Government Shutdown Deadline; Fed Fueled Selloff on Wall Street
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Good morning, I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with fast-moving developments in Washington, D.C. that are threatening to shut down the government by the end of the week. The stopgap spending bill that lawmakers agreed to just this week is dead. That's after President-elect Donald Trump came out against it and threatened to oust fellow Republicans who don't meet his demands. House Majority Leader Steve Scalise says now it's basically back to square one.

Obviously, there's still a lot of negotiations and conversations going on, but there's no agreement. Majority Leader Steve Scalise spoke after meeting last night with Vice President-elect J.D. Vance. Both Vance and Trump are asking for a streamlined bill that leaves out sweeteners like $100 billion for disaster relief and $10 billion for farmers. House Minority Leader Hakeem Jeffries says they had a deal. An agreement is an agreement. It was bipartisan agreement.

And there was nothing more to say. Minority leader Hakeem Jeffries says Republicans will own any harm that results from a government shutdown. On Nathan, President-elect Trump is demanding even more than just a clean spending bill. And we get more on that with Bloomberg's Laura Davison. The thing that he's really asking that is probably going to be the most politically problematic is he also wants to vote on raising the debt ceiling now.

Congress was originally slated to do this sometime this summer. Trump says he wants to do it under Biden's watch versus under his. This is always a tough vote. Usually there are weeks of negotiations heading up to this. To do it in 48 hours is going to be a really, really tall ask and potentially means that we could be tipping towards shutdown territory.

Bloomberg's Laura Davison says Congress has until the summer to raise the debt ceiling, but if lawmakers can't reach a new agreement on a funding plan, the government could shut down after midnight tomorrow night. Well, Karen, let's turn now to markets, where futures are moving higher following yesterday's Fed-fueled sell-off on Wall Street. The Dow Jones Industrial Average fell more than 1,100 points, or 2.6%. The S&P 500 fell 3%, while the Nasdaq was hardest hit, sliding more than 3.5%.

The turbulence came after the Fed scaled back the number of cuts it sees in 2025 to two. And Chair Jerome Powell said future easing would require fresh progress on inflation. Once again, we've had a year-end projection for inflation, and it's kind of fallen apart as we've approached the end of the year. So

That is certainly a large factor in people's thinking. I can tell you that might be the single biggest factor is inflation has once again underperformed relative to expectations. It's still, you know, going to be between two and a half and three. It's way below where it was. But, you know, we really want to see progress on inflation.

Jay Powell and company did deliver a widely expected quarter percentage point rate cut yesterday. Cleveland Fed President Beth Hammock was the lone dissenting vote. She preferred to hold rates steady. Well, Nathan, reaction is still pouring into the hawkish tilt by the Fed. And here's BlackRock's Jeffrey Rosenberg. This is a surprise to markets.

And so one of the things the markets had hoped for was a Fed that was very much leaning towards easy financial conditions, focusing more on the labor side than on the inflation side. And that was pretty supportive to financial conditions and taking risks. So you see the market reactions, not what markets were expecting. And so certainly that's a little bit less favorable environment for risk-taking.

In addition to BlackRock's Jeffrey Rosenberg, we also caught up with former Fed economist and Bloomberg opinion columnist Claudia Somm. We know this Fed. Like, we have watched this Fed. It is one that understands the dual mandate, and it's very data-driven. Everything's going to hinge on what do we actually see next year. I mean, these projections are not that informative. It's what are we facing?

And former Fed economist and Bloomberg Opinion columnist Claudia Somm, 15 of 19 officials now see a higher risk inflation will exceed their expectations. That's a massive shift from the three who felt the same back in September. Well, Karen, monetary policy is also in focus around the world this morning. The Bank of Japan kept its policy rate unchanged with the benchmark remaining at around a quarter percent.

However, the yen is weakening after comments by BOJ Governor Coswell Oueda cast doubt on whether the bank could hike interest rates in January. Well, next, Nathan, it is the Bank of England's turn. Economists expect the BOE to hold interest rates steady today. Bloomberg Chief UK Economist Dan Hanson says there is still scope for policymakers to cut rates in 2025. I think there's probably more room for the Bank of England to cut interest rates next year. So we think, um,

they'll get down to 3.75%. So that's 100 basis points of cuts, which is obviously a lot more than the market has at the moment. The market's got about 60. I think what that comes down to really is your view about this idea of the neutral rate and sort of how the rate that neither speeds up nor slows down the economy.

Bloomberg's Dan Hanson says BOE Governor Andrew Bailey and his colleagues are likely to strike a cautious tone given the inflation threats brewing at home and abroad. And speaking of abroad, Karen, Sweden's central bank acted today, lowering its benchmark rate by 25 basis points to a two-year low of 2.5%. It also signaled its easing campaign is likely to be wrapping up with one cut left to deploy. Norway's central bank kept its benchmark interest rate unchanged.

Well, checking some stocks on the move here in the U.S., Nathan. Shares of Micron, they are plunging down 14.5% this morning. The largest U.S. maker of computer memory chips second quarter revenue forecast missed projections by about $1 billion. It was hurt by sluggish demand for smartphones and personal computers. Shares of Lenar, Karen, they're down more than 5%. The homebuilders forecast for new orders in the first quarter missed analysts' estimates.

And now, Nathan, a Bloomberg exclusive. Apple is close to getting Indonesia to lift its ban on iPhone 16 sales. The move comes after the country's president gave his approval for the government to accept a $1 billion investment from the U.S. tech giant. The country prohibited the sale of Apple's flagship device last month, saying Apple had failed to comply with domestic content requirements for smartphones and tablets.

And it's time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's John Tucker. John, good morning. Good morning, Karen. Well, just in time for the holiday rush, Amazon warehouse employees and contract drivers in four states plan to walk off the job this morning. Bloomberg's Jeff Bellinger is here with more.

Groups of workers at seven locations in California, New York, Illinois and Georgia will go on strike and Teamsters local unions will put up picket lines at hundreds of Amazon fulfillment centers nationwide.

The move comes after the Teamsters called on Amazon to recognize its units and come to the bargaining table to negotiate a contract. The union says the company ignored the demands. Amazon says the Teamsters have intentionally misled the public about union efforts at the company and threatened workers. Jeff Bellinger, Bloomberg Radio. The suspect charged with the shooting death of a health insurance company executive on Manhattan Street will be in court today in Pennsylvania.

The AP reports Luigi Mangione's expected wave extradition, clearing the way for his return to New York. He could make the trip as soon as today. Mangione faces charges of murder as an act of terrorism in New York. The Federal Aviation Administration is warning the public against pointing lasers at aircraft.

This comes after a significant uptick in reports amid the drone frenzy in the Northeast. Pilot reports of laser strikes in New Jersey have increased 269 percent. The FBI warns of an increase in pilots being hit in the eyes by lasers by people on the ground who have mistaken them for drones.

Subway fares and bridge tolls going up in New York. The MTA, the largest mass transit provider in the U.S., approved a nearly $20 billion operating budget for 2025. It includes a planned 4% fare and total increase. The spending plan also assumes that a congestion pricing program will begin on January 5th.

And San Francisco has lost its top-tier credit rating from S&P Global Ratings, citing the city's projected $876 million deficit over the next two years and weakened business and property tax growth as reasons for the downgrade. Global News 24 hours a day and whatever you want it with Bloomberg News Now. I'm John Tucker. This is Bloomberg. Karen. All right, John. Thank you.

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Time now for the Bloomberg Sports Update brought to you by Tri-State Audi. Here's John Stashower. John, good morning. Good morning, Karen. The Knicks played tonight at Minnesota. It was back in early October that the two teams made the big trade, a swap of all-star big men, Carl Anthony Towns for Julius Randle. The Knicks also dealt Dante DiVincenzo. Knicks are pleased with the results. Towns averaging 25 points, 14 rebounds. Randle with the Timberwolves averaging 20 a game. Before facing his former team, he looked back on his time with the Knicks.

Spend a certain amount of time in a place, New York, you know, going there five years ago and, you know, having a goal in mind, you know, to accomplish a lot of great things and,

you know a lot of blood sweat and tears putting um into you know that organization uniform david chenzone has one season with the knicks at the club record for most three-pointers made the devils will now sit in first place in the metropolitan division played tonight at columbus devils have lost a road game in a month rangers meanwhile only three wins their last 14 games they just made a trade they sent capo caco to seattle for defenseman will borgen and two draft picks caco was the

Second overall pick of the 2019 draft. Did not live up to that. Borgen could be a Ranger rental. He could be a free agent after the season. Max Fried was a free agent. The deal he signed with the Yankees was eight years, $218 million, most ever for a left-handed pitcher. Fried was at the stadium yesterday. He took a virtual tour before signing, and that included a visit to the Yankee clubhouse. Three words that were put up on the wall, and it's prepare, compete, and win.

And I thought a lot about that. And to me, as a competitor, and just to me as a core, as a player, it really resonated with me. Yankee GM Brian Cashman said, we've done some heavy lifting, we've got more to do. They scheduled a sit-down with Japanese pitcher Roki Suzuki. NFL tonight, AFC West, Broncos, Chargers, both looking like they'll be AFC wildcard teams. They play in L.A. John Staschauer, Bloomberg Sports, Karen Nathan.

Coast to coast on Bloomberg Radio. Nationwide on Sirius XM. And around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. Where the holiday spirit may be running a little cold in Washington, D.C. President-elect Donald Trump has come out against the funding bill that was just agreed to this week.

and would keep the government from shutting down after tomorrow night. And that is prompting one key question for House Majority Leader Steve Scalise. The CR is officially done, though, right? Yes. Congressman Steve Scalise says the current continuing resolution known as the CR is dead. Joining us this morning, Bloomberg News Senior Editor Bill Ferrys. The perennial question about Washington, D.C., Bill, what is going on in the nation's capital? Good morning. Good morning.

Hey, good morning, Nathan. Well, it's a meltdown, I think, that's still in progress. We're going to learn a lot more today. I'm sure it was not a pleasant night for Speaker Johnson, or at least not for his staff, trying to figure out what the next plan is here. You heard from Congressman Scalise right there. There did not appear to be a plan B in case Donald Trump stepped in and voiced his opposition as he did.

So they're kind of be scrambling to come up with alternatives to prevent the government or at least government, part of the government from shutting down as soon as this weekend. But certainly, you know, I think the speaker and a lot of Republicans were celebrating the fact that they got this deal done. Now it looks like they're going to have to figure out an alternative strategy here. What is it that President-elect Trump is objecting to in Congress?

Plan A. I mean, a lot of the sweeteners we've been talking about in this continuing resolution were things that Republicans wanted, weren't they?

Yeah, I mean, you know, so on top of the continuing resolution just to keep government agencies going at the levels they had been previously funded at, there was $100 billion in there for disaster relief in the aftermath of some of those, the pair of hurricanes we had last year. Some of that money was also destined to help rebuild the Baltimore Key Bridge that collapsed.

There's an extension of the Farm Bill. There's $10 billion in additional aid to farmers. There's $500 million for child care funds. So there's a lot of other measures in there, too. Not necessarily all spending. But it sounds like, I mean, what we can figure out from what we've heard from the president-elect, what we've heard from Vice President-elect J.D. Vance, and frankly, what we've heard from Elon Musk is that

Donald Trump would like to see a clean, continuing resolution. So a lot of those sweeteners stripped out of there. And he really wants a deal to lift the debt ceiling under this Congress. So it's not something that he has to deal with, let's say, next summer in the early months of his presidency. That, to me, I think is one of the big things.

They'll have to figure out if they can do now. He wants he wants Joe Biden. He wants Democrats in Congress to have to to support that kind of a measure, lifting, raising the debt ceiling. Always a tough vote for Republicans. It's just not clear whether they'll be able to do that in the in the time remaining. Yeah, that debate over a debt ceiling. I mean, as you say, it's not supposed to be lifted potentially.

until later on this summer. In our last minute, Bill, is this a preview of fights to come between President-elect Trump and not just Democrats, but his own Republicans? Absolutely. I mean, I think this is going to be the roadmap for what's coming. I mean, you think about Speaker Johnson. He's already had to negotiate with the President-elect. He's had to negotiate with Democrats and Congress, and he's had to negotiate at some level with the White House.

Last night, he said he was also in the middle of texting Elon Musk and Vivek Ramaswamy about about this legislation. So he's got all these different people and parties he's got to work with, including his own caucus. It's going to be a very, very bouncy, very tumultuous 2025 in particular for him.

This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121.

Plus, listen coast to coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces. And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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