High Interest Rates Help Propel Big-Company Bankruptcies; U.S. Jobs Market Posts Hiring Surge

High Interest Rates Help Propel Big-Company Bankruptcies; U.S. Jobs Market Posts Hiring Surge By James Christie

Good day. While Friday's U.S. jobs report underscored that hiring remains resilient, the economy is facing headwinds from the effects of inflation and high interest rates, two of the problems cited by some large companies that have recently sought bankruptcy protection. Chapter 11 filings by more big companies are likely to increase as high rates weigh on their finances, alongside other economic risks. They include households running down pandemic savings, banks pulling back on lending, bond yields surging and the potential for more interest-rate increases.

Now on to today's news and analysis.

Top News Big-Company Bankruptcies Hang Over Economy

Business bankruptcies are rising briskly. What's even more worrisome: Many of the troubled companies are large.

Corporate behemoths including SVB Financial, Bed Bath & Beyond and Yellow sought chapter 11 bankruptcy protection this year. The filers blamed elevated inflation, higher interest rates, waning government aid and lingering supply-chain disruptions. More corporate filings are likely on the way as high interest rates push big companies over the edge .

Surprisingly Strong Hiring Sends Bond Yields Higher

Surging U.S. job growth shattered investors' expectations, the latest sign of accelerating economic momentum stoking a bond market selloff that is sending longer-term borrowing rates to new 16-year highs.

Wall Street Isn't Sure It Can Handle All of Washington's Bonds Pro Take: Gain of 336,000 Jobs Isn't What Fed Had in Mind With Rate-Hike Campaign By Bob Fernandez

Was Friday's U.S. jobs report the whoosh of the economy taking off? Did we miss a soft landing? Where does this shocker leave Federal Reserve policy makers? Scratching their heads, most likely, as this economy has no quit: robust consumer spending, an uptick in job openings and solid gross domestic product growth. Then on Friday: 336,000 new jobs in September. Read more .

U.S. Economy 'Hot' Labor Market Isn't Helping a Certain Group of Jobseekers

A deeper dive into recent jobs data reflects a more sobering picture of the hiring market, especially for many white-collar workers who are still having a tough time finding jobs with better pay or perks.

Higher Rates Have Bank Stocks on the Mat

Rising interest rates helped spark a regional-banking crisis earlier this year. The turmoil has eased, but bank stocks are still in the doldrums as the effect of higher rates has put the sector's earnings power under a cloud.

U.S. Economy's Secret Weapon: Seniors With Money to Spend

Why has consumer spending been so strong as the Federal Reserve has raised interest rates? One reason: Consumers are getting older. The finances of older Americans are relatively healthy, and they have less need to borrow .

Companies Borrow Against Their Assets in an Uncertain Economy

Asset-based loans are appealing during periods of economic uncertainty, as companies don't need to meet the same types of leverage and performance requirements included in loans based on a company's cash flow.

UAW Talks Turn to Key Battleground: Jobs at Future Battery Plants

Pivotal to Detroit automakers' and the United Auto Workers' futures are nearly a dozen U.S. battery factories that the carmakers have in the works, many still only a collection of steel beams and piles of dirt.

Texas Cities Are Booming, but Their Offices Are the Most Vacant

America's highest office vacancies aren't in the East and West Coast cities that have been shedding population and workers. They are in Texas , a thriving Sunbelt state that has been luring firms away from the big coastal cities.

Key Developments Around the World Saudi Arabia Willing to Raise Oil Output to Help Secure Israel Deal

Saudi Arabia would be willing to boost oil output next year if crude prices are high -a move aimed at winning goodwill in Congress for a deal in which the kingdom would recognize Israel and in return get a defense pact with Washington.

Oil and Gas Prices Jump on Conflict OPEC Says Oil Demand Will Stay Strong Through Middle of Century

Putin Redirects Russia's Economy to War Production

Military and war-related spending have already fueled much of Russia's economic growth this year, helping the country weather the impact of Western sanctions. Next year, the government plans to increase military spending even more.

China's Factory Floor Is Moving-But Not to India or Mexico

Low-cost manufacturing is expanding away from China's bustling coast as companies hunt for cheaper land and labor in central and western provinces, helping China deepen its dominance in swaths of the global market for factory work.

India's Booming Stock Market Is Leaving China in the Dust

India's stock market is booming and has outperformed China's for the past three years, helped by billions of dollars of inflows from international funds and a fast-growing army of small investors.

Chevron Labor Dispute Flares Up Again in Australia

Workers at two facilities operated by Chevron in Australia have voted to restart industrial action , reigniting a dispute that rattled global energy markets. The facilities account for roughly 7% of the global supply of liquefied natural gas.

Bank of Israel to Sell Up to $30 billion in FX as Shekel Tumbles

Israel's central bank said it will sell up to $30 billion in foreign exchange to support the shekel [https://www.marketwatch.com/story/bank-of-israel-to-sell-up-to-30-billion-in-foreign-exchange-as-shekel-tumbles-ee3e9b32#::text=Israel's%20central%20bank%20said%20it, surprise%20attack%20on%20the%20country.], which has tumbled in the wake of Hamas's surprise attack on the country. "The Bank will operate in the market during the coming period in order to moderate volatility in the shekel exchange rate and to provide the necessary liquidity for the continued proper functioning of the markets," the Bank of Israel said on Monday. (MarketWatch)

Financial Regulation Roundup The New Kings of Wall Street Aren't Banks

High interest rates, driven by the Federal Reserve's higher-for-longer policy, are shaking up how corporate loans get done . Soaring rates brought down banks such as Credit Suisse and Silicon Valley Bank and forced others to reduce lending. As those lenders stepped back, private-credit fund managers stepped up, financing one jumbo loan for U.S. corporations after another. This shift is accelerating a trend more than a decade in the making.

How FTX Executives Secretly Spent $8 Billion in Customer Money

Crypto exchange FTX went bust last year after executives spent billions in customer funds they had promised to safeguard on technology investments, luxury real estate and political contributions, among other things.

The Owner of the NYSE Wants to Expedite Your Mortgage

Intercontinental Exchange, the owner of the New York Stock Exchange, has plowed more than $23 billion into an ambitious, yearslong bet to overhaul the plumbing of the multi-trillion-dollar U.S. mortgage market.

Forward Guidance Monday (all times ET)

9 a.m.: Dallas Fed's Logan speaks at National Association for Business Economics Annual Meeting

9:15 a.m.: Fed's Barr speaks on bank regulation at American Bankers Association Annual Convention

10 a.m.: The Conference Board Employment Trends Index for September

1:30 p.m.: Fed's Jefferson speaks at National Association for Business Economics Annual Meeting

Tuesday

Time N/A: ECB's Lagarde and Panetta at IMF/World Bank Annual meetings

6 a.m.: NFIB Small Business Optimism Index for September

8 a.m.: ECB's Lagarde in official plenary session on "Facing the great systemic shocks" at IMF/World Bank Annual meetings

9:30 a.m.: Atlanta Fed's Bosic in moderated discussion at American Bankers Association annual convention

10 a.m.: U.S. wholesale trade for August

11 a.m.: New York Fed consumer expectations survey

1:30 p.m.: Fed's Waller speaks at Mercatus Center at George Mason University Conference

Research Jobs Data Mixed, Not Enough to Tip Scales for Bank of Canada

A hearty 63,800 rise in Canadian employment last month topped expectations and was yet another sign the country's job market remains sturdy, though the details are less impressive, BMO chief economist Douglas Porter says. He notes the gains were led by part-time jobs and total hours worked actually dipped. And, because of Canada's soaring population growth, even the strong headline rise in jobs was just enough to keep the unemployment rate flat at 5.5%. Still, Porter says the data isn't enough to tip the scales for the Bank of Canada, which likely will keep its tightening bias firmly in place.

-Robb Stewart

Commentary Don't Get Too Comfortable With a Good Job Market

The economy is facing significant headwinds in the fourth quarter, not least of which is the sharp increase in long-term interest rates, and the labor market can go from good to bad in a short time, Justin Lahart writes.

Lessons from the 1970s Energy Crisis Can Help Prevent the Next One

The gas shortage of a half-century ago still has U.S. politicians chasing the chimera of energy independence, Jason Bordoff and Meghan L. O'Sullivan write, adding there is a better solution: integrated, transparent global markets .

Jason Bordoff is the founding director of the Center on Global Energy Policy and professor of professional practice at Columbia University's School of International and Public Affairs. Meghan L. O'Sullivan is director of the Belfer Center for Science and International Affairs and the Jeane Kirkpatrick Professor of the Practice of International Affairs at Harvard University's Kennedy School.

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October 09, 2023 07:15 ET (11:15 GMT)

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