The selloff in U.S. semiconductor and megacap stocks has sucked up most of investors’ attention over the past couple of weeks. But they aren’t the only momentum trades that have stopped working.
Across financial markets, bets that had reliably minted profits all year have come undone in July.
On clear days, the Syrian villages alongthe border here look deceptively empty. The Jordanian soldiers peering north across no man’s land see only dusty ghost towns where nothing moves except feral dogs and an occasional farmer working fields that have seen too little rain and too much war.
But on nights when the fog rolls in over the hills, the frontier takes on a sinister, alternate existence. Dozens of men — in trucks, on dirt bikes and on foot — emerge from the mist to form heavily armed columns for a race across the border.
They carry assault rifles, rocket-propelled grenades, even machine guns. Concealed in their vehicles and backpacks are hundreds of packages containing many tens of thousands of small white pills. The drugs, a synthetic stimulant called Captagon, are fresh from factories in the Syrian heartland that churn out an estimated $10 billion worth of illicit drugs each year.
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In a country where traditional industry has all but ceased to exist, the pills are the fabulously profitable core of a zombie economy that has helped Syria’s political and military elite cling to power after 13 years of civil war and a decade of crushing sanctions. Having swollen to a massive scale with tacit government approval, according to U.S. and Middle Eastern officials, the trade increasingly threatens Syria’s neighbors, flooding the region with cheap drugs.
“If visibility is bad, they are coming — every single time,” said Col. Essam Dweikat, commander of a Jordanian Armed Forces unit responsible for defending the western sector of the country’s 200-mile border with Syria. “The problem is, the people who come across now are armed, and they are ready to fight.”
The Money War
The U.S. government is putting more sanctions on foreign governments, companies and people than ever. But these powerful tools of economic warfare can have unintended consequences, hurting civilian populations and undermining U.S. foreign policy interests. The Money War investigates the proliferation of U.S. financial sanctions and the dangers of overuse.
Jordan has twice dispatched fighter jets into Syrian airspace to carry out strikes against smugglers and their safe houses, according to intelligence officials in the region — operations the government in Amman has not acknowledged publicly.
Yet, despite extraordinary efforts to stem the tide, billions of Captagon pills from dozens of manufacturing centers continue to pour across Syria’s borders and through its seaports. The trade’s ripple effects are expanding ever outward, to include rising levels of addiction in wealthy Persian Gulf countries and the appearance of drugmaking labs in neighboring Iraq and as far away as Germany, according to Iraqi and German officials.
Huge profits from the pills — which cost less than a dollar to make but fetch up to $20 each on the street — have attracted a host of dangerous accomplices, from organized crime networks to Iranian-backed militias in Lebanon, Iraq and Syria, according to U.S. and Middle Eastern intelligence officials. In recent months, smugglers began moving weapons as well as drugs, the officials said. Jordanian raids on smuggling convoys have netted rockets, mines and explosives apparently intended for Islamist extremists in Jordan or possibly for Palestinian fighters in Gaza and the West Bank.
Fighters affiliated with Syria’s Hayat Tahrir al-Sham rebel group display drugs previously seized at a checkpoint they control in Daret Ezza, Syria, in 2022. (Omar Haj Kadour/AFP/Getty Images)
Most profoundly, the drugs have provided a lifeline for the government of Syrian President Bashar al-Assad, who has seized on Captagon as a way to stay in power, current and former U.S. officials said. As the United States and other Western countries ramped up pressure with sanctions — to hold Syrian officials accountable for war crimes or to pressure Assad to negotiate an end to the conflict — Syria’s ruling class found salvation in a small white pill, one that conferred massive profits and partial insulation from the punishment U.S. policymakers were serving up.
“This is the stream of revenue on which they are relying in the face of sanctions pressure from us and from the European Union,” said Joel Rayburn, the U.S. special envoy to Syria from 2018 to 2021. “The Assad regime could not withstand robust sanctions enforcement, except for Captagon. There is no other source of revenue that could make up for what they lost due to sanctions enforcement.”
The Syrian mission to the United Nations did not respond to a request for comment. The Assad government has repeatedly denied having any involvement with illicit drugs, and in the past year, it announced arrests of several low-level traffickers and the seizure of small quantities of the white pills. Yet Treasury Department documents have identified close relatives of Assad — including his brother Maher al-Assad, commander of the Syrian army’s 4th Armored Division — as key participants in Captagon trafficking. Most of the pills are produced in regime-held areas and moved through borders and port facilities under government control.
A 2023 study extrapolating from known seizures of drugs since 2020 estimated that Captagon generates about $2.4 billion a year for the Assad regime, “well above any other single licit or illicit source of revenue,” wrotethe authors at the Observatory of Political and Economic Networks, a nonprofit that conducts research on organized crime and corruption in Syria.
How Captagon makes its way through Syria
How Captagon makes its way
The industry’s rise illustrates the complexities of trying to change a foreign power’s violent repression by ratcheting up economic pressure on its leadership and business elites. U.S. officials and experts say sanctions remain the most powerful tool, short of war, for punishing a government that has been accused of numerous war crimes since Assad began brutally crushing a pro-democracy uprising in 2011.
The long list of offenses includes the systematic torture and executions of civilians, the deliberate targeting of hospitals and food distribution centers, and the killings of hundreds of women and children with outlawed sarin nerve gas, according to U.S. officials, U.N. investigations, and human rights and exile groups. Syria is officially listed by the United States as a sponsor of international terrorism and is regarded as an increasingly vital ally and strategic partner to Russia and Iran.
Assad has defied calls for his ouster while presiding over the destruction of this once moderately prosperous country of 22 million. At least 12 million Syrians are now refugees or internally displaced, and 90 percent of the country’s citizens live in poverty. The country’s GDP fell from a prewar high of $252 billion to just $9 billion in 2021, according to World Bank estimates. The economy continues to shrink, as does the life expectancy for young Syrians.
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The emergence of industrial-scale Captagon production beginning around 2019 prompted U.S. officials and Congress to shift the focus of sanctions to specifically target the drug trade and its sponsors. In April, Congress approved legislation targeting Syria’s drug kingpins as part of the $95 billion bipartisan foreign aid package signed into law by President Biden. That followed a Treasury Department announcement of new sanctions against Syrian business executives with alleged ties to Captagon smuggling.
Yet Captagon production continues to soar, and Assad is unshaken and apparently wealthier than ever, U.S. officials acknowledge. While the sanctions imposed against his government enjoy broad support among Syrian opposition leaders and human rights advocacy groups, the experience of the past decade underscores a perplexing reality: While sanctions remain a vital tool for punishing criminal behavior by governments, the targets of sanctions inevitably find ways to blunt their impact, often with painful consequences for ordinary citizens.
“The most profound point is that sanctions strengthen the bad actor relative to the rest of the population,” said Ben Rhodes, the former deputy national security adviser for the Obama administration who worked on Syria policy in the early years of the civil war. “The people who are most able to withstand this are the people with guns and power.”
A sack of confiscated Captagon pills in 2022 at the judicial police headquarters in Kafarshima, south of Lebanon’s capital, Beirut. (Joseph Eid/AFP/Getty Images)
A STATE ENTERPRISE
Syria’s Captagon crisis came on fast and hard.
A few well-connected Syrians and Lebanese nationals built the foundations for a vast drug empire amid the chaos of the country’s fragmentation.
Before the start of the conflict in 2011, Captagon was regarded as a niche product for a small number of crime groups in Lebanon and Turkey. These manufacturers developed a knockoff version of the drug that was first developed in the 1960s by a German pharmaceutical company and marketed under the Captagon brand. The original version combined amphetamine with a second drug that stimulates the central nervous system. It was used by German physicians to treat hyperactivity and depression until the 1980s, when U.S. regulators and the World Health Organization recommended outlawing it because of the high risk for abuse.
Beginning around 2018, U.S. and Middle Eastern officials said, cottage-scale manufacturing of the drug in Lebanon expanded to a handful of Syrian towns in a border region north of Damascus.
A key figure, according to Treasury Department sanctions documents, was Hassan Daqqou, a dual Syrian-Lebanese national and onetime car dealer who began buying up properties on both sides of the border for production centers and warehouses. Daqqou — dubbed the “King of Captagon” by the Lebanese news media — succeeded in building his empire through alliances with powerful friends within government and security circles in Syria and Lebanon.
Among his collaborators, U.S. and Middle Eastern officials said, were operatives with the Lebanese militia group Hezbollah as well top Syrian political and military leaders —not only Maher al-Assad, but also several Assad cousins and business executives close to the Syrian leader.
“
“The most profound point is that sanctions strengthen the bad actor relative to the rest of the population. The people who are most able to withstand this are the people with guns and power.”
Ben Rhodes,
former deputy national security adviser for the Obama administration
Two Biden administration officials, citing U.S. intelligence assessments, confirmed in interviews that Maher’s 4th Division has been an active participant in the Captagon trade since at least 2020, controlling distribution and transportation hubs, including port facilities in Latakia on the Syrian coast. Syrian control of operations increased after Daqqou was imprisoned in Lebanon for drug trafficking in 2021.
Biden administration officials say they have no evidence that Assad is personally directing the Captagon trade. But by naming his brother and cousins as key facilitators, U.S. officials made clear their view that drug manufacturing in Syria is now a state enterprise.
“Syria’s security forces now provide protection for drug traffickers,” said one Biden administration official, speaking on the condition of anonymity to discuss intelligence assessments. White House officials believe Assad is now using Captagon as leverage with Arab states, offering to selectively restrict the flow of drugs as a reward to governments that normalize ties with Syria.
“It is clear that he could shut this down if he wanted to,” the administration official said.
Also clear is the massive scale of drug manufacturing in Syria, which U.S. officials say now produces most of the world’s Captagon supply. Administration officials say ingredients for the drug, such as amphetamine, are purchased legally from several countries, including Iran and India, and imported through Latakia. The precursor chemicals are mixed in factories and machine-pressed into tablets bearing a distinctive double-C logo.
Since the start of the decade, law enforcement agencies intercepted huge shipments of Syrian-made drugs in busts at ports in Italy, Saudi Arabia, the United Arab Emirates and Malaysia. In 2021, the Malaysian authorities discovered more than 95 million Captagon tablets hidden inside a cargo ship — a record haul with a street value of $1.2 billion that was routed through Malaysia to hide its ultimate destination: Saudi Arabia.
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The biggest maritime busts showed smugglers going to extraordinary lengths to conceal their cargo. The 84 million tablets seized by customs officials in the Italian seaport of Salerno in 2020 had been hidden inside industrial-size spools of paper. Saudi police found millions of the white pills stashed inside containers of pomegranates and flour in separate incidents in August 2022 and April 2023. In one of the most recent attempts, uncovered by Dubai investigators this past September, drug traffickers hid 86 million pills inside prefabricated wooden panels and doors labeled for delivery to construction companies. Nearly all the pills were traced back to ports in Syria.
While it’s not technically accurate to call Syria a narco-state — Captagon is a stimulant, not a narcotic — the country has become so dependent on drug income that Assad would be hard-pressed to shut down the drug factories if he decided to, said Caroline Rose, a researcher who oversees the Special Project on the Captagon Trade at the New Lines Institute, a Washington nonprofit.
“They’ve taken Captagon to such a level that the industry can sustain itself,” Rose said. “It’s no longer mobile facilities, but permanent factories that can accommodate industrial-scale production. And on top of that, there’s an active security apparatus that provides guards, protection and support and even facilitates the movement of the drugs.
“It’s a perfect system,” she said.
Jordanian soldiers patrol along the border with Syria in 2022. (Khalil Mazraawi/AFP/Getty Images)
RUNNING BATTLES
For Syria’s neighbors, it’s a disaster.
Captagon has now become a drug of choice — and a public health crisis — among young people across the Middle East, making deep inroads in countries such as Saudi Arabia and the United Arab Emirates where alcohol is banned or, for locals, proscribed. Habitual use brings addiction and a wide array of health problems, from insomnia and depression to hallucinations and heart problems, according to medical researchers.
The drug is also a tool for Islamist groups, including Islamic State militants, because it provides users with a burst of euphoric energy and a feeling of invincibility and emotional detachment on the battlefield. Some fighters call it “Captain Courage.”
Surging drug trafficking has forced Jordan to deploy hundreds of soldiers on its northern border. In the past year, Jordanian forces have waged running battles with groups of up to 100 traffickers that left multiple people dead and wounded on both sides.
On a recent late-winter afternoon near Kom al-Raf, a dozen soldiers in full combat gear traced the southern edge of no man’s land, checking for signs of breaches in the barrier system of berms and coiled concertina wire. As they walked, other soldiers stood guard from atop armored vehicles and watchtowers that have been erected at half-mile intervals along the perimeter road. In recent months, officers said, the smugglers had begun using drones to conduct surveillance or, in some cases, to ferry small parcels to confederates across the border.
But vastly more drugs are hauled overland. Near Kom al-Raf, a firefight in 2022 killed a Jordanian soldier when his patrol surprised a large column of smugglers — at least 68 gunmen on foot, according to the after-action report — as they attempted to cross in dense fog.
A map of the Syria-Jordan border where smugglers transport Captagon.
A major storage location for Captagon and the launch point for shipments heading toward Jordan. Targeted by Jordanian airstrikes
in April 2022.
Sources: Human Rights Watch and Northwestern University’s Knight Lab
After a brief firefight, the smugglers fled back into Syria, leaving behind 100-pound packs filled with Captagon tablets as well as bolt-cutters and weapons, Jordanian officials said.
The convoy’s large size and willingness to engage a military patrol startled the Jordanians and prompted army commanders to adopt more aggressive measures.
“We’ve had to change our rules of engagement multiple times because their methods have changed,” Brig. Gen. Mustafa al-Hiyari said in an interview at the headquarters of the Jordanian Armed Forces, perched on a heavily fortified hilltop just outside Amman. “Smugglers generally don’t want to fight, but these are armed.”
Since 2020, the border region has seen at least a dozen armed clashes that resulted in deaths, injuries or arrests. One encounter in January resulted in the capture of 15 alleged traffickers, according to photos shown to The Washington Post. Jordanian officials said the men acknowledged during interrogations that they had undergone professional military training to qualify for the job of courier. At the time of the arrests, several were high on Captagon, the officials said.
Seized drugs, including Captagon, in Marea, Syria, in 2022. (AFP/Getty Images)
In one of the most recent cases, Jordanian authorities tracked a suspected drug shipment last month as it traversed more than 100 miles of open highway before police swooped in at a border crossing with Saudi Arabia. Millions of pills were found hidden inside construction equipment bound for the gulf kingdom, officials said.
Based on interrogations and other evidence, Jordanian intelligence officials said they have concluded that the most recent bands of smugglers are linked to Iranian-backed Syrian militias, including some of the same groups that have fired rockets at U.S. forces based in eastern Syria. There is no evidence of direct involvement in drug trafficking by Tehran, but Iranian officials have provided weapons, money and intelligence to the groups.
U.S. and Jordanian officials say the militias may be responsible for the increasingly sophisticated weapons carried by traffickers. In several instances, smugglers have left caches of weapons inside Jordanian territory, possibly with the intention of providing them to other Iranian-backed militants in the West Bank or the Gaza Strip. The Post was shown photos of some of the hidden weapons, which included Claymore-type anti-personnel mines.
“The Iranian proxy groups operate like warlords,” constantly competing for fighters, better weapons and cash, said Charles Lister, director of counterterrorism programs at the Washington-based nonprofit Middle East Institute. “Drugs are just an easy way to make money and become more powerful than your neighbors.”
Displaced Syrians in Idlib. At least 12 million Syrians are now refugees or internally displaced, and 90 percent of the country’s citizens live in poverty. (Bilal Alhammoud/AFP/Getty Images)
‘IN AN UNDERWORLD’
The U.S. policy of maintaining harsh sanctions enjoys broad bipartisan support. The toughest measures to date came in 2020, nine years after the start of the war and the same year that the first massive seizures of Captagon drugs were being recorded. The congressionally approved Caesar Act was named in honor of a Syrian military photographer and defector — known publicly only as “Caesar” — who used his camera to document the Assad regime’s torture and murder of more than 11,000 Syrian prisoners. The sanctions targeted the country’s largest remaining industrial sectors, including energy production and construction, and are explicitly intended to discourage international business agreements that could help Assad repair the country’s battered infrastructure.
As a means of inflicting well-deserved punishment on Syria’s leader, the sanctions are widely regarded as a triumph. Supporters of the measures warn that the world cannot “normalize” Assad or allow his regime to enrich itself through construction contracts to rebuild cities that Assad helped to depopulate and destroy.
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The Caesar Act, together with this year’s Captagon sanctions, sends an important signal to the Assad regime and its allies that the United States is standing with ordinary Syrians, said Mouaz Moustafa, executive director of the Syrian Emergency Task Force, a Washington-based nonprofit that advocates for victims of Syrian war crimes.
“There are strict humanitarian exceptions to ensure that no Syrian civilians, regardless of their political outlook, are harmed by these sanctions,” Moustafa said. “The sanctions are focused on the people who are harming ordinary Syrians with chemical weapons, torture and indiscriminate bombardment. The drugs were part of a deliberate strategy by these same people to ensure that they have a revenue source, and that they have complete control over it.”
Yet even the most ardent supporters acknowledge that no “victory” in Syria is completely clean.
While there may be few viable alternatives to sanctions, the measures always come with unwanted side effects — including the inevitable certainty that the elites of society will find ways to survive and even profit, said Peter Andreas, professor of international studies at Brown University and the author of a study on how sanctions increase illicit trade.
“The targets of sanctions, because their survival depends on it, are willing to go through all kinds of alliances to succeed,” Andreas said.
Sanctions can eventually “put the whole economy in an underworld,” he said. “It’s an unintended but very real and long-lasting consequence.”
Peyton Manning and Kelly Clarkson joined Olympics host Mike Tirico as official co-hosts for the event. NBC had promoted their presence for months before the opening ceremony. The gamble by executives – an attempt to draw a broader audience with the inclusion of the Season 1 “American Idol” winner and the Pro Football Hall of Famer – was a fine idea in the boardroom.
In practice, it could not have gone worse.
Tirico is the best of the best when it comes to hosting and play-by-play, and he was his typical self. But Manning and Clarkson were distracting at best and brutal to listen to at worst.
Olympics fans watching at home aren’t tuning in to hear a talk-show host (Clarkson) and football analyst (Manning) discuss things outside of their spheres of influence. They want substantive information about the countries and international athletes’ stories.
Clarkson saying she finds the rain “magical” twice in a span of 15 seconds and Manning doing a bit with a quarterback wristband didn’t elevate the broadcast. At least Manning appeared to have done some reporting by talking with athletes and relaying some anecdotes. By the end of the (way-too-long) show, it felt like they had both been benched, particularly Clarkson.
When NBC needed her most, to evaluate Celine Dion’s performance to cap the show, Clarkson literally said: “I actually can’t talk.”
NBC’s saving grace may have been Snoop Dogg. The rapper will be featured heavily in the coverage over the next two weeks, and his timing was effective. On Friday, the comedy he provided was desperately needed.
The most disappointing part of the broadcast was that it did not provide a proper reflection of what was happening in Paris. A dance party – a borderline rave – on one of the barges that went on for 20 minutes received little attention.
Even in the rain, many of the visual elements of the boat parade impressed and resonated. A metal scene featuring French band Gojira was an early highlight (and followed an ode to “Les Miserables”), while a dozen headless Marie Antoinette mannequins appeared in the Conciergerie. French singer Aya Nakamura and the Republic Guard’s performance intertwined history and modern music. A mock fashion show and nod to Louis Vuitton were other Parisian hallmarks that came through successfully on TV. The Eiffel Tower light show at the end, the Celine Dion performance under the landmark and the cauldron lighting were historic. Lady Gaga helped the festivities begin appropriately.
The vibes from the fans who braved the elements created a festive atmosphere on the ground. But the television broadcast struggled to convey that – the perils of having to focus on the boats and the immediate action on the river.
NBC didn’t adequately highlight the American boat and interviews with Maria Taylor, a capable reporter who actually asks questions (something that’s becoming rare on TV these days). That type of exclusive access should have been played up more. An opportunity to highlight athletes beyond big names like A’ja Wilson, Noah Lyles, Joel Embiid and Steph Curry went wasted.
Again, it’s worth pointing out how much the rain caused noticeable difficulties throughout the broadcast and likely impacted the ability to throw it to Taylor on the boat. But if this was the plan all along, she would have been better off sitting next to Tirico as a co-host.
Speaking of better options for the co-hosting gig, why not Rebecca Lowe, who led the pre-ceremony coverage? Or Snoop?
At one point, Manning’s audio sounded like he’d dipped his microphone into the Seine. “TODAY” show host Hoda Kotb promised a FaceTime call with Simone Biles while interviewing her family on a bridge over the Seine. That promise went unfulfilled, and Kotb disappeared from the broadcast for nearly three hours. Her co-host, Savannah Guthrie, finished one of the “TODAY” segments by saying that she couldn’t hear anything, and the network abruptly inserted its first commercial of the broadcast. NBC did keep the first hour of the broadcast commercial-free, as it said it would.
An opening ceremony such as this one was always going to be a challenge to produce. NBC Sports Olympic president and executive producer Molly Solomon said that from a television perspective, it was going to be the most-complicated event ever taped.
“It’s audacious, it’s bold, it’s daring and it’s going to be unforgettable,” Solomon told USA TODAY Sports in May.
Unfortunately for viewers in the U.S., and for NBC, it might be mostly for the wrong reasons.
White House insiders have revealed a chilling new detail of just what happened inside the Situation Room on September 11.
ADVERTISEMENT Writing in his book ‘The Situation Room’, former Clinton aid turned ABC anchor George Stephanopoulos revealed what it was like inside the White House on 9/11. According to Stephanopoulos, Frank Miller, the senior director for defense policy, urged everyone to leave the room but nobody did.
Taking a different approach, Miller then had everyone right down their name and social security number because ‘we want to know what bodies to look for’. Early on in the terror attacks that killed almost 3,000, it was feared a hijacked plane may also have been heading for the White House. United 93 was crashed into a Pennsylvania field by a heroic passenger revolt before it could reach its intended target of the White House of US Capitol. Stephanopoulos said that everyone inside, around 20 people, complied with Miller’s request. +6 View gallery
Frank Miller, the senior director for defense policy, had everyone right down their name and social security number because ‘we want to know what bodies to look for’ +6 View gallery
Smoke billows from the top of One World Trade Center and flames and debris explode from Two World Trade Center, Tuesday, Sept. 11, 2001 TRENDING Trump’s doctor releases an update on his recovery… and slams FBI 100.6k viewing now How Joe Biden made decision to drop out at ‘last minute’ 2k viewing now Incredible story of how El Chapo’s son set up drug lord El Mayo 5.9k viewing now Stephanopoulos also recalls how in 2008 the White House withdrew plans to have President Obama moved from the building during disruptive refurbishments to the building because they feared it would look racist. One White House aide stamped out the idea, saying: ‘We are not moving the first Black president of the United States out of the Oval Office. It ain’t happening.’ Writing in his book ‘The Situation Room’, former Clinton aid turned ABC anchor George Stephanopoulos revealed what it was like inside the White House on 9/11 The Situation Room, situated in the West Wing basement, was renovated as part of a $50 million makeover last year. Construction workers dug five feet below the secure 5,500-square-foot complex to install cutting-edge wiring and upgrade the facility JFK wanted after the 1961 Bay of Pigs Invasion. The maze of offices, conference rooms and computer banks has new screens, LED lights, clocks and high-tech communications infrastructure to monitor threats. While see-through glass offices can fade to opaque with just the press of a button in true. The modern finish replaces the old floors and furniture worn down over more than 50 years while history unfolded. Donald Trump monitored the 2019 operation that killed Islamic State leader Abu Bakr al-Baghdadi from inside the room. While Barack Obama stared intently as he watched the heart-stopping moment a Navy SEAL raid on 9/11 mastermind Osama Bin Laden ended with his assassination. President Biden watched in February 2022 when Abu Ibrahim al-Hashimi al-Qurayshi blew himself and his family up inside a Syrian hideout during a raid by U.S. forces. +6 View gallery
Obama stared intently as he watched the heart-stopping moment a Navy SEAL raid on 9/11 mastermind Osama Bin Laden ended with his assassination in 2011 +6 View gallery
According to Stephanopoulos, President Obama was not asked to vacate the White House while it was being refurbished because staff thought asking the first black president to vacate would look racist Access is tightly controlled and generally restricted to the president’s national security and military advisers. Anyone listening in on classified briefings needs clearance. Even the contractors working on the renovation last year had to get temporary security clearances. The complex was created in 1961 by the Kennedy administration after the Bay of Pigs invasion. President John F. Kennedy believed there should be a dedicated crisis management center where officials could coordinate intelligence faster and better. Nixon administration official Henry Kissinger described the space as ‘uncomfortable, unaesthetic and essentially oppressive.’ After 9/11, the White House did a significant update, along with a broader upgrade to presidential communications on Air Force One and the presidential helicopter. +6 View gallery
The complex was created in 1961 by the Kennedy administration after the Bay of Pigs invasion. Staff are seen here in the newly renovated complex Biden is given tour of White House’s newly renovated Situation Room
The complex is staffed around the clock by military and civilian personnel who monitor breaking developments worldwide. It has a reception area with a U.S. seal in stonework. Behind that is the main conference room, the ‘JFK room.’ To the right are a smaller conference room and two soundproof ‘breakout rooms.’ To the left is the ‘watch floor,’ a 24-7 operations center. The JFK room has a long wooden table with six leather chairs on each side and one at the head for the president. Leather armchairs line the walls. A giant, high-tech screen runs the length of the back wall. A 2-foot (0.6-meter) seal is positioned at the president’s end of the room, larger than the old seal. ObamaWhite House
Economic data has also remained remarkably resilient, even as rates stay at a 23-year high. Spencer Platt/Getty ImagesNew YorkCNN —
Wall Street is undergoing a palpable vibe shift.
Strong corporate earnings have helped stocks notch repeated record highs in 2024, despite stubborn inflation forcing investors to dial down their expectations for how many times the Fed will cut rates this year.
But cooling inflation data in recent weeks has led Wall Street to bet that the Federal Reserve will finally cut interest rates in September — and that there are now more options for gains beyond just the Big Tech stocks that have dominated the market this year.
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Data released Friday morning showed the Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, slowed to 2.5% for the 12 months ended in June — another sign for hopeful investors that inflation is continuing to ease from its four-decade high.
The Dow jumped 654 points, or 1.6%, on Friday after soaring more than 800 points earlier in the day. The S&P 500 gained 1.1% and the Nasdaq Composite added 1%.
For the week, the S&P 500 and Nasdaq fell while the Dow notched a gain.
Economic data has also remained remarkably resilient even as rates stay at a 23-year high. That, coupled with the slowdown in inflation, has raised hopes that the central bank could tame prices without triggering a recession, a feat it has achieved just once since the 1990s, according to some economists. Data Thursday showed the economy expanded at a robust 2.8% annualized rate during the second quarter, blowing past economists’ expectations.
Wall Street will get more clues about the Fed’s next moves at its policy meeting next week, where the central bank is expected to hold rates steady. While the Fed has penciled in just one rate cut for this year,traders are betting on up to three, according to the CME FedWatch Tool.
Big Tech gets pummeled
Brightening prospects for rate cuts typically signal good news for stocks, since the market tends to do better when higher borrowing rates don’t weigh down companies’ balance sheets. But you wouldn’t know that from the carnage in stocks this week.
The reason behind the selloff: Investors are shedding shares of the Magnificent Seven tech stalwarts that have dominated the market for the past two years, and their large weighting has dragged down the major indexes. Tech companies make up 32% of the total market capitalization, the highest level since the late 1990s, according to MRB Partners data as of June 28.
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An underwhelming start to the earnings season for the cohort has only intensified its declines: Tesla shares tumbled 12.3% on Wednesday after the electric vehicle-maker reported a more than 40% plunge in profits the prior evening. Alphabet shares slipped 5% after beating earnings expectations but missing analysts’ expectations for YouTube advertising revenue.
Smaller stocks prevail
One area that has benefited recently from the prospect of lower rates is small-cap stocks.
Shares of smaller companies tend to perform poorly when rates are high, since they have more floating rate debt than their larger counterparts. But they have historically tended to perform well when the Fed begins easing its high borrowing rates.
The Russell 2000 index, which tracks the performance of small-cap stocks, has gained 10.4% so far this month, outperforming the S&P 500’s 0.03% loss.
Investors are also picking at other areas of the market poised to gain when rates come down. Stephen Lee, founding principal at Logan Capital, said his firm added to its position in homebuilder stocks earlier this quarter, betting that cooling inflation would allow the Fed to cut rates and ease the ultra-tight housing market.
Sky-high interest rates have led homeowners to hold off on selling their homes to keep their pandemic-era low mortgage rates even as demand surged, driving up home prices to record levels.
More pain for Big Tech?
Investors have fretted over the past year that the market’s gains are beholden to just a handful of tech stocks, making the rally more vulnerable to pullbacks a few stocks stumble. The Magnificent Seven drove about 60% of the S&P 500’s total return during the first half of the year, according to Adam Turnquist, chief technical strategist at LPL Financial.
The recent gain in small-caps is making some investors hopeful that the market rally will continue to broaden.
There are signs that the pain in tech shares might not be over yet. Tech stocks’ steep losses following tepid quarterly results from Alphabet and Tesla suggest that investors are growing impatient with companies investing hefty sums into artificial intelligence with little to show for it in terms of revenue gains.
Many big tech firms have released AI chatbots and other flashy consumer tools since OpenAI’s ChatGPT kicked off the AI arms race two years ago, but the path to monetizing the technology remains unclear.
On Alphabet’s Tuesday earnings call, UBS analyst Stephen Ju noted that the initial use cases of the AI models that Big Tech firms have invested in building “are more on the cost savings or efficiency side.”
“When do you think we’ll start thinking about products that can help revenue generation for the Fortune 500, Fortune 1000 companies, which is probably something that can, hopefully, create greater value over time, versus just cutting costs?” Ju said.
As the AI arms race continues to heat up, companies are unlikely to slow their spending on AI. But it’s unclear when those investments will provide a boost to their balance sheets.
“The risk of underinvesting is dramatically greater than the risk of overinvesting for us here,” Alphabet CEO Sundar Pichai said on the call.
As stocks settle after the trading day, levels might change slightly.
The new Labour government has been in power for just over three weeks.
In that time, it says ministers have found government departments in a much worse state than they thought.
On Monday, the Chancellor will argue the public finances are in a bad place – and that will mean tough decisions.
To use the Westminster jargon, she’s rolling the pitch for announcements that might not be popular. But how much of what the government is facing is actually a surprise? And how much are these ministers trying to shape the political narrativ
The first thing to highlight is that we already had a good idea of the state of the country’s books. The Office for Budget Responsibility (OBR) publishes them twice a year – we last got a full breakdown last November.
We also knew during the election campaign that there were tough decisions to come.
The Institute for Fiscal Studies (IFS) suggested some government departments could see cuts of between £10bn and £20bn – something Labour were reluctant to engage with during the campaign.
So what is new?
Treasury insiders are claiming there have been surprises since they took over.
One is that public sector pay deals are likely to cost a lot more than expected.
The last government budgeted for a lower settlement of 2%, sources say, so to fund the much higher deal will cost billions of pounds. If a similar increase happens across the public sector, it would cost billions more.
Although some of that money was pay for civil servants who would have been working for the department anyway, sources say a lot of it was operational costs which were only discovered once the new government went through the books.
The Department of Health and Social Care has also warned of hospital building programmes in England costing a lot more than budgeted for.
Sources have also said there are extra spending commitments announced after the Autumn Statement which need to be paid for. Expect to hear about “in-year pressures” – extra spending that needs to be allocated immediately.
‘Black hole’
The Treasury intends to publish a full report and breakdown on Monday, explaining where it thinks it has found a “black hole”.
At that point we will be able to scrutinise the calculations and see what is really new.
But it was known before the election that whoever was in power afterwards would face big challenges.
Rachel Reeves started talking about a tricky inheritance well before polling day.
“We know things are in a pretty bad state… You don’t need to win an election to find that out.”
This is not just about the economy.
Ministers have been pointing to other areas where they say things are worse than they expected – the health service, prisons, the environment and more.
It is true to say there are big challenges with overcrowding. Senior ministers in the last government wanted action taken – but it was not signed off before the election.
But was it a surprise to the incoming government?
Sources in the justice department point to the system being a lot closer to “disaster” than they thought and how little time they had to try to solve the issue.
The picture is not a complete surprise, even if some specific details might have become clearer.
Framing the narrative
So let’s return to the politics. Because a lot of this is about politics.
The new government is trying to frame the debate over the next few years. It wants to argue it has been left such a dire inheritance that it has to do some pretty unpopular things.
It wants you to blame the Conservatives – not Labour.
The former chancellor Jeremy Hunt argues this is all nonsense and has warned Labour is paving the way for tax rises it did not disclose during the election campaign.
The Labour strategy though is not a new one.
The Conservatives did something similar when they won power in 2010, arguing that Labour in power had crashed the economy and left the government with no cash – and that was why austerity was essential.
It’s an argument Conservatives still make to this day.
And remember, Labour in power is making choices.
It has pledged not to increase income tax, National Insurance, VAT and corporation tax.
It has said it will not borrow extra money for day-to-day spending. It is likely to choose to pay public sector workers more than inflation, in line with recommendations from the pay bodies.
So the government has possibly found a few surprises that make its life a bit harder.
But it’s also trying to frame the political narrative and prepare the ground for what comes next.
Item 1 of 3 Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., June 24, 2024. REUTERS/Brendan McDermid/File Photo
[1/3]Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., June 24, 2024. REUTERS/Brendan McDermid/File Photo Purchase Licensing Rights, opens new tab
NEW YORK, July 26 (Reuters) – A gauge of global stocks climbed for the first time in four sessions on Friday as equities steadied after a sharp selloff and U.S. economic data showed an improving inflation landscape, sending Treasury yields lower.
The Commerce Department said the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, edged 0.1% higher last month after being unchanged in May, matching estimates of economists polled by Reuters.
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In the 12 months through June, the PCE price index climbed 2.5%, also in line with expectations, after rising 2.6% in May.
Reuters Graphics
The data likely sets the stage for the Fed to begin cutting rates in September, as the market widely expects.
“The more recent trend is building upon the market’s confidence that we are on a trajectory that would get us to 2% over the long run,” said Vail Hartman, interest rate strategist at BMO Capital Markets in New York.
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“This is just another month of good inflation data from the Fed’s preferred measure of inflation.”
The Fed is scheduled to hold its next policy meeting at the end of July. Markets see a less than 5% chance for a rate cut of at least 25 basis points (bps) at that meeting, but are fully pricing in a September cut, according to CME’s FedWatch Tool, opens new tab.
On Wall Street, U.S. stocks closed with strong gains, as small cap (.RUT), opens new tab stocks were once again among the best performers in a market that continued its recent rotation into undervalued names.The video player is currently playing an ad.00:10Inflation data, Big Tech boost U.S. stocks
However, megacap names also showed signs of stabilizing and the Nasdaq gained about 1% after three straight days of declines that sent the index down nearly 5%.
The Dow Jones Industrial Average (.DJI), opens new tab rose 654.27 points, or 1.64%, to 40,589.34, the S&P 500 (.SPX), opens new tab gained 59.88 points, or 1.11%, to 5,459.10 and the Nasdaq Composite (.IXIC), opens new tab gained 176.16 points, or 1.03%, to 17,357.88.
Despite the gains, the S&P 500 was down 0.83% for the week. The Russell 2000, however, secured a third straight week of gains in which it has surged 11.51%, its strongest three-week performance since August 2022.
European shares closed higher, buoyed in part by corporate earnings after two consecutive sessions of declines, but still on track for a weekly decline.
MSCI’s gauge of stocks across the globe (.MIWD00000PUS), opens new tab rose 6.69 points, or 0.84%, to 803.47 but was on pace for its second straight weekly fall.
The STOXX 600 (.STOXX), opens new tab index closed up 0.83% but finished down 0.27% on the week. Europe’s broad FTSEurofirst 300 index (.FTEU3), opens new tab ended 17.10 points, or 0.85%, higher.
U.S. Treasury yields were lower after the inflation data. The yield on benchmark U.S. 10-year notes fell 6.2 basis points to 4.194% its second straight daily fall, but was slightly higher on the week.
The 2-year note yield, which typically moves in step with interest rate expectations, fell 5.6 basis points to 4.3873% for its fourth weekly decline in the past five.
The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, slipped 0.03% at 104.30, with the euro up 0.1% at $1.0855.
The greenback also weakened 0.1% at 153.78 against the yen after the inflation PCE data and was on track for its biggest weekly percentage drop against the Japanese currency since early May.
The yen has strengthened on expectations a cut from the Fed is on the horizon while the Bank of Japan is expected to begin tightening policy by raising rates and reducing its bond purchases in the coming months. In addition, suspected BOJ intervention earlier this month also supported the currency.
Sterling strengthened 0.16% at $1.2871. The Bank of England will also hold a policy meeting next week, although uncertainty surrounds what action the central bank may take with regard to rates.
U.S. crude oil settled down 1.43% to $77.16 a barrel and Brent fell 1.51% on the day to end at $81.13 per barrel on declining Chinese demand concerns and hopes of a Gaza ceasefire agreement.
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Reporting by Chuck Mikolajczak; Additional reporting by Sinéad Carew and Karen Brettell in New York and Johann M Cherian in Bengaluru; Editing by Mark Heinrich and Marguerita Choy To read Reuters Markets and Finance news, click on <a href=”https://www.reuters.com/finance/markets”>https://www.reuters.com/finance/markets</a> For the state of play of Asian stock markets please click on:
Monthly repayments on a £200,000 mortgage would have risen by £412 from December 2021 to December last yearREUTERS
Hundreds of thousands of homeowners have been pushed into poverty by the rapid increase in their mortgage bills over the past couple of years.
A report from the Institute for Fiscal Studies, the economic think tank, estimates that the rise in mortgage rates over 2022 and 2023 led to an extra 320,000 people falling into poverty as they rolled on to much more expensive deals.
In December 2021, as the Bank of England started to raise interest rates again, the average rate for a two-year fixed mortgage was 2.34 per cent, according to Moneyfacts, the financial data provider. By December 2023 that figure had jumped above 6 per cent.
For somebody with a £200,000 mortgage, the increase in rates would have pushed up their monthly bill by £412, from £881 at the end of 2021 to £1,293 two years later.
Official statistics show that 230,000 people have been pushed into poverty by the jump in their mortgage bills, but Sam Ray-Chaudhuri, an economist at the IFS, said that this is “understating” the impact because mortgage rates are “not measured properly in the official income data”. Whereas the IFS accounts for variations in mortgage rates, the official data is based on an average rate.
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The IFS expects the problem to get worse. Adults remortgaging in 2022 were two percentage points more likely to fall into arrears on bills than those with mortgages who had not remortgaged. This suggests that once all households have remortgaged, the number of adults behind on bills could rise by 370,000.
The Bank of England also warned recently that those still on cheap mortgage rates face a shock when their deals run out. The Bank said the typical mortgagor refinancing over the next two years will see monthly repayments rise by £180, or 28 per cent, adding more than £2,000 to the average annual mortgage bill.
Despite the pandemic and the cost of living crisis, the IFS found that the level of absolute poverty in the UK, defined as households with incomes 40 per cent below the national average, was the same in 2023 as it was in 2019 at 18 per cent, or 12 million people.
It did, however, see an increase in more direct measures of hardship. The proportion of working-age adults who reported being unable to keep their home warm enough rose from 1.8 million to 4.6 million between 2019 and 2023, while there were 2.5 million people who reported being behind on bills last year, up from 2.1 million before the pandemic.
Peter Matejic, chief analyst at the Joseph Rowntree Foundation, which sponsored the IFS report, said the research “shows the cost of living crisis wasn’t felt equally by everyone”, noting that lower earners and pensioners “faced a rate of inflation even higher than the headline numbers”.Business & MoneyCompanies
Friday’s moves stem from a combination of oversold sentiment, a stronger-than-expected GDP report Thursday and the view that the Federal Reserve will begin cutting rates due to economic resilience, said CFRA Research’s Sam Stovall.
“Today’s benign PCE report helped talk the market off the ledge,” he added. “With this pullback, the great rotation lives on and breadth continues to be on our side.”
Investors continued their pivot into cyclical areas of the market and small caps, with the Russell 2000 rising 1.67%. Industrials and materials stocks rose, lifting their respective S&P sectors about 1.7%. 3M skyrocketed 23%, leading the industrials sector to the upside. The stock notched its best day since at least 1972.
Some technology names that have struggled amid this week’s sell-off gained, with Microsoft and Amazon adding more than 1% each. Meta Platforms climbed nearly 3%. The S&P’s information technology sector surged about 1%.
This positive inflation news has also lifted investor hopes for more rate cuts this year, with the fed funds futures market pricing in cuts in September, November and December.
“The numbers have been coming in tamer,” said Ken Mahoney, president of Mahoney Asset Management. “In housing and real estate, you’re starting to see some cracks. They’re going to stop messing around, start cutting rates.”
That data comes at the end of a volatile week on Wall Street. The S&P 500 declined 0.8%, while the Nasdaq lost 2.1%. Both indexes posted back-to-back weekly losses for the first time since April. The Dow outperformed, adding 0.8%, and notching its fourth consecutive positive week for the first time since May. The action came as investors seemed to participate in a rotation into small caps and cyclicals.
In other news, medical device maker Dexcom plunged 41% after releasing disappointing fiscal full-year guidance. Footwear company Deckers reported fiscal first-quarter earnings and revenue that exceeded analysts’ expectations, boosting shares 6%.
14 HOURS AGO
Stocks finish higher, Dow jumps more than 600 points
Stocks finish higher on Friday to cap off a volatile trading week.
3M shares tracked for their best day in more than 50 years on the back of better-than-predicted earnings.
The office suppliers maker jumped more than 21% in afternoon trading. If that holds through Friday’s closing bell, it will mark the stock’s biggest one-day gain since at least 1972.
Friday’s jump comes after the company easily beat expectations of analysts on both lines for the second quarter. 3M earned $1.93 per share, excluding items, on $6.26 billion in revenue, while analysts expected just $1.68 in earnings per share and $5.88 billion in revenue.
3M was the best performer in the blue-chip Dow in Friday afternoon trading. Shares also touched a new 52-week high amid the rally.
With this advance, shares are up more than 37% on the year.
— Alex Harring
15 HOURS AGO
Talking about substantial number of rate cuts is ‘premature,’ Torsten Slok says
Apollo’s Torsten Slok still thinks that discussion around more interest rate cuts in the future is “premature” following Friday’s PCE report.
“At the end of the day, if the strength of the economy is still running the risk here that we might get another … flare up or more tailwinds to the economic outlook, then I do think it’s premature to take out the champagne bottle and begin to talk about a dramatic amount of rate cuts coming,” the firm’s chief economist told CNBC’s “Squawk on the Street.”
Slok said that while the Federal Reserve may make a cut in September, there needs to be more progress on inflation. He added that he doesn’t believe some weakness in certain labor market indicators justifies the pricing of three cuts this year.
“I still think that the economy is doing quite well,” he continued.
— Sean Conlon
16 HOURS AGO
Fed should be cutting interest rates right now, Wharton’s Jeremy Siegel says
The Federal Reserve should already be lowering interest rates, according to Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School.
“If it were up to me, looking forward, they should be,” he said on CNBC’s “Squawk Box” on Friday morning.
Siegel also said the story of forward-looking inflation looks good for the central bank. He said investors should expect Fed Chair Jerome Powell to “tee up” a rate cut coming in September.
— Alex Harring
17 HOURS AGO
See the stocks moving midday
Nikolas Kokovlis | Nurphoto | Getty Images
These are some of the stocks making the biggest moves in midday trading on Friday:
3M — Shares surged more than 18% to hit a 52-week high after the maker of office supplies and adhesives reported stronger-than-expected quarterly results. 3M posted second-quarter adjusted earnings of $1.93 per share, exceeding an LSEG estimate of $1.68 per share. Revenue also topped Wall Street’s forecast.
Dexcom — Shares plummeted more than 40% after the medical device maker missed expectations for second-quarter revenue and offered soft full-year guidance for the measure. Dexcom said it earned $1 billion in revenue during the three-month period, under the consensus forecast of $1.04 billion from analysts polled by LSEG.
Coursera — The online course provider soared 37.8% after reporting $170 million in second-quarter revenue, above the consensus estimate of $164 million from analysts surveyed by LSEG.
Typical starter homes are worth at least $1 million in a record 237 US cities, Zillow reported.
Starter-home prices have appreciated faster than the average property, the firm said.
Nearly half of these cities are in California, with New York and New Jersey also heavily represented.
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A record number of US cities now have typical starter homes worth at least $1 million, Zillow reported.
On average, homebuyers can find seven-figure starter properties in 237 cities, the firm said, a considerable jump from where values stood five years ago. According to the real-estate agency, only 85 cities had such high prices back then.
Zillow defined typical starter homes as properties in the lower third of values. Given that they’re generally on the more affordable side of the market, these serve as an entryway for first-time buyers.
But instead, their recent sharp appreciation likely puts them out of reach for many potential consumers, reflecting a broader pain buyers are facing in the market.
Surging demand and limited home supply have amplified housing unaffordability in recent years. High interest rates have only added to the scarcity problem, as these elevated borrowing rates discouraged many owners from selling.
Buyers have also had to face off against property investors, who snapped up a record share of low-priced homes in 2023’s final quarter.
Zillow reported that starter home prices surged 54.1% in the five-year timeframe, outpacing the 49.1% appreciation of typical US homes.
To be sure, the typical starter home is worth $196,611 nationally, which Zillow considers an affordable price tag for the median-income buyers. But, $1 million starter homes can be found in nearly half of all states, it said.
California leads this trend, holding 117 of these cities. New York followed at 31, ahead of New Jersey at 21.
This line-up is identical to a Zillow report from April, which tracked the amount of average US homes worth $1 million. As with starter properties, a record amount of cities saw average home prices reach these highs.
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After Hours: Last | 07/26/24 EDT
