Dow closes at record high, defying fears of panic sparked by Trump’s tariff threat
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(NEW YORK) — The Dow Jones Industrial Average closed at a record high on Tuesday, achieving the milestone less than 24 hours after a tariff pledge from President-elect Donald Trump sparked fears of a panic in the stock market.
The S&P 500 also closed at a record high, surging about 0.55% on Tuesday to end the day at 6,021.63. The Dow ticked up about 0.25% during the day’s trading, closing at 44,860.31.
The tech-heavy Nasdaq advanced about 0.60%, ending the trading session at 19,174.30.
Trading began on Tuesday hours after Trump announced plans to slap tariffs on Canada, China and Mexico by executive order on the first day of his administration.
Trump late Monday said he would charge Mexico and Canada with a 25% tariff on all products coming into the United States until action is taken by those countries to stem illegal immigration and the overflow of drugs across the border.
For China, Trump said that he’d impose an additional 10% tariff on products coming to the U.S.
Economists widely forecast that tariffs of this magnitude would increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers.
Trump’s tariffs would cost the average U.S. household about $2,600 per year, according to an estimate from the Peterson Institute for International Economics.
The major indexes were bolstered by steady performance among some major firms.
Apple — which assembles many of its products in China but enjoyed key tariff exemptions during Trump’s first term — ticked up 0.12% on Tuesday. While Nvidia, the AI chipmaker that imports most of its semiconductors from Taiwan, rose 0.66% during the trading session.
Tesla, the electric vehicle company led by Trump-ally Elon Musk, has a manufacturing plant in Shanghai, China. Shares of the EV maker ticked down 0.11% on Tuesday.
ABC News’ Lalee Ibssa , Kelsey Walsh, and Soo Rin Kim contributed to this report.
(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) — As fast food chains continue to drop prices on popular menu items in hopes of enticing hungry customers, Popeyes is entering the arena with a new $5 deal.
The popular fried chicken chain announced new value offers on Monday, which includes an order of three pieces of its signature bone-in chicken for just $5.
The fast food franchise, which first started in New Orleans in 1972, timed the news in tandem with National Chicken Month.
“We first saw the ‘Value Wars’ taking off early in the summer, as consumers were looking for ways to indulge in their favorite foods, without the high price tag,” the company wrote in a blog post Monday. “This made our team think, how can we continue to serve our food, without compromising on the quality we are known for, but at a price our customers will be happy with?”
“This new promotion celebrates what Popeyes does best — Fried Chicken,” the company continued. “Each piece is expertly marinated in Popeyes signature blend of savory Louisiana herbs and seasonings, then battered in a crunchy southern coating and fried to golden brown perfection.”
According to Popeyes, the $5 deal is available at participating locations nationwide in restaurant, through the Popeyes app, or online.
“As consumers look for more ways to enjoy their favorite meals without breaking the bank, Popeyes is excited to join this conversation centered around guest satisfaction,” the company wrote.
The news comes on the heels of McDonald’s extending its $5 value meal and similar offers from competitors like Wendy’s, Burger King and even Chili’s.
(NEW YORK) — Tens of thousands of dockworkers are set to strike as soon as Oct. 1, potentially snarling dozens of ports along the East and Gulf coasts with major implications for the U.S. economy.
A shutdown of the ports would cost the economy up to $4.5 billion each day, according to a report from JPMorgan senior equity analyst Brian Ossenbeck.
The East and Gulf Coast ports account for more than half of U.S. container imports, facilitating the transport of everything from toys to fresh fruit to nuclear reactors, Ossenbeck found.
A strike lasting only a handful of days would wreak little damage, but a prolonged work stoppage of several weeks or months could drive up prices for some goods and cause layoffs at manufacturers as raw materials dry up, experts said.
“The supply chain will start to get shocked after a couple of weeks,” Adam Kamins, a senior director of economic research at Moody’s Analytics, told ABC News. “If it gets beyond that, we’ll start to see some much more signifiant implications.”
The International Longshoreman’s Association, the union representing 45,000 East and Gulf Coast dockworkers, did not respond to ABC News’ request for comment. The U.S. Maritime Alliance, an organization bargaining on behalf of the dockworkers’ employers, declined to respond to a request for comment.
President Joe Biden retains the power to prevent or halt a strike under the 1947 Taft-Hartley Act. Trade organizations sent a letter to Biden earlier this month urging the White House to intervene.
The White House did not respond to ABC News’ request for comment about the economic implications of a potential strike. In response to a different reporter’s request on Friday for comment, a White House spokesperson said the Biden administration does not intend to intervene but is “monitoring and assessing” ways to address the potential impact of a strike for the nation’s supply chain.
“The president supports collective bargaining and believe it’s the best way for American workers and employers to come to agreement. We continue to encourage the parties to continue negotiating towards an agreement that benefits all sides and prevents any disruption. We’ve never invoked Taft-Hartley to break a strike and are not considering doing so now,” White House spokesperson Robyn Patterson said in part.
Here’s what to know about how a dockworker strike could impact consumers and workers:
Higher inflation
A prolonged East and Gulf Coast port strike could moderately increase prices for a range of goods, experts told ABC News.
That upward pressure on prices would result from a shortage of products caught up in the supply chain blockage, leaving too many dollars chasing after too few items, they added.
Food products are especially vulnerable to an uptick in prices, since food could spoil if suppliers sent the products ahead of time to avert the strike impact as they have done for some other goods, Kamins said.
As much as 75% of the nation’s imported bananas come through ports on the East and Gulf Coasts, threatening the supply of a highly perishable product, Jason Miller, a professor of supply-chain management at Michigan State University, told ABC News.
“It’s simply infeasible to route those bananas through the West Coast ports,” Miller said.
A significant share of the nation’s imported auto parts come through the ports at issue in a potential strike, which could cause an increase in car prices if the strike persists for more than two weeks, Kamins said.
Potential price increases would likely be moderate but may nudge the Federal Reserve to hold off on interest rate cuts expected in the coming months, Kamins added.
“We’re not talking about prices skyrocketing by any means,” Kamins said, but even a few tenths of a percentage point tacked onto the annual inflation rate could scare off the Fed. “If it has an outsized effect on the consumer’s psyche and the Fed’s psyche, that in and of itself creates recession risks,” he said.
Manufacturing disruption and layoffs
A strike lasting a matter of months could cause a shortage of raw materials that brings some manufacturing activity to a halt, leading to layoffs at affected plants as well as in related industries such as shipping and logistics, some experts said.
“If there aren’t shipments to pick up, it would have a boomerang effect across the whole nation,” Bill Stankiewicz, owner of Georgia-based logistics consulting company Savannah Supply Chain, told ABC News.
At the heart of a potential disruption, shortages of parts would prevent manufacturers from assembling and shipping out final products, Miller said. The auto sector would be heavily impacted but the slowdown would affect “all types of industries,” he added.
“If you start having a very extended strike you’ll be looking at temporary layoffs because plants can’t get their parts,” Miller said.
Kamins echoed concern about manufacturing workers. Still, such an outcome would only result from a prolonged strike, he said.
In 2002, a strike among workers at West Coast ports lasted 11-days before then-President George W. Bush invoked the Taft-Hartley Act and ended the standoff. However, the last time East and Gulf Coast workers went on strike, in 1977, the work stoppage lasted seven weeks.
“Conceivably, some manufacturing workers could be affected,” Kamins said. “That would be many months down the road. I’d be surprised if it gets to that point.”
ABC News’ Elizabeth Schulze contributed to this report.
