A test for Trump’s cabinet pick
For businesses and markets, perhaps the most important of the hearings for the incoming Trump administration’s Cabinet picks starts on Thursday at 10:30 a.m. Eastern.
Scott Bessent, President-elect Donald Trump’s choice for Treasury secretary, will likely be confirmed by the Senate. But the billionaire hedge fund manager is still expected to face tough questions about his boss’s economic agenda, which has the potential to drastically disrupt global economies and trade.
“We can usher in a new, more balanced era of prosperity and rebuild communities and families across the country,” Bessent is expected to say in prepared remarks to the Senate Finance Committee.
Critics are skeptical. “Bessent has spent his life helping the rich get richer,” Senator Elizabeth Warren, Democrat of Massachusetts, told The Times. (Democrats intend to grill him on matters including how he collected earnings from his hedge fund that, they say, allowed him to avoid paying more than $900,000 in payroll taxes.)
That said, he has already won support from both Wall Street and hard-core Trump supporters. And even Warren has called him “smart” and “thoughtful.”
Bessent will be asked about two big parts of Trump’s economic vision. One is sweeping tariffs on allies and rivals alike as a means of extracting trade concessions — which if rolled out could drastically raise consumer prices. He’s expected to say that he would prefer such levies to be rolled out gradually, to avoid sticker shock.
Bessent’s also expected to call for extending the 2017 tax cuts that Trump signed into law, arguing that failing to do so would represent “the largest tax increase in history.” But doing that and adding other breaks would cost trillions, adding to America’s $36 trillion national debt load.
Both could also reignite inflation, which would probably persuade the Fed to slow down on cutting rates. It could also scare global bond markets, which some economists think would be the ultimate brake on the Trump agenda.
DealBook has more questions:
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How does he plan to approach the Fed, which historically has been politically independent? (And will he keep up the 75-year tradition of regularly having breakfast or lunch with the central bank’s chair, as mentioned by Jay Powell at the DealBook Summit last month?)
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What does he think about Trump’s proposal for creating a strategic reserve of Bitcoin?
HERE’S WHAT’S HAPPENING
Will Israel’s cabinet ratify a cease-fire deal with Hamas? Top ministers were expected to vote on Thursday on the agreement, which would begin with a 42-day truce and the release of hostages. But the office of Prime Minister Benjamin Netanyahu accused Hamas of reneging on unspecified parts of the agreement; Hamas said it was committed to the deal.
Jeff Bezos’s Blue Origin finally launches its heavy rocket. The 320-foot New Glenn blasted off from Cape Canaveral early this morning, eventually putting its second stage in orbit. The accomplishment, which had been hit by delays, bolsters Blue Origin’s hopes of competing with Elon Musk’s SpaceX in the increasingly important business of putting stuff in space.
Biden administration regulators take more parting shots. The Transportation Department sued Southwest Airlines, accusing the carrier of harming passengers with chronic delays on two routes in 2022; it’s seeking more than $2.1 million in civil penalties. And the F.T.C. sued John Deere, claiming the tractor maker illegally forced farmers to rely only on authorized dealers for repairs, padding its profits.
The latest on TikTok
It’s three days until a law requiring TikTok to be sold or face a ban in the United States takes effect, and the Supreme Court has yet to rule on the video app’s challenge. As the clock ticks down, here is what we know.
TikTok’s C.E.O. will sit on the dais for Donald Trump’s inauguration on Monday, The Times was first to report. The prominent position for Shou Chew — alongside other V.I.P. tech leaders, including Elon Musk and Mark Zuckerberg — is a sign of the growing ties between the company and Trump.
TikTok plans to shut its U.S. operations if it loses in court, according to The Information. That would change the expected dynamics of a ban: Many were expecting the app to be gone from app stores — but to still work on phones that had already downloaded it.
TikTok is changing its tone about the prospect of a Supreme Court loss. The app told U.S. employees on Tuesday that they will still have jobs next week if the high court upholds the law, tacitly acknowledging the possibility it may lose its legal challenge.
Trump is reportedly weighing ways to get around the law. One option would be issuing an executive order suspending enforcement of the law, according to The Washington Post, though legal experts question whether that would work.
The Post also reports that “some in Trump’s orbit” have floated the prospect of selling pieces of TikTok to U.S. investors, arguing that would satisfy the law’s requirement for a “qualified divestiture.”
Some analysts think that the longer the Supreme Court takes, the less likely a ban is. “If the Court is going to keep the ban in place, we suspect it wants to do so asap so Biden/Trump/China have a short window to potentially work out a fix to save TikTok,” wrote analysts at TD Cowen.
“But if the Court knows it’s going to reject the ban and let TikTok live, it could go as late as Saturday before issuing its ruling.”
Behind the market bounce-back
Stock futures are pointing to another solid open this morning. That comes a day after strong earnings from Wall Street giants and encouraging inflation data propelled the S&P 500 to its best rally in two months, putting the benchmark index in the green again for 2025.
More important, jitters in the bond market have eased, with the yield on the 10-year Treasury note falling significantly Wednesday.
The next Trump administration will find that encouraging. It’s expected to pursue policies that some economists warn could accelerate inflation and ultimately force the Fed into a holding pattern on interest rates.
Still, investors face more tests. Keep an eye on retail sales data this morning for another read on inflation, as well as what Bank of America and Morgan Stanley have to say about the strength of the economy, deal making and trading activity in their earnings calls.
Wednesday, JPMorgan Chase, Wells Fargo and Goldman Sachs reported year-end results that blew past analysts’ estimates.
The latest Consumer Price Index report gave markets a lift, too. While overall inflation remains a worry, the data showed that “core” C.P.I., which excludes volatile food and fuel prices, ticked down slightly month-on-month.
That may encourage the Fed to keep cutting rates this year, with the futures market this morning pricing in as many as two. Jeffrey Roach, an economist at LPL Research, wrote to investors Wednesday that he expects no cuts before the second quarter.
“Today, an oligarchy is taking shape in America of extreme wealth, power and influence that literally threatens our entire democracy.”
— President Biden, in a sharply worded farewell speech Wednesday. He warned of a growing “tech industrial complex” and of the erosion of truth with unchecked social media and A.I., potentially enabling “the abuse of power.”
A short seller heads for the exits
For eight years, Nate Anderson of Hindenburg Research has taken on scores of corporate giants, including Adani Group of India, Icahn Enterprises and the electric vehicle maker Nikola, accusing them of wrongdoing and defrauding shareholders.
His reports helped demolish billions of dollars in market value and, in one instance, led to someone going to prison.
Now he’s hanging up his hat.
“I have made the decision to disband Hindenburg Research, Anderson wrote in a note on the firm’s website on Wednesday. “The plan has been to wind up after we finished the pipeline of ideas we were working on. And as of the last Ponzi cases we just completed and are sharing with regulators, that day is today.”
Fellow short sellers praised Anderson’s work — “Sadly, the Golden Age of Fraud just got shinier,” wrote Jim Chanos, who helped expose Enron — though critics questioned if something else was afoot.
The stress of waging these battles was growing, Anderson told The Wall Street Journal. (Hindenburg has published more than 100 reports over the years.)
He voiced similar concerns to DealBook’s Bernhard Warner last month, but noted that he had unfinished work to do. Weeks later, he dropped a bomb on Carvana, calling it a “grift for the ages.” The company disputes the accusations, and its shares have since rebounded.
Short selling is risky. Such investors bet that a particular stock’s price will fall, usually this way: They borrow shares from other investors and sell it in the open market, hoping to buy it back at a lower price to repay their lenders. The potential upside is big, but the downside is enormous.
So-called activist short investors like Hindenburg take the additional step of publishing critical research reports on their targets, hoping to persuade other investors to also bet against the company.
That has drawn criticism and regulatory scrutiny. Targets often accuse short sellers of impugning their reputation for financial gain. Hindenburg has been sued, or been threatened with lawsuits, scores of times, Anderson previously told DealBook.
The S.E.C. and the Justice Department started investigating the practices of Hindenburg and others in 2022.
Others have called it quits as well, including Chanos, who closed his hedge fund two years ago. Anderson previously told DealBook that the huge market rally over the past three years had made it tougher to win big. But he added that wasn’t his only motivation.
“There’s still plenty of fraud out there,” he told DealBook in 2022. “If there’s ever a time that I feel that most of the corporate fraud in America has been eliminated, then I’ll probably announce that I’ll go grow tomatoes, or something.”
He told The Journal that he plans to travel and focus on investing via index funds. But, he added, he will also publish explainers “to open-source every aspect of our model and how we conduct our investigations.”
THE SPEED READ
Deals
Politics and policy
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“Ramaswamy Has a High-Profile Perch and a Raft of Potential Conflicts” (NYT)
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L3Harris Technologies, a big defense contractor, told Elon Musk’s cost-cutting panel, the Department of Government Efficiency, that the U.S. government’s procurement system is too slow to respond to threats from China and Iran. (Reuters)
Best of the rest
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The enormous insurance liability for the Los Angeles wildfires could be spread to homeowners across the state thanks to a little-noticed rule change last year. (WSJ)
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Washington Post employees, citing alarm over “recent leadership decisions,” have demanded a summit with Jeff Bezos, the newspaper’s owner. (NYT)We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com.