Stocks tumble in worst day in months, as tech stocks slide and bond yields climb.

Investors, weighing the prospect of the Federal Reserve preparing to reduce its purchases of government debt, sold off bonds, pushing the 10-year’s yield up to 1.53 percent, its highest level since June.

S&P 500






U.S. stocks fell on Tuesday, with the S&P 500 falling 1.8 percent by midday, putting the index on track for its worst day since May.

The trigger for Tuesday’s sell-off was a rise in the yield on the benchmark 10-year Treasury note. Investors, weighing the prospect of the Federal Reserve preparing to reduce its purchases of government debt, sold off bonds, pushing the 10-year’s yield up to 1.53 percent, its highest level since June.

Government bond yields are the basis for borrowing costs across the economy, and a rise can hinder the stock market’s performance because it makes owning bonds more attractive and can discourage riskier investments.

Tech stocks are particularly sensitive to the prospect of higher interest rates, and those companies’ shares were hard-hit on Tuesday. The tech-heavy Nasdaq composite was down 2.5 percent at midday.

Etsy, the online craft marketplace, was off 7.5 percent in the morning, and Shopify was off 5.2 percent. Both companies have soared during the pandemic and were still up more than 20 percent for the year.

“With tech stocks, you’re betting for a company to have a breakthrough years from now,” said Beth Ann Bovino, the chief U.S. economist at S&P Global. “If interest rates go up today, that value that you receive years from now is discounted.”

The vast pull the big tech companies have — particularly Amazon, Apple, Microsoft, Google and Facebook — also helped drag down the S&P 500. Apple was down 1.9 percent and was the best performer of the tech giants. Amazon, Microsoft, Facebook and Google were down by 2.5 percent or more.

Somewhat offsetting the drop in technology stocks was a rally in energy stocks. Schlumberger, Baker Hughes and Marathon Oil were among the best-performing shares in the S&P 500.

The trading echoes the volatility of earlier this year, when a jump in rates roiled financial markets. That rise happened as traders worried that higher inflation might cause the Fed to increase rates sooner than they had forecast.

“There’s no doubt that the equity market does not like higher rates — there’s just no debate about it,” Ralph Axel, director of U.S. Rates Strategy at Bank of America.

Investors were also concerned as Treasury Secretary Janet L. Yellen warned lawmakers on Tuesday of “catastrophic” consequences if Congress does not deal with the debt limit before Oct. 18. Ms. Yellen suggested that a default would jeopardize the dollar’s status as the international reserve currency.

Lauren Goodwin, an economist at New York Life Investments, wrote in a note to investors that risks like that “should do little to impact the broader fundamental environment.”

She said the forces affecting investor confidence would instead remain those that have been most at play throughout the past 18 months.

“The path will depend heavily on our three highly uncertain drivers — the pandemic, monetary policy and fiscal policy,” she wrote.


At a Senate Banking Committee hearing on Tuesday, Treasury Secretary Janet Yellen said it would be “disastrous” if the United States defaulted on its financial obligations.Credit…Stefani Reynolds for The New York Times

Treasury Secretary Janet L. Yellen on Tuesday warned lawmakers of “catastrophic” consequences if Congress failed to soon raise or suspend the statutory debt limit, saying inaction could lead to a self-inflicted economic recession and a financial crisis.

At a Senate Banking Committee hearing where she testified alongside the Federal Reserve chair, Jerome H. Powell, Ms. Yellen laid out in explicit terms what she expects to happen if Congress does not deal with the debt limit before Oct. 18, which Treasury now believes is when the United States will actually face default.

Seniors could see their Social Security payments delayed, soldiers would not know when their paychecks were coming and interest rates on credit cards, car loans and mortgages would rise, making payments more costly, she warned. She also suggested that a default would jeopardize the dollar’s status as the international reserve currency, which Democrats argue would be a gift to China.

“It would be disastrous for the American economy, for global financial markets, and for millions of families and workers whose financial security would be jeopardized by delayed payments,” Ms. Yellen said.

Ms. Yellen and Mr. Powell, America’s two top economic policymakers, also warned lawmakers on Tuesday that the Delta variant of the coronavirus had slowed the economic recovery, but they said the economy was continuing to strengthen.

Their testimony comes at a critical moment in the economic recovery. Businesses are facing labor shortages and consumers are coping with rising prices amid a resurgent pandemic. Congress is also grappling with a thicket of legislative challenges in the coming days, all of which could have an impact on the economy.

Those challenges include the need to extend federal funding to avoid a U.S. government shutdown; raising the debt limit to prevent defaulting on the nation’s financial obligations; and passing President Biden’s infrastructure and social safety net packages.

In a letter to Congress ahead of the hearing and in her opening remarks, Ms. Yellen said that Treasury is likely to exhaust the “extraordinary measures” she has been employing to delay a default if Congress has not acted by Oct. 18.

“At that point, we expect Treasury would be left with very limited resources that would be depleted quickly,” she wrote. “It is uncertain whether we could continue to meet all the nation’s commitments after that date.”

For weeks, Ms. Yellen has been quietly pressing lawmakers to put politics aside and ensure that the United States can continue to meet its fiscal obligations. She has been in touch with Wall Street chief executives and former Treasury secretaries as she looks to keep markets calm and find allies who can help her make the case to recalcitrant Republicans, who believe Democrats must deal with the debt limit on their own.

“It is imperative that Congress swiftly addresses the debt limit,” Ms. Yellen said. “The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.”

The debt limit is traditionally addressed on a bipartisan basis, but Republicans are refusing to join Democrats in passing legislation to lift the borrowing cap. Republicans argue that Democrats have the votes to lift the debt limit on their own and that they should do so. Democrats argue that Republicans are playing a dangerous political game.

In a tense exchange with Senator John Kennedy, Republican from Louisiana, Ms. Yellen said it was possible that Democrats could lift the debt limit on their own but that Republicans were shirking their responsibility by refusing to cover debts they helped incur.

“It is very important to recognize that raising the debt ceiling is about paying bills that Congress has incurred in the past,” Ms. Yellen said, noting that deficits have been run under Democratic and Republican administrations “It’s a shared responsibility.”

Mr. Kennedy, who was unconvinced, said that Democrats just wanted to tie Republicans to their big spending plans and that a crisis could be averted by Democrats.

“Easy, peasy. Finished. Let’s go have a cocktail,” Mr. Kennedy told Ms. Yellen.

Ms. Yellen also told lawmakers that the economy, while strengthening, is still in a “fragile” state.

“While our economy continues to expand and recapture a substantial share of the jobs lost during 2020, significant challenges from the Delta variant continue to suppress the speed of the recovery and present substantial barriers to a vibrant economy,” Ms. Yellen said in her opening remarks. “Still, I remain optimistic about the medium-term trajectory of our economy, and I expect we will return to full employment next year.”

Ms. Yellen and Mr. Powell will testify again on Thursday before the House Financial Services Committee.

Brent crude, the international oil benchmark, topped $80 a barrel on Tuesday for the first time in nearly three years amid growing signs of an energy crunch.

Oil prices have leapt by about a quarter over the last month as fears of a looming tight market have overcome concerns about the Delta variant slowing the global economic recovery. Soaring prices for natural gas are also influencing the oil market, analysts say, as some industrial users of gas switch to oil and other fuels.

This may be the first time that “gas impacts oil and not the other way around,” said Carlos Torres Diaz, head of gas and power at Rystad Energy, a consulting firm.

Brent crude rose as high as $80.70 a barrel on Tuesday. West Texas Intermediate crude, the U.S. benchmark, was also approaching a three-year high, reaching $76.64 a barrel.

Analysts say that outages caused by Hurricane Ida, which damaged oil platforms and infrastructure in the Gulf of Mexico in late August, have outweighed the modest increases in output agreed by the Organization of the Petroleum Exporting Countries in July.

OPEC and its allies including Russia are likely to come under pressure to speed up their plans for supply increases when the group meets by teleconference on Oct. 4. The group has already been criticized by the Biden administration for not doing enough to cushion price increases.

The long lines at gas stations in Britain, while caused by shortages of fuel truck drivers rather than oil, may also be adding upward pressure to prices.

Analysts at Goldman Sachs recently forecast that Brent would hit a peak of $90 a barrel in December, noting that global inventories are being burned off at what they described as a record rate.

“The current global oil supply-demand deficit is larger than we expected,” they wrote.

At the same time, the analysts said that successful coronavirus vaccine programs were “leading more countries to reopen, including to international travel.”

Aviation fuel has been the key laggard in the global recovery of oil demand, and so a pickup in air travel would be an important factor in bolstering the market.

Wells Fargo will pay $72.6 million in penalties for charging customers too much for foreign currency transactions, another fine for a bank that has struggled to shed its scandal-marred image.

Federal prosecutors in Manhattan said the bank had defrauded 771 clients, including many small or medium-size businesses, over seven years by adding markups, giving false information and providing worse prices to less-experienced customers. In a statement late Monday, prosecutors said Wells Fargo’s sales staff members were motivated by bonuses that could exceed $1 million a year based on the revenue from foreign exchange.

“We all put trust in our banking institutions to deal with us honestly, fairly and transparently,” said Audrey Strauss, the U.S. attorney for the Southern District of New York. “For the better part of a decade, Wells Fargo abused this trust, using tricks, false information, and other deceptive practices to fraudulently overcharge customers.”

The bank said in a statement that the conduct covered by the settlement had occurred before 2017, and that it had “significantly improved” its oversight and procedures related to foreign exchange transactions.

“This past behavior was unacceptable,” the bank said.

As part of the settlement, the bank paid back $35.3 million to customers it defrauded and received a further $37.3 million in civil penalties. Just three weeks ago, one of the bank’s major regulators, the Office of the Comptroller of the Currency, slapped Wells Fargo with a $250 million fine and stinging rebuke for failing to fix problems in its mortgage business.

Wells Fargo is still laboring under an asset cap put in place by the Federal Reserve in 2018 over a series of scandals, including a long-running one in which employees opened what may have been millions of bogus accounts in customers’ names to meet sales goals.

Two weeks ago, the bank’s continued difficulties in meeting regulators’ expectations prompted Senator Elizabeth Warren, Democrat of Massachusetts, to call for the bank to be broken up.

Coinbase’s initial public offering was advertised in Times Square in April. The company is one of many blockchain businesses aiming to offer services similar to those of traditional banks.Credit…Gabby Jones for The New York Times

The cryptocurrency exchange Coinbase announced on Monday that it would soon allow customers in the United States to deposit money from their paychecks directly into their crypto accounts.

Customers can keep that money in dollars or automatically convert it into Bitcoin or other cryptocurrencies. This means that users can “more easily make regular crypto trades,” Prakash Hariramani, Coinbase’s senior product director, wrote in a blog post.

Crypto companies are rapidly creating an alternative banking universe. Coinbase is one of many blockchain businesses aiming to offer services similar to those of traditional banks, like loans, savings accounts and debit and credit cards. Allowing direct deposits could make it easier for Coinbase customers to migrate their financial lives away from old-school financial institutions.

“Customers tell us that making frequent transfers is time-consuming and inconvenient,” Mr. Hariramani wrote.

The industry’s move into banking is causing alarm in Washington. Last week, Coinbase said that it would drop a proposed interest-generating product, called Lend, after the Securities and Exchange Commission threatened to sue because the service could violate securities laws. Notably, Lend would have been based on USD Coin, a stablecoin whose value is pegged to the dollar but was recently found not to be backed one-for-one with dollars, as claimed. U.S. financial regulators will soon issue a report on regulating the fast-growing stablecoin sector.

More regulation seems inevitable. Officials fear that crypto firms without the same reserve requirements and capital controls as traditional financial institutions will lure users with high yields and low fees without revealing the risks that come with these accounts. Big banks and their trade associations have also made that case, all while striking deals with the upstart competitors to get in on the action.

Protesters carrying a banner reading “Expropriate Deutsche Wohnen & Co.” at a demonstration this month in Berlin against rising rents.Credit…Christian Mang/Reuters

Communist rule ended more than three decades ago in eastern Germany, but in Berlin, fury over soaring housing costs has at least one socialist idea making a comeback.

In a referendum, Berliners voted on Sunday in favor of appropriating the property of large real estate companies. The initiative, “Expropriate Deutsche Wohnen & Co.,” named after one of the city’s biggest landlords, calls for seizing the property of any company with more than 3,000 apartments.

The measure, passed with 56 percent of the votes cast, or more than 1 million people, is not binding on Berlin’s Senate, which would have to pass a law putting it into force. Real estate companies are certain to oppose the measure as unconstitutional.

But the vote reflects the deep frustration among Berliners at the rise in rents and property prices, which have made the city increasingly unaffordable for middle- and low-income residents.

Organizers of the initiative argue that the expropriation would be legal, citing an article of the Constitution that allows the government to seize land, natural resources or means of production for the common good. (The provision does not mention buildings.)

Activists said they would put pressure on political leaders to implement the people’s will. “Disregarding the referendum would be a political scandal,” said Kalle Kunkel, a spokesman for the initiative, in a statement. “We will not give up until the socialization of housing corporations is a reality.”

Deutsche Wohnen owns more than 100,000 units in Berlin, according to the company’s website. Many were purchased from the government in the 1990s during a privatization drive.

The company said in a statement Monday that it respected the vote and would work with the city to increase the supply of affordable housing, and to avoid sharp rent increases or evictions. Expropriation “would be neither constitutional, nor financially feasible for Berlin,” Deutsche Wohnen said.

The video game publisher Activision Blizzard said Monday that it would pay $18 million in a settlement with a federal employment agency that filed a civil-rights complaint against the company earlier in the day, accusing it of sexual harassment and discrimination against female employees.

In a news release, Activision said the money would “compensate and make amends to eligible claimants,” with remaining funds going to charities that “advance women in the video game industry or promote awareness around harassment and gender equality issues,” as well as to company diversity and inclusion efforts.

In a seven-page document filed in U.S. District Court for the Central District of California, the Equal Employment Opportunity Commission accused Activision of discriminating against pregnant employees, paying female employees less than their male counterparts because of their gender and retaliating against employees who complained about unfair treatment.

Employees were subjected to “sexual harassment that was severe or pervasive to alter the conditions of employment,” said the complaint, which sought a jury trial. “The conduct was unwelcome and adversely affected the employees.” The complaint said “extensive” discussions with Activision to address the agency’s findings and come to an agreement had been unsuccessful.

The federal agency said the complaint had followed a nearly three-year investigation, which occurred while a California employment agency was also investigating Activision. The state inquiry culminated in a July lawsuit that sparked upheaval at the game publisher.

Monday’s settlement does not affect the California agency’s lawsuit, the company said.

Since July, other groups have weighed in. The Communications Workers of America, a labor union, filed a complaint this month with the National Labor Relations Board, accusing Activision of violating federal labor law, and Activision said last week that the Securities and Exchange Commission was also investigating the company.

The company said Monday that as part of the settlement, it would also improve its policies to prevent harassment and discrimination and appoint an external consultant to review Activision’s reporting and investigative procedures.

“There is no place anywhere at our company for discrimination, harassment or unequal treatment of any kind, and I am grateful to the employees who bravely shared their experiences,” Activision’s chief executive, Bobby Kotick, said in the news release. “I am sorry that anyone had to experience inappropriate conduct.”

In a separate legal filing, Activision denied “all allegations of wrongdoing,” and said it had agreed to the settlement to avoid “the expense, distraction and possible litigation associated with such a dispute.”

The Southern California Gas Company’s Aliso Canyon storage facility in Los Angeles. A 2015 blowout took months to contain.Credit…Jae C. Hong/Associated Press

Southern California Gas and its parent company, Sempra Energy, have agreed to pay up to $1.8 billion as part of a settlement agreement announced on Monday related to the nation’s biggest natural gas leak.

The settlement would resolve nearly all of the 35,000 claims filed by individuals and businesses after SoCal Gas’s Aliso Canyon natural gas storage facility blew out in 2015. The leak at the facility, in the Santa Susana Mountains northeast of Los Angeles, forced thousands of people from their homes in and around the Porter Ranch community, sickening many from the stench of chemicals wafting through the air near the plant.

From October 2015 to February 2016, the gas company worked to contain the leak, which released nearly 100,000 tons of methane and other substances into the air. Sempra had to temporarily close the facility, at one of the largest natural gas fields in the country. At the time, the leak raised concern among regulators about gas shortages that ultimately never happened.

“Our goal has always been obtaining justice for the men, women and children who were failed by SoCal Gas throughout every turn of this catastrophe,” said Brian Panish, the lead trial lawyer for the plaintiffs.

Scott Drury, the chief executive of SoCal Gas, said in a statement announcing the settlement that the company had worked to improve its operations as a result of the leak and had aimed to maintain new standards to ensure residents’ safety.

“These agreements are an important milestone that will help the community and our company work toward putting this difficult chapter behind us,” Mr. Drury said. “In the years since the leak, SoCal Gas has worked alongside regulators, technical experts and our neighbors to enhance safety at all our underground storage facilities and our engagement with the community.”

Plaintiffs can agree to accept the settlement until June 1, 2022.

Erin Griffith (@eringriffith) and Erin Woo (@erinkwoo), two of our tech reporters, are covering the trial of Elizabeth Holmes, who dropped out of Stanford University to create the blood testing start-up Theranos at age 19 and built it to a $9 billion valuation and herself into the world’s youngest self-made female billionaire — only to flame out in disgrace after Theranos’s technology was revealed to have problems.

Follow along here or on Twitter as she is tried on 12 counts of wire fraud and conspiracy to commit wire fraud. The trial is generally held Tuesdays, Wednesdays and Fridays.

Erin Woo

With that, we’re going to break for the weekend. I’ll be in the courthouse Tuesday, Wednesday and Friday next week — see you on Tuesday!

Erin Woo

For the past hour, Rosendorff has testified about problems w various tests, incl. the potassium, chloride and sodium tests. In a 10/27/14 email, he wrote: “I am not sure of the clinical value of a sodium assay, in which the only time we can report it is when it is not critical”

Erin Woo

We’re now getting into Rosendorff’s decision to leave. He forwarded work emails with issues of concern to his Gmail account in 2014, testifying that “I wanted to protect myself.” He also says he started looking for another job in mid-2013, shortly after joining Theranos.

Erin Woo

Today’s theme seems to be a) Rosendorff was concerned about faulty tests, b) Rosendorff recommended the company stop using those tests and c) Holmes/Balwani were aware but declined to change course.

Erin Woo

We’re now on issues with Theranos’s HDL (cholesterol) tests. Rosendorff says he “suspected” Theranos’ HDL was no longer working as of Feb. 2014 and suggested reverting to FDA-approved devices, but received pushback from Balwani, Holmes and Theranos VP Daniel Young.

Two Federal Reserve officials embroiled in controversy for trading securities that could have benefited from the central bank’s 2020 intervention in financial markets announced on Monday that they would leave their positions.

Robert S. Kaplan, who heads the Federal Reserve Bank of Dallas, will retire on Oct. 8, according to a statement released Monday afternoon. Eric S. Rosengren, the president of the Boston Fed, will retire this Thursday, accelerating his planned retirement by nine months.

The resignations followed the Fed’s announcement earlier this month that the Fed chair, Jerome H. Powell, had ordered a review of the central bank’s ethics rules in light of the controversy surrounding the trades.

Creative Artists Agency announced Monday that it was buying its smaller rival ICM Partners for an undisclosed amount, the largest industry consolidation in more than a decade and one that could have significant ripple effects in the entertainment and sports worlds.

The agencies’ top executives — Bryan Lourd at CAA and Chris Silbermann at ICM — positioned the deal as a supercharging of the representation business and an opportunity for CAA to expand in both publishing and sports. ICM has a substantial books division and sports assets that include the recently acquired N.F.L. agency Select Sports Group and the London-based soccer agency Stellar Group.

Christine Lagarde, the president of the European Central Bank, said the risk posed by supply bottlenecks could increase if problems in global shipping and other issues are not resolved.Credit…Kai Pfaffenbach/Reuters

It has been increasingly clear that shortages of semiconductors, raw materials and other goods are having a tangible effect on growth, but precisely how much was hard to gauge. On Tuesday, Christine Lagarde, the president of the European Central Bank, put a number on it.

Exports from the eurozone would have been almost 7 percent higher during the first six months of 2021 if not for supply bottlenecks, she said, citing analysis by central bank economists.

More than 40 percent of the eurozone’s gross domestic product is based on exports, so 7 percent of lost sales amounts to a substantial blow to overall growth. By comparison, exports account for only 12 percent of the U.S. economy.

“These risks to growth could mount if the pandemic continues to affect global shipping and cargo handling as well as key industries like semiconductors,” Ms. Lagarde said in a speech.

Ms. Lagarde also had some good news. After the steepest collapse on record, she said, the eurozone has bounced back more quickly than expected. Despite supply issues, economic output will exceed the prepandemic level by the end of this year, she said, nine months sooner than expected.

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