Stock futures tumble as recession fears fuel calls for interest rate cut
(NEW YORK) — Stock futures plummeted on Monday as markets reckoned with a disappointing jobs report last week that fueled concern of a possible recession.
Each of the major stock indexes fell more than 2% in pre-market trading on Monday. The tech-heavy Nasdaq dropped nearly 6%.
The market downturn triggered calls for a large interest rate cut at the Federal Reserve’s next meeting in September. Some investors voiced an even more urgent request for a rare emergency rate cut as soon as this week.
(NEW YORK) — Shares in former President Donald Trump’s social media company fell more than 12% Wednesday morning on the heels of Tuesday’s presidential debate, which a CNN poll indicated was won by Vice President Kamala Harris.
Shares of Trump Media & Technology Group, the parent company of Truth Social, were trading Wednesday at the lowest level since the company first went public — a drop of more than 70% since a closing high of $66.22 on March 27.
As of noon, the company’s shares were selling for $16.29.
For some investors, Trump Media serves as a bellwether for the former president’s odds in the upcoming presidential election. When Trump was convicted on 34 felony counts in New York in May, the company’s stock price tumbled — but the stock surged in the days following the July presidential debate and the assassination attempt on the former president.
Analysts have said that the company’s stock performance is removed from the financial outlook of the company, which reported losing more than $16 million over a three-month period ending in June during which it only brought in $836,000 in revenue.
The stock price has been buoyed by a number of passionate individual investors who bought shares in the company to support Trump or because they believe in the company’s mission.
Next week, Trump faces a pivotal choice about his investment in the company. The lockup provision that barred him from selling his shares for the first six months since the company went public expires next week, meaning that Trump could begin selling his shares in the company as early as Sept. 19.
According to filings with the Securities and Exchange Commission, Trump owns approximately 115 million shares of the company, which are worth nearly $2 billion based on Wednesday’s stock price.
On paper, Trump has lost more than $4 billion in his stake over the last six months as the company’s stock price has declined.
A representative for Trump Media & Technology Group did not immediately respond to a request for comment from ABC News.
(NEW YORK) — A worldwide selloff jolted markets on Monday in the aftermath of a weaker-than-expected U.S. jobs report that elicited fear of an economic recession.
Japan’s main Nikkei 225 stock index dropped more than 12%, its worst day of trading since 1987. Each of the major U.S. stock indexes plummeted more than 2%.
Nvidia, a chipmaker that had helped catapult market gains so far this year, dropped as much as 14% before recovering some of those losses.
Renewed warnings of an imminent recession arrive after years of doomsday forecasts that stretch back to the staggering rise of inflation three years ago. So far, the U.S. has defied alarm and sustained solid growth, proving many analysts wrong.
Economists who spoke to ABC News disagreed about whether current economic conditions warrant serious concern about a possible recession or foretell resilience of the kind that has followed previous bouts of uncertainty.
Some analysts voiced optimism, pointing to continued economic growth and a tendency for markets to overreact in the face of negative news. Others cautioned of a monthslong labor market cooldown that indicates wider economic weakness and a potential downturn.
“You can see the probability of a recession moving slightly higher, but for me it’s nowhere near the level at which you jump out of the window because the house is burning,” Olu Sonola, the head of U.S. regional economics at Fitch Ratings, told ABC News. “You can still safely take the elevator or the stairs.”
The stock market downswing was set off by a disappointing jobs report on Friday. Employers hired 114,000 workers in July, falling well short of economist expectations of 185,000 jobs. The unemployment rate climbed to 4.3%, the highest level since October 2021.
The unemployment rate has soared this year from 3.7% to 4.3%. That trend has triggered 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.
Some economists have doubted whether the trend signals a recession in this case. That’s because the rising unemployment rate owes more to an increase in eligible workers that has expanded the labor pool rather than layoffs that have reduced the number of people with jobs.
The labor market is still growing and the unemployment rate remains at a historically low level.
“I still think we’re in the soft-landing stage,” Stephan Weiler, a professor of economics at Colorado State University and a former Fed research officer, told ABC News, predicting an outcome in which inflation returns to normal and the economy averts a recession.
“Some people expected this recession two years ago or more, and it still hasn’t come about,” Weiler added.
Some economists rebutted that rosy outlook, however. Nancy Lazar, chief global economist at investment firm Piper Sandler, said the uptick in the unemployment rate marks a key piece of evidence indicating a recession will take place before the end of the year.
“It wasn’t just a one-month number,” Lazar said, referring to the jobs report on Friday. “This has been a rising trend.”
The recent labor market cooldown took hold roughly two years after the Federal Reserve began raising interest rates in March 2022 as part of an effort to dial back inflation. On average, Lazar said, the economy dips into a recession two-and-a-half years after the Fed begins a series of rate hikes.
“We’ve been expecting a recession to unfold,” Lazar added, acknowledging that Piper Sandler had previously forecasted a recession as early as the end of 2023. The firm had erred in part because it underestimated the staying power of pandemic-era government stimulus, she said.
“We’re now at the highest risk of the economy moving into a recession,” she added.
On Sunday, Goldman Sachs economists raised the probability of a U.S. recession in the next year from 15% to 25%.
The market downturn has triggered calls for a large interest rate cut at the Fed’s next meeting in September. Some investors have voiced an even more urgent request for a rare emergency rate cut as soon as this week.
In theory, interest rate cuts would ease borrowing fees, unleash consumer demand and business investment and help the economy avert a downturn.
Economists, however, said an interest rate cut likely would not help the economy avoid an imminent recession, since rate changes typically affect the economy only after a period of several months.
Pointing to the market drop-off on Monday, economists said investors have a track record of overreacting to emerging trends in the economy. But, experts added, market swings can help bring about a recession anyway.
“Markets always tend to overreact to the upside and overreact to the downside,” said Sonola, adding that market sentiment may in turn weigh on business investment and economic activity. “It can be a self-reinforcing feedback loop.”
(WASHINGTON) — On the road to the 2024 presidential election, Vice President Kamala Harris and former President Donald Trump’s views on electric vehicles (EVs) have offered two different visions of America’s automotive future.
Harris has been vocally supportive of the administration’s push to expand access and manufacturing of EVs in the U.S., while Trump has pledged to undo those policies.
Earlier this week, however, Trump appeared to soften his staunch anti-EV views when he spoke to Tesla CEO Elon Musk on X.
“You do make a great product,” Trump said to Musk, referring to Tesla vehicles. “That doesn’t mean everybody should have an electric car, but these are minor details … your product is incredible.”
Before his conversation with Musk, the former president had maintained that electric vehicle production and sustainable energy sources are bad for the economy. He has vowed on “day one” to repeal the Biden-Harris administration’s sustainable energy policies in favor of domestic oil production.
“I will end the electric-vehicle mandate on day one, thereby saving the U.S. auto industry from complete obliteration,” Trump told the audience at the Republican National Convention in July.
Biden-Harris pro-EV policies
While there is no federal electric vehicle mandate, the Biden-Harris administration has issued regulations calling on automakers to reduce emissions produced by their fleets, including by producing more electric and hybrid vehicles.
The administration’s 2022 Inflation Reduction Act – which Harris cast the tie-breaking vote to pass in Congress – marks the largest climate investment in United States history.
The legislation aims to reduce U.S. carbon emissions by 40% by 2030 and channels $370 billion into wind, solar, battery and electric vehicle production over the next 10 years.
Through the Inflation Reduction Act, candidate Harris has advocated for substantial investments in domestic electric vehicle car manufacturing, including funding for charging stations, and offering consumer incentives to buy EVs.
In May, Harris traveled to Detroit, Michigan, where she announced $100 million for small- and medium-sized auto manufacturers to upgrade their facilities for EV production.
“This investment will help to keep our auto supply chains here in America,” Harris said then, “which strengthens America’s economy overall and will keep those jobs here in Detroit.”
If elected, Harris is expected to continue advocating for eco-friendly fuel and emissions standards, increase funding for research and development for EV technology, and focus on leveraging EV industry growth to create more jobs.
An ABC News request to the Harris campaign for comment about their EV plans was not immediately returned.
EV sales impact on economy, climate
More Americans are starting to embrace EVs. Sales of electric cars and trucks last year totaled 1.4 million in 2023, up from 1 million in 2022, U.S. Energy Secretary Jennifer Granholm announced in January.
“The progress that’s been made is phenomenal,” Albert Gore III, executive director of the nonprofit coalition Zero Emission Transportation Association, told ABC News. “The United States has been a leader in electric vehicle manufacturing and also has really been a leader in a lot of good policymaking with regard to investment in every part of the EV and battery supply chain.”
Gore also noted that electric vehicles can have a significant impact on the economy, saying, “There’s a huge amount of opportunity.”
The industrial Midwest, Southwest and Southeast already have seen investment and job opportunities in the production of minerals and battery components for EVs. Georgia, Nevada, Texas, Ohio and Kansas have grown as domestic hubs for battery manufacturing, while Georgia, Tennessee, Ohio and Arizona have risen as leaders in EV manufacturing.
“So a lot of really exciting economic opportunity in these places, and oftentimes it’s multiple parts of the supply chain,” Gore added.
Last month, the Biden administration awarded nearly $2 billion in grants to General Motors, Stellantis and other automakers to expand electric vehicle manufacturing in eight states, including key election swing states Michigan, Pennsylvania and Georgia.
“It’s really important that we create a transportation system where our cars are made by union workers with good jobs, which we’re starting to do courtesy of the Biden-Harris Inflation Reduction Act,” Craig Segall, former deputy executive officer of the California Air Resources Board and current vice president of Evergreen Action, a nonprofit climate change advocacy group, told ABC News.
“We must stabilize the climate and America should lead that effort,” Segall added.
Segall believes a Harris-Walz White House promises a continuation of the Biden administration’s push for EV manufacturing, and a chance to further those goals.
“When I think about what we could have at the end of her first term, I think we’re talking about much clearer skies and much healthier communities,” Segall said.
Because they have zero emissions, electric vehicles typically have a smaller carbon footprint than gasoline cars, even when accounting for the electricity used for charging, according to the Environmental Protection Agency.
Obstacles to EV sales in the U.S.
Despite the push by carmakers and government officials, the EV market in the U.S. is still small compared to sales of gas-powered vehicles. Of the roughly 286 million cars on the road in 2023, just 9.3% were electric vehicles, according to Experian Automotive’s Market Trends report.
“The EV market is currently going through a bit of a rough patch,” Jessica Caldwell, head of insights at Edmunds, told ABC News.
Caldwell explained that consumers’ hesitancy to buy electric vehicles largely surrounds the charging infrastructure, range, prices, and battery longevity.
“In order for its buyer base to evolve from early adopters to mainstream consumers, EVs will likely rely on continued government support to hit volume sales targets across all brands,” Caldwell said. “Even with the enthusiastic backing of a fresh presidential administration, enacting such a dramatic shift in the vehicle market is a massive undertaking and the politically charged rhetoric surrounding EVs will likely place extra pressure on any new policy decisions.”
In order to combat consumer hesitancy, electric vehicles need to be offered at every price range, according to Alan Jenn, an assistant professor at the UC Davis Institute of Transportation Studies.
“In order to see EVs get even more mainstream than they are now, we want to see a larger release of vehicles in segments that are more affordable,” Jenn told ABC News.
The average transaction price for electric cars in June 2024 was $56,371 versus gas-powered vehicles at $48,644, according to Kelley Blue Book.
Segall believes a Harris presidency could bring federal investments and further tax credits to lower the costs of EVs.
Currently, the government offers tax credits up to $7,500 for eligible new electric vehicles and up to $4,000 for eligible used electric vehicles, according to the Department of Energy.
“They’re really well placed to stop paying for gas forever right now, and that’s only going to be a better story,” Segall said.