FTC seeks to block Kate Spade, Michael Kors merger
The Michael Kors Store on Rodeo Drive on Feb. 23, 2017 in Beverly Hills, Calif. (Fg/bauer-griffin/GC Images via Getty Images, FILE)
(NEW YORK) — The Federal Trade Commission is asking a federal judge in New York to block the $8.5 billion merger of Tapestry, the company behind Coach, Kate Spade, and Capri, which controls Michael Kors.
In April, the FTC sued to block the sale, arguing that these brands dominate what’s known as the “accessible luxury” market and that if they combined, consumers would suffer by paying higher prices.
“This has to be the first time the focus of a federal court hearing turned to a $279 Kate Spade tote described as ‘colorful, joyful, feminine, green and white seen on Emily in Paris,” ABC News senior investigative reporter and correspondent Aaron Katersky said on Good Morning America Tuesday.
Tapestry argues the FTC is ignoring the reality of a marketplace, in which consumers have a lot of choices, suggesting it takes a mere stroll through Bloomingdale’s or Macy’s to see Gucci, Kors and Calvin Klein bags fighting for attention.
Michael Kors himself testified last month during a hearing, telling the judge there’s already plenty of competition for handbags, noting that he learned about one brand when he saw a photo of pop superstar Taylor Swift wearing an Aupen bag similar to those made by Kate Spade.
Kors also testified his handbags have “reached a point of brand fatigue” and a lawyer arguing in favor of the merger said it would revitalize the Michael Kors brand, so consumers have yet another choice. The goal, he said, is to sell more handbags to consumers.
The judge took these arguments under advisement and could rule at any time.
(NEW YORK) — Borrowers have waited years for a sign of relief from high interest rates for everything from credit card loans to mortgages. The wait may come to an end this week.
Investors widely expect the Federal Reserve to cut interest rates at a meeting on Wednesday. The move would dial back the central bank’s benchmark rate from a 23-year high, reversing some of the rate hikes initiated three years ago in an effort to fight inflation.
Questions, however, remain about the size of the rate cut, what it means for borrowers and how it may impact the 2024 presidential race.
Experts spoke to ABC News about what to know ahead of the potential interest rate cut.
Why is the Fed expected to cut interest rates?
In 2021, the Fed began aggressively raising interest rates in an effort to bring inflation under control. The policy has largely succeeded. Inflation has slowed dramatically from a peak of about 9% in 2022, though it remains slightly higher than the Fed’s target of 2%.
Meanwhile, the job market has slowed. A weaker-than-expected jobs report in each of the last two months has stoked concern among some economists. The unemployment rate has ticked up this year from 3.7% to 4.2%.
Those trends have shifted the Fed’s focus away from controlling inflation and toward ensuring a healthy job market.
In theory, lower interest rates help stimulate economic activity and boost employment; higher interest rates slow economic performance and ease inflation.
“The Fed has been very much guided by data,” Anastassia Fedyk, a professor of finance at Haas Business School at the University of California Berkeley, told ABC News. “ Inflation numbers in the last few months have started looking good, and things are not looking so hot in terms of the jobs reports.”
What will the size of the rate cut be?
The chances of an interest rate cut at the Fed’s meeting next week are all but certain, according to the CME FedWatch Tool, a measure of market sentiment.
Market observers are divided nearly down the middle over whether the Fed will impose its typical cut of a quarter of a percentage point, or opt for a larger half-point cut. The tool estimates the probability of a quarter-point cut at 51% and the odds of a half-point cut at 49%.
“There is that much uncertainty because it seems not all Fed officials are of the same opinion,” Gregory Daco, chief economist at accounting firm EY, told ABC News.
Some Fed policymakers appear to prefer a gradual approach to rate cuts in light of easing inflation and a resilient, albeit weakened, labor market, Daco said. By contrast, others seem to favor a large initial cut that would help avert a more severe job market slowdown.
What would a rate cut mean for credit card fees, mortgage rates?
An interest rate cut would mark a major milestone as the Fed shifts toward a lowering of rates and an easing of costs for borrowers, experts said. Still, they added, the initial rate cut would not substantially lessen loan payments.
“In the grand scheme of things, it’s peanuts,” Daco said.
Nevertheless, some loan relief has already emerged in anticipation of a gradual lowering of interest rates over the coming months.
Mortgage rates fell last week to their lowest level since April 2023, Freddie Mac data showed. The 10-year treasury yield, which helps set the level of many consumer loans, has plummeted nearly a percentage point since July.
“This is a sign of a trend that’s going to start, but it’s going to take a lot longer and be milder than an immediate transition,” Fedyk said.
What would a rate cut mean for the November election?
Typically, lower interest rates make borrowing less expensive for businesses and consumers, propelling companies to invest in new projects and everyday people to stretch for bigger purchases. That all should help propel economic growth and buoy consumer optimism.
In turn, an economic surge could benefit the incumbent party, dispelling concern about a recession and improving the livelihoods of everyday people, some analysts previously told ABC News.
However, the benefits of a forthcoming rate cut could prove more limited, since rate moves take hold after a period of delay that can last months, analysts said.
The most recent Democratic presidential candidate who failed to win reelection, Jimmy Carter, lost his bid amid a historic series of rate hikes at the Fed.
A rate cut would deviate from the policy approach taken by the Fed prior to many recent presidential elections, a Reuters analysis found. Policy rates were left unchanged for six to 12 months before the 2020, 2016, 2012 and 2000 U.S. presidential elections, according to Reuters.
To be sure, the Fed says it bases its decisions on economic conditions and operates as an independent government body.
When asked about the 2024 election at a press conference in Washington, D.C., in December, Fed Chair Jerome Powell said, “We don’t think about politics.”
(NEW YORK) — Inflation bedeviled the U.S. economy for years, but a cooldown in price increases has shifted concern toward a different foe: Unemployment.
Hiring remains solid but has slowed dramatically from a peak achieved during the nation’s rebound from the pandemic. The unemployment rate still hovers near historic lows but has climbed markedly this year.
A jumbo-sized interest rate cut at the Federal Reserve last week was viewed by some economists as an effort to fend off rising joblessness, even as Fed Chair Jerome Powell offered up reassurance.
“The U.S. economy is in good shape,” Powell said.
Mixed signals sent by the nation’s labor market pose a high-stakes question for tens of millions of jobholders as well as millions of people seeking work: Where are conditions headed from here?
Economists who spoke to ABC News disagreed sharply about the outlook.
Some acknowledged a slowdown in recent months but dismissed worries about its implications, pointing to resilient job growth and other healthy metrics that suggest the economy continues to hum. Others, however, emphasized their concerns about the trajectory of labor conditions and what it indicates about potential layoffs.
“The job market is cooling but it has not frozen up,” Mark Hamrick, senior economic analyst at Bankrate, told ABC News. “This is a situation that’s seen as relatively stable but results may vary.”
Economists widely acknowledge that the labor market has slowed. That trend doesn’t come as a surprise after a years-long period of high interest rates, which typically weigh on economic activity and company hiring, some economists told ABC News.
In 2022, the pandemic rebound triggered a blazing-hot job market that saw employers add an average of nearly 400,000 jobs per month. Over a three-month period ending in August, employers added an average of about 116,000 jobs per month.
The unemployment rate has climbed this year from 3.7% to 4.2%, though it remains relatively low by historical standards.
The sky-high job growth was bound to slow, in part because the economy lacked room for expansion after employers had hired the workers they needed and a dwindling number of unemployed people remained on the sidelines, according to Valerie Wilson, a labor economist who runs the program on race, ethnicity and the economy at the left-leaning Economic Policy Institute.
“We expected job growth at some point to slow down,” Wilson said. “To me, that alone isn’t cause for concern.”
The uptick in unemployment isn’t cause for concern yet either, Wilson said, highlighting data that demonstrate strength in the labor market and across the wider economy.
The share of job holders between the ages of 25 to 54 — known as the “prime age” for workers — stands at a 23-year high. U.S. gross domestic product grew at a solid pace over three months ending in June, U.S. Bureau of Economic Analysis data showed. A relatively low number of people has claimed unemployment benefits in recent weeks, suggesting few layoffs.
“I don’t think there’s an immediate cause for concern,” Wilson said.
Some economists disagreed. They pointed to a recession indicator known as the “Sahm Rule,” which says that a rise of 0.5 percentage points in the unemployment rate within a 12-month period typically precedes a recession.
“When it comes to the Sahm Rule, what you see in the data is when the unemployment rate starts rising, it usually has a lot of momentum and takes a while to stop,” Nick Bunker, economic research director for North America at Indeed Hiring Lab, told ABC News. “That’s the concern.”
The rule’s originator, former Fed economist Claudia Sahm, has questioned whether it applies in this case, in part because unemployment remains low.
Economists who are worried also pointed to data suggesting that the employment situation may not be as strong as some contend.
Despite low unemployment, more than 10% of Americans can’t find enough work, meaning for instance that they are working part-time but want full-time jobs or have fallen out of the labor force because they’ve stopped looking for work, Julia Pollak, chief economist at ZipRecruiter, told ABC News.
“Rising unemployment is not just a blip,” Pollak said.
The exact path forward for the job market is difficult to predict, some economists said. Last week’s interest rate cut could help jumpstart economic activity, some noted; while others said such policy typically takes effect on a lag that will render it irrelevant in the near term.
“The future is uncertain,” Bunker said. “I wouldn’t say we’re moving in this great direction where everything will be completely fine. But I wouldn’t fall into the trap of saying there’s a rising unemployment rate so we’re certain to be in a recession soon.”
(NEW YORK) — Apple is unveiling its new iPhone 16 on Monday replete with artificial intelligence-driven features as the company introduces the buzzy technology into its signature smartphone.
The Cupertino, California-based company is also releasing fresh versions of its Apple Watch and Apple AirPods.
The announcements arrive months after Apple raised the curtain on an AI-fueled operating system to be used across many of its products.
The generative AI capability, called Apple Intelligence, will allow users to summarize messages and enhance photos, among other features, the company said.
The product rollout on Monday marks the first time consumers get a look at exactly how the firm is incorporating AI into some of its top items, analysts told ABC News.
“There is still a large question mark around AI of, ‘Should I care?’” Ben Bajarin, an analyst at research firm Creative Strategies, told ABC News. “That’s the question that the industry has to address.”
For Apple, Bajarin added, the latest round of product updates are a “big deal.”
Investors, however, appeared unimpressed about an hour after the product release event began. The stock dipped roughly 1.5%.
Here are the new products released by Apple on Monday:
Apple Watch Series 10
Nearly 10 years after Apple announced the debut of its Apple Watch, the company released its Series 10 model, featuring a wider display, brighter screen and new processor.
The display screen on the Series 10 is as much as 30% larger than previous models of the Apple Watch, the company said. The larger display eases typing and reading on the product, Apple said.
Meanwhile, the screen is nearly 40% brighter than previous models. The display updates once per second in always-on mode instead of once per minute.
The updates are powered by a new chip: the S10 SiP. The improved processing enables better crash and fall detection, among other benefits, the company said.
The Series 10 Apple Watch starts at $399. It can be preordered today and will be available beginning on Sept. 20, the company said.
The company also released a new model of its high-powered Apple Watch Ultra. The Apple Watch Ultra II starts at $799. It can also be preordered today and will be available on Sept. 20.
AirPods 4
The company released AirPods 4, the latest model of its ear-bud headphones. The new product features the capacity for noise cancellation, as well as an upgraded processor and improved surround sound, the company said.
AirPods 4 allows users to nod their head “yes” or “no” in response to prompts from Siri, Apple said. Meanwhile, the product uses what Apple calls “noise isolation” in order to automatically remove background noise during a phone conversation.
When a user begins a conversation with someone in his or her immediate environment, AirPods 4 automatically turns down music or other media perviously playing through the ear buds, the company said.
A new H2 chip fuels the new features, Apple said.
AirPods 4 begin at $129. A version of the ear buds that includes noise cancellation will cost $179. The product is available for preorder and will go on sale on Sept. 20, the company said.
An enhanced version of the product, AirPods 4 Max, will begin at $249.
iPhone 16
The iPhone 16 will incorporate Apple Intelligence for summaries of emails and texts, aid in composing messages, enhanced camera functions and improved Siri, the company said.
The generative AI technology designed for iPhone 16 will help users draft or revise text written in third-party apps, such as Slack messages or Goodreads reviews, Apple said.
In addition, users can create novel emojis by writing a description of the desired animation.
Apple Intelligence will also improve the function of the iPhone 16 camera, allowing users to instantly learn information about the subject captured in a photo, such as a restaurant’s hours of operation or a dog’s breed, the company said.
Meanwhile, Siri will draw on Apple Intelligence to better understand prompts, even when a user stumbles on their words, the company. The new version of Siri will also respond to written prompts.
Apple Intelligence will be available in a U.S. dialect of English this year, and is expected to be released in other dialects of English next year. Months later, the company expects to release versions of Apple Intelligence in Mandarin Chinese, Spanish and other languages, the company said.
Beyond AI, the iPhone 16 will feature a wider screen display and new chip. The iPhone 16 will boast a 6.1-inch screen, while the iPhone 16 Pro will feature a 6.7-inch screen.
The new A18 chip will process up to 30% faster than the chip built into the company’s previous smartphone model.
The iPhone 16 begins at $799, while the high-powered iPhone 16 Plus begins at $899.
The price of the iPhone 16 matches the cost of last year’s iPhone 15. The unchanged price aligns with a trend initiated by Apple in recent years, said Bajarin of Creative Strategies.
“This is a priority for them to keep pricing in line,” Bajarin said.
