The daily business briefing: June 17, 2022

(Image credit: Al Drago/Bloomberg/Getty Images)

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1. Stocks plunge as recession fears mount, but futures rise
2. Biden tells AP recession 'not inevitable'
3. Revlon files for Chapter 11 bankruptcy
4. Elon Musk talks with Twitter staff about his ideas for the company
5. Mortgage rates rise to highest level since 2008

published 17 June 2022

1. Stocks plunge as recession fears mount, but futures rise

U.S. stocks plunged on Thursday as mounting concerns about high inflation and the threat of a recession rattled Wall Street. The Dow Jones Industrial Average fell 2.4 percent and closed below 30,000 for the first time since January 2021. It is now down 18 percent this year. The S&P 500 fell 3.3 percent and is now down 23 percent from its record high. The tech-heavy Nasdaq dropped 4.1 percent on Thursday, closing 32 percent below its all-time high. Stocks rallied Wednesday after the Federal Reserve sharply raised interest rates to fight inflation, and U.S. stock futures rose early Friday. The Dow and the S&P 500 were up 0.7 percent and 0.9 percent at 6:45 a.m. ET. The Nasdaq was up 1.1 percent.

President Biden said Thursday in an interview with The Associated Press that a recession is "not inevitable." Biden said the American people are "really, really down" due to two years of the COVID-19 pandemic followed by high inflation and gas prices. But there is still time to boost confidence and revive the economic recovery, he said, adding that it is "bizarre" for Republican critics to blame last year's COVID-19 aid package for pushing inflation to a 40-year high. "If it's my fault, why is it the case in every other major industrial country in the world that inflation is higher?" he asked. "You ask yourself that? I'm not being a wise guy."

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Iconic cosmetics company Revlon has filed for Chapter 11 bankruptcy protection. According to a filing Wednesday in the U.S. Bankruptcy Court in New York, Revlon has lined up $575 million in financing, pending court approval, and plans to use it to keep operating as it restructures. The filing was necessary due to Revlon's heavy debt load, "disruptions to [the company's] supply chain network, and surging costs," The Associated Press reports. Revlon is one of the last holdings of private-equity financier Ronald Perelman, whose daughter Debra Perelman serves as CEO. She said demand for Revlon products remains strong but the company's "legacy debt constraints" make it difficult to "unlock the full potential of our globally recognized brands."

Tesla CEO Elon Musk participated in a virtual meeting with Twitter employees on Thursday, and tried to reassure them about the social media platform's future once he completes his planned $44 billion takeover. "Trust is as trust does," he said, according to a tweet by a high-ranking Twitter executive. "I tend to be extremely literal in what I say. ... One does not (need) to read between the lines. One can simply read the lines." Musk also talked about his suggestion that there would be layoffs at the company, according to multiple news outlets. "Costs exceed revenue. That's not a great situation," he said. Musk also called for increasing Twitter's user base four-fold, to a billion.

Mortgage rates jumped to their highest point since 2008 this week, according to Freddie Mac data released Thursday. The 30-year fixed-rate mortgage, the most popular home loan, rose to 5.78 percent this week from 5.23 percent a week earlier. It was the biggest one-week increase since 1987, adding pressure to an already cooling housing market. At 5.23 percent, a $300,000, 30-year fixed-rate loan would have cost about $1,653 a month, excluding taxes and insurance, but at 5.78 percent the cost to the borrower rises to $1,756, The Washington Post reported, citing Lending Tree economist Jacob Channel. The change came as the Federal Reserve, as expected, raised its benchmark short-term interest rate by three-quarters of a percentage point, an unusually sharp increase intended to fight high inflation.

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Harold Maass is a contributing editor at The Week. He has been writing for The Week since the 2001 debut of the U.S. print edition and served as editor of TheWeek.com when it launched in 2008. Harold started his career as a newspaper reporter in South Florida and Haiti. He has previously worked for a variety of news outlets, including The Miami Herald, ABC News and Fox News, and for several years wrote a daily roundup of financial news for The Week and Yahoo Finance.