WSJ What’s News - U.S. Stocks Fall After Fed Promises Slower Rate Cuts

Episode Date: December 18, 2024

P.M. Edition for Dec. 18. The Federal Reserve drops interest rates by a quarter point, but signals intent to slow interest-rate cuts next year. And former students have filed a motion in a lawsuit against several elite universities, alleging that they colluded to determine students’ financial aid packages. WSJ higher education reporter Doug Belkin talks about how the suit taps into growing public frustration with the schools. Plus, reporter Richard Rubin talks about a new proposal in Congress that could cut taxes for Americans living abroad. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

How do airplanes fly? What's in this box? What does this thing do? Kids are curious about everything, including guns. Learn how to store your gun securely and make your home safer at nfamilyfire.org. Brought to you by N Family Fire, Brady and the Ad Council. U.S. stocks fell sharply after Fed officials signaled they might keep interest rates higher than investors expected in 2025. I would say today was a closer call, but we decided it was the right call because we thought it was the best decision to foster achievement of both of our goals, maximum employment and price stability.

And the Supreme Court will hear a case deciding whether a law that would ban TikTok is constitutional. Plus, do elite universities give preferential treatment to rich applicants? A lawsuit alleges that they do. It's Wednesday, December 18th. I'm Alex Osola for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. The Federal Reserve has announced that it is cutting interest rates by a quarter point. That was a move that experts had anticipated, but it signaled greater doubt over how much

and how fast it would reduce interest rates moving forward. The latest reduction, which was approved by 11 of 12 Fed voters, will lower the Fed's benchmark federal funds rate to between 4.25% and 4.5%, a two-year low. To discuss that, we have global editor of Heard on the Street, Spencer Jacob. So Spencer, this rate cut was approved by 11 of the 12 members of this committee at the Fed. What does that tell us? Well, the headline doesn't tell us very much at all because this was, as you said, completely

expected. It was a little surprising that there was a descent, which was not expected, one of the 12 voting members of the FOMC. And the big, big surprise is the language that it contained, which suggests that the pace of rate cuts is going to slow next year. And the expectations about inflation, unemployment, and other aspects of the economy have shifted, that they are less pessimistic about unemployment rising and they're less optimistic about inflation coming down.

Could there be any of these kinds of data points that change next year that don't exactly fit into what the Fed has predicted that could change the schedule that it's made for itself? Yeah. It's not like a train conductor that sets a schedule and they have to stick to it. They're always shifting with what they see. And so, for example, it's possible that by early next year, you'll see some signs of economic weakness that will prompt them the next time around or two meetings hence, to be more aggressive in terms of rate cuts. That was WSJ Global Head of Herd on the Street, Spencer Jacob.

The Dow fell sharply after the Fed announcement. The Dow fell more than 1,100 points, losing about 2.5% in its longest losing streak in five decades. The Nasdaq dropped about 3.5%, while the S&P 500 lost nearly 3%. We're exclusively reporting that Russia is withdrawing advanced weaponry from Syria and shifting it to eastern Libya, which is controlled by Moscow-backed Libyan warlord Khalifa Haftar. According to US and Libyan officials, Russia has flown air defense equipment, troops, and

military aircraft to Libya as Moscow scrambles to preserve a military presence in the Middle East. Spokespeople for the Kremlin and Haftar didn't respond to requests for comment. The Syrian bases have been the cornerstone of Moscow's ability to project power in the Middle East and Africa, and now Russia appears to be angling to use another old partner, Libya, as a way to retain influence in the region. The U.S. Supreme Court has agreed to decide the constitutionality of a law that would effectively ban TikTok in the U.S. if the social media app doesn't shed its Chinese ownership.

Earlier this year, a bipartisan coalition in Congress passed the law in response to concerns that TikTok was a threat to national security. An appeals court in Washington upheld the law earlier this month. Now, the Supreme Court will decide whether that law violates the First Amendment. With the ban set to take effect on January 19, the Supreme Court scheduled fast-track oral arguments for January 10. Coming up, a lawsuit reveals how elite colleges really talk about rich applicants. That's after the break. Former college students have filed a lawsuit against several major universities. They're suing MIT, Notre Dame, University of Pennsylvania, Georgetown, and Cornell University, alleging that the

universities colluded to determine students' financial aid packages. It's the latest salvo in a lawsuit that began in January 2022. Central to this case is the allegation that top schools assess children of privilege differently from the rest of the applicant pool. Joining me now is Doug Belkin, who covers higher education for the Wall Street Journal. So Doug, what evidence do the plaintiffs have to support this idea that universities consider admissions differently for the children of wealthy families? As part of this suit, they have gone through discovery and gotten some internal documents from a lot of the universities looking at how they admit students and how they

determine the aid that they should give different students. At Notre Dame, one of the things in the docket was that they rank students according to strength of their admissions and some of the kids are very weak but were put onto a list that would give them kind of a bump, were admitted. And that same year, a lot of kids who were considered exceptionally strong, they weren't able to admit because they didn't have room. So it spoke to this notion that there's probably somewhere around 3% of the students at Notre Dame, and this given year at least, who were not academically as competent as the rest of their classmates. This is something the school denies, but the documents kind of lead you to that

conclusion. One of the interesting comments from the admissions officer at the time was he said, quote, we allowed their high gifting or potential gifting to influence our choices more this year than last year. And then he finished off that by saying, sure hope the wealthy raise a few more smart kids. So it's a little bit damning. Doug, you mentioned that spokespeople for Georgetown, Notre Dame and MIT said the schools plan to fight the suit in court and that their students all earned their places. But you also mentioned that this is a precarious time for elite universities. Why is that? Confidence in universities, particularly elite universities, has been on a downward spiral for a decade.

And the Republicans really effectively have run against the elites. And universities in this suit and others are good proxies for elite and elitism. That's part of the brand of these schools. So the schools say, well, we're really meritocratic institutions. The documents in this motion belie that notion. And so that's why the story can be, I think, infuriating to a lot of our readers. That was Wall Street Journal education reporter Doug Belkin. Elon Musk has added to Mike Johnson's headaches as the House speaker faces

an internal rebellion over a bipartisan deal he negotiated to avoid a partial government shutdown this weekend. As we mentioned in our morning show, the more than 1,500-page continuing resolution ignited a firestorm among some Republicans, who criticized its inclusion of what they called wasteful provisions and the limited time they have to review it before a Friday deadline. Now, Musk, the billionaire businessman who's set to run a cost-cutting effort under President Donald Trump, posted today on social media that this bill should not pass, adding later that any lawmaker, quote, who votes for this outrageous spending bill deserves to be voted out in two years.

It's not yet clear just how much influence his opinion will have over lawmakers. Donald Trump himself has yet to weigh in. The bill could come to vote as early as this evening. [♪THEME MUSIC PLAYING Illinois Republican Representative Darren LaHood today is introducing a proposal that could remove income tax requirements for Americans living abroad, one of President-elect Donald Trump's campaign promises. Unlike nearly every other country in the world,

Americans living overseas pay taxes both in the country where they live and in the U.S. Richard Rubin covers U.S. tax policy for The Wall Street Journal and says LaHood is introducing the bill with a few goals in mind. This would affect up to four million Americans who live outside the country. And it would also affect people who were thinking about moving abroad and trying to do so in a way that doesn't give up their U.S. citizenship. The goal is to try to find a way to prevent really wealthy people from just saying,

oh, I live in Bermuda or the Cayman Islands or Monaco and I don't owe any income taxes to any country or someplace with a really low tax rate. Lowhood is putting this bill out now at the very end of this Congress to kind of start getting some feedback so we can build support and momentum and also try and refine the proposal as they consider it for inclusion next year. It's been a year since Japan's Nippon Steel announced that it would buy U.S. Steel for

about $14 billion. The takeover bid has run into opposition from politicians and union leaders and faced skepticism from investors. Wall Street Journal metals and manufacturing reporter Bob Tita joins me now. Bob, where does this deal stand? It seems like it's in a bit of a precarious position right now. Time is running out on the Biden administration. Time is running out on the application that Nippon Steel made for approval of this deal under the process where you have to get approval for a foreign company to acquire a U.S. company. This deal is coming down to the wire. It's unclear how

this is going to end up. There's still a lot of opposition to it that hasn't gone away in the past year. So it's going to be a bit of a nail-biter. What would happen to US Steel if it doesn't go through? Well, US Steel has said they couldn't match the sort of investment commitments that Nippon Steel has made, and that probably over time they would close plants and things like that because they just don't feel

like they have the funds to invest in, particularly some of these older mills that need work. That was Wall Street Journal reporter Bob Tieta. And that's what's news for this Wednesday afternoon. Today's show was produced by Pierre Bienneme and Anthony Bansi with supervising producer Michael Cosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning.

Thanks for listening.