The daily business briefing: August 2, 2018
The Fed holds interest rates steady, Tesla shares jump after renewed promise of profitability, and more
- 1. Fed holds interest rates steady, with cut expected in September
- 2. Tesla shares jump after Musk promises profitability is near
- 3. U.S. stock-index futures lose ground on fresh trade war concerns
- 4. Fidelity to launch first mutual funds charging zero for expenses
- 5. Conde Nast to close three magazines, but marquee titles safe
1. Fed holds interest rates steady, with cut expected in September
Federal Reserve policy makers held interest rates steady between 1.75 percent and 2 percent as expected at the end of a two-day meeting on Wednesday. The unanimous statement by Fed Chairman Jerome Powell and other leaders of the central bank showed little change from the current plan to raise interest rates at least two more times this year. The next hike is expected in September as the economy grows strong enough to further unwind measures the Fed took to give the economy a boost out of the Great Recession. Higher interest rates are designed to keep the economy from overheating. President Trump recently publicly criticized the Fed for raising rates despite the threat of rising trade tensions, which Powell said have added "considerable uncertainty" to Fed deliberations. "It's hard to know how this is going to turn out," Powell said.
2. Tesla shares jump after Musk promises profitability is near
Tesla shares jumped by 9 percent in after-hours trading on Wednesday after the electric-car maker reported mixed quarterly results but renewed its promise that profitability was near. Tesla, which is ramping up production of its first mass-market sedan, the Model 3, said it lost $718 million in the quarter, up from $336 million in the same period last year. Tesla CEO Elon Musk struck a calmer tone on a post-report conference call than he did in his confrontational and widely criticized May call. He apologized to two analysts who were cut off in that call, and said the company would make a profit in the second half of the year.
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3. U.S. stock-index futures lose ground on fresh trade war concerns
U.S. stock futures dropped early Thursday on renewed fears of an intensifying trade war with China. On Wednesday, the Trump administration announced that President Trump had asked U.S. Trade Representative Robert Lighthizer to consider raising proposed tariffs on $200 billion in Chinese goods to 25 percent rather than 10 percent. "The president is going to continue to hold China responsible for their unfair trade practices," said White House Press Secretary Sarah Huckabee Sanders. Chinese foreign ministry spokesman Geng Shuang warned that Beijing would "definitely fight back." Futures for the Dow Jones Industrial Average fell by about 0.3 percent, as did futures for the S&P 500. Nasdaq-100 futures declined by 0.4 percent.
4. Fidelity to launch first mutual funds charging zero for expenses
Fidelity Investments on Wednesday announced that it would soon launch two mutual funds with annual expense ratios of 0 percent, making them essentially free to own. The funds, which debut on Aug. 3, include one index fund covering the whole U.S. stock market, and another focusing on international stocks. Fidelity plans to make money by lending securities to broker-dealers and other institutions, and by providing other services to people who invest in the funds. The funds are the first in the highly competitive mutual fund industry to charge nothing for maintenance, although that has been seen as the logical next step, as fees have been dropping on Wall Street while index funds grow in popularity over more expensive actively managed funds.
5. Conde Nast to close three magazines, but marquee titles safe
Conde Nast reportedly plans to put three of its 14 magazines — Brides, Golf Digest, and W — up for sale, The New York Times reported Wednesday, citing three executives. Over the last decade, the once cash-rich publisher has closed Details, as well as the print versions of Self and Teen Vogue, in an ongoing effort to save money. It also cut 80 employees last year and combined photo and research departments of some magazines, but the savings were not enough. Robert A. Sauerberg Jr., the company's chief executive, plans to address senior staff members on Aug. 8 to discuss the situation. Conde Nast's marquee titles, including Vogue, Vanity Fair, and The New Yorker, reportedly are safe.
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Harold Maass is a contributing editor at The Week. He has been writing for The Week since the 2001 debut of the U.S. print edition and served as editor of TheWeek.com when it launched in 2008. Harold started his career as a newspaper reporter in South Florida and Haiti. He has previously worked for a variety of news outlets, including The Miami Herald, ABC News and Fox News, and for several years wrote a daily roundup of financial news for The Week and Yahoo Finance.
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