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      Stocks Drop as Jobs Report Shakes Market

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      Stocks skidded on Friday, capping off a turbulent week for Wall Street, as investors were jolted by data showing that hiring slowed and unemployment rose in July.The spiking uncertainty about the economic outlook, and the question of whether the Federal Reserve has been too slow to raise interest rates, was evident across financial markets.The S&P 500 fell 2.4 percent within the hour after the jobs report was released, while the tech-heavy Nasdaq dropped 3 percent. Yields on government bonds, which are sensitive to expectations for the economy, dropped sharply, and oil prices were lower too.The U.S. economy added 114,000 jobs 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 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.Markets are now predicting a half a percent cut in interest rates at the Fed’s next meeting in September, up from the quarter-point cut investors had been anticipating as of Thursday, according to CME FedWatch. The two-year Treasury yield, which is also reflective of short-term interest rate expectations, fell 20 basis points, to 3.96 percent.This week had already been a rocky one for Wall Street. The Federal Reserve’s indication on Wednesday that it was moving closer to cutting interest rates in September prompted an accelerated market rally, and the S&P 500 rose 2 percent on comments by Jerome H. Powell, the Fed chair.But the market sold off on Thursday, with the S&P 500 falling 1.4 percent, led lower by a drop in chip stocks and economic data suggesting the economy is cooling. The 10-year U.S. Treasury yield — which underpins many other borrowing costs — also dropped below 4 percent on Thursday.All this comes as investors started reconsidering their appetite for big technology stocks last month and bought up shares of smaller companies, which are particularly sensitive to borrowing costs and stand to benefit from interest rate cuts. Also driving this shift is a rethink among investors about the potential for artificial intelligence to continue to drive gains at big companies like Microsoft, Nvidia and Alphabet, after shares of those businesses surged in the past year. More

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      Why You Should Be Taking a Hard Look at Your Investments Right Now

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      After big gains in stocks and mediocre returns for bonds, investors are taking on undue risk if they don’t rebalance their holdings, our columnist says.All eyes were on the Federal Reserve this past week, or so several market analysts solemnly said. This was true even though the Fed essentially did nothing in its latest meeting but hold interest rates high to fight inflation, just as it has done for many months.To be fair, there was a little news: The Fed did appear to affirm the likelihood of rate cuts starting in September, and that’s important. But so are the big performance shifts in the market, away from highflying tech stocks like Nvidia and toward a broad range of less-heralded, smaller-company stocks. In fact, there’s a great deal to think about once you start focusing on the behavior of the markets and the health of the economy in an election year.But what is perhaps the most important issue for investors rarely gets attention.In a word, it is rebalancing.I’m not talking about a yoga pose, but rather about another discipline entirely: the need to periodically tweak your portfolio to make sure you’re maintaining an appropriate mix of stocks and bonds, also known as asset allocation. If you haven’t considered this for a while — and if nobody has been doing it for you — it’s important to pay attention now because without rebalancing, there’s a good chance you are taking on risks that you may not want to bear.The rise in the stock market over the last couple of years, and the mediocre performance of bonds, has twisted many investment plans and left portfolios seriously out of whack. I found, for example, that if you had 60 percent of your investments in a diversified U.S. stock index fund and 40 percent in a broad investment-grade bond fund five years ago, almost 75 percent of your investments would now be in stock. That could make you more vulnerable than you realize the next time the stock market has a big fall.Asset AllocationThe Securities and Exchange Commission defines asset allocation as “dividing an investment portfolio among different asset categories, such as stocks, bonds and cash.” It’s an important subject, but it’s not as straightforward as that description seems.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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      Supreme Court Rejects Challenge to Consumer Watchdog’s Funding

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      A decision against the agency, the Consumer Financial Protection Bureau, could have cast doubt on all of its regulations and enforcement actions.The Supreme Court rejected a challenge on Thursday to the way the Consumer Financial Protection Bureau is funded, one that could have hobbled the bureau and advanced a central goal of the conservative legal movement: limiting the power of independent agencies.The vote was 7 to 2, with Justice Clarence Thomas writing the majority opinion.Had the bureau lost, the court’s ruling might have cast doubt on every regulation and enforcement action it had taken in its 13 years of existence, including ones concerning mortgages, credit cards, consumer loans and banking.The central question in the case was whether the way Congress chose to fund the bureau had violated the appropriations clause of the Constitution, which says that “no money shall be drawn from the Treasury, but in consequence of appropriations made by law.”Justice Thomas said the mechanism was constitutional.“Under the appropriations clause,” he wrote, “an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes. The statute that provides the bureau’s funding meets these requirements. We therefore conclude that the bureau’s funding mechanism does not violate the appropriations clause.”Justice Samuel A. Alito Jr., joined by Justice Neil M. Gorsuch, dissented.The bureau, created after the financial crisis as part of the 2010 Dodd-Frank Act, is funded by the Federal Reserve System, in an amount determined by the bureau so long as the sum does not exceed 12 percent of the system’s operating expenses. In the 2022 fiscal year, the agency requested and received $641.5 million of the $734 million available.A unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit, in New Orleans, ruled in 2022 that the bureau’s funding method ran afoul of the appropriations clause.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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      Trump Is Flirting With Quack Economics

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      More than 30 years ago, the economists Rudiger Dornbusch (one of my mentors) and Sebastian Edwards wrote a classic paper on what they called “macroeconomic populism.” Their motivating examples were inflationary outbreaks under left-wing regimes in Latin America, but it seemed clear that the key issue wasn’t left-wing governance per se; it was, instead, what happens when governments engage in magical thinking. Indeed, even at the time they could have included the experience of the military dictatorship that ruled Argentina from 1976 to 1983, which killed or “disappeared” thousands of leftists but also pursued irresponsible economic policies that led to a balance-of-payments crisis and soaring inflation.Modern examples of the syndrome include leftist governments like that of Venezuela, but also right-wing nationalist governments like that of Recep Tayyip Erdogan of Turkey, who insisted that he could fight inflation by cutting interest rates.Will the United States be next?I wish people would stop calling Donald Trump a populist. He has, after all, never demonstrated any inclination to help working Americans, and his economic policies really didn’t help — his 2017 tax cut, in particular, was a giveaway to the wealthy. But his behavior during the Covid-19 pandemic showed that he’s as addicted to magical thinking and denial of reality as any petty strongman or dictator, which makes it all too likely that he might preside over the type of problems that result when policies are based on quack economics.Now, destructive economic policy isn’t the thing that alarms me the most about Trump’s potential return to power. Prospects for retaliation against his political opponents, huge detention camps for undocumented immigrants and more loom much larger in my mind. Still, it does seem worth noting that even as Republicans denounce President Biden for the inflation that occurred on his watch, Trump’s advisers have been floating policy ideas that could be far more inflationary than anything that has happened so far.It’s true that inflation surged in 2021 and 2022 before subsiding, and there’s a vigorous debate about how much of a role Biden’s economic policies played. I’m skeptical, among other things because inflation in the United States since the beginning of the Covid pandemic has closely tracked with that of other advanced economies. What’s notable, however, is what the Biden administration didn’t do when the Federal Reserve began raising interest rates to fight inflation. There was a clear risk that rate hikes would cause a politically disastrous recession, although this hasn’t happened so far. But Biden and company didn’t pressure the Fed to hold off; they respected the Fed’s independence, letting it do what it thought was necessary to bring inflation under control.Does anyone imagine that Trump — who in 2019 insisted that the Fed should cut interest rates to zero or below — would have exercised comparable restraint?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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      March’s Hot Inflation Report is a Political Blow to Biden

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      The unexpected re-acceleration in price growth across the economy is at least a temporary setback for President Biden, who has been banking on cooling inflation to lift his re-election prospects.Mr. Biden and his aides have publicly cheered the retreat of annual inflation rates over the last year, after watching the fastest price growth in 40 years dent the president’s approval ratings earlier in his tenure.They have been anxious for inflation to fall even further, in order give relief to consumers and to potentially spur the Federal Reserve to cut interest rates — a move that would help to drive down borrowing costs for mortgages, car loans and other consumer credit. Mr. Biden has been particularly focused on home buyers, including young voters who are key to his electoral coalition, and who are struggling to afford high housing prices as mortgage rates remain around 7 percent.Wall Street analysts saw Wednesday’s surprise pickup in the inflation rate as a sign that the Fed could leave rates on hold for months longer than expected. That could mean no cuts before the November election, a campaign where Mr. Biden’s Republican opponent, former President Donald J. Trump, has slammed Mr. Biden for both rapid price increases and high borrowing costs.The news comes as polls have begun to show Americans’ views of the economy slowly improving over recent months. Democratic pollsters have also pointed to recent surveys as a road map for how Mr. Biden should talk about inflation in the months to come: They suggest American voters blame corporate greed, more than government spending, for price increases. Mr. Biden has leaned into that message, including calling out companies in his State of the Union address for keeping prices high.He struck a similar tone on Wednesday in a statement that emphasized consumer frustration with inflation.“Prices are still too high for housing and groceries, even as prices for key household items, like milk and eggs, are lower than a year ago,” Mr. Biden said. “I have a plan to lower costs for housing — by building and renovating more than two million homes — and I’m calling on corporations, including grocery retailers, to use record profits to reduce prices.” More

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      Assessing Donald Trump’s Claims That He Would Have Done Better

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      The war in Ukraine. Hamas’s attack on Israel. Inflation. The former president has insisted that none would have occurred if he had remained in office after 2020.Aside from falsely insisting that he did not lose the 2020 election, former President Donald J. Trump has peddled a related set of theories centered on one question: What would the world have looked like had he stayed in office?Mr. Trump, in rallies and interviews, has repeatedly asserted — more than a dozen times since December, by one rough count — that three distinct events, both in the United States and abroad, are a product of the 2020 election.“There wouldn’t have been an attack on Israel. There wouldn’t have been an attack on Ukraine. And we wouldn’t have had any inflation,” he declared during a rally in January in Las Vegas. The next month in South Carolina, he baselessly claimed that Democrats had admitted as much.Politicians routinely entertain what-ifs, which are impossible to prove or rebut with certainty. But Mr. Trump’s suppositions underscore the ways in which he often airs questionable claims without explanation and which might not be supported by the broader context.And unlike simply attacking an opponent’s record or making a campaign promise, such alternative realities enjoy the benefit of being untestable.“People already grapple with how to hold elected officials accountable,” said Tabitha Bonilla, an associate professor of political science at Northwestern University who has researched campaign promises and accountability. “And what is super interesting here is that there’s no way to hold someone accountable at all, because there’s no way to measure any of this.”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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      Fed Chair Powell Signals a Retreat on Banking Rules

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      The Fed chair said regulators could scale back or rework a sweeping capital-requirements proposal that Wall Street has been fighting for months.Jay Powell, the Fed chair, stunned Wall Street yesterday with an apparent U-turn in bank regulation.Kenny Holston/The New York TimesJay Powell’s surprise For months, Wall Street C.E.O.s have been complaining bitterly and lobbying against the prospect of higher capital requirements, which would require them to keep more money on hand and would lower their profits. It appears they have scored a big win.Jay Powell dropped the bombshell in his testimony before the House on Wednesday. Markets were still digesting the Fed chair’s go-slow comments on interest rate cuts when he signaled that proposed new rules to force lenders to beef up their books would be scaled back, or reworked.“I do expect that there will be broad and material changes to the proposal,” he said.The capital rules, known as the “Basel III Endgame,” would apply to the largest banks. They would have to set aside a bigger emergency cushion to soak up losses stemming from shocks like the bank run last year that led to the collapse of Silicon Valley Bank and prompted a wider crisis.But the proposals have come under fire from bank chiefs, industry lobbyists, Republican lawmakers and even some liberal members of Congress, who fear that a mandate to set aside billions to fight the next potential crisis could feed another one.Critics fear that Basel III would crimp lending just as banks grapple with upheaval in commercial real estate. Lenders face a looming “maturity wall” of as much as $1.5 trillion in commercial real estate loans set to come over the next two years.That risk came into blaring focus during Powell’s testimony. The stock price of New York Community Bank, a Long Island-based lender with a mountain of souring real estate loans, plummeted on news it was seeking emergency funding. (More on that below.)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