Tech Stocks Look Unstoppable Again. How They’re Defying Fed Rate Hikes.

Everybody knows that tighter policy from the Federal Reserve beats down high-growth stocks. Just look at 2022, when the Nasdaq dropped by about a third as the Fed ratched up borrowing costs.

How different things look now. The tech-heavy index is up 34% in 2023. It hasn’t recouped all of last year’s losses, but it’s well on its way. And, to be sure, it hasn’t had a great August, and September is historically bad as well. But the Nasdaq is up 4% over the past four days, its biggest gain over a comparable period since March.

All this is happening as Fed rates are the highest since 2001. The central bank’s chairman, Jerome Powell, sounded hawkish last week in Jackson Hole, reiterating that inflation is still too high. Atlanta Fed President Raphael Bostic on Thursday said the central bank wants to avoid unnecessary pain, but added the caveat that he’s not in favor of easing policy soon.

With data on inflation and jobs to parse through before the week is out, higher rates look like the new normal.

The surprise is that the immovable object of Fed hikes appears to have met its match in the unstoppable force of tech.

—Brian Swint

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Investors Focus on Friday’s Jobs, Unemployment Numbers

Investors await this Friday’s jobs report for August, which is expected to show another drop in nonfarm payrolls. The report comes just weeks before the Federal Reserve holds its next interest-rate policy meeting, and the market believes a cooling labor market could encourage a pause on rate increases.

• Analysts expect the economy added 170,000 jobs, down from 187,000 in July. The Hollywood strike and the bankruptcy of the Yellow trucking company, which employed 30,000 staff, affected job creation. The U.S. added an average 287,000 jobs a month in the first four months of the year.

• Even current hiring is too strong for Fed officials. They want the labor market to cool off further to ease the upward pressure on wages, and believe employment growth has to slow to around 75,000 to 100,000 a month, MarketWatch reported.

• The unemployment rate is expected to dip to 3.5% from 3.6%, hovering near the lowest level since the late 1960s. Even though hiring has slowed, there hasn’t been a meaningful increase in unemployment.

• The Biden administration outlined a plan to make 3.6 million more workers eligible for time-and-a-half overtime pay. It updated the income threshold to qualify to around $55,000. The current threshold, set in 2020, is for workers making up to $35,568 a year.

What’s Next: Acting Labor Secretary Julie Su said she kept hearing from people who are working long hours for no extra pay. The rule could cost employers $1.2 billion to implement the first year, and boost wages by $1.2 billion, the Labor Department estimates.

—Janet H. Cho

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Airline Delays Are Growing. Weather Doesn’t Help.

Airline passengers who have already experienced delays and other headaches this year face more disruptions heading into Labor Day weekend, as carriers canceled hundreds of flights at airports in the potential path of Hurricane Idalia. Tampa International Airport said it would resume normal operations today.

• So far in 2023, 23% of flights have been delayed—worse than the 21% in the first eight months of last year. Bad weather has been a major culprit. Idalia caused 4,786 flight delays in the U.S., and more than 1,100 U.S. flight cancellations on Wednesday.

• Summer travel has been particularly rough. From May 1 to Aug. 29, nearly a quarter of flights within the U.S. arrived more than 15 minutes behind schedule, according to FlightAware. That’s up from 23% of flights delayed last year, 20% delayed in 2021, and 18% in 2019.

• Delta Air Lines
  has had 20% of its flights delayed so far in 2023.
  Alaska Air’s
  Alaska Airlines has had 21% of flights delayed.
  American Airlines,
  fined a record $4.1 million this week after thousands of passengers were stranded for hours, has delayed 25% of flights.

• Separately, more than 99% of American Airlines’ flight attendants voted to authorize a strike and picketed at several airports, as their union seeks higher wages and workplace protections. American Airlines’ pilots this month ratified a contract that boosts overall pay 46% over the next four years.

What’s Next: The Transportation Security Administration said it expects to screen more than 14 million people during Labor Day weekend from Friday through Sept. 6. The busiest day is expected to be Friday, when an estimated 2.7 million people are forecast to travel through airport checkpoints.

—Callum Keown and Janet H. Cho

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Visa, Mastercard Raising Merchants’ Card Fees Starting in October

Visa
and
Mastercard
are planning to raise the fees merchants pay when customers pay with credit or debit cards, including for online purchases, starting in October. The move could increase the fees by another $502 million annually, according to consulting company CMSPI.

• CMSPI estimated that more than half of that revenue will come from higher network fees, and the rest will come from increased interchange, or swipe fees. Visa and Mastercard set and keep the fees that merchants pay, while interchange fees go to the banks issuing the credit cards.

• U.S. merchants paid a record $160.7 billion in swipe fees in 2022, up 17% from the previous year, according to the industry publication Nilson Report. Some merchants raise prices to cover those costs, while others offer discounts to shoppers paying with cash, check or debit cards.

• CMSPI said in a blog post Wednesday that digital merchants should be prepared for another $154 million in costs from a digital services fee Visa is planning, and about $82 million from an updated billing structure by Mastercard.

• Visa, Mastercard, and the big banks say the fees help cover costs of innovation and for preventing fraud. The banks also use interchange fees to fund credit-card rewards programs.

What’s Next: CMSPI said in its blog post that changes to some credit interchange fees alone are expected to boost merchant costs by an estimated $247 million annually, with commercial card fee increases expected to add another $80 million.

—Janet H. Cho