farmer in Mayville, Wisconsin, last year was forced to sell most of his cows, his farmhouse and about one-third of his land to clear his farm’s debt. Now, his wife works 16-hour shifts at a local nursing home to help pay bills.
Giese and two of his sons tried and failed to get a line of credit for the farm.
“If you have any signs of trouble, the banks don’t want to work with you,” said Giese, whose experience echoes dozens of other farmers interviewed by Reuters. “I don’t want to get out of farming, but we might be forced to.”
Michelle Bowman, a governor at the U.S. Federal Reserve, told an agricultural banking conference in March that the sharp decline in farm incomes was a “troubling echo” of the 1980s farm crisis, when falling crop and land prices, amid rising debt, lead to mass loan defaults and foreclosures.
JPMorgan Chase’s FDIC-insured units pared $245 million, or 22%, of their farm-loan holdings between the end of 2015 and March 31 of this year.
JPMorgan Chase did not dispute Reuters’ findings but said it has not “strategically reduced” its exposure to the farm sector. The bank said in a statement that it has a broader definition of agricultural lending than the FDIC. In addition to farmers, the bank includes processors, food companies and other related business.
FEDERAL BACKING FOR SMALLER BANKS
The decline in farm lending by the big banks has come despite ongoing growth in the farm-loan portfolios of the wider banking industry and in the government-sponsored Farm Credit System. But overall growth has slowed considerably, which banking experts called a sign that all lenders are growing more cautious about the sector.
The four-quarter growth rate for farm loans at all FDIC-insured banks, which supply about half of all farm credit, slowed from 6.4% in December 2015 to 3.9% in March 2019. Growth in holdings of comparable farm loans in the Farm Credit System has also slowed.
Many smaller, rural banks are more dependent on their farm lending portfolios than the national banks because they have few other options for lending in their communities. As farming towns have seen populations shrink, so have the number of businesses, said Curt Everson, president of the South Dakota Bankers Association.
“All you have are farmers and companies that work with, sell to or buy from farmers,” Everson said.
As the perils have grown, some smaller banks have turned to the federal government for protection, tapping a U.S. Department of Agriculture program that guarantees up to 95% of a loan as a way to help rural and community banks lend to higher-risk farmers.
Big Wall Street banks have steadily trimmed their farm portfolios since 2015 after boosting their lending in the sector in the wake of the financial crisis.
Capital One Financial Corp’s (COF.N) farm-loan holdings at FDIC-insured units fell 33% between the end of 2015 and March 2019. U.S. Bancorp’s (USB.N) shrunk by 25%.
Capital One Financial Corp did not respond to requests for comment. U.S. Bancorp declined to comment.
The agricultural loan holdings at BB&T Corp (BBT.N) have fallen 29% since peaking in the summer of 2016 at $1.2 billion. PNC Financial Services Group Inc (PNC.N) - which ran full-page ads in farm trade magazines promoting “access to credit” during the run-up – has cut its farm loans by 12% since 2015.
BB&T said in a statement that the decline in its agricultural lending portfolio “is largely due to aggressive terms and pricing” offered by competitors and its “conservative and disciplined” approach to risk.
PNC said its farm-loan growth is being held back by customers who are wary of taking new debt, along with increased competition from the Farm Credit System.
LOAN DEMAND STILL RISING
Lenders are avoiding mounting risks in a category that is not core to their business, said Curt Hudnutt, head of rural banking for Rabobank North America, a major farm lender and subsidiary of Dutch financial giant Rabobank Group.
In March of this year, FDIC-insured banks reported that 1.53% of their farm loans were at least 90 days past due or had stopped accruing interest because the lender has doubts it will be repaid. This so-called noncurrent rate had doubled from 0.74% at the end of 2015.
The noncurrent rates were far higher on the farm loans of some big Wall Street banks. Bank of America Corp’s noncurrent rate for farm loans at its FDIC-insured units has surged to 4.1% from 0.6% at the end of 2015. Meanwhile, the bank has cut the value of its farm-loan portfolio by about a quarter over the same period, from $3.32 billion to $2.47 billion, according to the most recent FDIC data.
Bank of America (BAC.N) declined to comment on the data or its lending decisions.
Gordon A. Giese and his son Paul Giese get ready to fill a manure tank at the family farm, God Green Acres in Mayville, Wisconsin, U.S., June 24, 2019. Picture taken June 24, 2019. REUTERS/Darren Hauck
For PNC Financial Services, the noncurrent rate was nearly 6% as of the end of March. It cut its farm-loan portfolio to $278.4 million, down from $317.3 million at the end of 2015.
David Oppedahl, senior business economist for the Federal Reserve Bank of Chicago, said the banking community is increasingly aware of how many farmers are struggling.
“They don’t want to be the ones caught holding bad loans,” he said.
Reporting by P.J. Huffstutter in Chicago and Jason Lange in Washington; Additional reporting by Elizabeth Dilts and Ayenat Mersie in New York, and Pete Schroeder in Washington; Editing by Caroline Stauffer and Brian Thevenot
