USA finance and payments: news summary 27 April
Headlines: Wednesday 27 April 2022
- With markets closed it is becoming clear that inflation and a possible Beijing lock down have investors spooked: Dow Jones (+0.19%), NASDAQ Composite (-0.014%), S&P 500 (+0.21%).
- Electricity prices have increased eleven percent over the last year: which states pay the highest prices?
- Elon Musk’s purchase of Twitter has wiped $126 billion from Tesla’s market value.
- Citing high gas prices, Maine passed a budget that includes a $850 stimulus check for many residents
- President Biden is considering canceling “all or most” student loan debtduring a meeting with members of the House Hispanic Caucus.
- Home buyers see a quick rise in interest rates as the Federal Reserve aims to combat inflation.
- Full student debt cancellation has not been proposed, but the White House has cancelled some borrowers' debt. Who is affected?
Helpful links & information
- What are the nine states that do not pay income tax and why?
- Missed the tax deadline? These are the penalties to be aware of.
- Can federal student loans be forgiven after 10 or 25 years?
- Stimulus checks can still be claimed, if you haven't received the federal payments.
It's been a punishing month for Big Tech stocks with the tech-heavy Nasdaq closing more than 4% on Friday, and falling by 10% over the course of April. This represents the worst month for Nasdaq stocks since 2008 and is cause for concern for investors in some of the most coveted stocks on the market.
We take a look at which stocks has suffered the brunt of the slump, and what the underlying reasons might be...
Data from the Mortgage Bankers Association (MBA) released on Wednesday found that the average contract rate on a 30-year fixed-rate mortgage rose to 5.37% for the week ending 22 April. This is the most popular type of home loan in the United States and it has risen to the highest level since June 2009.
However while the interest rates for some have risen sharply, many prospective home-owners are looking to reduce the initial monthly costs by opting for an alternative housing loan.
Food, fuel price shocks from Ukraine war to last at least 3 years, World Bank says
Global food and fuel price shocks linked to the Russia-Ukraine war are set to last until at least the end of 2024 and raise the risk of of stagflation, the World Bank said in its latest Commodities Market Outlook report.
In its first comprehensive analysis of the war's impact on commodity markets, the bank, which provides loans and grants to low- and middle-income countries, said the world faces the biggest commodity price shock since the 1970s.
It is being aggravated, it said, by restrictions in food, fuel and fertiliser trade that are exacerbating already elevated inflationary pressures around the world.
"Policymakers should take every opportunity to increase economic growth at home and avoid actions that bring harm to the global economy," said Indermit Gill, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions.
Russia is the world's largest natural gas and fertiliser exporter, and second largest crude oil exporter. Together with Ukraine, it accounts for nearly a third of global wheat exports, 19% of corn exports and 80% of exports of sunflower oil exports.
Production and exports of these and other commodities have been disrupted since Russia's Feb. 24 invasion of Ukraine.
As a result, the World Bank expects energy prices to rise more than 50 percent in 2022 before easing in 2023 and 2024, while non-energy prices, including agriculture and metals, are seen climbing by almost 20 percent in 2022 before moderating.
IRS encourage users to avoid calling
The Internal Revenue Service request that users avoid calling helpline numbers with the system overwhelmed and point customers to online solutions for any queries that arise.
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Will Biden cancel student loans?
It was an often-mentioned feature of his presidential election campaign, but what is President Biden going to do about student loans? During campaigning he said he would wipe off a proportion of student loan debt for all borrowers, with some low-income students getting an entire elimination of their student debt.
None of that had been officially proposed by the White House, but Biden now appears close to outlining his plan for student debt reductions.
Congress awaits huge White House student loans proposal
Having failed to push through his Build Back Better package last year, President Biden needs a legislative win to bolster his popularity ahead of the midterms later this year. Student debt was a main point of his succesfull presidential campaign and he promised to write off a proportion of student loan debt for all Americans. These pledges are yet to solidify into clear legislative proposals, but we could soon be seeing what Biden is offering.
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New York City is regularly ranked among the most expensive places to live in the United States. In 2021 Rocket Mortgage found that NYC was second only to San Francisco in terms of the costliest American locations.
The price of a single square foot in Manhattan is close to the average monthly mortgage payment across the US, meaning that New York City is a very expensive place to find a first home.
Fortunately there are programs on offer, both from the city and at a state level, which provide financial support for first time home-owners.
What have politicians said about Manchin's budget plans?
Our meetings were both preliminary and good, and we’re going to continue to keep talking. If you want to get rid of inflation, the only way to do it is to undo a lot of the Trump tax cuts and raise rates.
I am the most skeptical, I want to see the results. I want to put two of my colleagues in the room with a blank sheet of paper and ask them, ‘What will you agree to?’ There seems to be some problems with that.
As Democrats, we need to deliver. We need to hit costs head on, and we have the power to do that. We’ve got less than 200 days left, though, and instead of looking backwards, let’s look forward. Let’s get done what we can get done for the American people who elected us, for the American people who are counting on us.
Senator Joe Manchin: "There's not a Build Back Better revival, there's not."
New plans are afoot to deal with the failed Build Back Better Bill, though it will not be at all linked to the original. Joe Manchin, the architect of the previous bill's downfall, is planning a bipartisan bill he hopes will make it to the ppresident's desk.
Manchin wants half of any increased tax revenue to go toward deficit reduction, saying that it’s the “only way you’re going to fight inflation.”
“Just a fair, competitive tax code,” Manchin added about what he wants to see in a reconciliation bill.
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How President Biden could cancel student debt is still up for legal debate. When asked in a recent press gathering about student debt, White House press secretary Jen Psaki said, “Not a single person in this country has paid a dime on federal student loans since the president took office”. This references the debt moratorium, which is due to expire at the end of August.
So what power does the president have to deal with student loans and which government bodies must be negotiated with?
Tweet pokes fun at critics of student debt cancellation
With the news the US government is once again looking at student debt relief, many Republicans are angry that as much as $1.7 trillion of debt could be lifted off the backs of American students. This tweet from Chris Mohney aims to poke fun at that thinking by highlighting how much money the US has spent in the past on causes that some consider less important than student debt.
For comparison, the US government subsidised fossil fuel companies $5.9 trillion in 2020, according to the Yale School of the Environment. For bailing out banks in the banking crisis of 2008, the US government gave them $700 billiob, about $934 billion.
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Many residents of the Golden State are looking for relief, and the Low Income Home Energy Assistance Program (LIHEAP) Block Grant may be a good place to start. This program, administered by the Federal Department of Health and Human Services, provides eligible low-income households with “financial assistance to offset the costs of heating and/or cooling dwellings, and/or have their dwellings weatherized to make them more energy efficient.”
Read our full coverage for more details on who is eligible and how to apply.
White House responds to questions over student debt cancellation
Thanks, Jen. On the issue of student debt, I know you’ve been asked about this before, but Senator Schumer just told reporters on the Hill that the President is getting closer to canceling up to $50,000 in student loan debt for borrowers. He said, “The President is moving in our direction… We’re getting closer.” Is that true? When can we expect a decision?
MS. PSAKI: Look, the President has been considering and looking at options for how to provide more le- — relief to students across the country.
I would note, again, that not a single borrower of federal student loans has paid a penny on these loans since he took office. And this has been the longest time of that for any President, probably, in history. You can factcheck me on that. And he’s continuing to consider a range of options in terms of any additional steps.
Amidst increasing inflation many businesses are planing on increasing prices
Yahoo News has reported that many small businesses are planning to increase prices as their costs surge amidst increased inflation. For consumers who are already feeling the impacts of inflation, the move could further threaten the purchasing power of many households.
A survey conducted by the National Federation of Independent Business found that "more than two-thirds of small business owners plan to increase prices in the next three months."
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Is President Biden going to cancel student loan debt?
Senate Majority Leader Chuck Schumer stated earlier today that President Biden was moving closer to forgiving student loan debt. This comes after it was reported that President Biden is strongly considering student debt cancellation, many are wondering when the announcement could come. Currently he is considering a wide variety of options and but the White House not made any of those being considered public.
During a briefing, White House Press Secretary Jen Psaki said that if Congress were to pass a bill that would cancel up to $10,000 in student loan debt, the President would be very supportive. However, Jen Psaki did not have any information for those who have either paid off their debt or saved to cover the costs of college.
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Is President Biden going to cancel student loan debt?
Senate Majority Leader Chuck Schumer stated earlier today that President Biden was moving closer to forgiving student loan debt. This comes after it was reported that President Biden is strongly considering student debt cancellation, many are wondering when the announcement could come. Currently he is considering a wide variety of options and but the White House not made any of those being considered public.
During a briefing, White House Press Secretary Jen Psaki said that if Congress were to pass a bill that would cancel up to $10,000 in student loan debt, the President would be very supportive.
As the Russian invasion of Ukraine continues to impact global energy markets, some households in the United States are feeling the pinch. Energy prices have increased fourteen percent since January, with the cost of electricity moving up around eleven percent from March 2021 and jumping two percent from February to March this year. Western states have seen the greatest increase in the price of electricity, jumping more than four percent from January to March.
Read our full coverage for more details on states with the highest and lowest electricity prices.
After the US Federal Reserve began to increase interest rates, the average mortgage rate nearly doubled. Various forecasters have had to revise down their market value projections in light of the new rates as some buyers may be priced out of the market, lowering demand and thus creating a less competitive market.
With housing prices having increased around eleven percent last year, many are wondering if a bubble could be forming and impacting prices. This concern has been addressed by some experts, but if there is a bubble many believe that we will not know until, or if, it pops.
How did the pandmeic impact that work life of parents?
The BLS has has reported that in 2021, the number of mothers and fathers who formed part of the workplace remained basically unchanged compared to 2020.
The level for both remains under that recorded in 2021 but sizeable drops in participation have not been identified. Around seventy-two percent of mothers were working in 2021, while the number for fathers was twenty points higher at ninety-two percent.
The agency reported that mothers with younger children were less likely to work and that the same was true for fathers with older children.
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States implement Child Tax Credit for residents
The enhanced Child Tax Credit for the 2021 fiscal year gave millions of American households with children recieve a boost to family finances. Eleigible Americans received up to $300 per child each month starting in July last year. The direct payments were credited with a dramatic drop in childhood poverty and financial and food insecurity.
Efforts to pass an extension were squashed in the Senate at the end of last year when Senator Joe Manchin said he could not vote for a roughly $2 trillion spending package that besides the Child Tax Credit extension included a range of programs to invest in families and a greener economy.
However, states have stepped into the breech setting up their own Child Tax Credit programs. So far 10 states have implemented some version of the financial assistance to families with children as policymakers across the ideological spectrum recognize the value of its ability to aid American households.
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The official deadline for most taxpayers to file 2021 tax returns was 18 April 2022, but days prior to that date around 66 million filers had yet to send in their tax declaration. Not to fret though, the IRS is still accepting taxpayers’ annual income reports and the sooner you file the better.
The IRS urged all Americans, even those who are not required, to file this year, especially given the enhanced tax credits that were available for the 2021 fiscal year.
The agency advises those taxpayers who owe taxes to “file now to limit penalties and interest.” Taxpayers that don’t owe taxes will not be penalized for filing late and can still claim the Child Tax Credit for the 2021 tax year.
Biden touts gains in US economy since taking office
Since I took office, our economy has created 7.9 million jobs and unemployment has dropped to 3.6%. It’s historic.
Our economy has gone from being on the mend to being on the move.
Since the start of the year the average interest rate on the most popular US home loan has climbed at its fastest pace since 1994 as Fed tightens policy.
Purchasing a home in the US is becoming more and more costly as mortgage rates climb from their historic lows in 2021. The current 30-Year Fixed Rate Mortgage Average is 5.11 according to the St Louis Federal Reserve Bank is the highest since 2009.
IRS calls on taxpayers to claim their refund or lose out
The deadline to file a tax return and pay any taxes due has passed. For those who owe taxes and haven't filed yet, the agency urges you to submit your tax declaration as soon as possible to avoid penalties and interest.
For those who don't owe taxes and aren't required to submit a tax return, you may be leaving money on the table. Taxpayers have three years from the tax deadline for each year to claim an overpayments they made to Uncle Sam through income withheld for taxes.
For those that didn't heed the call from the IRS, although it can no longer be claimed, the IRS was holding on to $1.5 billion in unclaimed tax refunds from 2018 from 1.5 million people.
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Gas and Oil execs enjoy increased compensation as fuel costs soar
Research by Accountable.US shows that CEOs from 28 of the top oil and gas companies enjoyed a bumper rise in their compensation in 2021. After receiving a combined raise of $1.9 million, total compendation for the 28 CEOs was $394 million, including $31 million in bonuses, roughly $1.6 million per excecutive on average.
It's estimated that US oil and gas companies will see a windfall of up to $126 billion in profits this year due to high global gas prices caused by supply shortages exacerbated by Russia's invasion of Ukraine.
Democratic lawmakers have introduced legislation called the Big Oil Windfall Profits Tax to redirect some of those profits back to US taxpayers suffering from the high gas prices which have been inching up again.
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Schumer calls out oil and gas companies for not helping American households
As gas prices remain high, currently $4.13 per gallon on average in the US, Democratic lawmakers are calling out US oil and gas companies for profiteering on the back of American households struggling to afford to fill up their tanks.
Senate Majority Leader Chuck Schumer took to the floor to deride the companies for lining their pockets and those of their shareholders.
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Biden signals he may cancel student debt through executive order
President Biden has extended the moratorium on student loans four times, which have been frozen since March 2020, the latest will expire at the end of August 2022.
On Monday, in a closed-door meeting with members of the Congressional Hispanic Caucus, Biden said that along with considering a further extension, he could soon announce a broader student loan debt forgiveness through executive order.
Publicly though, the White House will only confirm that the president is continuing to weigh the options available to him.
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While the White House has not budged from their opposition over President Biden using his executive authority to cancel up to $50,000 worth of debt per borrower, smaller batches of loan cancellation have been announced.
Wall Street suffers another grim day
All three indexes were down with sizeable losses at the end of Tuesday's trading. The Dow Jones dropped over 800 points, and the Nasdaq lost over 500 now down over 20 percent since the start of the year.
Investors confidence was shaken after Federal Reserve chairman Jerome Powell voiced hawkish stance on fighting inflation, indicating potentially back-to-back half point interest rate hikes.
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What have economists said about the World Bank report?
Households across the world are feeling the cost of living crisis... We're particularly worried about the poorest households since they spend a larger share of income on food and energy, so they're particularly vulnerable to this price spike.
World Bank predicts huge economic shock from Ukraine war
The World Bank has published a report conceding that the world is to face some of the most testing economic circumstances in 50 years. It says there will be "the largest 23-month increase in energy prices since the 1973 oil price hike", in which tensions in the Arab Gulf states caused rapid increases in the price of fuel.
Energy prices are set to increase more than 50 percent, pushing up bills for households and businesses, the report says.
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To help residents “grappling with the increased costs as a result of pandemic-driven inflation,” the Maine legislature has passed a budget that includes relief checks for Mainers.
Three federal stimulus checks - worth a maximum of $1,200, $600 and $1,400, respectively - have been sent out to eligible Americans during the covid-19 pandemic.
AS USA's Will Gittins explains how to check how much you've received as part of three rounds of federal stimulus checks paid out in the US since early 2020.
Americans who missed tax-filing deadline may be able to avoid fine - IRS
Taxpayers who missed the deadline to submit their 2021 federal income tax return - for most filers, this was 18 April - may be able to avoid being hit with a fine, the IRS says. The agency is encouraging Americans who failed to file their taxes or get an extension by the due date to check out its First Time Penalty Abatement.
Find out more about the First Time Penalty Abatement on the IRS' website
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Elon Musk and Bill Gates have clashed over approaches to the covid pandemic, the effectiveness of vaccines, death tolls, the space race, electric vehicles...
AS' Laura Martín Sanjuan on the tycoons' difficult relationship
Tesla takes 12.2% hit over Musk Twitter funding fear
(Reuters) - Tesla Inc lost $126 billion in value on Tuesday amid investor concerns that Chief Executive Elon Musk may have to sell shares to fund his $21 billion equity contribution to his $44 billion buyout of Twitter Inc.
Tesla is not involved in the Twitter deal, yet its shares have been targeted by speculators after Musk declined to disclose publicly where his cash for the acquisition is coming from. The 12.2% drop in Tesla's shares on Tuesday equated to a $21 billion drop in the value of his Tesla stake, the same as the $21 billion in cash he committed to the Twitter deal.
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South Africa-born Elon Musk is not oft out of the headlines, and his recent acquisition of Twitter has brought the world’s attention upon him again. It is costing him around $44 billion, or just under one-fifth of his total wealth.
Coming from the humble background of emerald mine owners, Musk made his early break in software companies such as Zip2 and Paypal, before taking the plunge into some huge business ventures such as Tesla and SpaceX
AS USA's financial news live blog
Good morning and welcome!
Congress has returned after a two-week break with long list of legislation to pass, including measures to tackle inflation. We'll bring you the latests on what is being done to combat rising prices.
The deadline to file a 2021 tax return and pay taxes has passed, but what can you do if you missed it? Looking for how to track your refund? Want to know what is being considered on Capitol Hill and in the states to support US households combat inflation? We have you covered.