Congress Races Against Time to Avert Government Shutdown as Markets Slide

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Stock markets are on shaky ground as September draws to a close, with Congress scrambling to pass a spending bill before government funding lapses on October 1.

The three major U.S. indexes have all declined this month amid worries over rising interest rates and recession risks. The Dow Jones Industrial Average has dipped 2.2%, the S&P 500 has fallen 4.2%, and the tech-heavy Nasdaq Composite has dropped 5.9% since September began.

With the new fiscal year starting on October 1, Congress is facing a Saturday deadline to approve legislation to keep the government running and prevent disruptive shutdowns of federal agencies and services. But bitter partisan divisions have stalled progress on a funding package.

House Republicans Leave Washington Without Advancing Spending Bill

The Republican-controlled House adjourned for the weekend on September 23 without putting a spending bill to a vote, as conservatives rebelled against Speaker Kevin McCarthy’s efforts to pass a “continuing resolution” that would temporarily extend current funding levels.

McCarthy lacks the votes within his caucus to pass the resolution without Democratic support. But the Democratic majority in the Senate has ruled out supporting any funding package with major spending cuts, which hardliners in the House Freedom Caucus have demanded.

With no clear path forward, McCarthy admitted “I don’t know what to think” about the chances of avoiding a shutdown in interviews on Sunday political talk shows.

Meanwhile, Senate Majority Whip Dick Durbin (D-Ill.) accused House Republicans of “playing Russian roulette with our economy” in a separate interview.

The White House has promised to veto any resolution with drastic cuts that could harm economic recovery. But without a deal by September 30, hundreds of thousands of federal workers may face furloughs until Congress can break the impasse.

Economic Growth at Risk from Prolonged Government Shutdown
A funding lapse lasting more than a few days could start to negatively impact the economy, economists warn. Vital services like mortgage approvals, small business loans, and IRS tax transcripts could be stalled. National parks and museums would likely close.

During the longest shutdown in history, which extended from December 2018 to January 2019, the nonpartisan Congressional Budget Office estimated around $11 billion in lost productivity. Goldman Sachs analysts have said each week of shutdown could shave 0.1 to 0.2 percentage points from quarterly GDP growth.

With recession fears looming, business leaders and market analysts hope to avoid added economic uncertainty. The political standoff in Washington comes as consumer confidence sinks and the Federal Reserve pursues aggressive rate hikes to combat inflation.

Hollywood Writers Reach Tentative Deal to End Months-Long Strike

Striking film and TV writers marked a major breakthrough over the weekend, reaching a tentative deal with producers after nearly 150 days off the job.

The Writers Guild of America (WGA) announced a temporary agreement was struck after marathon negotiating sessions between the union and the Alliance of Motion Picture and Television Producers (AMPTP).

Details of the three-year deal will not be disclosed until the WGA presents the terms to its members for ratification. But in a message to writers, the union said it includes “meaningful gains and protections for writers in every sector of the membership.”

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The work stoppage began in early March over disputes about compensation for projects on streaming platforms like Netflix and Hulu. Writers sought bigger residuals payouts as media consumption shifts online, along with protections regarding the use of artificial intelligence.

The breakthrough came after months of production delays that hampered networks, streaming services, and movie studios. Film releases like “Mission Impossible 8” and “Transformers 7” were postponed, while popular shows like “The Tonight Show” aired reruns.

Industry analysts estimate the strike cost California’s economy nearly $2.5 billion in lost output. The tentative WGA agreement now heads to union members for approval.

Amazon Bets Big on AI Future with $4 Billion Investment in Anthropic

E-commerce leader Amazon will invest $4 billion in artificial intelligence startup Anthropic, betting on what many see as a revolutionary technology.

Anthropic develops conversational AI bots like Claude, which can generate lengthy text responses like chatbots created by OpenAI. The deal provides cash to fund Anthropic’s growth while designating Amazon Web Services as the firm’s primary cloud provider.

The partnership also allows AWS customers special access to Claude and other Anthropic products to improve business workflows.

For Amazon, the blockbuster investment represents a major push into futuristic AI capabilities as companies like Microsoft, Google, and Baidu pour billions into the field.

Amazon’s cloud computing division will gain important technical tools to keep pace with rivals. Anthropic, founded in 2021 by former OpenAI research head Dario Amodei, secures key backing to scale up fast.

Credit Card Losses Hit Highest

Rate Since 2009 Recession
American consumers are falling behind on credit card bills at the sharpest rate in over a decade, according to data from Goldman Sachs.

Banks are currently facing credit card losses of 3.63%, a jump of 1.5 percentage points since the rate bottomed out at 2.12% in September 2021.

Analysts say losses could climb further to nearly 5% in the coming months, levels not seen since the 2009 financial crisis when the loss rate peaked at 10.5%.

Rising prices on essentials like food, rent, and utilities are making it harder for many households to pay off monthly balances, especially those without savings. Total revolving credit card debt topped $1 trillion this year.

Along with looming recession worries, higher losses could lead banks to tighten lending standards in the future. But for now, major issuers like Chase, Citi, and Amex remain profitable due to higher interest rates.

The Road Ahead

With economic uncertainty growing, the government shutdown standoff in Washington and potential Hollywood strikes ending add some relief. But markets face continued volatility as the Fed keeps raising rates to fight stubborn inflation.

Stay tuned to our business page for the latest on how policy and financial news could impact your investments. And click below to subscribe to get our market updates straight to your inbox.

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