New Inflation Data Expected to Show Faster Increase in October
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This week, the main witnesses at the fraud trial of Elizabeth Holmes, the founder of the blood testing start-up Theranos, were former lab directors who testified about some of the inner workings of the failed company. But a different issue increasingly loomed over the proceedings: Just how long is Ms. Holmes’s trial going to last?
Here are the key takeaways from this week’s events.
Plagued by delays
First there was a Covid scare. Then a juror had to travel for a funeral. Then a broken water main canceled testimony. And on Tuesday, the court’s technology system went down, delaying proceedings several hours and forcing lawyers to show exhibits on a projector.
Judge Edward Davila of U.S. District Court for the Northern District of California, who is overseeing the case, apologized and said he was “very embarrassed” by the technical issues. The witness stand was outfitted with a lamp.
The delays, cancellations and other unexpected interruptions have added to a growing sense of time pressure for a trial that was originally set to begin in mid-2020 but was then postponed many times by procedural issues, the pandemic and, finally, Ms. Holmes’s pregnancy.
By the time jury selection began in August, six years had passed since The Wall Street Journal exposed how Theranos’s claims about its technology were not what they appeared to be. Many witnesses have said during testimony that their memory of events — some from more than a decade ago — was not crystal clear.
The prosecution has taken 10 weeks to get through 23 witnesses from a list of nearly 200 it could call. By contrast, the homicide trial of Kyle Rittenhouse over the shootings last year in Kenosha, Wis., has heard 26 witnesses in six days.
Many of the boldface names on the prosecution’s list, like Henry Kissinger, Rupert Murdoch or David Boies, have not yet been called. Judge Davila’s public calendar has the trial set to end on Dec. 10.
On Wednesday, the prosecution provided some timing clarity. Prosecutors said they were likely to rest their case against Ms. Holmes next week. Then her defense will be up next.
Who’s Who in the Elizabeth Holmes Trial
Erin Woo📍Reporting from San Jose, Calif.
Who’s Who in the Elizabeth Holmes Trial
Erin Woo📍Reporting from San Jose, Calif.
Elizabeth Holmes, the disgraced founder of the blood testing start-up Theranos, stands trial for two counts of conspiracy to commit wire fraud and nine counts of wire fraud.
Here are some of the key figures in the case →
A lab director who never visited the lab
Lynette Sawyer, a public health doctor who was a co-director of Theranos’s lab in 2014 and 2015, testified to the lab’s fly-by-night nature.
Dr. Sawyer said she had never set foot inside it, for instance. She said she hadn’t known it was developing its own tests and hadn’t heard of Edison and miniLab, Theranos’s testing machines, or the nanotainer, its blood collection cartridges. She did not get reports about lab activities, she said, nor did she meet Ms. Holmes.
Her job, Dr. Sawyer testified, was to sign documents that she could not edit. She left, she said, because she felt “very uncomfortable about the lack of clarity about the lab.”
Dr. Sawyer worked alongside Dr. Sunil Dhawan, who testified earlier that he had spent a total of five to 10 hours doing work for Theranos. Dr. Dhawan was a dermatologist with no experience in laboratory science.
Immediate jeopardy
Dr. Kingshuk Das, who became Theranos’s lab director in 2016, provided a look at the fallout from critical media reports about the company — and how Ms. Holmes reacted.
Shortly after The Journal’s exposé of Theranos in the fall of 2015, the Centers for Medicare and Medicaid Services, the regulatory body that oversees laboratory testing, conducted an inspection of the start-up’s lab. The agency then sent the company a notice titled “Condition Level Deficiencies — Immediate Jeopardy.” In its report, the agency laid out how Theranos’s lab was not in compliance with regulations and said it was possible that every patient test the company conducted on one of its machines was inaccurate.
When Dr. Das laid out the problems to Ms. Holmes, he said, she suggested an alternative explanation from Daniel Edlin, one of Theranos’s employees: The Theranos machines had not failed; there was simply a problem with the quality-control processes.
Dr. Das disagreed and concluded that Theranos should void as many as 60,000 tests, sending patients a report that simply said, “Void.”
In cross-examination, Lance Wade, a lawyer for Ms. Holmes, pointed out that she agreed to void the tests, despite “a fair amount of media scrutiny” and “potentially serious ramifications for the company.” Dr. Das, who gave most of Mr. Wade’s questions one-word answers, said he did not know Ms. Holmes’s intentions. Unlike previous lab directors, Dr. Das reported directly to Ms. Holmes.
Ultimately, Dr. Das testified that Theranos’s testing machines, which promised to do comprehensive blood testing on a drop of blood, had malfunctioned from the start.
“I found these instruments to be unsuitable for clinical use,” he said.
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Elon Musk, the chief executive of Tesla, disclosed on Wednesday that he had sold about $5 billion worth of Tesla shares, in part to cover his tax obligations after exercising options on a large tranche of stock.
Mr. Musk sold about 4.5 million shares between Monday and Wednesday, according to filings with the Securities and Exchange Commission. Tesla’s stock closed trading on Wednesday at $1,067.95, which would value the shares at about $4.8 billion, but some were sold for slightly higher prices.
In the filings, Mr. Musk said he had sold about a million of the shares “solely” to cover taxes on 2,154,572 shares he picked up at $6.24 each. Those shares he acquired, for a total of $13.4 million, were instantly worth about $2.3 billion. Later Wednesday, he disclosed the sale of an additional 3.6 million shares, though he did not provide a reason for those divestments.
Mr. Musk still owns nearly 17 percent of Tesla’s stock, shares worth about $180 billion. Tesla recently passed $1 trillion in market valuation.
Over the weekend, Mr. Musk posted a poll to Twitter asking his followers whether he should sell 10 percent of his stock, referring to a political debate over whether the wealthiest Americans should be taxed according to their wealth rather than their income. He said he would abide by whatever respondents chose, and about 58 percent said to sell.
Regardless of the poll, the disclosures indicated that Mr. Musk had put a plan in place in September to sell shares when buying options. Mr. Musk holds more than 20 million stock options, worth nearly $30 billion, that expire in August. Many of those options are unlikely to qualify for preferential tax treatment, meaning he could owe billions of dollars in taxes if he exercises all of them.
Tesla’s stock slid 16 percent in the two days of trading after his Twitter post, though it gained 4.3 percent on Wednesday before Mr. Musk disclosed his trades. Tesla’s shares were up in aftermarket trading following his disclosures.
Stephen Gandel contributed reporting.
Correction:
An earlier version of this article misstated the day that Elon Musk sold $1.1 billion in Tesla shares to cover tax obligations. It was Monday, not Wednesday. (He sold an additional $3.9 billion in shares this week unrelated to the exercise of his stock options.)
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WASHINGTON — President Biden on Wednesday pledged to do more to confront rising prices as he stood at the Port of Baltimore to promote the benefits of the $1.2 trillion bipartisan infrastructure deal he plans to sign into law on Monday.
Mr. Biden’s appearance alongside union workers at the port was intended to kick off what administration officials promise will be an all-out effort by the administration to make sure the public is aware of the benefits they will get: repaired roads, replaced pipes, better internet and safer bridges.
But the president’s speech came on the day that government figures showed inflation continued to surge in October, adding to the public’s concerns about their purchasing power and fueling political attacks from Mr. Biden’s Republican critics.
In his speech, the president acknowledged the worry.
“Many people remain unsettled about the economy and we all know why,” he said. “They see higher prices,” adding that “they can’t find what they always want and when they want it. And we’re tracking these issues, trying to figure out how to tackle them head on.”
The bottom line, he admitted, is that “everything from a gallon of gas to a loaf of bread costs more and it’s worrisome.”
Mr. Biden said his administration was taking steps to keep prices down, pointing to recent efforts to get major ports to operate around the clock. He said making it easier for goods to get to market will even out supply and demand and allow prices to fall.
He also predicted that the infrastructure projects financed by his new legislation would help bring down prices in the coming years. He said long-delayed upgrades to roads, bridges, rail systems, ports and airports would ease the pressure on prices.
“The bottom line is this: With the bill we passed last week, and the steps we’re taking to reduce bottlenecks at home and abroad, we’re set to make significant progress,” he said.
But it is unclear how quickly Mr. Biden can make good on his promises. Rising prices have contributed to frustration among voters about the state of the economy and the president’s approval rating has dropped significantly since taking office in January.
And many of the investments financed by the infrastructure measure will not even begin to be carried out for months, if not longer. That could mean that prices — and frustration among voters — continue to increase through next year, just as Mr. Biden’s party is fighting to keep control of the House and Senate in the 2022 midterm elections.
Republicans have already begun calling the rising prices “Bidenflation,” a signal that they view the issue as a powerful one.
Still, the president expressed optimism during his speech on Wednesday.
“We’re already in the midst of historic economic recovery,” he said. “And thanks to those steps we’re taking very soon we’re going to see the supply chain start catching up with demand. So not only will we see more record breaking job growth, we’ll see lower prices, faster deliveries as well.”
White House officials said Mr. Biden intends to sign the infrastructure bill into law at a ceremony at the White House on Monday. They said it will be attended by members of both parties in Congress who voted for its passage.
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Boeing has broadly agreed to accept responsibility for the crash of a 737 Max in Ethiopia in 2019 and to be responsible for successful compensation claims by most families of the 157 people who were killed.
Under a deal filed in federal court on Wednesday, Boeing will accept blame for the crash, which led to a worldwide ban on the plane until last year, and will take on sole responsibility for compensatory damages awarded to the victims’ families in the future. The families agreed not to seek punitive damages from Boeing, which they were unlikely to have won.
Boeing also agreed not to try to have cases moved if families filed lawsuits for compensatory damages in Illinois, where it has its headquarters, in a victory for families in jurisdictions that severely limit the amount of money awarded for such claims.
“This is a significant milestone for the families in their pursuit of justice against Boeing, as it will ensure they are all treated equitably and eligible to recover full damages under Illinois law while creating a pathway for them to proceed to a final resolution, whether through settlements or trial,” a committee representing most of the victims’ families said in a statement.
Some families had already settled with Boeing, and the agreement covers all but two of the families with outstanding cases.
In a statement, Boeing offered its “deepest condolences” to the families of those who died on the flight in Ethiopia and to the families of the 189 people who were killed months earlier in a crash of a 737 Max in Indonesia.
“Boeing is committed to ensuring that all families who lost loved ones in the accidents are fully and fairly compensated for their loss,” it said. “By accepting responsibility, Boeing’s agreement with the families allows the parties to focus their efforts on determining the appropriate compensation for each family.”
The two crashes led to a global ban on Boeing’s best-selling plane, the 737 Max, for about 20 months, costing the company billions of dollars. The Federal Aviation Administration approved the plane for flight late last year, and it has been used widely without incident since then.
The debacle damaged Boeing’s reputation and led to additional scrutiny from aviation authorities around the world. In January, Boeing reached a $2.5 billion settlement with the Justice Department. Last month, a federal grand jury indicted a former top pilot for Boeing, and last week a group of current and former company board members settled a shareholder lawsuit.
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Disney+ needs to get hot again.
Disney may be the world’s largest entertainment company, with vast theme park, sports television and consumer products divisions, but the only business that has come to matter in Wall Street’s punishing gaze is streaming — specifically “subs,” or the number of subscribers. And Disney+ has started to lag.
On Wednesday, Disney said its flagship streaming service had added 2.1 million subscriptions in the recent quarter, sharply fewer than analysts polled by FactSet had forecast. After a dazzling introduction in late 2019, Disney+ has encountered numerous headwinds, including a pandemic-related shortage of new shows, an increasingly competitive streaming environment, the delay of Indian Premier League cricket games and difficulties rolling out in Latin America.
The new membership additions bring the Disney+ worldwide paid base to 118.1 million. Disney+ added 12.4 million subscribers in the previous quarter, resulting in total membership of 116 million as of June 27. Slower growth is a concern because it makes it harder for Disney+ to achieve the 230 million to 260 million paid subscribers promised by the company by the end of the 2024 fiscal year.
“I want to reiterate that we remain focused on managing our D.T.C. business for the long term, not quarter to quarter, and we’re confident we are on the right trajectory,” Bob Chapek, Disney’s chief executive, told analysts on a conference call, using media industry shorthand for “direct to consumer.”
Mr. Chapek had tried to prepare investors for weak Disney+ growth in the quarter. Speaking at a Goldman Sachs investor conference in September, he said subscriber rates would be in the “low single digits of millions,” by far the slowest increase to date. Mr. Chapek has also emphasized that Disney is new to streaming and thus learning about subscriber behavior. “We’re finding out there’s tremendous seasonality in this business that we may not have known about before we really got into it,” he said in August on an earnings-related conference call.
Some analysts pared their expectations. Others appeared to disregard Mr. Chapek’s remarks. FactSet’s poll revealed a projected increase of about 10 million subscribers, to 126 million.
Disney shares declined over 4 percent in after-hours trading on Wednesday.
In a sign of the pressure, Disney has been marshaling its considerable marketing resources to refocus attention on Disney+. On Monday, the company announced a one-week discount: Those who subscribe by Nov. 14 will receive one month for $2, followed by the regular rate of $8. On Friday, deemed Disney+ Day by the company, a crush of content will arrive on the service, including a Billie Eilish documentary, new Marvel specials, “Shang-Chi and the Legend of the Ten Rings” and “Home Sweet Home Alone,” a reboot of the comedic “Home Alone” holiday movie franchise. There are marketing tie-ins at Disney parks. Disney television networks like ESPN and ABC are also promoting the service.
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Some analysts have started to worry that Disney+ will need to broaden its content offerings to reach its growth goals. The service has no R-rated material and has mostly been relying on exclusive Marvel and “Star Wars” shows, including “Loki,” “WandaVision,” “The Mandalorian” and the coming “Book of Boba Fett.”
Some animated films that were originally supposed to play in theaters — for instance, “Luca” and “Soul,” both from Pixar — were rerouted to Disney+ entirely during the pandemic. But Disney has ended that practice, at least for the time being.
“Encanto,” an animated musical set in the mountains of Colombia, will arrive in theaters on Nov. 24 and on Disney+ a month later. The company views “Encanto” as a crucial test. Will most families rush out to theaters to see it (especially now that children can be vaccinated), ultimately denting demand online? Or will they instead wait for the Disney+ debut, resulting in lower-than-expected box office sales?
Or will the film generate sizable interest in both venues?
Like other media companies, Disney has turned to streaming because cable television is in long-term decline. More and more, people are forgoing cable hookups in favor of streaming options. Hulu, another Disney-owned streaming service, expanded its subscriber base to 43.8 million in the most recent quarter, an increase of only one million since late June. About 17.1 million people pay for access to the company’s sports-focused ESPN+ platform, up from 14.9 million at the end of June.
A variety of costs (content production, marketing, technology infrastructure) contributed to losses of roughly $600 million for Disney’s streaming unit; losses totaled $400 million in the same quarter a year ago. Disney’s chief financial officer, Christine M. McCarthy, told analysts on Wednesday that Disney+ losses would peak in 2022 — instead of 2021 — because of pandemic-related disruptions to the service’s content pipeline.
In total, Disney generated $18.5 billion in revenue, a 26 percent increase from a year earlier, when many theaters were closed because of the pandemic and Disney theme parks were closed or operating with reduced capacity.
Profit in the quarter, the fourth in Disney’s fiscal year, totaled $160 million, or 9 cents a share. A year ago, Disney lost $710 million, or 39 cents a share.
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SAN FRANCISCO — The Justice Department sued Uber on Wednesday, accusing the company of discriminating against passengers with disabilities by charging them fees when they needed more time to enter the ride-hailing vehicles.
The suit stems from a fee policy Uber instituted in 2016 to compensate drivers who waited more than two minutes for a passenger to arrive. The company previously didn’t pay drivers for their time until a ride began, frustrating those who were sometimes forced to wait long periods for passengers.
But the Justice Department said Uber did not adjust the wait time fees for people with disabilities, violating the Americans With Disabilities Act, a federal law that prohibits discrimination by private transportation companies. A passenger might need time to break down a wheelchair or walker and stow it in the car, or a blind passenger might need extra time to walk to the car, the Justice Department said. Yet even when Uber knew someone needed additional time because of a disability, the company charged a wait fee after two minutes, the suit said.
“Uber and other companies that provide transportation services must ensure equal access for all people, including those with disabilities,” Kristen Clarke, the assistant attorney general for the Justice Department’s civil rights division, said in a statement.
Uber said on Wednesday that it had been in discussions with the Justice Department about its wait time policies, which were intended only for riders who kept drivers waiting and not for passengers who required extra time to get into the car. The company said it had refunded riders with disabilities who alerted the company that they had been charged. Last week, it also updated its policy to automatically waive wait time charges for passengers who said they were disabled.
Matt Kallman, a spokesman for Uber, said in a statement that the lawsuit was “surprising and disappointing.” He added, “We fundamentally disagree that our policies violate the A.D.A. and will keep improving our products to support everyone’s ability to easily move around their communities.”
The Justice Department previously investigated Lyft for allowing its drivers to deny rides to passengers with wheelchairs or walkers. Lyft settled the allegations last year and agreed to revise its wheelchair policies, to pay damages of $4,000 to $30,000 to four passengers and to pay a $40,000 civil penalty.
The Justice Department previously scrutinized Uber for data breaches in 2014 and 2016. Last year, the agency charged a former Uber executive with trying to conceal the 2016 hack from federal investigators.
The new lawsuit, filed in U.S. District Court for the Northern District of California, asks for a court order to stop Uber from discriminating against people with disabilities. It also asks the court to require Uber to change its wait time policy for people with disabilities, train its employees and drivers on the Americans With Disabilities Act, pay damages to customers affected by the wait time policy and pay a civil penalty.
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China Evergrande, the troubled property giant, made interest payments on at least two of its bonds on Wednesday, a company bondholder said, a sign that it yet again managed to head off default.
Evergrande owed investors interest payments totaling nearly $150 million on three bonds, with the grace periods for those payments set to expire on Wednesday. Missing them would have triggered a default that could ripple through the Chinese economy: With some $300 billion in debt outstanding, the company’s inability to pay its debt would potentially hurt banks, property developers, and even home buyers in the country.
Instead, the company has managed to leap from one deadline to the next, meeting its obligations at the last minute — but often without explaining how or even publicly disclosing that it had done so. The company has tried to sell off parts of its empire to raise enough cash.
In October, when Evergrande said it had scrapped its effort to sell a $2.6 billion stake in its property services company to another developer, the company warned in a Hong Kong securities filing that there was “no guarantee” it would be able to meet its financial obligations or negotiate an extension with its creditors.
On Wednesday, the company met its interest payment deadline for bonds that mature in 2022 and 2023, the company bondholder said, speaking on condition of anonymity to discuss the matter.
The person did not specify if a payment on the third bond had also been made, but Bloomberg News reported that obligations for all three bonds were met, citing a spokesman for a clearing house.
The company didn’t respond to a request for comment.
Although Evergrande has managed to avoid default so far, its troubles have already begun to weigh on other Chinese developers, with the government tightening controls on borrowing and investors retreating from the sector.
At least six Chinese property developers have defaulted on foreign bonds in recent weeks, rattling domestic financial markets and raising the cost of borrowing for all Chinese companies. Property prices are slowing and fewer people are buying apartments, worsening the outlook for real estate.
Evergrande’s challenges could spread outside of China as well, as they ripple through global financial markets. On Monday, the Federal Reserve said troubles in China’s property sector could threaten the United States.
“Given the size of China’s economy and financial system as well as its extensive trade linkages with the rest of the world, financial stresses in China could strain global financial markets through a deterioration of risk sentiment, pose risks to global economic growth, and affect the United States,” the Fed said in its twice-yearly update on the American financial system.
Alexandra Stevenson contributed reporting.
Correction:
An earlier version of this article misstated the amount that China Evergrande needed to pay in interest on bonds Wednesday. It was $150 million, not $150 billion.
President Biden acknowledged the pain that Americans are feeling from spiking prices across the economy on Wednesday, saying in a statement that he was directing economic officials in the White House to do more to reduce energy costs and other sources of inflation.
The statement marked a continued shift in messaging for a White House that has seen inflation concerns rise among voters in recent months. The pop in prices also poses a risk to the spending bill in Congress carrying much of Mr. Biden’s economic agenda, as lawmakers express concern about the impact more federal spending could have on inflation.
After the Labor Department reported prices rose by 6.2 percent in October, compared with a year ago, Mr. Biden conceded the challenges of the issue in increasingly blunt terms and only briefly alluded to the administration’s longstanding hopes that price increases would ease anytime soon.
Annual price changes in October
Fuel oil
+
59
%
Motor fuel
+
50
Car, truck rentals
+
39
Piped utility gas service
+
28
Used cars, trucks
+
26
Hotels and motels
+
26
Beef, veal
+
20
Bacon, breakfast sausage
+
15
+
13
Living room, other furniture
Bedroom furniture
+
12
Eggs
+
12
Televisions
+
10
New cars, trucks
+
10
+
9
Men’s suits, sport coats
+
9
Women’s dresses
Computers, peripherals
+
8
Boys’ and girls’ footwear
+
8
Postage, delivery services
+
7
–
1
%
Public transportation
–
2
Recreational books
–
5
Airline fares
–
6
Health insurance
–
21
Smartphones
–
45
Food at employee
sites and schools
Annual price changes in October
Fuel oil
+
59
%
Motor fuel
+
50
Car and truck rentals
+
39
Piped utility gas service
+
28
Used cars and trucks
+
26
Hotels and motels
+
26
Beef and veal
+
20
Bacon and breakfast sausage
+
15
Living room, kitchen and dining furniture
+
13
Bedroom furniture
+
12
Eggs
+
12
Televisions
+
10
New cars and trucks
+
10
Men’s suits, sport coats and outerwear
+
9
Women’s dresses
+
9
Computers and peripherals
+
8
Boys’ and girls’ footwear
+
8
Postage and delivery services
+
7
–
1
%
Public transportation
–
2
Recreational books
–
5
Airline fares
–
6
Health insurance
–
21
Smartphones
–
45
Food at employee sites and schools
“Inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me,” Mr. Biden said, in advance of a trip on Wednesday afternoon to Baltimore, where he is expected to talk about the administration’s efforts to unclog supply chains and slow the rising cost of goods ahead of the holiday shopping season.
But it was unclear if the statement signaled any concrete shift in the administration’s policies toward inflation. Those policies are currently built around efforts to fight corporate consolidation in industries like meat packing — which administration officials blame in part for rising food prices — and to relieve supply chain backlogs at ports and elsewhere that have slowed the flow of goods at a time when Americans have dramatically increased their spending on them.
Mr. Biden noted that energy costs were driving the price increases reported in October, and that natural gas prices had fallen in recent days. He also vowed more action, though without specifics, saying that he had directed the National Economic Council “to pursue means to try to further reduce these costs” and that he was asking the Federal Trade Commission “to strike back at any market manipulation or price gouging in this sector.”
The president also tossed much of the responsibility for taming inflation to the Federal Reserve, whose mandate includes keeping prices stable. “I want to re-emphasize my commitment to the independence of the Federal Reserve to monitor inflation, and take steps necessary to combat it,” he said.
Mr. Biden is expected to make the case in Baltimore that the infrastructure bill awaiting his signature will reduce inflationary pressures, along with the larger spending bill still pending in Congress. But that argument may not find much purchase with influential lawmakers. Senator Joe Manchin III, Democrat of West Virginia, who has voiced concerns about the size of the spending bill and its impact on inflation, reiterated his concerns in a Twitter post after the inflation report, saying, “DC can no longer ignore the economic pain Americans feel every day.”
By all accounts, the threat posed by record inflation to the American people is not “transitory” and is instead getting worse. From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.
— Senator Joe Manchin (@Sen_JoeManchin) November 10, 2021
The bonds market’s outlook for inflation over the next few years shot to a fresh high on Wednesday after the government reported a sharper-than-expected rise in prices last month.
The Consumer Price Index jumped 6.2 percent in October from a year ago, the Labor Department said. That’s the fastest rate of increase since 1990.
Soon after the numbers were released, a key measure of the bond market’s expectations for inflation over the next five years — known as a break-even — rose to a new high roughly 3.10, according to Bloomberg data. It essentially means that investors now expect inflation to average about 3.10 percent a year for the next five years, far higher than at any time in the decade before the pandemic hit.
These expectations are closely watched by officials at the Federal Reserve, who — historically — have considered them when deciding when to raise interest rates. Higher rates tend to put the brakes on inflation, but can also ding stock prices and slow growth in the job market.
In the futures markets where traders bet on the short-term interest rates that the central bank traditionally controls, traders placed larger bets on the probability that the central bank would start lifting those rates in the middle of next year. That would happen shortly after the Fed is expected to end the bond purchasing programs that it put in place amid the market tumult of the early days of the pandemic. The Fed announced the start of that process last week.
While of special interest to the bond market, the Fed’s position on interest rates matters for all financial markets. And in the past, periods of rising rates have coincided with rocky runs for stock markets.
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Prices of clothes, lawn mowers and car parts surged in October, data released Wednesday showed, as supply chain disruptions continued to fuel shortages and raise transportation costs.
The increases drove the Consumer Price Index up 6.2 percent last month from the prior year, the fastest pace since 1990.
Factory shutdowns, clogged ports, a shortage of truckers and a surge in demand for imported products have combined to drive up shipping costs for food, furniture, automobiles and other products, which are being passed on in part to consumers. Major shipping companies like FedEx and UPS have announced rate increases.
According to the Bureau of Labor Statistics, the following products and services saw prices increase in October from the prior month:
-
Bedroom furniture: up 1.3 percent
-
Outdoor equipment and supplies: up 5.1 percent
-
Women’s suits: up 2.4 percent
-
Car parts: up 1.4 percent
-
Gardening and lawn care services: up 1.1 percent
-
Legal services: up 1.8 percent
-
Postage and delivery services: up 4.6 percent
Supply chain disruptions have left some products in short supply as the holiday shopping season approaches. And shortages of some components, from resins and computer chips to filters and vegetable oil, are also curbing output for American factories.
Delivery times from Chinese factories to American warehouses have stretched to 76 days from 43 days just two years ago, according to data from Freightos, an online freight marketplace. The price to ship a 49-inch television in a 40-foot container across the ocean has soared to $48.03 per unit this year from $3.66 in 2019.
Dawn Tiura, the chief executive of Sourcing Industry Group, a member association for supply chain professionals, said that the combination of a surge in consumer spending, a lack of warehousing and a shortage of port workers and truck drivers were leading to price pressures for “anything that isn’t produced locally.” She expects those supply chain difficulties to last into the third quarter of 2022.
“Almost all consumer goods are going to be impacted,” said Ms. Tiura. “It’s not going to let up anytime soon.”
The White House says the $1 trillion infrastructure bill that passed the House last week will help to alleviate supply chain bottlenecks, by making much needed investments in railways, ports, roads and other infrastructure. But most effects of new projects and grant programs will not be felt immediately, and many analysts expect the bottlenecks to persist well into next year.
Mr. Biden is expected to tout the bill and its impact on easing supply chain disruptions when he visits the Port of Baltimore on Wednesday.
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A surge in consumer inflation in October was led by increasing rents and rising prices at the grocery store and the fuel pump, posing a burden for American households as they head into a winter that may also come with higher heating bills.
The government reported Wednesday that the Consumer Price Index rose 6.2 percent in October compared with a year earlier, a three-decade high in the rate of inflation. The data is likely to throw fuel on an already fiery battle in Washington over elevated inflation numbers and how policymakers can address them.
Gasoline prices were 49.6 percent higher in October than a year earlier, and fuel oil, which is used for industrial and domestic heating, was up by 59 percent. Food prices, which have been affected by supply chain issues, also continued their ascent, climbing 5.3 percent since last year.
Those gains come on the heels of a continuous hike in energy prices this year. Prices for natural gas, used to heat almost half of U.S. households, have almost doubled since this time last year. The price of crude oil — which deeply affects the 10 percent of households that rely on heating oil and propane during the winter — is also at multiyear highs.
Those commodity price increases will be quickly passed through to consumers, who have become accustomed to cheaper energy costs in recent years, following a domestic boom in fuel production last decade.
“This is going to be devastating for millions of Americans. We need to have a much more rational policy that leverages American abundance, not scarcity,” said Senator Dan Sullivan, Republican of Alaska, during an interview on CNBC before the report was released. He voiced frustrations from conservatives that the Biden administration’s clean energy policies were responsible for the uptick in costs.
Most energy industry analysts say that the reason for the price jumps are more nuanced and outside the realm of White House actions. Several factors — thin global fuel inventories, incentives for oil and gas producers to let prices rise and a mismatch between supply and demand as economies emerge from the pandemic — have combined to push bills higher.
The Federal Reserve, which is charged with promoting price stability, may also be unable to address the root causes of food and fuel price inflation, economists say.
“Rising energy prices, just like rising food prices, will be a key component in households’ perception of higher inflation this winter,” said Gregory Daco, chief U.S. economist at Oxford Economics, and a believer in the hypothesis that inflation is transitory. “But there isn’t much the Fed can do to address the underlying sources of stress.”
With differing levels of intensity, leading Republicans, some centrist Democrats in Congress and some prominent economists connected to former Democratic White Houses, have been vocal about their belief that government spending in the past year may be culpable for inflation this year.
Critics of the stimulative emergency policies enacted by the White House and the Fed are seeing this month’s high inflation reading as further evidence that the $1.9 trillion American Rescue Plan enacted in March was counterproductive and went too far, creating more demand for goods and services than the economy can handle.
Another school of thought — led by an array of more optimistic investors, Fed officials and progressive policymakers — is still making the case that the majority of price spikes are related to pandemic disruptions that will pass in time. But price gains have lasted longer than many experts expected.
It’s a political dilemma for the White House and its economic team, which believe in this “transitory” interpretation, yet also privately acknowledge that it’s a hard sell. Asking American families to trust technocratic analysis and bear the brunt of increased costs in the meantime is, some worry, a recipe for depressed polling numbers and a stark rebuke in next year’s midterm elections.
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A wave of retirements combined with truck drivers simply quitting for less stressful jobs is leading to empty store shelves, panicked holiday shoppers and congestion at ports.
“I had no personal life outside of driving a truck,” said one driver who quit in October after almost a decade as a trucker. “I finally had enough.”
A report released last month by the American Trucking Associations estimated that the industry is short 80,000 drivers and that number could double by 2030. READ THE ARTICLE →
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In a major ruling that bolsters the European Union’s efforts to clamp down on the world’s largest technology companies, Google lost an appeal on Wednesday to overturn a landmark antitrust ruling by European regulators against the internet giant.
The decision by the Luxembourg-based General Court related to a 2017 decision by the European Commission, the bloc’s executive branch, to fine Google 2.4 billion euros (about $2.8 billion) for giving preferential treatment to its own price-comparison shopping service over rival services.
The penalty was the first of three issued by Margrethe Vestager, the European Commission’s top antitrust enforcer, against Google. And with the other cases also being appealed — and additional European investigations underway against Amazon, Apple and Facebook — the case has been closely watched as a signal of the court’s view of the European Commission’s aggressive use of antitrust law against the American tech giants.
Google can appeal the decision to the European Union’s highest court, the European Court of Justice.
Amid increasing support for regulating large tech platforms in the United States and European Union, courts will play a central role in determining just how far governments will be able to go when intervening in the digital economy. In the United States, Google is facing a Justice Department lawsuit for anticompetitive behavior, and Facebook is facing another from the Federal Trade Commission.
In Europe, the courts have sometimes ruled against regulators. Last year, the General Court ruled against an order to require Apple to pay €13 billion in unpaid taxes. Amazon also successfully appealed another order to repay taxes.
In its ruling against Google on Wednesday, the court said, “By favoring its own comparison shopping service on its general results pages through more favorable display and positioning, while relegating the results from competing comparison services in those pages by means of ranking algorithms, Google departed from competition on the merits.”
Google said it was reviewing the decision, but added that it had already made a number of changes to its shopping product to comply with the 2017 decision.
“Shopping ads have always helped people find the products they are looking for quickly and easily, and helped merchants to reach potential customers,” the company said in a statement. “Our approach has worked successfully for more than three years, generating billions of clicks for more than 700 comparison shopping services.”
The €2.4 billion fine was a record at the time, before being surpassed in 2018, when the commission fined Google €4.34 billion for illegally using the Android operating system to bolster the use of its search engine and other services on mobile devices.
In 2019, Ms. Vestager’s office fined Google €1.49 billion for imposing unfair terms on companies that used its search bar on their websites in Europe.
The investigations of Google helped inspire stiffer new competition rules that are being drafted in the European Union that target the world’s largest technology platforms. The draft law — the Digital Markets Act — is expected to be adopted next year and would give European regulators new powers to intervene in the digital economy, including blocking companies like Google and Apple from giving their services preferential treatment over rivals.
Violating the new rules would result in fines of up to 10 percent of a company’s annual revenue.
Google’s competitors welcomed Wednesday’s ruling, but many said the investigations and court hearings had taken so long that Google had been able to further entrench its dominant position.
“While we welcome today’s judgment, it does not undo the considerable consumer and anticompetitive harm caused by more than a decade of Google’s insidious search manipulation practices,” said Shivaun Raff, the chief executive and a co-founder of Foundem, a comparison shopping service in Europe that helped bring the original complaint against Google.
Market valuations of automakers
Rivian
$86 billion
29% today
Ford
$77 billion
-4% today
Tesla
$1 trillion
4% today
Source: FactSet and S.E.C. filings·As of the market’s close on Wednesday. Valuations are estimates based on the most recently available number of shares.
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Shares in Rivian, which has ambitious plans to make electric trucks and delivery vans, soared Wednesday on their first day of trading, rivaling the market value of large established automakers even before the company begins significant production.
Rivian priced its initial public offering on Tuesday at $78 a share. After it opened trading at $106.75, the stock rose to nearly $120 before closing slightly above $100, a gain of 29 percent. That gave Rivian a market capitalization of at least $86 billion, compared to Ford Motor’s $77 billion and General Motors’ $86 billion.
Despite minuscule output of just 156 pickup trucks so far, investors on Wednesday decided Rivian was in the same league as some of the most recognized names in the auto industry, which churn out millions of vehicles a year. READ MORE →
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Brian Williams, the square-jawed news anchor laid low by a fabulism scandal who mounted a career comeback with a popular 11 p.m. talk show on MSNBC, said on Tuesday that he would step down from his program after a five-year run and depart NBC News entirely at the end of the year.
The exit of Mr. Williams, whose contract is set to expire next month, comes amid a ratings decline in the cable news industry and restlessness among some of MSNBC’s star personnel. Rachel Maddow, the network’s top-rated anchor, is expected to refocus soon on projects outside of her nightly prime-time show, although she has announced no formal plans. READ THE ARTICLE →
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Moderna and the National Institutes of Health are in a bitter dispute over who deserves credit for inventing the central component of the company’s powerful coronavirus vaccine, a conflict that has broad implications for the vaccine’s long-term distribution and billions of dollars in future profits.
The vaccine grew out of a four-year collaboration between Moderna and the N.I.H., the government’s biomedical research agency — a partnership that was widely hailed when the shot was found to be highly effective. A year ago this month, the government called it the “N.I.H.-Moderna Covid-19 vaccine.”
The agency says three scientists at its Vaccine Research Center — Dr. John R. Mascola, the center’s director; Dr. Barney S. Graham, who recently retired; and Dr. Kizzmekia S. Corbett, who is now at Harvard — worked with Moderna scientists to design the genetic sequence that prompts the vaccine to produce an immune response, and should be named on the “principal patent application.” Moderna disagrees. READ THE ARTICLE →
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Today in the On Tech newsletter, Shira Ovide writes that mammoth shipping containers packed with dehumidifiers in the Pacific Ocean provide a glimpse at how the pandemic and Amazon might be shifting shopping as we know it.
