--:-- Alex Osola: Better than expected bank earnings show that the U.S. economy is still going strong. Plus, how frustrated shoppers are dealing with grocery prices that just keep rising. And as countries back off their EV targets, what does that mean for automakers? Many people still see EVs as the future in the industry, but it's a future which will arrive a bit later than previously anticipated.
--:-- Alex Osola: It's Wednesday, October 15th. 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.
--:-- Alex Osola: On yesterday's show, we told you that a handful of big U.S. banks had reported better than expected earnings for the third quarter. Today, Bank of America said its profit rose 23 percent to $8.5 billion, thanks to healthy consumer activity and a busy summer in its investment banking division.
--:-- Alex Osola: As a group, the six largest banks in the U.S. earned nearly $41 billion in the last three months, up 19 percent from a year ago. Banks are viewed as barometers for the broader economy because they see details of the financial health of millions of American households and companies.
--:-- Alex Osola: In earnings calls this week, executives pointed out signs of strength. We do see in our data that the consumer's spending more. That was Bank of America Finance Chief Alistair Borthwick talking about consumers putting more on their credit and debit cards.
--:-- Alex Osola: And that feels consistent with a growth economy. But executives also pointed out causes for concern about the U.S. economy at a moment when it's been flashing conflicting signals.
--:-- Alex Osola: In recent months, national GDP and other indicators showed the economy was holding steady. Concerns about a sluggish job market have raised fears about the financial health of lower-income households.
--:-- Alex Osola: Most banks and financial services companies say the economy is holding up, even if they remain wary about potential cracks.
--:-- Alex Osola: New lawsuits against Bank of America and Bank of New York Mellon over their ties to Jeffrey Epstein accuse the banks of maintaining relationships with a convicted sex offender and failing to report suspicious activities until after his 2019 death.
--:-- Alex Osola: The two class action lawsuits were filed in federal court today on behalf of a Jane Doe and other women who have accused Epstein of abuse. They allege that Epstein trafficking operation would not have existed without the banks that provided special treatment to Epstein and his co-conspirators.
--:-- Alex Osola: The suits seek unspecified financial damages. Spokesmen for Bank of America and Bank of New York Mellon had no immediate comment.
--:-- Alex Osola: The Labor Department has delayed the release of September inflation data until next week because of the government shutdown. That information gives an important update on prices.
--:-- Alex Osola: But for businesses and shoppers, there's plenty of evidence out there right now for rising prices, particularly at the grocery store.
--:-- Alex Osola: This is the chief executive of Albertson's grocery company, Susan Morris, on an earnings call this week.
--:-- Susan Morris: So what we've seen from the consumer is a continued focus on value, a shift to trading down, maybe it's smaller package sizes, a focus on own brands.
--:-- Alex Osola: While overall inflation this year has been far below the pandemic-era price increases, the August inflation report showed grocery price inflation picking up.
--:-- Alex Osola: The price of coffee rose nearly 21 percent over the 12 months ending in August, while ground beef rose 13 percent during the same period. Dairy, fruit and vegetables and cereals all got more expensive.
--:-- Alex Osola: So how are people feeling about the rising cost of groceries? Outside my local grocery store in Brooklyn, it wasn't hard to get people to talk about it.
--:-- Alex Osola: This is Robert Klein.
--:-- Robert Klein: The prices are ridiculous. Right. I come here because it's near my house, but all prices, they're ridiculous.
--:-- Alex Osola: I have grandkids. You can't buy a toy. It's through the ceiling.
--:-- Alex Osola: You know things have to go up. People have to earn a living, but within reason.
--:-- Alex Osola: Rising commodity prices are driving some of the increases, including American beef.
--:-- Alex Osola: The Trump administration's tariffs have made some imports like Spanish olive oil more expensive, but food companies have absorbed some of those costs.
--:-- Alex Osola: Albertsons, the supermarket company, is trying to cut down its own cost to counter inflation, its CEO said.
--:-- Alex Osola: Shoppers are trying to save too. We see an increased usage in coupons. We see them sticking closer to their shopping list, maybe not buying that extra item, that extra bottle of whatever.
--:-- Alex Osola: They're kind of shortening their list and sticking to it.
--:-- Alex Osola: Blockbuster earnings by America's biggest banks tempered fears that the economy is headed for a slowdown, pushing U.S. stocks mostly higher today.
--:-- Alex Osola: The Nasdaq rose about 0.7 percent, the S&P 500 was up 0.4 percent, and the Dow ended nearly flat.
--:-- Alex Osola: Meanwhile, gold prices hit yet another record high.
--:-- Alex Osola: Coming up, what do changing government subsidies mean for the future of electric vehicles? That after the break.
--:-- Alex Osola: [pause]
--:-- Alex Osola: Hey, I got a guy pointing a gun at me driving. We're armed as well. He keeps throwing the gun in our faces.
--:-- Alex Osola: A man is calling 911 about a driver with a gun. Minutes later, someone is killed on Camp Swamp Road.
--:-- Alex Osola: This seemed like an open and shut case of self-defense, except for the shooter's decision to record his phone calls. And an investigation by the dead man's sister.
--:-- Alex Osola: Listen to Camp Swamp Road, a new series from The Journal. Available now in The Journal feed wherever you get your podcasts.
--:-- Alex Osola: Automakers have spent billions of dollars on new electric models to try to get ready as governments around the world pushed for more electric vehicles.
--:-- Alex Osola: Now, countries are softening their EV targets and rolling back their emissions goals. And automakers are taking their foot off the gas.
--:-- Alex Osola: Stephen Wilmot covers global carmakers for the journal and joins me now.
--:-- Stephen Wilmot: Yeah, it absolutely isn't the only one. The European Union has had pretty tight emissions regulations and has been very reluctant to water them down, but it has actually caved into pressure this year from automakers.
--:-- Alex Osola: We've seen the same in the U.K., which, of course, is no longer part of the European Union, who sets its own emissions regulations. And we've seen that play out in Canada too under Mark Carney, who was a former champion of green policy.
--:-- Stephen Wilmot: What those three examples all have in common is that the changes have been led by politicians who have strong pro-green agendas that have nonetheless had to cave to a more pragmatic way of thinking about EVs faced with rather reluctant consumer adoption.
--:-- Alex Osola: So because of this change coming from governments around the world, what does this mean for automakers? Are they changing their operations accordingly?
--:-- Stephen Wilmot: Yes, they have. It's been a two-way street where EV sales have been weak. That's forced automakers to react. And they've also been lobbying governments very hard to change the rules so they don't have to pay massive fines for not selling enough EVs.
--:-- Stephen Wilmot: Porsche, which was previously very focused on EVs, it went public in 2022. with very aggressive EV targets. And last month, it dialed those back quite radically and took a big write-down.
--:-- Stephen Wilmot: Only this week, we saw GM do the same in the US, citing the change in government position and notably the cancellation of the EV tax credit GM had this billion write linked to its EV programs.
--:-- Stephen Wilmot: Last week Ferrari which had previously said that 40% of its models in 2030 would be EVs, now is saying 20% of its models in 2030 will be EVs.
--:-- Alex Osola: So it's been a very broad response from the automakers. And the long-term prospects for EVs. How might that shift because of this?
--:-- Stephen Wilmot: Many people still see EVs as the future in the industry, but it's a future which will arrive a bit later than previously anticipated.
--:-- Stephen Wilmot: I think the most plausible scenario is that EVs do continue to be bought by consumers in greater numbers, but just not as rapidly. And it's more about the timetable.
--:-- Alex Osola: But of course, timing is everything when you're having to plan products five years out. And if you get that wrong, it's very expensive.
--:-- Alex Osola: So it's not like this is trivial for the industry at all.
--:-- Alex Osola: That was WSJ reporter Stephen Wilmot. Thanks, Stephen.
--:-- Stephen Wilmot: Thank you.
--:-- Alex Osola: In other news, a federal judge has temporarily blocked the Trump administration from going through with mass firings of federal workers while the government remains shut down.
--:-- Alex Osola: The Trump administration last week sent reductions in force notices, otherwise known as RIFs, to about 4,000 employees at more than half a dozen federal agencies.
--:-- Alex Osola: President Trump has referred to the layoffs as Democrat-oriented and has tried to put pressure on Democrats to end the standoff on government funding.
--:-- Alex Osola: And a startup backed by NVIDIA called Poolside and cloud infrastructure provider CoreWeave said today that they are planning to build a giant data center in West Texas.
--:-- Alex Osola: The data center will be built on more than 500 acres of land, two-thirds the size of Central Park, and will be capable of generating its own power from the natural gas resources in the area.
--:-- Alex Osola: Many planned data centers across the U.S. have been built without power generation capabilities, and the companies are betting that having their own power source improves the long-term viability of their project.
--:-- Alex Osola: Poolside and Corweave declined to say what the overall expected cost would be. They expect to complete construction in the first quarter of 2027.
--:-- Alex Osola: And that's what's news for this Wednesday afternoon.
--:-- Alex Osola: Today's show was produced by Pierre Bien-Aimé and Zoe Kolkin with supervising producer Tali Arbel.
--:-- Alex Osola: I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.
