Business Highlights: Inflation surges, stocks end lower

July 13, 2022 GMT

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US inflation surges again in June, raising risks for economy

WASHINGTON (AP) — Surging prices for gas, food and rent catapulted U.S. inflation to a new four-decade peak in June, further pressuring households and likely sealing the case for another large interest rate hike by the Federal Reserve. Consumer prices soared 9.1% compared with a year earlier, the biggest yearly increase since 1981. The persistent price acceleration underscores the brutal impact inflation has inflicted on Americans, with the costs of necessities, in particular, rising much faster than average incomes. Lower-income and Black and Hispanic American have been hit especially hard. As consumers’ confidence in the economy declines, so have President Joe Biden’s approval ratings.

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EXPLAINER: Why US inflation is so high, and when it may ease

WASHINGTON (AP) — Inflation’s relentless surge didn’t merely persist in June. It accelerated. For the 12 months ending in June, the government’s consumer price index rocketed 9.1%, the fastest year-over-year jump since 1981. And that was nothing next to what energy prices did: Fueled by heavy demand and by Russia’s invasion of Ukraine, energy costs shot up nearly 42% in the past 12 months, the largest such jump since 1980. Even if you toss out food and energy prices — which are notoriously volatile and have driven much of the price spike — so-called core inflation soared 5.9% over the past year.

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EXPLAINER: What’s the impact of euro parity with the dollar?

The euro is hovering close to parity with the dollar, falling to its lowest level in 20 years and even briefly touching a one-to-one exchange rate with the U.S. currency this week. That’s the market’s verdict on Europe’s economic prospects. The euro is falling as fears of a recession grow due to Russia restricting natural gas supplies. European officials say it’s retaliation for the bloc’s support for Ukraine amid Russia’s war. Moves by the U.S. Federal Reserve are strengthening the dollar with higher interest rates. U.S. tourists may get a break on some of their travel bills, but Europeans will pay more for imported oil because it’s priced in dollars.

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Dems stress national security as computer chips bill stalls

WASHINGTON (AP) — The Biden administration and Democrats are warning of dire consequences if Congress fails to act on computer chips legislation. They say Congress needs to pass a bill by the end of July that’s designed to boost semiconductor manufacturing in the United States. Advocates say the plan is important for the economy and national security. Commerce Secretary Gina Raimondo says computer chipmakers are being offered lucrative incentives from other countries such as South Korea, Japan, France, Germany and Singapore to locate plants there. Raimondo says “there are very real, very devastating consequences if Congress doesn’t do its job in the month of July.”

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Netflix to rely on Microsoft for its ad-backed video service

SAN FRANCISCO (AP) — Netflix has picked Microsoft help deliver the commercials in a cheaper version of its video streaming service expected to launch later this year with a pledge to minimize the intrusions into personal privacy that often accompany digital ads. The alliance announced Wednesday marks a major step toward Netflix’s first foray into advertising after staying commercial-free for 15 years. Netflix announced it would create an ad-supported option three months ago after disclosing it had lost 200,000 subscribers during the first three months of the year amid stiffer competition and rising inflation. Netflix still hasn’t disclosed the price of its ad-backed service.

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UN sees progress in talks to free up Ukraine grain exports

ISTANBUL (AP) — U.N. Secretary-General Antonio Guterres said Russian and Ukrainian officials meeting in Istanbul have taken a “critical step forward” to ensure the export of grain from Ukraine’s Black Sea ports. Turkish Defense Minister Hulusi Akar says the sides reached agreements concerning joint control of vessels as they leave and arrive at ports and the safety of the transfer routes. Military officials from Russia, Ukraine and Turkey and U.N. envoys met Wednesday in Istanbul for talks on a plan to export Ukrainian grain to world markets through the Black Sea. Ukraine is one of the world’s largest exporters of wheat, corn and sunflower oil.

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Stocks end lower as Wall Street braces for big hike in rates

Stocks ended another shaky day lower on Wall Street Wednesday after a highly anticipated report on inflation turned out to be even worse than expected. The S&P 500 fell 0.5% after tumbling as much as 1.6% earlier. The Nasdaq slipped 0.2% to erase nearly all of an early loss of 2.1%. Stocks took a few U-turns through the day, as has become the norm on Wall Street this tumultuous year. They were following the lead of Treasury yields in the bond market, which initially surged on expectations the Federal Reserve will hike interest rates drastically to slow the nation’s skyrocketing inflation.

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US, allies aim to cap Russian oil prices to hinder invasion

WASHINGTON (AP) — The U.S. and its allies are working on new measures to cap the price of Russia’s oil, its main source of revenues. Leaders of the Group of Seven industrial nations have tentatively agreed to back a cap to force Russia to accept below-market prices for oil. The goal is to help bring Russia’s war on Ukraine to a halt while possibly lowering energy costs. Treasury Secretary Janet Yellen is touring Indo-Pacific countries to lobby for the price cap proposal. In Japan on Tuesday, U.S. and Japanese officials agreed to explore the feasibility of price caps. Russia hasn’t signaled a response. The Kremlin could retaliate by taking its oil off the market, which would cause more turmoil.

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Delta posts $735 million profit, sees strong revenue in Q3

The summer is off to a profitable start for Delta Air Lines. The airline said Wednesday that it earned $735 million in the second quarter, as planes were packed with vacation travelers. Still, the earnings per share fell short of Wall Street expectations. Delta blames that on high fuel prices and several thousand canceled flights in May and June. CEO Ed Bastian says Delta “had a rough six weeks,” but it’s doing better now after cutting its schedule and hiring more pilots. Figures from Flightaware show Delta is canceling far fewer flights so far in July.

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Hungary declares ‘energy emergency’ over threat of shortages

BUDAPEST, Hungary (AP) — Hungary’s government has declared an “energy emergency” in response to supply disruptions and skyrocketing energy prices in Europe. A government official told a news conference in Budapest that there is “unlikely to be enough gas in Europe for the autumn and winter heating season.” The official said Wednesday that Hungary would increase its domestic energy production capacities to ensure adequate supply. Hungary is heavily dependent on fossil fuels from Russia and gained concessions from the European Union in May when the bloc aimed to impose sanctions on Russian oil exports.

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The S&P 500 fell 17.02 points, or 0.4%, to 3,801.78. The Dow Jones Industrial Average fell 208.54 points, or 0.7%, to 30,772.79. The Nasdaq fell 17.15 points, or 0.2%, to 11,247.58. The Russell 2000 index of smaller companies fell 2.15 points, or 0.1%, to 1,726.04.

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