TOP NEWS TODAY - Dow Jones & Company

[Pages:12]Wednesday, December 15, 2021

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TOP NEWS TODAY

News and Insight from Dow Jones and The Wall Street Journal.

THE NUMBERS

DJIA S&P 500 NASDAQ EUR/US Gold NYMEX Crude US 10-Year Note

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35,927.43 4,709.85

15,565.58 $1.1296

$1,778.90 $71.55 1.45

Change 383.25 75.76 327.94

$0.0035 $6.60 $0.82 0.00

MARKET WRAPS

STOCKS: U.S. stocks turned higher after Federal Reserve officials approved plans to more quickly wind down the central bank's pandemic stimulus efforts. The Dow Jones Industrial Average, which was in the red for most of the session, closed up 383 points.

TREASURYS: U.S. government bond yields ticked higher after the Federal Reserve announced a faster wind-down of its bond-buying stimulus program and signaled that it could raise short-term interest rates at least three times next year to slow inflation.

FOREX: The U.S. dollar slipped against rivals after the Federal Reserve's policy statement was not as hawkish as some traders had anticipated.

COMMODITIES: Oil futures settled higher, finding support from risk-on sentiment as U.S. benchmark stock indexes climbed in the wake of the Federal Reserve's move to speed up tapering of asset purchases, and boost the number of interest-rate hikes planned for next year.

HEADLINES

Fed Decision: Officials Project Three Interest Rate Rises in 2022 and Accelerate Stimulus Wind Down

Most Federal Reserve officials signaled Wednesday they were prepared to raise their short-term benchmark rate at least three times next year to cool high inflation. As expected, officials also approved plans to more quickly scale back the Fed's pandemic stimulus efforts in response to hotter inflation, opening the door to rate increases starting next spring. Fed officials voted to hold rates near zero on Wednesday, but the latest projections are a significant shift from just three months ago. In September, around half of those officials thought rate increases wouldn't be warranted until 2023. Read More #

U.S. Retail Sales Slow With Holiday Shoppers Facing Inflation, Shortages

Retail sales rose modestly at the start of the holiday season, as shoppers faced rising inflation and supply shortages, and some snapped up gifts earlier. Sales at U.S. retail stores, online sellers, and restaurants rose by a seasonally-adjusted 0.3% in November from the previous month, the Commerce Department said Wednesday. That was smaller than last month's increase in consumer prices, and a slowdown from October's robust 1.8% sales increase. Read More #

SEC Seeks to Prevent One Cause of Investor Runs During Financial Panics

WASHINGTON--Wall Street regulators are set Wednesday to propose requirements for some moneymarket mutual funds to diminish investors' tendency to flee the instruments during financial crises.

Such rules would aim to prevent episodes like the ones that occurred during the past two recessions, in 2007-09 and 2020. The Federal Reserve backstopped the funds after they were hit with a surge of redemption requests that caused credit markets to seize up.

The Securities and Exchange Commission plans to offer changes to make the most-vulnerable subset of money-market funds less susceptible to runs by their investors. The changes would include a measure called swing pricing that firms including BlackRock Inc. and Federated Hermes Inc. have warned could destroy swaths of the industry.

Read More #

Bank of Canada Governor `Not Comfortable' With Elevated Inflation

OTTAWA--Bank of Canada Gov. Tiff Macklem said central bank officials are uncomfortable with inflation in the country at an 18-year high, and they possess the will and tools to bring it down to its preferred 2% target.

The remarks reinforce a sharp pivot from Mr. Macklem in recent weeks regarding inflation. Economists said his tone suggests the Bank of Canada is edging closer to rate rises.

Statistics Canada said Wednesday that annual inflation of 4.7%, or an 18-year high, was unchanged in November from the previous month. That reading is well above the Bank of Canada's target range of 1%-to-3%. Annual inflation has risen above 3% each month since April.

Read More #

U.S. Set to Ban American Investment in Some Chinese Companies Over Surveillance

WASHINGTON--The Biden administration plans to ban American investment in the world's largest drone-maker and seven other Chinese companies for what the U.S. says are their roles in China's mass surveillance of Muslim ethnic groups.

The Treasury Department is set to announce the blacklisting of the eight firms on Thursday, adding them to a list of companies that support China's military, according to a draft of the announcement reviewed by The Wall Street Journal.

Companies being added to the list include commercial drone-making giant DJI Technology Co. and several leading developers of facial-recognition technology that have supplied products to China's security agencies involved in the surveillance and detention of Uyghurs and other Muslim ethnic groups in the Xinjiang region.

Read More #

CDC's Early Covid-19 Test Hampered by Design Flaw, Contamination

A design flaw and contamination caused the Centers for Disease Control and Prevention's initial batch of Covid-19 tests to fail, an investigation by the agency concluded, adding to the understanding of a major misstep in the early U.S. response to the pandemic.

In February of 2020, public-health laboratories reported errors with the PCR test that the CDC designed to identify the virus that causes Covid-19. That left the U.S. partly blind to Covid-19's early spread.

The CDC's investigation concluded that a section of some of the tests was contaminated with a synthetic piece of genetic material. Because of a design flaw, components of another part of the test sometimes interacted together and triggered false positives, according to results of the investigation published Wednesday in the scientific journal PLOS ONE.

Read More #

Amtrak's New $22 Billion Man: Meet the CEO Who Will Manage Its Federal Infusion of Cash

Amtrak named Stephen Gardner its new chief executive on Wednesday, tapping a longtime executive to manage the biggest infusion of federal funding in the railroad's halfcentury history.

Mr. Gardner, Amtrak's current president, has served at the national passenger railroad since 2009 and is the architect of its plans to expand rail service between cities across the country. He will assume the top post when outgoing CEO Bill Flynn retires on Jan. 17, the company said.

Mr. Gardner, 45 years old, will be Amtrak's fifth CEO since 2016, a period of fiscal and operational overhaul that resulted in record ridership and financial strength before Covid-19 hammered the government-owned business in early 2020. Read More #

Cineworld Ordered to Pay Cineplex Damages Over Soured Merger

A Canadian court ordered Cineworld Group PLC to pay 1.29 billion Canadian dollars, equivalent to about $1 billion, in damages for walking away from a merger agreement with Cineplex Inc. after the Covid-19 pandemic rocked the movie-theater industry world-wide. An Ontario judge rejected arguments by U.K.-based Cineworld that Canada-based Cineplex violated the terms of a planned merger between the two companies when it took steps to conserve cash by deferring payments to landlords, vendors and film studios after box offices shut down in the early days of Covid-19's global spread. "Cineplex cannot be held in default...when it was prevented from conducting its normal dayto-day operations by government mandate," said Justice Barbara Conway of the Ontario Superior Court of Justice in her ruling on Tuesday. Read More #

Amazon Web Services Suffers Brief Outage

Inc.'s cloud-computing unit suffered a brief outage Wednesday, stoking fears of a repeat of the hourslong outage last week that caused much of the internet to stop working. This time around, Amazon said on its site Wednesday that it identified issues in Oregon and Northern California after 10:43 a.m. ET and fixed both problems in less than 30 minutes. An Amazon spokeswoman said the issues were resolved. Read More #

Sotheby's Sells $7.3 Billion in Art, Fueled by Moneyed Millennials

One of the world's chief auction houses has put the pandemic behind it, thanks mainly to millennials who splurged on everything from designer watches to digital artworks.

After suffering double-digit sales losses two years ago, Sotheby's said Wednesday it sold $7.3 billion in art in 2021, a new high bar for the 277-year-old company. That figure breaks down to $6 billion in auction sales in 2021, up 71% from the year before, and $1.3 billion in privately brokered art sales, up nearly a third from the year before.

Rivals Christie's and Phillips said they intend to release their year-end sales figures later this week or early next.

Read More #

TALKING POINTS

The Outlook For Inflation, A Q&A

By Gwynn Guilford

U.S. inflation hit a 39-year high in November, with prices up 6.8% from a year before, as measured by the Labor Department's consumer-price index. The Wall Street Journal sat down with Nela Richardson, chief economist at human-resources software firm Automatic Data Processing Inc., to learn what high inflation means for consumers, and what to expect in 2022.

Her answers have been edited for length and clarity.

WSJ: What is inflation, and does high inflation affect consumers?

MS. RICHARDSON: The best way to think about inflation is an acceleration of prices in a basket of goods. It's kind of like salt, right? If you add too much, you spoil the soup. But if you don't have enough, the soup has no flavor. And that's exactly the role of inflation in the economy. There are things that you do want to rise--you want wages to rise and you want profits to rise if you want standards of living to rise. Tolerating a certain amount of inflation is actually good for economic growth.

The issue is if inflation accelerates faster than productivity growth. That means that wages can't keep up with [prices]. And that's when it harms consumers. So that's what we're looking for--if inflation spirals outside of our comfort zone and keeps accelerating.

WSJ: Inflation is at the highest rate since the early 1980s. How is today's inflation similar to or different from the inflation of the 1970s and early 1980s?

MS. RICHARDSON: In a word, a pandemic. This isn't inflation that was caused by energy spikes or political issues around oil production and supply. It really is because of Covid-19,

which was at first deflationary--it was a hit to both supply and demand. But in solving one problem, the world economy kind of triggered another. Advanced economies solved the lackof-demand problem by pushing out money.

That increased demand, but at the same time we still had supply bottlenecks. So the combination of high demand and low supply has led to the price increases you're seeing now. At first, those price increases were contained in services and goods that were very impacted by the pandemic. But more recently the inflationary pressure has spread out.

WSJ: What is causing higher inflation now?

MS. RICHARDSON: We've seen strong consumer spending during [the pandemic, along with] a massive shift of consumer purchasing behavior toward goods and away from services.

And that shift has come at a time when there are supply shortages and labor shortages, which may have caused some firms to raise prices or stop supplying goods altogether, which means consumers are looking for other places to buy them.

WSJ: Wages are also rising. But are they rising enough to help consumers' keep pace?

MS. RICHARDSON: Real wages--if you take wage growth absent inflation--are negative for most people, or they're barely treading water.

What inflation really does when you're talking about wages is act as tax, and there's a real concern that it disincentivizes working. If my dollar doesn't go as far, and all of my expenses have increased when it comes to finding child care or buying clothes to wear to work or transportation or buying my lunch, then I might be disincentivized to work even for wages that are higher than they were, because the cost of work in terms of all the other things that I need to have in place in my life [to go to work] has also gone up. Child care is notable as one of those expenses that have gone up because of the pandemic, which could alter the decision to work, especially for women and working families.

WSJ: Are people right to worry about inflation remaining high?

MS. RICHARDSON: Yes, they are. I like to reassure, and I generally believe that things do correct themselves. But people don't live in the future--they live now. What they see at the grocery store is reality.

Eventually, that perspective [can become entrenched]. If you look at the New York Fed measures of consumer expectations for inflation a year from now, it's over 5%--after being really boring and below 3% for years.

The rising U.S. inflation rate is triggering a debate about whether the country is entering an inflationary period similar to the 1970s. WSJ's Jon Hilsenrath looks at what consumers can expect next. WSJ: How long will inflation stay this high before going back down to where it was before the pandemic?

MS. RICHARDSON: I've heard people say, "The supply-chain issue is going to get fixed and then inflation is going to be less of an issue." I do think that the supply-chain issue gets fixed, but I think it gets fixed at a higher price point than it was before the pandemic that's going to add costs to the consumer.

What companies have learned from the pandemic is that they need to diversify their supply chains, both for goods and for people. That might be less risky, but it also means that prices aren't likely to go down. Obviously, the rate of change may slow, but we're unlikely to see the very low inflation that defined the previous expansion anytime soon.

WSJ: How will these expectations influence inflation?

MS. RICHARDSON: In terms of wages, I don't think they will just keep going up. A lot of the businesses hard hit by the pandemic have been those with narrow margins--especially Main Street firms--that can't just keep escalating wages for new hires, because it means having to increase wages for current employees. They can only do that so long before it doesn't make sense to even keep operating.

So I don't think that you're going to see that wage-push inflation that people have been really concerned about.

WEALTH MANAGEM

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