The daily business briefing: May 2, 2023
Janet Yellen says the U.S. could run short of money to pay bills by June 1, writers go on strike in Hollywood, and more
Janet Yellen warns U.S. could default on debt by June 1
Treasury Secretary Janet Yellen wrote in a letter to Congress Monday that the government might not be able to meet all of its obligations "potentially as early as June 1" unless Congress takes action. President Biden on Monday called House Speaker Kevin McCarthy (R-Calif.), Democratic leader Hakeem Jeffries (D-N.Y.), Senate Majority Leader Chuck Schumer (D-N.Y.), and Senate Republican leader Mitch McConnell (R-Ky.) to meet with him in the White House on May 9 to discuss raising the debt ceiling to prevent a potentially catastrophic default on federal debt. House Republicans passed a bill offering to raise the debt limit in exchange for deep spending cuts, but Biden and leaders in the Democratic-controlled Senate said there should be no conditions.
Hollywood writers go on strike for 1st time in 15 years
The Writers Guild of America called its first strike in 15 years starting Tuesday, potentially halting Hollywood film and TV production. Union board members voted unanimously to call the strike to demand higher pay and a bigger share of streaming revenue from studios such as Disney and Netflix. Thousands of union members are expected to picket in Los Angeles, New York, and other cities after last-minute talks failed to produce a deal on a new three-year contract. The old one expired at midnight. The WGA accused studios of creating "a gig economy inside a union workforce" and "devaluing the profession of writing." The Alliance of Motion Picture and Television Producers said it offered "generous" pay increases and "improvements in streaming residuals."
AI pioneer quits Google job to warn of technology's risks
Artificial intelligence pioneer Geoffrey Hinton said Monday he has quit his job at Google so he can speak freely about the dangers posed by AI. Hinton and two of his University of Toronto graduate students created the foundation of today's AI systems like ChatGPT in 2012. He said he now regrets the breakthrough, which he and other experts warn could be a tool for misinformation, kill jobs, and pose other risks down the road. "I console myself with the normal excuse: If I hadn't done it, somebody else would have," Hinton told The New York Times. More than 1,000 technology leaders and researchers signed an open letter in March calling for a six-month moratorium on the development of new AI systems.
Stock futures struggle as Fed meets
U.S. stock futures slipped early Tuesday ahead of a Federal Reserve meeting expected to end with another interest rate hike in the central bank's fastest campaign to raise rates in 40 years. Futures tied to the Dow Jones Industrial Average and the S&P 500 were down 0.2 percent at 6:30 a.m. ET. Nasdaq futures were flat. Federal Reserve officials meet Tuesday and are expected to raise the benchmark federal-funds rate another quarter-percentage point to a 16-year high. Fed officials have hinted they are near the end of their "tightening journey" of raising borrowing costs to fight inflation as stress in the banking industry complicates the economic outlook.
Morgan Stanley announces another round of layoffs
Morgan Stanley plans to cut 3,000 jobs in another round of cost reductions as recession fears discourage deal-making, Bloomberg reported Monday, citing people with knowledge of the matter. The reductions would amount to about 5 percent of the financial firm's staff, excluding financial advisers and support staff in the wealth management division. Most of the cuts are expected to come from Morgan Stanley's banking and trading group. The latest layoffs come months after Morgan Stanley cut 2 percent of its workers. Other big Wall Street banks said as they reported quarterly results that their fees from helping companies with takeovers and efforts to raise capital had fallen over the last year.