If markets are right, tomorrow's Fed meeting policy statement will announce the next-to-last rate hike of the cycle, with a quarter-point move that's expected to be matched on March 22. However, Federal Reserve Chair Jerome Powell probably has other ideas. That's why the S&P 500 backed off from a six-week high on Monday, but markets firmed up Tuesday after the Employment Cost Index showed softer wage growth in Q4.
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Powell may make a case as to why interest rates may need to go a bit higher and stay there for longer than investors are betting. Even so, Wall Street doubled-down on its belief that rate hikes are about to end. In fact, odds for a quarter-point hike in March fell from 98% on Monday to 82.5% today, according to CME Group's FedWatch page.
While markets could turn out to be right, this week's Fed meting is all about the Fed keeping options open. Powell has zero interest in providing fodder for the S&P 500 to move higher and Treasury yields to move lower.
The big tell will be how Powell characterizes the balance of risks. If he says that they're now balanced between higher-than-expected inflation and lower inflation amid a weakening economy, the S&P 500 will shoot higher. But he's probably not willing to go there yet and will continue to say that inflation risks are to the upside.
An even-clearer S&P 500 rally signal would come if the Fed drops its language saying the policy committee anticipates "ongoing increases" in the Fed's key interest rate. Most expect the language will remain.
Fed Meeting Minutes Fire Warning Shot
Minutes from the Fed meeting in mid-December highlighted policymakers' concern about an "unwarranted easing in financial conditions." Rallying financial markets could "complicate the Committee's effort to restore price stability," the minutes said.
That concern may be top of mind for policymakers going into this week's Fed meeting. That's because the Chicago Fed's gauge of national financial conditions through Jan. 20 showed that they were easier than any time since rate hikes started last March.
Still, Powell's 2:30 p.m. news conference tomorrow after the Fed meeting wraps will hardly be the last word on the rate-hike outlook. Arguably, the raft of labor market data out this week will have more impact on markets than Powell.
Jobs, Wage Data Are Key
On Tuesday morning, the Labor Department's Employment Cost Index showed compensation costs rose 1% in Q4 vs. the 1.1% expected. However, compensation rose 5.1% from a year ago, a slight uptick from the 5% growth in Q3.
Economists pay close attention to wage growth for private-sector workers, excluding those in incentive-paid occupations, as a good indicator of underlying wage growth. In Q4, pay in this category rose 0.9%, or a 3.6% annualized pace. That measure excludes occupations in which pay is driven by commissions, which may be more influenced by cyclical highs and lows.
The ECI report has elevated importance with the Fed emphasizing the need for lower wage growth to return inflation to the 2% target. Powell has said that wage growth easing to 3.5% would be sufficient.
With consumer spending and manufacturing both showing signs of weakness, Friday's January jobs report will provide more evidence as to whether the economy's last major source of strength is giving way. Analysts expect a solid gain of 185,000 jobs, but average hourly wage growth is seen easing to 4.4% from 4.6% in December.
S&P 500 Set-Up
In Tuesday stock market action, the S&P 500 jumped 1.5% after ECI report. Through Monday's close, the S&P 500 had rallied 12.3% off its Oct. 12 bear-market closing low, but was still 16.2% below its all time high.
On Friday's the S&P 500 crested around 4094, making a third run at clearing 4100 since the start of December. That's the key level to watch for now.
Be sure to read IBD's The Big Picture every day to stay in sync with the market direction and what it means for your trading decisions.
After the ECI data, the 10-year Treasury yield slipped to 3.52% from 3.55% on Monday.
Elon Musk is looking at adding a payments system to Twitter, according to the Financial Times.
Dogecoin climbed as much as 10% on speculation the meme coin could be a part of Twitter's revenue stream.
Dogecoin has surged more than 30% so far in 2023 amid a broader crypto rally.
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Dogecoin soared Tuesday following a Financial Times report that Elon Musk is looking at adding a payments system to Twitter, fueling speculation the company could incorporate the altcoin into his social media site.
In its aim to create a new revenue stream for the platform, Twitter has started applying for regulatory licenses and designing the software needed to introduce payments on the system, the report said.
A team at Twitter is also creating a vault for safely storing user data that a payment system would collect, sources told the FT.
Allowing payments on Twitter is key for the company as its advertising business of $5 billion a year has been hit since Musk bought Twitter in October, with marketers citing concerns about management and content moderation.
Musk has been a high-profile buyer of dogecoin and previously has pushed for its as a payments vehicle. The prospect that it could be a payments option on Twitter sent the meme coin jumping much as 10% to an intraday high of $0.095655. The gain was later pared to 7%. It was outperforming the bulk of the 10 top most-traded coins during Tuesday's session.
Tuesday's gains for dogecoin extended the meme coin's price advance in January, heading toward a 35% surge in the first month of 2023.
The move comes amid a broader rally in crypto markets after a dismal 2022. Bitcoin is up almost 40% in January, and is set for the best month since October 2021.
The total value of the crypto market regained $1 trillion last week for the first time since FTX's collapse. Investors are warming to risk assets as cooling inflation fuels hopes for the Fed to pull back on rate hikes.
SEATTLE (AP) — Boeing bids farewell to an icon on Tuesday: It’s delivering its final 747 jumbo jet.
Since its first flight in 1969, the giant yet graceful 747 has served as a cargo plane, a commercial aircraft capable of carrying nearly 500 passengers, a transport for NASA’s space shuttles, and the Air Force One presidential aircraft. It revolutionized travel, connecting international cities that had never before had direct routes and helping democratize passenger flight.
But over about the past 15 years, Boeing and its European rival Airbus have introduced more profitable and fuel efficient wide-body planes, with only two engines to maintain instead of the 747′s four. The final plane is the 1,574th built by Boeing in the Puget Sound region of Washington state.
A big crowd of current and former Boeing workers is expected for the final send-off. The last one is being delivered to cargo carrier Atlas Air.
“If you love this business, you’ve been dreading this moment,” said longtime aviation analyst Richard Aboulafia. “Nobody wants a four-engine airliner anymore, but that doesn’t erase the tremendous contribution the aircraft made to the development of the industry or its remarkable legacy.”
Boeing set out to build the 747 after losing a contract for a huge military transport, the C-5A. The idea was to take advantage of the new engines developed for the transport — high-bypass turbofan engines, which burned less fuel by passing air around the engine core, enabling a farther flight range — and to use them for a newly imagined civilian aircraft.
It took more than 50,000 Boeing workers less than 16 months to churn out the first 747 — a Herculean effort that earned them the nickname “The Incredibles.” The jumbo jet’s production required the construction of a massive factory in Everett, north of Seattle — the world’s largest building by volume.
The plane’s fuselage was 225 feet (68.5 meters) long and the tail stood as tall as a six-story building. The plane’s design included a second deck extending from the cockpit back over the first third of the plane, giving it a distinctive hump and inspiring a nickname, the Whale. More romantically, the 747 became known as the Queen of the Skies.
Some airlines turned the second deck into a first-class cocktail lounge, while even the lower deck sometimes featured lounges or even a piano bar. One decommissioned 747, originally built for Singapore Airlines in 1976, has been converted into a 33-room hotel near the airport in Stockholm.
“It was the first big carrier, the first widebody, so it set a new standard for airlines to figure out what to do with it, and how to fill it,” said Guillaume de Syon, a history professor at Pennsylvania’s Albright College who specializes in aviation and mobility. “It became the essence of mass air travel: You couldn’t fill it with people paying full price, so you need to lower prices to get people onboard. It contributed to what happened in the late 1970s with the deregulation of air travel.”
The first 747 entered service in 1970 on Pan Am’s New York-London route, and its timing was terrible, Aboulafia said. It debuted shortly before the oil crisis of 1973, amid a recession that saw Boeing’s employment fall from 100,800 employees in 1967 to a low of 38,690 in April 1971. The “Boeing bust” was infamously marked by a billboard near the Seattle-Tacoma International Airport that read, “Will the last person leaving SEATTLE -- Turn out the lights.”
An updated model — the 747-400 series — arrived in the late 1980s and had much better timing, coinciding with the Asian economic boom of the early 1990s, Aboulafia said. He recalled taking a Cathay Pacific 747 from Los Angeles to Hong Kong as a twentysomething backpacker in 1991.
“Even people like me could go see Asia,” Aboulafia said. “Before, you had to stop for fuel in Alaska or Hawaii and it cost a lot more. This was a straight shot — and reasonably priced.”
Delta was the last U.S. airline to use the 747 for passenger flights, which ended in 2017, although some other international carriers continue to fly it, including the German airline Lufthansa.
Atlas Air ordered four 747-8 freighters early last year, with the final one leaving the factory Tuesday.
Boeing’s roots are in the Seattle area, and it has assembly plants in Washington state and South Carolina. The company announced in May that it would move its headquarters from Chicago to Arlington, Virginia, putting its executives closer to key federal government officials and the Federal Aviation Administration, which certifies Boeing passenger and cargo planes.
Boeing’s relationship with the FAA has been strained since deadly crashes of its best-selling plane, the 737 Max, in 2018 and 2019. The FAA took nearly two years — far longer than Boeing expected — to approve design changes and allow the plane back in the air.
America’s central bank is expected to raise rates by a quarter point on Wednesday. The question now is what comes next.
Federal Reserve officials are widely expected to raise interest rates by a quarter point at their meeting this week, further slowing what had been an aggressive pace of rate increases in 2022 as they wait to see how swiftly inflation will fade.
Moving gradually will give Fed officials more time to assess how high rates need to rise and how long they need to stay elevated to fully wrangle inflation, both of which are looming and crucial questions. The answers will help to determine how much damage the Fed inflicts on the labor market and broader economy in its quest to control price increases.
Central bankers raised interest rates from near zero to above 4.25 percent last year, and they are expected to lift rates to a range of 4.5 to 4.75 percent on Wednesday. Investors will be even more attuned to what may come next, and will parse the Fed’s 2 p.m. statement and the subsequent news conference by the Fed chair, Jerome H. Powell, for clues about the future.
Fed officials predicted in December that they would lift rates to just above 5 percent in 2023, then hold them at a high level throughout the year. But incoming data will drive how high the Fed raises rates and how long it keeps them at that level.
Since the Fed’s last decision, inflation has meaningfully slowed, and data on the economy show that consumers are becoming more cautious and beginning to spend less. Anecdotes suggest that shoppers may be more sensitive to prices, which would make it more difficult for companies to continue passing along big price increases. At the same time, the job market remains very strong, and economists and central bankers have warned that a re-acceleration in growth and inflation remains possible. That is likely to keep the Fed wary of prematurely declaring victory over inflation.
“They’re going to stay vigilant on inflation — I don’t think they’re going to break out the ‘mission accomplished’ banner just yet,” said Gennadiy Goldberg, a rates strategist at T.D. Securities. “If they don’t send the signal that they really want to get inflation under control, the market could over-interpret that as a signal that they’re done. That’s not the message they want to send.”
Wall Street will be focused on one word in particular in the Fed’s policy statement: “ongoing.” In recent months, central bankers have stated that “ongoing increases in the target range will be appropriate.”
The question is whether that term will remain relevant since policymakers could stop raising rates at some point in the coming months. But some economists think that officials on the policy-setting Federal Open Market Committee will retain it anyway, hoping to avoid giving Wall Street any hint that their efforts to control inflation are finished.
“Although the F.O.M.C. might be inclined to adjust this language as it approaches a pause, doing so at this meeting has little upside and risks widening the gap between the market and the Fed,” Matthew Luzzetti at Deutsche Bank and his colleagues wrote in a meeting preview.
The Fed has been somewhat at odds with financial markets in recent months. Central bankers have insisted that they have more work to do on the policy front to ensure that they bring inflation fully under control. Yet markets have begun to expect the Fed to cease rate increases soon — stopping once they get to a range of 4.75 to 5 percent, if not earlier — and then to begin cutting borrowing costs before the end of 2023.
When investors anticipate less aggressive Fed policy, it matters to the real economy. Those market expectations cause interest rates, like those on home loans, to drop lower. That, in turn, can help economic activity perk back up even as central bankers try to slow it down.
But there are signs that the economy is playing out roughly the way the Fed has been hoping, which is why many investors think that relatively little further policy adjustment will be needed. Inflation moderated to 5 percent in December from 5.5 percent in November, based on the latest reading of the Fed’s preferred price index.
That is more than double the 2 percent price increases the Fed aims for on average over time, but price increases have now been slowing for six months across a range of measures and the moderation shows signs of broadening. Plus, demand seems to be waning at last.
Many economists expect that deceleration in demand to persist. Higher interest rates mean that it’s expensive to borrow money to buy a house or expand a business, which should slow both big purchases and the labor market. A worsening hiring situation should cause wage growth to cool — early signs suggest that a slowdown is already underway, and the Fed will receive another key reading on worker pay on Tuesday. Weaker wage gains would further weigh on spending.
But other factors could shore up the economy’s resilience, even in the face of Fed rate moves. Consumers still have savings stockpiles left from the early days of the pandemic, albeit shrinking ones. The unemployment rate is 3.5 percent, its lowest level in half a century, and many workers are experiencing faster-than-typical wage gains.
That is why the Fed is taking a cautious stance and trying to avoid pulling back prematurely from its assault on inflation.
“We do not want to be head-faked,” Christopher Waller, a Fed governor, said in his most recent speech.
That will place particular focus on Mr. Powell’s postmeeting news conference. He could join some of his colleagues — including Lael Brainard, the vice chair — in emphasizing positive recent developments on inflation and reasons the economy might be headed for a soft landing, in which inflation cools without spurring an outright recession.
“It remains possible that a continued moderation in aggregate demand could facilitate continued easing in the labor market and reduction in inflation without a significant loss of employment,” Ms. Brainard said in a recent speech.
Or he could focus more on signs that the economy remains strong, cautioning that the Fed needs to be steadfast in its efforts to rein in consumer and business demand and underlining that services inflation, in particular, is likely to prove stubborn without a notable slowdown in the labor market. John C. Williams, the president of the Federal Reserve Bank of New York, has said things along those warier lines.
“It seems to me that demand is still very strong relative to available supply,” Mr. Williams told reporters at a recent event, and the “concern” is that this would continue to put pressure on inflation.
Many economists expect Mr. Powell to hew to a more inflation-focused line, in hopes of underscoring the central bank’s commitment to combating inflation. But investors will be watching for any hint at which narrative is becoming dominant — emphasis on progress toward lower inflation, or a focus on how much more work there is to do.
“We expect the division of opinion on the committee to become more pronounced as 2023 unfolds,” said Sonia Meskin, head of U.S. macro at BNY Mellon Investment Management.
Officials are also beginning to entertain the idea that the Fed could stop raising interest rates, then restart if the economy shows signs of re-accelerating — something Mr. Powell could face questions about. Lorie Logan, president of the Federal Reserve Bank of Dallas, suggested as much in recent remarks.
“I believe we shouldn’t lock in on a peak interest rate,” Ms. Logan said. “Even after we have enough evidence to pause rate increases, we’ll need to remain flexible and raise rates further if changes in the economic outlook or financial conditions call for it.”
Because this is the first meeting of 2023, the Fed will get new voting members: Four of the central bank’s 12 regional president rotate in and out of voting seats each year, while New York’s president and the Fed’s seven governors in Washington hold a constant say. This year, Ms. Logan from Dallas, Austan Goolsbee from Chicago, Neel Kashkari from Minneapolis and Patrick Harker from Philadelphia will vote.
America’s central bank is expected to raise rates by a quarter point on Wednesday. The question now is what comes next.
Federal Reserve officials are widely expected to raise interest rates by a quarter point at their meeting this week, further slowing what had been an aggressive pace of rate increases in 2022 as they wait to see how swiftly inflation will fade.
Moving gradually will give Fed officials more time to assess how high rates need to rise and how long they need to stay elevated to fully wrangle inflation, both of which are looming and crucial questions. The answers will help to determine how much damage the Fed inflicts on the labor market and broader economy in its quest to control price increases.
Central bankers raised interest rates from near zero to above 4.25 percent last year, and they are expected to lift rates to a range of 4.5 to 4.75 percent on Wednesday. Investors will be even more attuned to what may come next, and will parse the Fed’s 2 p.m. statement and the subsequent news conference by the Fed chair Jerome H. Powell for clues about the future.
Fed officials predicted in December that they would lift rates to just above 5 percent in 2023, then hold them at a high level throughout the year. But incoming data will drive how high the Fed raises rates and how long they keep them at that level.
Since the Fed’s last decision, inflation has meaningfully slowed, and data on the economy show that consumers are becoming more cautious and beginning to spend less. Anecdotes suggest that shoppers may be more sensitive to prices, which would make it more difficult for companies to continue passing along big price increases. At the same time, the job market remains very strong, and economists and central bankers have warned that a re-acceleration in growth and inflation remains possible. That is likely to keep the Fed wary of prematurely declaring victory over inflation.
“They’re going to stay vigilant on inflation — I don’t think they’re going to break out the ‘mission accomplished’ banner just yet,” said Gennadiy Goldberg, a rates strategist at T.D. Securities. “If they don’t send the signal that they really want to get inflation under control, the market could over-interpret that as a signal that they’re done. That’s not the message they want to send.”
Wall Street will be focused on one word in particular in the Fed’s policy statement: “ongoing.” In recent months, central bankers have stated that “ongoing increases in the target range will be appropriate.”
The question is whether that term will remain relevant since policymakers could stop raising rates at some point in the coming months. But some economists think that officials on the policy-setting Federal Open Market Committee will retain it anyway, hoping to avoid giving Wall Street any hint that their efforts to control inflation are finished.
“Although the F.O.M.C. might be inclined to adjust this language as it approaches a pause, doing so at this meeting has little upside and risks widening the gap between the market and the Fed,” Matthew Luzzetti at Deutsche Bank and his colleagues wrote in a meeting preview.
The Fed has been somewhat at odds with financial markets in recent months. Central bankers have insisted that they have more work to do on the policy front to ensure that they bring inflation fully under control. Yet markets have begun to expect the Fed to cease rate increases soon — stopping once they get to a 4.75 to 5 percent range, if not earlier — and then to begin cutting borrowing costs before the end of 2023.
When investors anticipate less aggressive Fed policy, it matters to the real economy. Those market expectations cause interest rates, like those on home loans, to drop lower. That, in turn, can help economic activity perk back up even as central bankers try to slow it down.
But there are signs that the economy is playing out roughly the way the Fed has been hoping, which is why many investors think that relatively little further policy adjustment will be needed. Inflation moderated to 5 percent in December from 5.5 percent in November, based on the latest reading of the Fed’s preferred price index.
That is more than double the 2 percent price increases the Fed aims for on average over time, but price increases have now been slowing for six months across a range of measures and the moderation shows signs of broadening. Plus, demand seems to be waning at last.
Many economists expect that deceleration in demand to persist. Higher interest rates mean that it’s expensive to borrow money to buy a house or expand a business, which should slow both big purchases and the labor market. A worsening hiring situation should cause wage growth to cool — early signs suggest that a slowdown is already underway, and the Fed will receive another key reading on worker pay on Tuesday. Weaker wage gains would further weigh on spending.
But other factors could shore up the economy’s resilience, even in the face of Fed rate moves. Consumers still have savings stockpiles left from the early days of the pandemic, albeit shrinking ones. The unemployment rate is at 3.5 percent, its lowest level in half a century, and many workers are experiencing faster-than-typical wage gains.
That is why the Fed is taking a cautious stance and trying to avoid pulling back prematurely from its assault on inflation.
“We do not want to be head-faked,” Christopher Waller, a Fed governor, said in his most recent speech.
That will place particular focus on Mr. Powell’s post-meeting news conference this week. Mr. Powell could join some of his colleagues — including Lael Brainard, the vice chair — in emphasizing positive recent developments on inflation and reasons the economy might be headed for a soft landing, in which inflation cools without spurring an outright recession.
“It remains possible that a continued moderation in aggregate demand could facilitate continued easing in the labor market and reduction in inflation without a significant loss of employment,” Ms. Brainard said in a recent speech.
Or he could focus more on signs that the economy remains strong, cautioning that the Fed needs to remain steadfast in its efforts to rein in consumer and business demand and underlining that services inflation, in particular, is likely to prove stubborn without a notable slowdown in the labor market. John C. Williams, the president of the Federal Reserve Bank of New York, has said things along those warier lines.
“It seems to me that demand is still very strong relative to available supply,” Mr. Williams told reporters at a recent event, and the “concern” is that this would continue to put pressure on inflation.
Many economists expect Mr. Powell to hew to a more inflation-focused line, in hopes of underscoring the central bank’s commitment to combating inflation. But investors will be watching for any hint at which narrative is becoming dominant — emphasis on progress toward lower inflation, or a focus on how much more work there is to do.
“We expect the division of opinion on the committee to become more pronounced as 2023 unfolds,” said Sonia Meskin, head of U.S. macro at BNY Mellon Investment Management.
Officials are also beginning to entertain the idea that the Fed could stop raising interest rates, then restart if the economy shows signs of re-accelerating — something Mr. Powell could face questions about. Lorie Logan, president of the Federal Reserve Bank of Dallas, suggested as much in recent remarks.
“I believe we shouldn’t lock in on a peak interest rate,” Ms. Logan said. “Even after we have enough evidence to pause rate increases, we’ll need to remain flexible and raise rates further if changes in the economic outlook or financial conditions call for it.”
Because this is the first meeting of 2023, the Fed will get new voting members: Four of the central bank’s 12 regional president rotate in and out of voting seats each year, while New York’s president and the Fed’s seven governors in Washington hold a constant say. This year, Ms. Logan from Dallas, Austan Goolsbee from Chicago, Neel Kashkari from Minneapolis and Patrick Harker from Philadelphia will vote.
The trial, centered on a pair of tweets announcing Musk had obtained the money to take Tesla private in 2018, reeled the 51-year-old billionaire into a federal courtroom in San Francisco for three days of testimony that opened a peephole into his often inscrutable mind.
Musk, who now owns the Twitter service that he deploys as his megaphone, was often a study in contrasts during his roughly eight hours on the stand. The CEO of the electric carmaker is facing a class-action lawsuit filed on behalf of Tesla shareholders after Musk tweeted about a company buyout that didn’t happen.
Through both his testimony and the evidence submitted around it, Musk came across as impetuous, brash, combative and contemptuous of anyone who questioned his motives as a game-changing entrepreneur who has inspired comparisons to Apple's late co-founder, Steve Jobs.
At other times, Musk sounded like the savvy visionary that his supporters hail him to be — an intrepid rebel who by his own estimates has raised more than $100 billion from investors. They have been richly rewarded from his leadership of pioneering companies that include PayPal in digital payments, Tesla in electric vehicles and SpaceX in rocket ships.
“It is relatively easy for me to get investment support because my track record is extremely good,” Musk wryly observed.
But his confidence in his ability to get the money he wants to pursue his plans is one reason he found himself in court. The three-week trial is set to resume Tuesday and head for jury deliberations by Friday.
Here's what to know so far:
PLANTING THE SEEDS
Evidence and testimony have shown Musk had started to mull taking Tesla private in 2017 so he wouldn't have to hassle with the headaches and distractions that accompany running a publicly traded company.
After a July 31, 2018, meeting with a top representative from Saudi Arabia's sovereign wealth fund, Musk sent a letter to Tesla's board outlining why he wanted to take the automaker private at a price of $420 per share — about 20% above its stock price at the time.
Musk was serious enough that he had already discussed the pros and cons with Michael Dell, who had gone through the public-to-private transition in 2013 when he led a $25 billion buyout of the personal computer company bearing his name, according to trial evidence.
THE TROUBLESOME TWEETS
The crux of the case hinges on an Aug. 7, 2018, tweet in which Musk declared “funding secured" to take Tesla private. Musk abruptly posted the tweet minutes before boarding his private jet after being alerted that the Financial Times was about to publish a story that Saudi Arabia's Public Investment Fund had spent about $2 billion buying a 5% stake in Tesla to diversify its interests beyond oil, according to his testimony.
Amid widespread confusion about whether Musk's Twitter account had been hacked or he was joking, Musk followed up a few hours later with another tweet suggesting a deal was imminent.
Musk defended the initial tweet as a well-intentioned move to ensure all Tesla investors knew the automaker might be on its way to ending its then-eight-year run as a publicly held company.
“I had no ill motive,” Musk testified. “My intent was to do the right thing for all shareholders.”
Guhan Subramanian, a Harvard University business and law professor hired as an expert for shareholder lawyers, derided Musk's method for announcing a potential buyout as an “extreme outlier" fraught with potential conflicts.
“The risk is that Mr. Musk timed his announcement of his (management buyout) proposal to serve his own interests rather then the interests of the company," Subramanian testified.
WHERE'S THE MONEY?
There's another issue threatening to undermine Musk's defense. He hadn't locked up the financing for his proposed deal or even pinned down down how much would be needed to pull it off, based on testimony from Musk, other witnesses and other evidence.
That is one reason U.S. District Judge Edward Chen had decided last year that Musk's 2018 tweets were false and has instructed the jury to view them that way.
It also prompted regulators to allege Musk misled investors with the tweets, resulting in a $40 million settlement with the U.S. Securities and Exchange Commission that also required Musk to step down as Tesla's chairman.
Chen ruled that the 2018 settlement, in which Musk didn't acknowledge wrongdoing and has since lamented making, can't be mentioned to the jury.
Musk testified that he believed he had secured an oral commitment to provide wherever money was needed for a Tesla buyout during a July 31, 2018, face-to-face meeting with Yasir al-Rumayyan, governor of Saudi Arabia's wealth fund.
That was reinforced in testimony from Tesla's former chief financial officer, Deepak Ahuja, who was at the discussions and took al-Rumayyan on a half-hour tour of a Tesla factory.
But a text message al-Rumayyan sent to Musk after the “funding secured" tweets made it appear that the discussions about the Saudi fund financing a private buyout were preliminary.
“I would like to listen to your plan Elon and what are the financial calculations to take it," al-Rumayyan wrote to Musk, according to a copy submitted as evidence in the trial.
Musk framed al-Rumayyan's text as an attempt to backpedal from his previous commitment. He also insisted the Saudi fund had given an “unequivocal commitment" to financing the buyout.
MONEY MANEUVERING
After his 2018 tweets, Musk tried to get the money needed for the Tesla buyout with the help of Egon Durban, co-CEO of the private equity firm Silver Lake, which helped finance the Dell buyout in 2013. Musk also enlisted Dan Dees, a top executive with Goldman Sachs, an investment banking firm that had worked closely with Tesla.
In testimony, both Durban and Dees discussed efforts to raise money for a Tesla buyout for a wide range of potential investors that included two Chinese companies, Alibaba and Tencent, as well as Google in documents initially code-named “Project Turbo," then “Project Titanium."
The buyout would have required anywhere from $20 billion to $70 billion, according to the documents — funding that never came close to getting raised, Durban and Dees both testified, largely because Musk scrapped the proposal to take Tesla private on Aug. 24, 2018, after consulting with shareholders.
Tesla's shares are now worth eight times what they were then, after adjusting for two stock splits.
Musk still contends he could have gotten the money had he wanted and, even if there was a shortfall, he could have covered any gap by selling some of his stock in privately held SpaceX. That is a strategy Musk used in his $44 billion purchase of Twitter, except he sold about $23 billion of his stock in Tesla.
Durban and Dees both testified that they had no doubt the money for a buyout could have been raised — echoed by former Tesla director Antonio Gracias.
“He is the Michael Jordan of fundraising," Gracias testified.
Sundar Pichai, CEO of Google parent Alphabet, announced on January 20 that around 12,000 staff would be laid off.Justin Sullivan/Getty Images
A laid-off Googler said colleagues should 'find perspective' about the recent layoffs.
In a LinkedIn post, Mallika Iyer said of the cuts: "No one died. Seriously."
Iyer said there was "always a silver lining," adding: "Now let's quit whining and get to work."
A Google employee of more than five years who succumbed to the recent layoffs has said colleagues should "find perspective" about the cuts.
"I see a lot of 'deeply saddened' and all that stuff," Mallika Iyer, who worked as head of product for translation of artificial intelligence at Google, wrote in a LinkedIn post, adding: "No one died. Seriously."
Iyer said "perspective is if something happened to my dogs or kid I'd be a blubbering mess. I felt physically ill when my shepherd almost died of bloat 2 years ago. This is not that."
Iyer said there was "always a silver lining" and "if there isn't one, you can damn well draw it," adding: "Now let's quit whining and get to work."
Sundar Pichai, CEO of Google parent Alphabet, emailed staff on January 20 to say the company was cutting about 12,000 jobs and that he took "full responsibility for the decisions that led us here."
Iyer said in the LinkedIn post, published on January 20, that it was a "privilege" to work at Google, adding: "Google rocks, it always will, it's one of my happy places and has the best co-workers."
Google didn't immediately respond to a request for comment by Insider, made outside normal working hours.
SAN FRANCISCO (Reuters) - The board chair of Tesla Inc defended CEO Elon Musk in a securities fraud trial on Friday, telling jurors that she would have quit as a director if she had thought Musk lied by tweeting in 2018 that he had "funding secured" to take Tesla private. Tesla board Chair Robyn Denholm is a defendant in the lawsuit alongside Musk, Tesla and other directors. Investors allege they lost billions of dollars because of Musk's Aug. 7, 2018, tweets that he had "funding secured" and "investor support confirmed" to take Tesla private at $420 per share, which was a premium of about 23% to the prior day's close.
Tesla's stock initially surged and then fell as it became clear that the buyout would not happen.
At the time of the tweets, Denholm led Tesla's audit committee, which oversees company controls meant to ensure compliance with securities law.
She took the stand for around 30 minutes on Friday, saying that she would have quit if she had thought the tweets contained false information.
"If I believed that Elon was trying to mislead the public I would have stood down from the board," she said.
Denholm took over as board chair after Musk agreed to relinquish the role in 2018 as part of a settlement with the U.S. Securities and Exchange Commission, which alleged the tweets were fraudulent.
He and Tesla also paid $40 million in penalties to settle the allegations. They did not admit wrongdoing.
Denholm said that as the potential buyer, Musk was free to tweet about the deal.
"Because he was tweeting on behalf of himself, the policy doesn't apply," Denholm said, referring to a Tesla policy requiring disclosures by insiders to be vetted by the company ahead of time. Musk told the jury earlier this week he could have financed the potential deal from existing Tesla investors as well as a Saudi wealth fund. "Funding was absolutely not an issue," Musk told the jury. "It was quite the opposite." Musk, however, acknowledged he did not have binding agreements with investors for specified amounts, leaving it to the jury to decide if he misled shareholders. Egon Durban, the co-chief executive officer of private equity firm Silver Lake, testified earlier on Friday that he had advised Musk on the going-private proposal, but that there were uncertainties as to whether the transaction could proceed. There was no written commitment by investors despite their interest, he said.
Dan Dees, a banker at Goldman Sachs, also testified on Friday. The "funding secured" tweet came as a surprise to him, as Goldman, which had long worked with Tesla, was not involved in the deal. A jury of nine will decide whether Musk artificially inflated the company's share price by touting the buyout's prospects, and if so, by how much. The buyout deal never came together because investors, particularly retail shareholders, expressed their interest in keeping the company public, according to testimony by Musk.
The trial is scheduled to resume on Tuesday.
(Reporting by Hyunjoo Jin in San Francisco and Jody Godoy in California; writing by Tom Hals in Wilmington, Delaware; editing by Peter Henderson, Noeleen Walder and Leslie Adler)
Enlarge/ Dr. Peter Marks, director of the Center for Biologics Evaluation and Research within the Food and Drug Administration, testifies during a Senate Health, Education, Labor, and Pensions Committee hearing on the federal coronavirus response on Capitol Hill in March 2021, in Washington, DC.
The US Food and Drug Administration's committee of independent vaccine experts gathered Thursday to discuss the future of COVID-19 shots. The meeting seemed primed for explosive debate. Earlier in the week, the FDA released documents that made clear the agency is holding steadfast to its idea that COVID vaccines will fit the mold of annual flu shots—with reformulations decided in the first half of each year, followed by fall rollouts in anticipation of winter waves.
But outside experts, including some on the FDA's advisory committee, have questioned almost every aspect of that plan—from the uncertain seasonality of COVID-19 so far, to the futility of chasing fast-moving variants (or subvariants, as the case may be). Some have even questioned whether there's a need to boost the young and healthy so frequently when current vaccines offer protection against severe disease, but only short-lived protection against infection.
One particularly outspoken member of FDA's committee, Paul Offit, a pediatrician and infectious disease expert at Children’s Hospital of Philadelphia, has publicly assailed the bivalent booster, writing a commentary piece in the New England Journal of Medicine earlier this month titled: Bivalent Covid-19 Vaccines — A Cautionary Tale. (The FDA's advisory committee voted 19-2 in support of the bivalent boosters last year, with Offit being one of the two votes against.)
Yet, despite the charged background of yesterday's meeting, the sparks of disagreement fizzled over a calm discussion. The nine-hour meeting culminated with a unanimous vote by the committee in favor of "harmonizing" future formulations of COVID-19 vaccines so that primary series and boosters are matched formulations. For example, the primary series vaccines would match the updated bivalent boosters, which currently target both the original strain of SARS-CoV-2 that came out of Wuhan, China, as well as omicron subvariants BA.4/5.
Streamlining
The FDA seemed to soften the ground with questions and discussion topics focused on "harmonizing" and simplifying COVID vaccines. After the single vote, the agency directed the committee to discuss "simplifying the immunization schedule," before getting to the more perilous, but still gentle discussion topic of considering "periodic updates to COVID-19 vaccine composition."
Overall, the committee members favored streamlining vaccines where possible—making primary series shots match booster doses, and potentially whittling down regimens to one dose for adults and two for children and high-risk adults.
"There's so much confusion about these different formulations that I think anything we can do to ease up on that confusion and simplify things, it's going to be a good thing," said Archana Chatterjee, Dean of Chicago Medical School and a voting committee member, said at the end of yesterday's meeting. "I concur with my other colleagues that there definitely remains a need for these vaccines and for us to do our best to get them into arms. Having vaccines is not sufficient, we need to have them be used. ... This is a step in the right direction in getting us there."
But, the bigger steps for future vaccines—deciding what formulation should be used next, who should get them, and when—remained elephant-sized questions in the meeting room. And even among the relatively placid comments, it was clear that large disputes were bubbling under the surface.
Before the committee's vote and discussion, the advisors listened to a series of presentations from vaccine makers, the FDA, and the Centers for Disease Control and Prevention, which all provided updates on the state of COVID-19 and the performance of the vaccines so far.
Data dive
Although Offit and others have criticized the bivalent boosters for not being better than the previous boosters, the data presented in the meeting argued otherwise. Real-world observational data shows an advantage for people boosted with the bivalent booster compared with the original (monovalent) vaccine—even against the more recent subvariants. Data presented during the meeting shows it has outcompeted the original vaccine in terms of protection against symptomatic infection, visits to the emergency department or urgent care visits, and hospitalization.
In a CDC study published Wednesday, for instance, researchers found that the bivalent booster's relative vaccine effectiveness against symptomatic infection with a BA.5-related omicron sublineage (which includes BQ.1 and BQ.1.1) was 52 percent among people from 18 to 49 years old. In other words, people in this age group had 52 percent more protection against infection with BA.5-related strains than people who received the original booster. For ages 50 to 64, the relative effectiveness against BA.5-related infection was 43 percent, and it was 37 percent among those 65 years and older.
Against the more recent XBB/XBB.1.5-related omicron subvariants, relative effectiveness against infection was 49 percent among people 18 to 49, 40 percent among people 50 to 64 years, and 43 percent among those 65 years and older.
There's also been a slew of serology studies looking at how the bivalent booster's antibody responses compare with those from the original booster when up against the gamut of currently circulating omicron subvariants. The results are mixed and, in some cases, hard to compare due to differences in intervals between vaccination, the number of people involved, and the types of assays used. But overall, the FDA argued that they suggest that the bivalent booster provides better neutralizing antibody responses against currently and recently circulating omicron subvariants than the original vaccine.
"The important thing is that the results all trend in the same direction," Jerry Weir, director of the FDA's Division of Viral Products, said in the meeting Thursday. "In other words, with all of these studies just like those from the manufacturers, there is improved variant-specific neutralization following administration of the bivalent BA.4/5 vaccine compared with the monovalent… I find it somewhat remarkable to see that level of uniformity."
For instance, one of the most recently published studies, released Wednesday in the New England Journal of Medicine, found that a bivalent boost led to a roughly threefold increase in neutralizing antibody levels against XBB.1 compared with people boosted with the original booster. That increase was roughly the same (3.6-fold and 2.7-fold) among people without and with previous SARS-CoV-2 infection, respectively.
Despite criticism by Offit and others before the meeting, committee members seemed comfortable with the bivalent data, accepting the FDA's rosy retrospective.
"I'm totally convinced that the bivalent vaccine is beneficial as a primary series and its boosters," committee member David Kim, an infectious disease expert at the Department of Health and Human Services, said.
Variant selection
But, the question of whether future vaccines will be similarly bivalent seemed contentious. Some wondered if the part of the vaccine targeting the Wuhan strain—which is no longer circulating—is helping. The reason it was included last year was that initial data suggested having it provides broader protection, which would be valuable if a new variant emerges that is more like the original strain than the current omicron lineage. But some members seemed to now doubt such a scenario is likely.
Stanley Perlman, an infectious disease expert at the University of Iowa who acted as the committee chair yesterday, drew a comparison to another circulating human coronavirus, 229E. That virus, which is associated with mild illnesses, has evolved over time so that antibodies from 30 years ago no longer neutralize the circulating strains, he remarked. "This is relevant, I think, because one of the things about keeping the ancestral strain in the [COVID] vaccine is the question of whether we would go back to that original variant," Perlman said. "With 229E, it doesn't seem to have happened," he noted and wondered aloud if SARS-CoV-2 would be similar. "Maybe we're never going to end up going back there, so maybe it's not important."
Others briefly touched on the concern of imprinting, a phenomenon in which the immune system's responses are biased toward fighting the version of a pathogen it first encounters, potentially making subsequent responses to different versions less effective. Researchers are still studying this phenomenon with respect to SARS-CoV-2 responses. But there's widespread concern for the possibility that repeated boosting with Wuhan-targeting vaccines could end up hampering responses to newer variants.
"One of the biggest questions that we're going to have to think about—and I know this will be discussed in later discussions, but—is do we include the primary strain, the Wuhan strain, in future vaccines," Steven Pergam, an infectious disease expert at Fred Hutchinson Cancer Center, said amid the discussion. "I think that's a real big question we're going to have to debate."
But, if not the Wuhan strain, what strain or strains should be included? Many committee members noted the futility of chasing variants. The FDA seemed to agree but argued that the goal of discussing (potentially annual) reformulations would be to continue to improve the vaccines.
"The object of course—before anyone says anything— is not to chase variants. None of us think that's realistic," the FDA's Weir said. "But I think our experience so far with the bivalent vaccines that we have do indicate that we can continue to make improvements to the vaccine and that would be the goal of these meetings."
Flu model
The frequency of those meetings to reassess vaccine formulation was also a fraught question. The FDA, of course, argued for at least annual meetings—sometime in May or early June, so that vaccine formulations could be decided with enough time for vaccine manufactures to have updated doses for the fall, ahead of winter waves. But committee members pushed back, noting that the winter waves were not necessarily established. There's simply not enough data yet. And although there have been winter waves, there have also been summer waves.
Peter Marks, the FDA's top vaccine regulator, chimed in to defend the flu-like reformulation model. While acknowledging that the seasonality of COVID-19 is not yet established, he raised an argument he and other FDA officials made in an editorial last year, that is, that winter is the best time to vaccinate for COVID-19 because it coincides with peaks in other respiratory viruses, such as influenza and RSV.
"When do we have to worry about the worst overwhelming of the hospitals? It will be when we have influenza, RSV, and potentially COVID at the same time," Marks said. Another advantage is that if people can get a flu shot and a COVID shot simultaneously, it could increase uptake. "Overall, this seems like a reasonable way to go."
"I just want to echo something," he added later in the discussion. "We totally agree with everyone: This isn't flu." But, on the other hand, he argued, the flu model has served us well. "So we can take the best of that model and essentially adjust around it."
Committee members seemed wary of committing to an annual schedule, though a plan for a fall reformulation seemed reasonable for at least the coming year.
"We're not going to know how often to do it," committee member Eric Rubin, an infectious disease expert and editor-in-chief of the New England Journal of Medicine, said. "I think it's quite reasonable to think about another one for the fall. … For step one, that would be ok. It's hard to say that it's going to be annual at this point."
Dose of data
Apart from the formulations, the committee also left lingering questions about dosage and doses. The committee indicated it would prefer to simplify the current regimens, particularly for young children in the age range of 3 to 5 years, who currently have available either a two-dose or a three-dose series.
For young children, Moderna's two-dose vaccine appeared 47 percent effective after one dose and 57 percent effective after two. For Pfizer-BioNTech's three-dose vaccine, data suggests it was just 12 percent effective after one dose (though the confidence interval stretched below zero for this, suggesting it could offer lower or no protection). Protection jumped to 39 percent after two, but there was no clear data for assessing the efficacy of the third dose. It will clearly take more data with different doses to determine if a two-dose series is possible with Pfizer's vaccine.
In the end, the committee called for a plethora of data to match the many unanswered questions. "I think there's a general agreement that updating the vaccine composition is good," Perlman said in a final summary. "And that whether it comes to being once a year or how it actually pans out, that we need to have as much information as we can."
Adani shares plunge further for second straight day of losses
Shares of Adani Group companies continued to see sharp losses for a second consecutive trading session in India after short seller firm Hindenburg announced its short position in the conglomerate's firms earlier this week.
Adani refuted the claims in two separate statements, adding that the group is "evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hidenburg Research," Adani Group's head of legal Jatin Jalundhwala said in a statement.
Hindenberg doubled down on its initial stance, emphasizing that Adani has not answered any of the questions raised in their claims.
"We fully stand by our report and believe any legal action taken against us would be meritless," it said," it said.
— Jihye Lee
Tokyo's inflation stays above Bank of Japan's target
Consumer prices in Japan's capital Tokyo rose by 4.3% in January, higher than expected by economists polled by Reuters.
The reading also maintained levels higher than the Bank of Japan's target of 2% inflation for an eighth consecutive month after rising 2.1% in June 2022.
The Japanese yen strengthened 0.3% after the data release and last traded at 129.82 against the US dollar.
— Jihye Lee
CNBC Pro: These 6 global ETFs are the only ones to have posted gains every year for the past five years
Only six global stock ETFs have consistently posted yearly gains over the past five years, according to new analysis by CNBC Pro.
They are the only funds among 7,000 equities ETFs trading worldwide to:
Not have a single year of negative returns between Jan. 1, 2018, and Dec. 31, 2022;
Singapore home prices rose less in final quarter of 2022
Private residential property prices in Singapore rose by 0.4% in the final quarter of 2022, a release by the Urban Redevelopment Authority showed.
The reading showed home prices rose less than the previous period's increase of 3.8% and the slowest growth since the second quarter of 2020.
Home prices rose 8.6% in the full year of 2022, the release said, also less than then 10.6% increase seen in the full year of 2021.
— Jihye Lee
Australia producer price index rises 5.8% from year ago
The producer price index in Australia rose 5.8% for the final quarter of 2022 on an annualized basis, data from the Australian Bureau of Statistics showed.
The reading was slightly lower than the previous quarter's print of 6.4%, a signal inflation may be easing in the nation.
On a quarterly basis, the index rose 0.7%, also slower than the previous period's reading of 1.9%.
The Australian dollar strengthened slightly during Asia's morning session and last traded at 0.7123 against the U.S. dollar.
— Jihye Lee
GDP, other fourth-quarter data shows economic challenges are 'beginning to clear,' economist says
Thursday's GDP data adds to a broadening picture of economic growth in the fourth quarter, according to Curt Long, chief economist at the National Association of Federally-Insured Credit Unions. And that signals to him the economic outlook is improving.
"The big picture view of economic growth in the fourth quarter is a positive one. Much of that growth was concentrated in inventory build, which is unlikely to grow at a similar pace in 2023," Long said. "Nevertheless, with resilient consumer spending, low unemployment claims, and receding inflation, some of the clouds that were forming over the economy several months ago are beginning to clear."
— Alex Harring
CNBC Pro: Buy the dip? Top Morningstar strategist names 3 stocks trading at a steep discount
U.S. stocks are around 15% undervalued, according to Dave Sekera, chief U.S. market strategist for Morningstar, who says the extent of this undervalued territory is rare.
Since the end of 2010, the market has traded at or below the current discount only 5% of the time, he said.
He picks three stocks that he says are trading at steep discounts.
Tesla’s strong orders and weak margins have Wall Street analysts conflicted
Wall Street analysts are divided on Tesla after the electric car company's latest quarterly results.
Tesla reported a beat on both earnings and revenue for the fourth quarter, and assuaged investor fears of weaker growth at the company after recently issuing a round of price cuts. While the move triggered a drop in used Tesla prices, they also supported demand for the vehicles.
"Thus far in January we've seen the strongest orders year to date than ever in our history. We're currently seeing orders of almost twice the rate of production," Musk said during a call with analysts.
For Goldman Sachs' Mark Delaney, that was the "most important takeaway from the call."
"Importantly, Tesla commented that since it lowered prices it has seen the strongest orders year-to-date in its history, with orders running about 2X production. While we believe this rate of orders may not be sustained in light of the weak macroeconomic environment, it would suggest the company is tracking well to our 1.8 mn delivery estimate," Delaney wrote.
Other analysts were more negative on the stock outlook, however, saying that Tesla's automotive gross margins, which was the lowest figure in the last five quarters, spelled trouble ahead.
AllianceBernstein's Toni Sacconaghi reiterated an underperform rating on Tesla, saying the automaker's latest results and earnings call had "something for bulls and bears," adding he remains "torn" on the company. While the strong orders are promising, the analyst said the auto gross margins were too weak to overlook.
"Despite raising our energy storage forecast materially, our FY EPS declines from $3.80 to $3.54 amid lower margins. Moreover, while no one (including Tesla) knows what demand elasticity is, we believe it is uncertain whether surging demand will be sustained, particularly in China, where we believe more price cuts will likely be needed before year end," Sacconaghi wrote.
CNBC Pro subscribers can read the full story here.
— Sarah Min
CNBC Pro: Morgan Stanley has a ‘simple’ tech playbook, names TSMC and others as stocks to buy right now
A recession may be coming, and the semiconductor sector — widely seen as cyclical and volatile — could be an unlikely safe refuge for investors.
Morgan Stanley says chip stocks have historically done well in past recessions. The bank named its top Asia chip stocks — giving one 40% upside.
U.S. GDP rose slightly more than expected in the fourth quarter
The U.S. economy expanded at an annualized pace of 2.9% in the fourth quarter, slightly outperforming a Dow Jones estimate of 2.8%. The Commerce Department's report comes even as inflation persists and the Federal Reserve continues to raise rates.
Consumer spending rose 2.1% for the period, down slightly from 2.3% in the previous period but still positive.
— Jeff Cox
Bitcoin heading toward best month since 2020
Bitcoin's remains in rally mode despite pulling back the past two days and the cryptocurrency is on pace for its best month since 2020. Some investors see crypto prices as a leading indicator of investors' risk appetite.
So far this month and year, bitcoin has risen almost 40% and is poised to post its best monthly performance since December 2020, when it gained 49.47% for the month.
Meanwhile, the S&P 500 has risen about 5% this month.
