Hurricane Milton, inflation and the economy

Of hurricanes and inflation

The economy and the stock market have been defying the doomsday scenarios of low growth for more than a year. Mother Nature is now testing that record.

Hurricane Milton slammed into Florida’s densely populated west coast, tearing a path of destruction that could cause billions of dollars in damage. S&P 500 futures fell slightly overnight after the benchmark index hit its 44th high of the year on Wednesday.

Adding to market tensions: Investors are waiting for another big inflation report this morning.

The Fed is on high alert this hurricane season. Raphael Bostic, the president of the Atlanta Fed, said Milton and Helene’s one-two punch could impact the economy for at least six months, mainly by constricting supply chains.

Officials also worry that the closure of the Port of Tampa Bay, Florida’s largest, will cut fuel supplies to a part of the state, from Tampa to Orlando, that is an economic powerhouse, accounting for about 2.8 percent of the nation’s GDP, could disrupt.

Here’s the latest:

Thursday’s economic data is expected to bring better news. The Consumer Price Index report, due at 8:30 a.m. Eastern, is expected to show inflation continuing to cool despite a labor market recovery and solid wage growth.

Here’s what you can watch:

The White House would welcome evidence of declining inflation. Donald Trump has made rising prices a central point in his attacks on Vice President Kamala Harris and the Biden administration’s handling of the economy. That message has helped him gain a lead over Harris in some polls on this crucial issue.

But Harris is starting to eat into his lead in that area, with her support especially strong among female voters. The big question: Can inflation moderate enough to encourage undecided voters to support Harris?

Wall Street will also be watching closely. A low CPI figure would likely increase expectations that the Fed will cut rates twice more this year. The futures market was expecting a decline of 0.25 percentage points this morning during next month’s meeting.

HERE’S WHAT’S HAPPENING

OpenAI reportedly doesn’t expect to be profitable until 2029. Internal forecasts from the company behind ChatGPT suggest losses will reach $14 billion by 2026 before revenues catch up, according to The Information. In other artificial intelligence news, a startup led by OpenAI chairman Bret Taylor is said to be close to a deal to raise funds at a valuation of more than $4 billion.

TD Bank would have to pay a $3 billion fine for money laundering. The Canadian lender is also expected to agree to limit its growth in the United States to end federal allegations that it failed to properly monitor the banking activities of drug cartels, according to The Wall Street Journal. TD has said it is working to improve its anti-money laundering practices, and Bharat Masrani stepped down as CEO in August in part over the issue.

Brown University rejects a student proposal to divest companies linked to the Israeli military. The vote by the school’s board of directors (chaired by Bank of America CEO Brian Moynihan) was part of negotiations between protesters and administrators last spring. In addition, the University of Michigan’s student government voted to restore funding for campus activities and clubs after pro-Palestinian representatives withheld the money unless the school made similar divestitures.

New York State has a gun sales code

New York joins the list of states looking to use the banking sector to tackle gun violence.

Gov. Kathy Hochul signed a law Wednesday that would require the use of a special transaction code to mark the sale of firearms and ammunition. The initiative, whose underlying idea is something Andrew has been writing about for years, is gaining popularity among gun control advocates but has proven politically polarizing.

What New York Adopts: The bill would require gun shops to use a special dealer category code created in 2022 by the International Organization for Standardization. The state’s attorney general would have the authority to enforce the law, with possible fines of up to $10,000.

New York is the third state to require the use of the code, after California and Colorado. American Express, Mastercard and Visa have adopted it – after previously opposing the initiative.

Supporters say the code is a powerful tool to combat gun violence. The idea is to make firearm sales easier to track by separating them from other retail purchases. “New York sets a common standard across industries and ensures that clearly suspicious patterns of firearm purchases can be detected,” said Zellnor Myrie, a New York state senator and sponsor of the legislation.

But the initiative was met with strong opposition. The same day California began requiring the code, four Republican-led states — Georgia, Iowa, Tennessee and Wyoming — banned it. Other states, including Democratic-led New Jersey, are also considering bans.

Card processors initially opposed the creation of the code, arguing that Congress, not companies, should be responsible for gun control measures. Mastercard and Visa later said they would support it, but paused their decision amid opposition from Republican policymakers and Second Amendment advocates. The companies ultimately agreed to implement it to comply with California law.

At the national level, the code has adopted dueling legislation from Democrats and Republicans.

Musk’s robotaxi dream is getting closer to reality

In recent months, Elon Musk seems to have attracted as much attention for his support of Donald Trump as he does for running his companies.

But on Thursday he’s focused on a Tesla event in Hollywood highlighting the automaker’s robotaxi efforts — called “We, Robot” — in which he’ll unveil prototypes for a vehicle on which he’s betting the company’s future.

Musk sees robotaxis as the key to a new era in transportation. He said That Tesla’s so-called Cybercab would be an autonomous vehicle that underpins a new ride-hailing platform. Individual owners could make money by letting others use their vehicles while the cars would otherwise sit idle, an initiative Musk has called “a combination of Airbnb and Uber.”

It’s part of his push to make Tesla more than just a car manufacturer. In April, Musk said the company should be seen as an artificial intelligence robotics company. And he’s made big strategic moves in that direction, including plans to develop a cheaper Tesla model and cut the team working to expand its supercharger network.

Musk’s shift comes amid a slowdown in Tesla’s core business. Car sales represent the bulk of the company’s revenue, but the manufacturer has been hit by an industry-wide slowdown and increasing competition, especially from Chinese rivals.

That said, Musk has often downplayed the sales slowdowns, and Tesla just reported its best quarter ever in China, a key market.

Tesla faces serious hurdles. Experts warn that the company’s autonomous vehicle systems are far less capable than those of Alphabet’s Waymo and General Motors’ Cruise. Tesla is moving away from using advanced sensors like lidar, making them more susceptible to safety concerns: Federal authorities have linked hundreds of crashes and at least 29 fatalities this year to the use of Tesla’s existing driver assistance systems.

Analysts are also unsure whether the rent-a-Tesla network can turn a profit. Other companies, including Uber, are working on similar plans, and if too many owners make their cars available for robotaxi rides, the profits for them and for Tesla will likely be small.

Investors seem willing to give Musk the benefit of the doubt. The Tesla chief has a history of overhyping robotaxis — he said in 2019 that they would be on their way by the end of the year — but shares in the company have largely risen since he started promoting the robotaxis in April disclosure.

A Trump adviser’s plan to undermine Powell

Many economists and investors are concerned about Donald Trump’s plans for the Fed if he were to win in November, especially given his stated desire to have more say in the central bank’s interest rate policy.

Jay Powell, the Fed chairman, has strongly defended the institution’s political independence, and he was not a favorite during Trump’s presidency. Now Scott Bessent, head of hedge funds and Trump adviser, is proposing a measure that could undermine the Fed chairman.

Trump should nominate Powell’s replacement and seek Senate confirmation well before the Fed chief’s term ends in May 2026, Bessent told Barron’s. More about the idea:

Critics of Trump’s calls for more control over interest rate policy have attacked the proposal. Ed Yardeni, president of Yardeni Research and a longtime Fed observer, told Barron’s that this would “create a lot of noise in the market.”

READING THE SPEED

Offers

Elections, politics and policy

The best of the rest

We want your feedback! Send your ideas and suggestions by email to [email protected].

Adblock test (Why?)