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Stocks, bond yields drop Washington turmoil rattles markets

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The growing political drama in Washington rattled Wall Street Wednesday, knocking the Dow Jones industrial average down more than 370 points and giving the stock market its biggest single-day slump in eight months.

Investors worried that the headline-fueled political turmoil that has enveloped the White House may hinder President Donald Trump’s plans to cut taxes, roll back government regulations and other aspects of his pro-business agenda.

The steep drop ended an unusually long period of calm for the markets, which had been hovering near all-time highs.

Financial stocks, which had soared in the months since the election, declined the most as bond yields fell sharply. Bonds, utilities and gold rose as traders shunned riskier assets. The dollar fell.

“When you are at these valuations, the market has to reassess whether or not the agenda is actually going to be implemented,” said Quincy Krosby, market strategist at Prudential Financial. “What you’re seeing is a classic run toward safety.”

The Standard & Poor’s 500 index had its biggest drop since September, sliding 43.64 points, or 1.8 percent, to 2,357.03. The Dow lost 372.82 points, or 1.8 percent, to 20,606.93. The Nasdaq composite index, coming off setting two consecutive record highs, gave up 158.63 points, or 2.6 percent, to 6,011.24.

Small-company stocks fell more than the rest of the market. The Russell 2000 index sank 38.79 points, or 2.8 percent, to 1,355.89. Those companies would stand to benefit even more than large ones from corporate tax cuts Trump is proposing. They also had risen sharply in the months following the election.

The sell-off snapped an unusually long period of calm after hitting a series of record highs. On Tuesday the S&P 500, the benchmark favored by professional investors, marked its 15th straight day of moving up or down by less than 0.5 percent. It closed at its latest record high on Monday.

Bond prices rose sharply. The 10-year Treasury yield fell to 2.21 percent from 2.33 percent late Tuesday, a large move.

The seeds of Wednesday’s steep market sell-off were present late Tuesday, when a published report revealed that Trump allegedly made a personal appeal to now-fired FBI Director James Comey to drop the bureau’s investigation into former National Security Adviser Michael Flynn. The White House denied the report.

Trump had already been facing pointed questions about his discussions with Russian diplomats during which he was reported to have disclosed classified information.

“The controversy is not new, but this one really seems to be sticking,” said Erik Davidson, chief investment officer for Wells Fargo Private Bank. “The Trump economic program is either going to be delayed by this turn of events or possibly be derailed, that’s why investors are acting the way they are.”

The latest headlines ratcheted up the market’s unease. The VIX index, a measure of how much volatility investors expect in stocks, rose to its highest level since April 13. Investors shifted into U.S. government bonds, pushing yields lower, and into gold. The precious metal jumped 1.8 percent, climbing $22.30 to settle at $1,258.70 per ounce.

Among the hardest-hit stocks Wednesday are in sectors that benefited most from the post-election rally as investors banked on Trump to cut taxes, boost infrastructure spending and relax regulations that affect energy, finance and other businesses.

Banks fell sharply as bond yields declined, which will mean lower interest rates on loans. Bank of America slid $1.42, or 5.9 percent, to $22.57.

Unease over the potential implications of the latest political fallout in Washington weighed on the dollar Wednesday. The euro strengthened to $1.1150 from $1.1095. The dollar dropped to 111.11 yen from 113.03 yen.

Benchmark U.S. crude rose 41 cents, or 0.8 percent, to close at $49.07 per barrel in New York. Brent crude, used to price international oils, gained 56 cents, or 1.1 percent, to close at $52.21 per barrel in London. In other futures trading, natural gas fell 4 cents to $3.19 per 1,000 cubic feet. Wholesale gasoline was little changed at $1.60 per gallon. Heating oil rose 2 cents to $1.53 per gallon.

Among other commodities, silver added 16 cents to $16.85 per ounce. Copper was little changed at $2.54 per pound.

Markets overseas were also mostly lower.

In Europe, Germany’s DAX fell 1.4 percent. The CAC 40 in France slid 1.6 percent. The FTSE 100 index of leading British shares dipped 0.2 percent. Asian markets mostly fell. Japan’s Nikkei 225 dropped 0.5 percent, while South Korea’s Kospi dipped 0.1 percent. Hong Kong’s Hang Seng index slipped 0.2 percent.

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Explained: Why Colorado, Arizona teachers are walking off the job

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Tens of thousands of schoolteachers plan to walk off the job in Arizona and Colorado on Thursday, shuttering classrooms in pursuit of better pay and school funding.

But there are key differences between the protests in the two states, which share below-average spending on public schools. The actions build on a movement that spread from West Virginia, Oklahoma and Kentucky.

Here’s a look at what’s happening in Arizona and Colorado:

WHAT ARE TEACHERS PLANNING AND WHAT WILL HAPPEN?

Teachers will walk off the job to hold rallies and other demonstrations at their respective state Capitols.

In Arizona, the first-ever statewide strike starts Thursday after educators voted overwhelmingly in favor of the action. There’s no end date scheduled, so it’s not clear how long classes might be interrupted.

Educators who are planning to participate could face consequences in the right-to-work state, where unions do not collectively bargain with school districts and representation is not mandatory.

The Arizona Education Association, the largest teacher membership group, has warned its 20,000 members about a 1971 Arizona attorney general opinion saying a statewide strike would be illegal under common law and participants could lose their teaching credentials.

But no school district has said they would fire educators who strike or revoke teaching certificates.

In Colorado, teachers in four suburban school districts, including two of the largest in the state, will hold protests Thursday. But the bulk of the widespread walkouts will happen as a single-day demonstration Friday.

No laws in Colorado prohibit strikes. In response to recent national protests, a Republican lawmaker proposed a measure docking teacher pay and threatening fines and jail time for striking. Democrats oppose it, and it’s not expected to pass the politically divided Legislature.

WHAT ARE THE DEMANDS?

Arizona teachers have a long list, including a 20 percent raise for teachers, who earn $47,403 annually compared with a national average of $59,660, according to 2017 data from the National Education Association. They also want yearly raises until their salaries reach the national average and competitive wages for classified staffers.

They are seeking a return to pre-Great Recession spending levels, which would be a roughly $1 billion increase annually, plus additional funding increases until Arizona reaches the national average in per-pupil spending.

In Colorado, teachers secured a $150 million annual boost to schools in this year’s budget negotiations but want to wipe out an annual school funding shortfall within the next four years. After next year’s boost, Colorado will underfund its schools by $672 million a year versus what’s required by the state Constitution.

Colorado teachers don’t have specific demands regarding salaries, because they are set at the local level. But the hope is that more state funding will trickle down in the form of better pay. The average Colorado teacher earned $51,808 in 2017, according to the national teacher salary data.

Complicating matters, lawmakers are negotiating sweeping changes to the state and school pension fund, which will likely cut teacher retirement benefits and could decrease their take-home pay. Educators say they hope their protests highlight that any changes to the pension fund could further erode their compensation.

HOW ARE STATE LEADERS RESPONDING?

Republican Gov. Doug Ducey of Arizona has offered teachers a 20 percent raise by 2020 and pledged to see his proposal through despite concerns on how to fund it.

Ducey’s plan relies on higher-than-expected state revenue. Republican legislative leaders have questioned where the money might come from and are negotiating the plan this week.

Colorado lawmakers have secured a bipartisan deal to boost school funding but are negotiating on the pension changes. Republicans want public employees, including teachers, to put more of their own pay into the system to close a $32 billion funding gap. Democrats have countered with a plan to contribute $225 million in annual state funding to shore up the fund.

WHAT DOES THE WALKOUT MEAN FOR SCHOOLS, TEACHERS AND PARENTS?

In both states, school districts have been weighing whether to stay open or cancel classes.

Many in Arizona, including the state’s largest district in suburban Phoenix, will be closed at least Thursday and Friday. Some have said they will try to stay open if they have enough staff.

Many parents are scrambling to make child care plans. Community groups are organizing day camps, churches are opening for free care and some stay-at-home parents are volunteering to watch others’ children.

Colorado’s largest district, Denver Public Schools, will be closed Friday, along with more than a dozen others. Four others, including large suburban districts in Jefferson and Douglas counties, will be shuttered Thursday but are expected to reopen Friday.

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Why are teachers in the Steel City prepared to strike: ‘Teachers are walking into classrooms that are not funded’

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Teachers in Pueblo are prepared to join a national movement of educator activism and walk out of their classrooms later this year if their demand for a 2 percent raise isn’t met.

Members of the Pueblo Education Association, the southern Colorado town’s teachers union, voted last week to authorize a strike after the local school board rejected a third party recommendation that the district provide the cost-of-living pay increase the teachers were seeking during this year’s contract negotiations.

As part of its rationale for rejecting teacher raises, the board cited other budget priorities, a desire to protect funding reserves, and raises given to most teachers in the past two years. The average teacher salary this year in Pueblo is $47,617, according to state data.

The board’s vote came after the district recently decided to go to a four-day week, in part as a cost-saving measure.

The extraordinary vote — the last teacher strike in Colorado occurred in 1994 — took place as teachers across the country have left their classrooms over demands for better salaries and more school funding. So far, teachers in West Virginia and Oklahoma have staged weeklong strikes. Arizona teachers are also preparing to leave their lesson plans behind.

“I think both movements, both nationally and locally, show that teachers have had enough,” Suzanne Etheridge, the Pueblo teachers union president said. “Teachers are walking into classrooms that are not funded.”

For the moment, Pueblo teachers are still in their classrooms. A strike can’t take place until after the state decides in early May whether it will step in to broker a deal.

Etheridge, in an interview with Chalkbeat, discussed the circumstances that led teachers in the 16,000-student school district to take such “drastic” action, how the national climate is fueling their effort, and how the looming strike could be resolved.

This interview has been edited for length and clarity. (Click here to read the district’s statement on the union’s vote to strike.)

Negotiations between the union and the district have been tense before. What’s different this time? Why did you go all the way to taking a vote for a strike?
I think what’s different this time is the true lack of openness during this round of bargaining. Although the district has accused us of never coming off our demand for 2.8 percent, which was our initial request, they also stuck to zero the whole entire time. There were also some issues, some discussions we should have had but never happened. We were invited to one budget summit that consisted of a sit-and-listen to somebody lecture the school board. So, it was just the real lack of openness and transparency through this process.

What finally tipped the balance was when the school board took its vote. Some of the comments made really angered our teachers. It felt like we were being publicly lectured asking for a cost-of-living increase. One of our board members went on about the value of younger teachers versus more experienced teachers, when we’re all valuable. There should be none of those lines drawn. We felt like some of the comments were very caustic in nature. I watched teachers’ faces at that board meeting. I watched the disappointment. I watched the hurt. I watched the anger. Our members after that were very, very upset.

You said in another interview that this wasn’t just about money, but about respect. How have Pueblo teachers been disrespected?
Educator voices are not part of the decision-making in our schools right now. At one of our schools, which is in turnaround status, they just had their lesson plan format changed for the sixth time this year. It’s the middle of April! We have very little input at the district level. We have made three open records request for the district’s staffing model for next year. And still, we’re just told no, that it’s still fluid. When they ask questions, they’re very often met with not only resistance, but are sometimes punished. It’s those sorts of things that have just added up for teachers.

There’s a five-member board. Two of the members were endorsed by the union. How did your relationship with the board break down?
The board members who voted against the fact finder report aren’t hearing teachers. What we’re trying to tell them is that a budget is about choices. And we don’t agree with some of the choices they’re making right now. One of the choices was that the instructional budget was cut, but business services had their budget increased, so did human resources. That’s a choice. The district is spending a lot of money on a law firm out of Boulder. That’s a choice. Administrators received a cost-of-living increase this year, teachers are not. More importantly our paraprofessionals have not. It’s those kind of choices we’re looking at in our budget analysis and saying, “Wait a minute.” We’ve also found money where we believe the district is over-budgeting and has some money available.

The school board president, Barb Clementi, a former teacher whom you did endorse, wrote an editorial recently about her vote against giving teachers a raise: “There is no question that our employees deserve more, and yet we are in a grim financial situation. Since three educators were elected to the board, teachers, paraprofessionals and other educators have seen two raises and three step increases in pay. We are struggling to continue to fund those increases in the coming budget and will undoubtedly see cuts to staff and programs in order to do so. It is fiscally irresponsible to dig an even deeper financial hole by raiding our reserves, which are meant to cover one-time emergency expenses, or by further cutting staff and programs.” I know you’re suggesting that the district doesn’t need to use reserves to pay for these raises, but more broadly, why is she wrong? Is it just possible that it’s just not the teachers’ turn for a raise? Was a guarantee of a raise next year never part of the conversation?

No, it was not. At least not until now, after all this has got rolling. We still have next year’s contract hanging out there. It’s been mentioned in some informal conversations, “Well, there’s next year.” The problem is, those raises, the past two years only came after this same process — long, drawn-out negotiations. Steps (or years of tenure) are not a raise for all of our employees. There are some places people are frozen. What the district also fails to recognize, is that in all of its years, it’s never once been on the state’s watchlist for fiscal risk. They’ve always been very healthy financially. They’ve maintained stable ground. We’ve tracked reserves through the years, and this is the first year you can see a little bit of a decrease. But that’s because the district made a choice to move some money to address facility issues, which we also understand. The other thing they neglect to mention is that the district continues to get more money from the state despite declining enrollment. They are getting additional money, and they’re set to get more money. School finance is looking a little better in Colorado for next year.

Should teachers expect to get raises every year?
I think there are ways that we need to start looking at our traditional salary scales. That should be something on the table at a future point. Do I think some of the structures of our salary schedules are a little outdated? Yes. I think there are ways we can change that to make the money a little bit better. What people also need to understand is that schools are funded by the state based on cost of living. So, I think it’s reasonable for there to be something. Does it need to be a 10 percent raise? Not necessarily, because we are dependant on state funding.

Teachers, in a lot of cases, have the same level of education as attorneys, physicians assistants, nurses. And those people can expect raises. They have a high level of education and so do our teachers. Teachers have been deprofessionalized by the lack of funding, by the lack of raises. Do I think teachers deserve to come into a profession and take care of their own families, to pay off their own students loans? Absolutely.

We’re at a moment of national unrest and action by teachers. Do you think your members are feeling embolden by that? Would your members have voted to strike if it there wasn’t this national conversation?
I think we’d still be heading here, even without the momentum. But do I think the national momentum has helped? Absolutely. I think both movements, both nationally and locally, show that teachers have had enough. Teachers are walking into classrooms that are not funded. We have teachers who (can only make) 100 copies a month from the building copier. And yet, they see 125 to 150 students a day. That’s the kind of thing teachers are tired of. My daughter-in-law, she’s a teacher, the decorations in her classroom are bought with her own money. Teachers for the last five to seven years have been put in the situation of having to buy basic supplies such as paper and pencils because schools have been so underfunded. It’s all part of the same issue. It’s about respect. No other professional would be asked to buy their supplies like teachers do.

Pueblo is the only urban school district in the state to not have voter approval for additional local funding for its schools. What do voters in Pueblo and Colorado need to know about how the financial situation is contributing to this moment?
Colorado has fallen further and further behind in school funding. Current estimates suggest we’re either 46th or 48th in funding schools. Which is really tragic considering our economy — at least in the northern part of the state — has been healthier than it’s ever been.

The other piece of this, for districts like ours that have not passed a tax increase: We’ve hurt ourselves. School districts have had to pass local tax increases to keep the cash flow coming in to do things like keep up facilities, supplies, and technology.

We desperately need one. We need a long-term, well-thought-out plan for a mill levy override and perhaps a bond issue to be able to get our schools up to date. There was supposed to be a committee to get this started. And we were supposed to be part of that committee. But it hasn’t happened.

Getting back to the potential strike, teachers at a local middle school recently staged a “sickout.” One parent responded: “If the teachers want to strike, fine: strike like the steelworkers strike where they don’t get paid a damn dime. But for them to use sick time and screw over all these kids, who’re aren’t in school today because of that? That’s wrong. And they expect the community to take them seriously?” What do you say to that parent? Are you at all concerned that this could backfire, are you worried that the district could just drop the collective bargaining all together?
That’s always a concern. That’s something we hope doesn’t happen. The association did not plan what happened at Corwin International Magnet School. I didn’t even know about it. I read it on Facebook and in the news like everyone else.

What I would say to that parent is that we’re not walking out to harm our students. In reality, we’re planning a strike to help our students. One of the things that this district struggles with is high teacher turnover. It’s one of the highest rates in the state. We have positions filled this year by teachers who have come out of retirement for limited contracts. We have teachers in classrooms on alternative licenses. Finding a special education teacher in the city of Pueblo is like finding a needle in a haystack. We believe that if we can get back to work openly, honestly, and collaboratively with the school district, where we can compete salary-wise with districts surrounding us, then we can keep highly qualified teachers in our classroom. That’s what we’re after. Our goal is not to harm students. But we feel like to benefit our students, we have to take drastic opinions right now.

What is the long-term solution, so a strike can be avoided and you’re not here next year?
We have made a conscious decision: We feel a 2 percent raise is fair. It’s off of our initial proposal by almost a full percent. We’d like to be able to come back to the table with some sort of real labor-management partnership collaboration agreement so we’re not here again. It’s going to take some real work. It might even take some outside help to repair our relationship. However, when we do come to the table again, I’d like to see come forward a real partnership agreement. Not one that is just written on paper.

What’s the nationwide or state solution to this moment of educator unrest?
Funding formulas across states need to be changed. States need to take a long hard look at how they fund schools. I believe Colorado’s is archaic. Will money solve everything? No. But it’s a big piece of it. We also have to get teachers to the table when education decisions have been made.

Chalkbeat is a nonprofit news site covering educational change in public schools.


Originally posted on Chalkbeat by Nic Garcia on April 23, 2018

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More than just pie, the Pecan industry sets sights on snacks

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The humble pecan is being rebranded as more than just pie.

Pecan growers and suppliers are hoping to sell U.S. consumers on the virtues of North America’s only native nut as a hedge against a potential trade war with China, the pecan’s largest export market.

The pecan industry is also trying to crack the fast-growing snack-food industry.

The retail value for packaged nuts, seeds and trail mix in the U.S. alone was $5.7 billion in 2012, and is forecast to rise to $7.5 billion by 2022, according to market researcher Euromonitor.

The Fort Worth, Texas-based American Pecan Council, formed in the wake of a new federal marketing order that allows the industry to band together and assess fees for research and promotion, is a half-century in the making, said Jim Anthony, 80, the owner of a 14,000-acre pecan farm near Granbury, Texas.

Anthony said that regional rivalries and turf wars across the 15-state pecan belt — stretching from the Carolinas to California — made such a union impossible until recently, when demand for pecans exploded in Asian markets.

Until 2007, most U.S. pecans were consumed domestically, according to Daniel Zedan, president of Nature’s Finest Foods, a marketing group. By 2009, China was buying about a third of the U.S. crop.

The pecan is the only tree nut indigenous to North America, growers say. Sixteenth-century Spanish explore Cabeza de Vaca wrote about tasting the nut during his encounters with Native American tribes in South Texas. The name is French explorers’ phonetic spelling of the native word “pakan,” meaning hard-shelled nut.

Facing growing competition from pecan producers in South Africa, Mexico and Australia, U.S. producers are also riding the wave of the Trump Administration’s policies to promote American-made goods.

Most American kids grow up with peanut butter but peanuts probably originated in South America. Almonds are native to Asia and pistachios to the Middle East. The pecan council is funding academic research to show that their nuts are just as nutritious.

The council on Wednesday will debut a new logo: “American Pecans: The Original Supernut.”

Rodney Myers, who manages operations at Anthony’s pecan farm, credits the pecan’s growing cachet in China and elsewhere in Asia with its association to rustic Americana — “the oilfield, cowboys, the Wild West — they associate all these things with the North American nut,” he said.

China earlier this month released a list of American products that could face tariffs in retaliation for proposed U.S. tariffs on $50 billion worth of Chinese goods. Fresh and dried nuts — including the pecan — could be slapped with a 15-percent tariff, according to the list. To counter that risk, the pecan council is using some of the $8 million in production-based assessments it’s collected since the marketing order was passed to promote the versatility of the tree nut beyond pecan pie at Thanksgiving.

While Chinese demand pushed up prices it also drove away American consumers. By January 2013, prices had dropped 50 percent from their peak in 2011, according to Zedan.

U.S. growers and processers were finally able in 2016 to pass a marketing order to better control pecan production and prices.

Authorized by the Agricultural Marketing Agreement Act of 1937, federal marketing orders help producers and handlers standardize packaging, impose quality control and fund research, according to the U.S. Department of Agriculture, which oversees 28 other fruit, vegetable and specialty marketing orders, in addition to the pecan order.

Critics charge that the orders interfere with the price signals of a free, unfettered private market.

“What you’ve created instead is a government-sanctioned cartel,” said Daren Bakst, an agricultural policy researcher at the conservative Heritage Foundation.

Before the almond industry passed its own federal marketing order in 1950, fewer almonds than pecans were sold, according to pecan council chair Mike Adams, who cultivates 600 acres of pecan trees near Caldwell, Texas. Now, while almonds appear in everything from cereal to milk substitutes, Adams calls the pecan “the forgotten nut.”

“We’re so excited to have an identity, to break out of the pie shell,” said Molly Willis, a member of the council who owns an 80-acre pecan farm in Albany, Georgia, a supplement to her husband’s family’s peanut-processing business.

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