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Stocks skid to 15-month low after Fed raises rates again

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Stocks skid to 15-month low after Fed raises rates again

NEW YORK (AP) — Stocks gave up a big rally and took a dive in afternoon trading Wednesday after the Federal Reserve raised interest rates again and signaled it’s likely to keep raising them next year. The market finished at its lowest level since September 2017.

The U.S. central bank said it expects to increase interest rates at a slightly slower pace next year, and also said it isn’t planning any changes in the gradual shrinking of its large bond portfolio. But investors appeared to hope the Fed would unveil a sharper slowdown in interest rate hikes and other credit tightening policies because economic growth is likely to slow down.

The Dow Jones Industrial Average swung from a gain of 381 points right before the Fed’s decision was announced at 2 p.m. Eastern time to a closing loss of 351 points. The index is down almost 9 percent in December.

The rate increase, to a range of 2.25 percent to 2.5 percent, was the Fed’s fourth this year. Its benchmark interest rate is at its highest point since 2008, which means higher borrowing costs for many consumers and businesses.

Bond prices rose, sending yields sharply lower. The yield on the 10-year Treasury note fell to 2.77 percent from 2.84 percent immediately before the Fed’s announcement and 2.82 late Tuesday. That’s a substantial move for that benchmark lending rate. Bonds yields are benchmarks for many kinds of long-term loans including mortgages.

The Fed is now forecasting two increases in rates in 2019 instead of three. The central bank expects the long-term level of its main interest rate will be 2.8 percent, down from an earlier projection of 3 percent.

The yo-yo movements for the stock market were a result of markets trying to parse Fed Chairman Jerome Powell’s comments, which essentially were: The economy is strong enough to warrant a rate increase now, but not so strong to need three rate increases, as the Fed had indicated a few months ago.

“Chairman Powell was threading the needle today,” said Frances Donald, head of macroeconomic strategy at Manulife Asset Management. “He had to say that the economic picture is not as good as three months ago, while also saying that the pillars of the economy remain intact. And markets have to react, live, to that ‘on the one hand, on the other hand’ that Powell has to play in this economy.”

But Powell may have failed to smooth the market’s key anxieties. They fear that continued increases in interest rates will slow the economy too dramatically. They’re also concerned about the trade dispute between the U.S. and China, which threatens economic growth and corporate profits.

Internet, technology and consumer-focused companies dropped. Facebook fell sharply after the New York Times reported that the social media network gave companies more access to users’ personal data than it has previously said. The report said Facebook had arrangements with more than 150 companies including Microsoft, Amazon, Spotify and Netflix that some companies read, write and delete users’ private messages or see the names of a user’s friends or their news feeds without their consent.

Separately, the District of Columbia sued Facebook for allowing Cambridge Analytica, a data-mining firm working for the Trump campaign, to improperly access data from as many as 87 million Facebook users.

Facebook lost 7.2 percent to $133.25. It’s down 39 percent since late July on concerns about a slowdown in user growth, multiple privacy and safety scandals, as well as the possibility of increased regulation in the future.

FedEx plunged after saying international shipping, especially in Europe, fell in the latest quarter. FedEx also said the U.S.-China trade dispute is affecting its business. The shipping company posted a smaller profit than analysts expected and said it will cut spending and offer buyouts to some workers to help make up for the shaky results.

FedEx stock lost 12.2 percent to $162.51. It has dropped 35 percent this year. Rival UPS lost 3 percent to $94.32 and has slumped 21 percent in 2018.

The Dow fell 1.5 percent to 23,323.66. The S&P 500 skidded 39.20 points, or 1.5 percent, to 2,506.96. It’s tumbled 14.5 percent in the last three months, including a loss of 9.2 percent so far in December.

The Nasdaq composite gave up 147.08 points, or 2.2 percent, to 6,636.83. The Russell 2000 index, which has suffered broader declines than the rest of the market, fell 27.95 points, or 2 percent, to 1,349.23.

Despite the losses, David Kelly, the chief global strategist for JPMorgan Funds, said the market will ultimately react to the health of the economy. He said the Fed’s moves Wednesday made sense and could prolong the already long-lasting growth in the U.S.

“The Fed behaving in a very prudent, balanced way increases the possibility of a very balanced expansion” continuing, he said.

Oil prices turned higher after plunging a day earlier on worries about rising supplies and weakening global growth, which could weigh on demand.

Benchmark U.S. crude climbed 2.1 percent to $47.20 a barrel in New York. It dropped 7 percent Tuesday and closed at a 16-month low, and has fallen almost 40 percent since Oct. 3. Brent crude, used to price international oils, rose 1.7 percent to $57.24 a barrel in London.

Wholesale gasoline rose 2.7 percent to $1.39 a gallon and heating oil added 2.9 percent to $1.81 a gallon. Natural gas lost 2.9 percent to $3.73 per 1,000 cubic feet.

Energy company stocks fell again. They’re trading at their lowest levels since early 2016.

The dollar was down for the day and recovered slightly after the Fed’s move. The dollar slipped to 112.36 yen from 112.53 yen. The euro rose to $1.1368 from $1.1357 and the British pound dipped to $1.2621 from $1.2639.

European stocks rose after Italy’s government reached an agreement with the European Commission on its budget plans. The Italian FTSE MIB jumped 1.6 percent. Britain’s FTSE 100 rose 1 percent while Germany’s DAX added 0.2 percent and the CAC 40 in France rose 0.5 percent.

Japan’s Nikkei 225 index fell 0.6 percent and while South Korea’s Kospi rose 0.8 percent. Hong Kong’s Hang Seng was 0.2 percent higher.

Gold rose 0.2 percent to $1,256.40 an ounce. Silver added 0.8 percent to $14.82 an ounce. Copper climbed 1.9 percent to $2.72 a pound.

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Business Writer Stan Choe contributed to this story from New York

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AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP

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Economy

Progressive think tanks: If the economy holds strong, Trump should win in a landslide

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Progressive think tanks If the economy holds strong Trump should win in a landslide

Tribalism makes it challenging to gauge where the sentiment of the most important voting blocks stand. Hyper-leftists would vote for a broken refrigerator before voting for President Trump in 2020, while the MAGA crowd would stand in line with no food, water, or a bathroom for two days if that’s what would be required for them to vote for their man.

But these won’t be the people who determine the results of the 2020 election. They never are, even if their numbers are greater on both sides as noted by Ben Shapiro in his new book. The rabid Republicans and determined Democrats may ebb and flow in size, but it’s the people in the mushy middle who win elections.

Knowing this, it’s often difficult to determine what the sentiment is if we go solely based on the news. Just as with the dedicated tribes, so too are media outlets generally spun in how they present the news. This is why a story from today on left-leaning Politico prompted a read. It was worthwhile going through the leftist spin to reach the meat of the story, which basically says if conventional wisdom about incumbents and the economy hold up and the economy can remain strong through the election, President Trump should win in a landslide regardless of who the Democrats nominate.

Models from multiple think tanks conclude the conventional model favors the President, but these are unconventional times. It’s still very possible for the economy to remain strong and for the President to be hit with another onslaught of scandals, as he was in 2016. Then, there’s the “it” factor of the Democratic nominee. Someone like Senator Kamala Harris throws in the minority-female combination as an appealing wildcard in the mix. Meanwhile, Beto O’Rourke and Senator Bernie Sanders still have incredible fundraising infrastructures that could help them dominate the money battle through the primaries and during the general election.

Of course, there’s always the possibility the economy could fall. Analysts have been predicting it in a way that’s vulgar, as if they hope the economy falls and people are hurt by it just to make sure President Trump loses in 2020.

If Republicans can put on a full-court press on the economy, something they failed miserably at in the 2018 midterms, they may be able to ride the President’s wave to victories on Capitol Hill as well. November 2020 will sneak up very quickly.

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Democrats

TIL the famous bar AOC worked at shut down over rising costs, minimum wage increase

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TIL the famous bar AOC worked at shut down over rising costs minimum wage increase

Today I learned something that surprised me, not because of the event itself but because so few people have talked about it. Representative Alexandria Ocasio-Cortez (D-NY) is known for being a leader of the socialist movement in Washington DC after rising from the humble status of bartender to the Congresswoman of the 14th district in New York. Her policies include a push for a “living wage” of $15 per hour. I’ve always thought the wording was odd considering Senator Bernie Sanders (I-VT) and others have been calling for a rise in “minimum wage.” Today, I found out why she’s shying away from that phrase.

When New York City raised their minimum wage $15, many businesses were hit hard, especially in the hospitality industry. Restaurants and bars started cutting hours and often even closing their doors over the increase. One of those hit hard by the massive bump was The Coffee Shop. Owner Charles Milite blamed the closure on high costs, with the rise in minimum wage as the last straw.

“The rents are very high and now the minimum wage is going up and we have a huge number of employees,” he said.

The Coffee Shop is the bar where AOC once worked.

Keep in mind, this wasn’t some random bar. The Coffee Shop in Union Square was considered a high-end establishment, buzzing all the time with “A-list” patrons. It was featured many times in the HBO show Sex and the City and had built a reputation as an “it” spot for Manhattan residents and tourists alike. In other words, this wasn’t a hole in the wall hanging on by a string. It was a vibrant, successful business for almost three decades before New York City’s untenable leftist policies, including a $15 minimum wage, became more than the bar could bear.

On the surface, many voters may see the very basic math of “oh, Democrats want to pay me more” and assume there’s no repercussions for such actions. This is why Democrats prey on those people who currently make lower wages. They feel if they can promise them something that sounds good even if they know with 100% certainty based on empirical evidence that it will actually hurt them, these new socialists are willing to make that trade. They figure they can blame the conservatives later for why the place they were working at before cut their hours, removed their jobs, or shut down because of raising the minimum wage.

As usual, socialists rely on ignorance and emotion as the driving forces behind their plans. They’re not stupid. They know their ideas won’t work. But they’re willing to push them on people anyway in hopes that ignorance will keep them in power.

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Economy

Thomas Sowell makes a clear point about Medicare-for-All

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Thomas Sowell makes a clear point about Medicare-for-All

How was the left able to take heat away from their Medicare-for-All proposal, and more specifically the estimated $32 trillion price tag over a decade? They tripled down with the Green New Deal, which some estimate would cost upwards near $100 trillion.

So, the price tag of the Democrats’ desired replacement for utterly failing Obamacare is to take current government control over healthcare and put it on a regiment of steroids and methamphetamine. When you’re going through Hell, keep going, I suppose.

But all of this could be alleviated if voters and politicians took a moment to think about the prospects of Medicare-for-All logically. Let’s erase, for a moment, the Utopian notion that taxing rich people extreme amounts will give us enough money to make healthcare free for everyone while also improving the quality. That’s the goal, right? Cheaper, better healthcare is what most people want. Conservatives believe it’s best to pull government administration out of the equation and put it all on a competitive capitalist model that has worked for nearly every other industry for over a century. Hyper-leftists want to add more government control.

Conservative commentator Thomas Sowell has some thoughts on the matter. One in particular can be wrapped up into an eloquent quote that should be ideological checkmate allowing us to win the healthcare debate.

“It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer it.”

Of course, our version of checkmate requires common sense, logic, and basic math skills. These attributes aren’t as readily present on the left, therefore they might hear this logic and still think single-payer makes sense.

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