What’s Up? (Oct. 23-29)
Musk at the Helm
Elon Musk ushered Twitter into a new era on Thursday, completing a $44 billion deal to acquire the service. This outcome was hardly inevitable: Mr. Musk’s bid in April to buy Twitter was followed by months of reversals and lawsuits that brought the two parties to the brink of a trial. But Mr. Musk met an Oct. 28 deadline set by a judge to carry out his purchase, and he immediately began cleaning house, firing at least four top executives. The swift cuts suggest that Mr. Musk is going to move quickly to carry out his vision — and by taking Twitter private, the mercurial billionaire is not beholden to shareholders or required to make regular public disclosures as he does so. What he is planning to do remains somewhat hazy, but Mr. Musk has described himself as a “free speech absolutist” and said he would reverse the ban on former President Donald J. Trump from the platform. Mr. Trump said Thursday evening that he had been told his account would be restored on Monday.
Tech Companies Feel Economic Pain
Earnings reports last week brought grim tidings from Silicon Valley. Once relatively insulated from the consequences of inflation and cooling demand, even the biggest tech companies are now experiencing the same travails as much of the rest of the economy. Meta’s quarterly profit fell 50 percent from a year earlier. Microsoft reported its slowest revenue growth in five years. And Alphabet, Google’s parent company, reported a profit for the latest quarter that was down 27 percent from a year earlier. These companies still raked in billions in profits. But they have also collectively shed trillions in market value so far this year. And their problems go beyond rising prices and changing consumer habits. Many of them are struggling with the consequences of Apple’s privacy changes, which have limited the way tech companies can target advertising, and few have hit on fresh, profitable ideas for their businesses in recent years.
Making Sense of the Economic Data
G.D.P., P.C.E, E.C.I. — if this sounds like alphabet soup to you, read on. Fresh economic data released last week created a complex, and at times seemingly contradictory, portrait of the global economy. The U.S. economy returned to growth in the third quarter, lending some credibility to arguments that it is not yet in a recession — though that data belied other troubling signs in Thursday’s gross domestic product report. Similarly, economists warned not to put too much stock in Germany’s report on Friday that its economy expanded in the third quarter. Reports on the same day by both France and Spain showed that their economies had slowed, and economists believe that Europe is heading for a serious slowdown. New U.S. inflation numbers also landed on Friday, adding even more uncertainty to the outlook for the economy. Prices (in the Personal Consumption Expenditures index) are still climbing at a concerning pace, and wages (in the Employment Cost Index) ticked up, too. There may be some mixed signals from these reports, but the broad takeaway is that economies around the world are weakening.
What’s Next? (Oct. 30-Nov. 5)
Another Big Rate Increase
The Federal Reserve is poised to announce another three-quarter-point increase to its benchmark rate at its meeting this week, the fourth consecutive increase of that size. Not long ago, policymakers at the Fed expected to debate slowing the pace of the increases at their November meeting. But economic data since their last gathering has suggested that the labor market is still strong and that inflation remains stubbornly persistent, prompting them to delay any discussion of easing. Among officials’ foremost concerns now is that inflation could become a permanent fixture of the U.S. economy if they allow it to linger too long. The more Americans come to expect high prices — a troubling possibility suggested by some food companies’ quarterly earnings reports, for example — the more their behaviors will reinforce inflation.
Taking the Labor Market’s Temperature
This week’s jobs report is expected to show a resilient labor market, with employers adding an estimated 200,000 jobs in October. That would be a slight moderation from the 263,000 jobs added in September, which itself was a slight moderation from the month before, when 315,000 were added. So job growth is slowing, but perhaps not enough for Fed officials, who have said that the central bank is keeping a close eye on jobs data as it considers how aggressive to be. There have been some indications to that effect: In the last month, many companies have announced hiring freezes or slowed hiring.
A Boon for Big Oil
The global economy has its winners and losers, and as high energy prices driven in part by the war in Ukraine squeeze businesses and households, particularly in Europe — and particularly as temperatures drop — oil companies are the clear winners. Last week, Shell, TotalEnergies, Exxon Mobil and Chevron announced big quarterly profits, with Shell and Total reporting profits more than double what they earned in the same period a year earlier. BP is poised to complete the picture this week: Last quarter, the company beat analysts’ expectations, bringing in $8.5 billion in profit. With the midterm elections nearing, and gas prices, and the economy more broadly, playing a large role in voters’ thinking, these windfalls could strengthen President Biden’s calls for oil companies to increase output and cut prices.
Mortgage rates rose above 7 percent, their highest level since 2002. Adidas cut ties with Kanye West last week after his antisemitic comments, ending a partnership that may have been worth close to $100 million annually for the rapper. Credit Suisse is overhauling its business as it tries to recover from years of losses and scandals.