Good morning. Andrew here. Two weeks ago, I spoke with Mary Barra of G.M. about her decision to pull back from electric vehicles. Now, Ford is doing something similar — taking a nearly $20 billion charge in the process. The question is, how should we think about these billion-dollar mistakes? Did American carmakers misunderstand consumer demand? Or did they miss the political winds that would end subsidies? A combination of both? And will this turn away from E.V.s leave U.S. manufacturers uncompetitive in the global market? We get into all of that and more below. Also: Take a look at the latest betting market on which of the “two Kevins” may become the next Fed chair. And we’re watching the latest jobs numbers, which will finally be released this morning. (Was this newsletter forwarded to you? Sign up here.)
Better late than never?A data blackout prompted by the government shutdown this fall left the Fed and Wall Street flying blind for weeks about the true state of the U.S. economy, and what that might mean for interest rate policy. A deluge of indicators, beginning with this morning’s jobs and retail sales reports, should offer some clues. But the releases are expected to be full of gaps, which could make markets choppy. Jay Powell set the tone last week. The Fed chair said at a news conference that policymakers would need to review the data “carefully and with a somewhat skeptical eye.” Markets are reflecting that uncertainty. S&P 500 futures this morning are down. That’s despite traders putting the odds of a Fed rate cut by March at 60 percent, up from roughly 50 percent last week. The investor view is that a rate cut in the first quarter could be warranted if today’s payroll numbers show the labor market faltering. What to expect:
Expect the data accuracy debate to continue. Skeptics have long complained that government data collection can be spotty, forcing investors and policymakers into a game of second-guessing. President Trump made this a bigger political issue when he fired the head of the Bureau of Labor Statistics this summer. But Powell has his misgivings, too. He surprised many last week when he said that the labor market appeared to be in far worse shape than what the government data has revealed. The Fed chair reckoned that the economy has been losing about 20,000 jobs per month since April, instead of adding 40,000 per month. Signs of a hiring drought may have persuaded Fed policymakers to vote for a rate cut last week. But the path from here looks uncertain. Other data shows that inflation is still well above the central bank’s 2 percent target, suggesting that hawkish policymakers will want to keep rates steady. Expect scrutiny over more government data in a few days. The latest Consumer Price Index report, which was also delayed, will be released on Thursday. It, too, may cloud the outlook for rates.
Oil prices fall, in part over Russia-Ukraine peace talks. The cost of Brent crude, the international benchmark, fell below $60 a barrel for the first time since the spring. Progress in the Moscow-Kyiv negotiations — and the prospect of reduced restrictions on shipments of Russian oil — is seen as a major factor in the move, though many issues haven’t been resolved. The gunmen behind the Australia shootings were motivated by ISIS, officials say. The country’s prime minister, Anthony Albanese, said that the suspects, a father and son, had been radicalized by “Islamic State ideology.” They are accused of killing 15 people at a Hanukkah celebration on Bondi Beach in Sydney. Albanese also said he would toughen Australia’s gun laws. And his government was urged to do more to combat antisemitism. President Trump sues the BBC for $10 billion over a documentary. The president’s lawsuit, filed in federal court in Miami, argued that the British news outlet intentionally defamed him by misleadingly editing footage to make it look as if he called for violent action before the Jan. 6 attack on the Capitol. The BBC has rejected claims that the error revealed any fundamental bias in its news coverage. Nasdaq is said to apply for permission to host round-the-clock trading. The stock exchange is seeking regulatory clearance to let investors trade for 23 hours a day, five days a week, according to Reuters. (More technically, it wants to run two trading sessions, between 4 a.m. and 8 a.m. and then from 9 p.m. to 4 a.m.) The New York Stock Exchange and Cboe also want to host longer market hours amid demand from investors. Senators dig into A.I. and rising electricity pricesThe build-out of immense data centers to power artificial intelligence has spiked electricity demand across the United States — and Americans’ electricity bills with it. Now, that trend is attracting scrutiny from Congress. Yesterday, three Democratic senators sent a letter to several of the large technology companies at the forefront of the A.I. boom, demanding information about how data centers may be driving up electricity bills for individuals and businesses, The Times reported. The senators — Elizabeth Warren of Massachusetts, Chris Van Hollen of Maryland and Richard Blumenthal of Connecticut — sent the letter to Google, Meta, Amazon, Microsoft and other major technology companies.
To fuel an all-out A.I. race, tech giants have poured billions into data centers that gobble up huge amounts of electricity. Some of the cost for meeting that demand is passed along to consumers, according to the Times report: The large, boxy data center buildings filled with computer servers consumed more than 4 percent of the nation’s electricity in 2023. Government analysts estimate that will increase to as much as 12 percent in just three years. That’s because computers that train A.I. systems consume much more electricity than those used for popular internet services like Netflix or TikTok. To meet that demand, energy companies have rushed to build more power plants and power lines. Although tech companies are shouldering a lot of those costs, they are not paying for all of it. Some of the expenses are ultimately borne by other businesses and individuals through higher electricity rates. Electricity bills have surged. The average cost of electricity for American households that use 1,000 kilowatt-hours of electricity rose 7 percent in September from a year earlier, to about $181, according to the latest data from the Energy Information Administration, a federal agency. And demand for electricity is expected to rise significantly in the coming decades. A factor at the ballot box: Concern over surging electricity prices showed up in recent statewide elections in Georgia, New Jersey and Virginia, as part of the growing debate over the U.S. affordability crisis. Virginia is the nation’s leader in data center power draw, and Georgia ranks in the top 10.
Chart of the day: Fed chair oddsWithin the past 24 hours, Kevin Warsh, a former Fed governor, has emerged as the new favorite to be President Trump’s pick to run the central bank, according to trading on the prediction market Kalshi. Warsh’s odds have overtaken those of Kevin Hassett, a top economic adviser to Trump, though those close ties may be hurting his chances, CNBC reported. Trump could make a decision in the coming weeks. The gas-powered engine lives onFor years, carmakers and government officials in the U.S. and Europe saw electric cars as the future. Now, a new move by Ford and an expected one by the E.U. underscore a reversal on those views. Exhibit A: Ford will take a $19.5 billion accounting charge to pivot away from E.V.s. It’s an admission that it overestimated demand for battery-powered cars and trucks. The company will switch production at a new factory in Tennessee to gas-powered pickup truck models from electric ones; will cancel an electric commercial van model; and will turn the F-150 Lightning vehicle into a hybrid from a pure electric vehicle. Exhibit B: Tough limits on E.U. ban on new gas-powered vehicles by 2035 is expected to be watered down. The move, which is set to be announced today, will ease rules approved two years ago that required all new vehicles sold from 2035 onward to have zero carbon emissions. That would have effectively barred the sale of hybrid vehicles as well as traditional internal combustion engines. Such a policy change was supported by several European officials, including Chancellor Friedrich Merz of Germany and Prime Minister Giorgia Meloni of Italy, who have pushed to help out industries key to their countries. The changes reflect continuing consumer and political demand for gas-powered vehicles. Sales of new E.V.s in the U.S., especially more expensive models, have slowed since the beginning of 2024. And the Trump administration has rolled back financial incentives for consumers to buy E.V.s, further depressing sales. G.M. and Stellantis have already shifted more of their production to combustion engine vehicles, taking financial hits as well. But companies don’t expect E.V.s to go away. Ford said it was still committed to building a medium electric truck with a $30,000 price target. More important, Western vehicle makers are keenly aware of the competitive threat posed by Chinese E.V. giants, whose models are becoming popular in Asia, Europe and elsewhere. They’re essentially barred in the U.S. yet because of tariffs — but, experts say, that won’t last forever. Ford’s changeover in vehicle production is meant to put it on better footing for that face-off, according to Jim Farley, the company’s C.E.O. “I think this makes our company much more China-proof,” he told The Times. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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