(NEW YORK) — The price of bitcoin has tumbled about 12% from a record high reached earlier this week.
After topping $108,000 for the first time on Tuesday, the world’s largest cryptocurrency dropped to a price below $93,000 in early trading on Friday. Bitcoin soon recovered some of those losses, settling around $95,000 at 9:30 a.m. ET.
The selloff rippled through the wider cryptocurrency market. Ether, the second-largest cryptocurrency, ticked down about 1%. Lesser-known dogecoin fell 4% and crypto-trading exchange Coinbase fell nearly 2%.
The slide for bitcoin has largely come after the Federal Reserve announced late Wednesday that it expects fewer interest rate cuts next year.
Lower interest rates typically stimulate economic activity, drive up corporate profits and lift the value of forward-looking assets like stocks and cryptocurrencies. In theory, a longer-than-expected period of high interest rates could diminish those returns.
The Fed’s forecast sent stocks falling within minutes and helped push bitcoin to its lowest level in weeks.
The recent slide for bitcoin erases some of the gains enjoyed since the election of former President Donald Trump, who is widely viewed as friendly toward cryptocurrency. Still, the price has climbed about 36% since Election Day.
Bitcoin had climbed to a new high earlier this week after Trump reaffirmed support for a U.S. bitcoin strategic reserve.
A U.S. bitcoin strategic reserve would amount to a substantial government holding of bitcoin similar to the country’s stockpile of oil or gold. Bitcoin bulls expect such a potentially large acquisition of bitcoin to drive up demand and hike the price.
Supporters of a bitcoin strategic reserve also say the asset would help diversify the nation’s financial holdings, protecting it from the possible decline in value of other assets, such as the U.S. dollar.
Since the price of bitcoin is highly volatile, a large purchase of the asset could end up threatening the nation’s financial stability rather than safeguarding it, some critics say.
The major stock indexes rebounded on Thursday, recovering some of the losses they took after the Fed’s unwelcome forecast.
(NEW YORK) — Oil prices climbed more than 3% on Tuesday in the immediate aftermath of an Iranian missile attack on Israel.
The spike in prices is expected to push up the price of U.S. gasoline, experts told ABC News.
Drivers could face a price increase of between 10 and 15 cents per gallon, experts estimated. The national average price of a gallon of gas currently stands at $3.20, AAA data showed.
A further escalation of the conflict between Israel and Iran could send oil and gas prices significantly higher, said Ramanan Krishnamoorti, a professor of petroleum engineering at the University of Houston.
“Clearly this will have a huge impact on gas prices,” Krishnamoorti told ABC News. “There’s no doubt about that.”
Iran said the attack on Tuesday was retaliation for a wave of assassinations carried out by Israel over the last several weeks targeting Hezbollah leaders. Israel will have a “significant response” to Iran’s attack, an Israeli official told ABC News.
While sanctions have constrained Iranian oil output in recent years, the nation asserts control over the passage of tankers through the Strait of Hormuz, a trading route that facilitates the transport of about 15% of global oil supply.
Passage through the Suez Canal, another important shipping route for crude oil, could be impacted by further attacks, as happened with Yemen-based Houthi attacks on freight ships earlier in the war, Krishnamoorti said.
Despite a recent uptick, the price of oil stands well below a 2022 peak reached when the blazing-hot economic rebound from the pandemic collided with a supply shortage imposed by the Russia-Ukraine war. Gas prices, meanwhile, have plummeted in recent months.
The U.S. set a record for crude oil production in 2023, averaging 12.9 million barrels per day, according to the U.S. Energy Information Administration, a federal agency.
The surge in U.S. production would help limit the impact of a possible supply disruption, though oil prices are set on a global market, where a major supply shock could not be entirely accounted for with U.S. oil output, Timothy Fitzgerald, a professor of business economics at the University of Tennessee who studies the petroleum industry, told ABC News.
“This is less troubling than it would’ve been a generation ago,” Fitzgerald said. “Today, we export more crude oil than we import.”
If both sides deescalate, the price of crude oil could quickly drop back to where it stood before the Iranian attack on Tuesday, Fitzgerald added.
“There would be no lasting importance of that,” Fitzgerald said.
The rise in oil prices comes at a relatively quiet period in the U.S. gasoline market. Drivers have enjoyed a sharp decline in gasoline prices over recent months, in part due to sluggish demand for gas as the busy summer traveling season has given way to an autumn slowdown.
Still, a regional war in the Middle East could upend the market and spike prices, experts said.
Republican Sen. Lindsey Graham of South Carolina condemned Iran’s missile attack on Israel, calling it a “breaking point” on Tuesday and urging President Joe Biden’s administration to respond.
Graham called for oil refineries to be “hit and hit hard” and said his prayers are “with the people of Israel.”
President Joe Biden and Vice President Kamala Harris are monitoring the Iranian attack from the White House Situation Room. Biden directed the U.S. military to aid Israel’s defense against Iranian attacks and shoot down missiles.
ABC News’ Allison Pecorin and Jordana Miller contributed to this report.
(WASHINGTON) — The U.S. government is set to release new inflation data on Wednesday, offering a fresh look at price increases little more than a week after the issue appeared to help former President Donald Trump win re-election.
Inflation has cooled dramatically since a peak of 9% attained in 2022, now hovering near the Federal Reserve’s target rate of 2%.
The slowdown of price increases has coincided with robust economic growth, establishing the twin conditions necessary for the U.S. to achieve a “soft landing.”
Economists expect prices to have risen 2.6% over the year ending in October. That figure would mark a slight uptick from the annual rate of 2.4% recorded during the previous month.
Still, policymakers at the Fed forecast that inflation will inch downward toward normal levels next year, and reach the central bank’s target rate in 2026, according to projections released in September.
The Fed cut interest rates by a quarter of a percentage point last week. The move came two months after the Fed cut its benchmark interest rate a half of a percentage point, dialing back its fight against inflation since it began in 2021.
The Fed is guided by a dual mandate to keep inflation under control and maximize employment. In theory, lower interest rates help stimulate economic activity and boost employment.
While the central bank’s concern about inflation has receded in recent months, a renewed focus on the labor market has risen to the fore. Employment has continued to grow but expansion has slowed in recent months. The unemployment rate has ticked up from 3.7% to 4.1% this year.
“We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and labor market can be maintained with inflation moving sustainably down to 2%,” Fed Chair Jerome Powell said at a press conference in Washington, D.C., last week.
Even as inflation has slowed, that progress hasn’t reversed a leap in prices that dates back to the pandemic. Since President Joe Biden took office in 2021, consumer prices have skyrocketed more than 20%.
The price hikes appeared to fuel support for Trump in last week’s election. More than two-thirds of voters say the economy is in bad shape, according to the preliminary results of an ABC News exit poll.
However, Trump’s proposals of heightened tariffs and the mass deportation of undocumented immigrants could rekindle rapid price increases, some experts previously told ABC News.
When asked last week about the Fed’s potential response to Trump’s policies, Powell said the central bank would make its decisions based on how any policy changes could impact the economy.
“In the near term, the election will have no effects on our policy decisions,” Powell said on Thursday. “We don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy will be.”
“We don’t guess, we don’t speculate and we don’t assume,” Powell added.
(NEW YORK) — In the final weeks of the campaign, former President Donald Trump and Vice President Kamala Harris have sought to best each other on the all-important issue of the economy, which many voters rank as their top concern.
Both candidates have made manufacturing a centerpiece of their plans, but their respective approaches feature stark differences.
Harris aims to close corporate tax loopholes and throw government support behind the production of critical goods. By contrast, Trump wants to protect domestic manufacturers with tariffs on foreign products while cutting corporate taxes and easing regulations.
Manufacturing accounts for about 10% of U.S. gross domestic product and an even smaller share of the nation’s jobs. But the sector bears outsized importance since the production of essential goods holds national security implications and many manufacturing workers live in key swing states, experts said.
“There’s a belief that manufacturing is special,” Mary Lovely, a senior fellow at the Peterson Institute for International Economics who studies trade policy, told ABC News.
Here’s what to know about where Harris and Trump stand on manufacturing, and what experts think of their respective plans:
Trump: Tariffs and corporate tax cuts
On the campaign trail, Trump talks about tariffs more than just about any other policy proposal. The tax on imports makes up a key part of his plan for revitalizing manufacturing, alongside a lower tax burden for companies that he says would boost production and hiring.
Trump has promised a sharp escalation of tariffs enacted during his first term. Trump has proposed tariffs of between 60% and 100% on Chinese goods. A set of far-reaching tariffs would also include a tax as high as 20% on all imported products.
In theory, a tax on imports would give domestic producers a leg up in competition with foreign manufacturers, Christopher Conlon, a professor of economics at New York University who studies trade, told ABC News.
“His plan is based on the idea that foreign competitors are pricing their products too low and what we need to do is erect a wall of tariff barriers around the U.S.,” Conlon told ABC News.
An escalation of tariffs could expand certain areas of U.S. manufacturing vulnerable to foreign competition, which could result in added jobs at companies protected by the policy, experts said.
The economy added manufacturing over the first few years of his presidency, though the pandemic wiped out much of those gains.
Experts cautioned about a spike in input costs and consumer prices that could end up hindering many manufacturers and hammering household budgets. Evidence indicates that the Trump tax cut did not provide a significant boost for the economy, they added.
U.S. manufacturers of sophisticated products like automobiles and advanced medical equipment often import raw materials. A tariff would likely raise costs for those companies and risk making them less competitive on the global market, Conlon said. While adding jobs at some manufacturers, the policy could cause layoffs at others.
“Nobody seems to have shared that wisdom with the Trump campaign,” Conlon said.
A similar cause and effect applies to prices paid by everyday people for imported goods at the grocery or department store. Broad tariffs on foreign goods would likely force importing companies to raise prices and reignite inflation, experts said.
In a statement to ABC News, the Trump campaign said its manufacturing plan would create jobs and cut taxes.
“President Trump is a businessman who built the greatest economy in American history, and certainly doesn’t need economics lessons from a professor who has never created jobs or built anything in his life,” Trump campaign spokesperson Karoline Leavitt said.
“President Trump successfully imposed tariffs on China in his first term AND cut taxes for hardworking Americans here at home — and he will do it again in his second term. President Trump’s plan will result in millions of jobs and hundreds of billions of dollars returning home from China to America,” the statement added in part.
Harris: Close tax loopholes and provide government support
Harris has proposed a different approach to manufacturing that emphasizes closing tax loopholes for some large corporations and providing government support for high-priority areas within the sector.
The agenda carries over a key part of the strategy undertaken by the Biden administration, which invested billions into manufacturing through a series of measures focused on bolstering key industries.
The Inflation Reduction Act spent hundreds of millions of dollars to boost U.S. production of renewables as the nation pursues ambitious carbon emissions goals and a supply chain less dependent on China. While the CHIPS and Sciences Act infused tens of billions into the production of semiconductors.
“The Biden administration has picked sectors, and in those sectors companies are eligible for assistance,” said Lovely.
Last week, Harris put forward a plan calling for $100 billion investment in manufacturing to further bolster the sector. The policy would prioritize “industries of the future,” such as carbon-efficient steel production and data centers for artificial intelligence, the campaign said in a statement last week.
The Harris campaign said it aims to pay for the investment with a reform of the international tax code that prevents producers from skirting U.S. taxes in a “race to the bottom.”
“The facts are clear: When he was president, Trump lost nearly 200,000 manufacturing jobs and created new incentives for companies to ship American jobs to China. Economists warn if Trump takes power again, his policies will crush American manufacturing jobs, send even more jobs to China, and cost middle class families $4,000 a year. This is a fundamental contrast with Vice President Harris, who is leading an American manufacturing boom – creating jobs right here at home and outcompeting China,” Harris campaign spokesperson Joseph Costello said in a statement to ABC News.
It remains unclear whether the support for manufacturing provided by the Biden administration has yielded significant gains in output or jobs, experts said.
The measures, however, have elicited a burst of factory construction. Spending on manufacturing-related construction surged from $76.4 billion in January 2021 to $238.2 billion in August 2024, U.S. Census Bureau data showed.
The surge in construction marks a positive signal but the critical test will be whether the plants deliver strong output and well-paying, long-term jobs, said Conlon.
“We haven’t had enough time to see if there’s a real effect or not,” he added. “How many chips are getting built by these plants? We don’t know that yet.”
