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The Federal Reserve cut its benchmark interest rate by a quarter point Wednesday for the second time since September. Before that, it had gone nine months without a cut.The federal funds rate is the rate at which banks borrow and lend to one another. While the rates consumers pay to borrow money aren’t directly linked to this rate, shifts affect what you pay for credit cards, auto loans, mortgages, and other financial products.“While the full economic impact of such a move will unfold over time, early indicators suggest that even modest rate cuts can have meaningful consequences for consumer behavior and financial health,” said Michele Raneri, vice president and head of U.S. research at credit reporting agency TransUnion.The Fed has two goals when it sets the rate: one, to manage prices for goods and services, and two, to encourage full employment. Typically, the Fed might increase the rate to try to bring down inflation and decrease it to encourage faster economic growth and increase hiring. The challenge now is that inflation is higher than the Fed’s 2% target but the job market has been weak. The government shutdown has also prevented the collection and release of data the Fed relies on to monitor the health of the economy.Still, the Fed has projected it will cut rates once more before the end of the year.Here’s what to know: Interest on savings accounts won’t be as appealing For savers, falling interest rates will slowly erode attractive yields currently on offer with certificates of deposit (CDs) and high-yield savings accounts.Three of the top five high yield savings accounts had rate cuts after the last Fed rate cut in September, according to Ken Tumin, founder of DepositAccounts.com, while two of the big five banks (Ally and Discover/Capital One) cut their savings account rates. The top rates for high yield savings account right now remain around 4.46% to 4.6%.Those are still better than the trends of recent years, and a good option for consumers who want to earn a return on money they may want to access in the near-term. A high yield savings account generally has a much higher annual percentage yield than a traditional savings account. The national average for traditional savings accounts is currently 0.63%, according to Bankrate.There may be a few accounts with returns of about 4% through the end of 2025, according to Tumin, but the Fed cuts will filter down to these offerings, lowering the average yields as they do. A cut will impact mortgages gradually For prospective homebuyers, the market has already priced in the rate cut.“Mortgage rates, in particular, have responded swiftly,” said Raneri. “Just in the past week, they fell to their lowest level in over a year. While mortgage rates don’t always move in lockstep with the Fed’s target rate often pricing in anticipated future cuts, the continued easing of monetary policy may well push rates even lower.”Bankrate financial analyst Stephen Kates said a declining interest rate environment will provide some relief for borrowers over time.“Whether it’s a homeowner with a 7% mortgage or a recent graduate hoping to refinance student loans and credit card debt, lower rates can ease the burden on many indebted households by opening opportunities to refinance or consolidate,” he said. Auto loans are not expected to decline soon Americans have faced steeper auto loan rates over the last three years after the Fed raised its benchmark interest rate starting in early 2022. Those are not expected to decline anytime soon. While a cut will contribute to eventual relief, it might be slow in arriving, analysts say.“If the auto market starts to freeze up and people aren’t buying cars, then we may see lending margins start to shrink, but auto loan rates don’t move in lockstep with the Fed rate,” Kates said.Prices for new cars remain at historically high levels, not adjusting for inflation.Generally speaking, an auto loan annual percentage rate can run from about 4% to 30%. Bankrate’s most recent weekly survey found that average auto loan interest rates are currently at 7.10% on a 60-month new car loan. Credit card rate relief could be slow Interest rates for credit cards are currently at an average of 20.01%, and the Fed’s rate cut may be slow to be felt by anyone carrying a large amount of credit card debt. That said, any reduction is positive news.“While inflation continues to exert pressure on household budgets, rate cuts offer a potential counterbalance by lowering debt servicing costs,” Raneri said.Still, the best thing for anyone carrying a large credit card balance is to prioritize paying down high-interest-rate debt, and to seek to transfer any amounts possible to lower APR cards or negotiate directly with credit card companies for accommodation. The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism. Cora Lewis, Associated Press
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E-Commerce
Shares of Meta Platforms (Nasdaq: META) were down about 9% in premarket trading on Thursday. It follows what can only be described as a mixed bag of a quarter-three earnings report on Wednesday, October 30. On the one hand, Meta announced $51.2 billion in revenue, a 26% increase year-over-year (YOY) from $40.6 billion and a quarterly record for the company. The boost also beat Wall Streets estimate of $49.6 billion, according to consensus estimates cited by Bloomberg. However, Meta also reported a non-cash income tax charge of $15.93 billion. This one-time charge led to a significant decrease83%in Metas net income YOY. It also meant the companys earnings per share dropped to $1.05 from 2024s $6.03. While the parent company of Facebook, Instagram, WhatsApp, and Threads points out that its earnings per share would have been $7.25 without the tax charge, in reality it severely missed Wall Streets predicted $6.70, according to consensus estimates cited by the Guardian. “Our compute needs have continued to expand” Meta also increased its estimated total expenses for 2025, from between $114 billion and $118 billion to $116 billion and $118 billion. Similarly, its estimated capital expenditures for the year rose to $70 billion to $72 billion, up from a range of $66 billion to $72 billion. Why the higher numbers? It all comes down to AI. In an earnings call, CEO Mark Zuckerberg stated that despite building an aggressive assumption worth of AI infrastructure, the demand keeps increasing in a way that is very likely to be a profitable thing. He claimed that there are more than a billion people actively using Meta AI on a monthly basis. As we have begun to plan for next year, it’s become clear that our compute needs have continued to expand meaningfully, including versus our own expectations last quarter, Zuckerberg stated. We are still working through our capacity plans for next year, but we expect to invest aggressively to meet these needs, both by building our own infrastructure and contracting with third-party cloud providers. Zuckerberg does admit that there could be unnecessary overflow, but he claims that it could be converted into intelligence and better recommendations for Metas family of apps and advertisements. He further shared that capital expenditures and total expenses will be significantly higher in 2026 than 2025, due to infrastructure and employee compensation costs. Notably, Meta laid off 600 people from its AI superintelligence research lab just last week. By reducing the size of our team, fewer conversations will be required to make a decision, and each person will be more load-bearing and have more scope and impact, Meta chief AI officer Alexandr Wang stated in a memo about the layoffs. Zuckerberg only announced the new superintelligence lab in June.
Category:
E-Commerce
Fast-casual restaurant chain Chipotle Mexican Grill (NYSE: CMG) is seeing its stock price plummet this morning after reporting third-quarter 2025 earnings and a sales forecast that alarmed investors. As of the time of this writing, CMG shares are down a staggering 19% to $32.21 in premarket trading. Heres what you need to know about the companys stock price crash. Whats happened? On Wednesday, Chipotle reported its Q3 2025 earnings after the bell. Some of what the company revealed has alarmed investors. But first, here are the companys most critical quarterly metrics: Total revenue: $3 billion (a 7.5% increase) Comparable restaurant sales: up 0.3% Operating margin: 15.9% (down 1% point) Adjusted diluted earnings per share: $0.29 (up 7.4%) Stores opened: 84 As noted by CNBC, Chipotles adjusted EPS of 29 cents matched investor expectations, and its $3 billion in revenue came close to the $3.03 billion expected by LSEG analysts. However, while Chipotle’s main Q3 metrics largely met expectations, the companys forecast led investors to dump the stock in the hours after it reported its latest earnings. Full-year comparable sales expected to decline Investors generally arent happy with only their expectations being met. They want unlimited growth into the future, too. A perceived lack of future growth can send investors fleeingand that appears to be what is happening to Chipotles stock in premarket trading. After reporting its relatively expected Q3 results, Chipotle issued its full fiscal 2025 forecast, revealing that it was cutting its sales outlook. For the full fiscal year (the company is now in its Q4 2025), Chipotle says it expects full year comparable restaurant sales declines in the low-single digit range. This is the third time in a row that the restaurant chain has cut its sales forecasts. Back in February, the company had initially said that it expected full-year sales to increase by low-to-mid single digits. Why the gloomy outlook? As for the factors affecting its lowered sales forecast, Chiptole CEO Scott Boatwright cited several reasons on the companys investor call. As consumer sentiment has declined sharply throughout the year, Chipotle stores have seen a broad-based pullback in frequency of customer visits, Boatwright said. This is especially true for low- to middle-income customers, which Boatwright says include households earning less than $100,000, representing about 40% of Chiptoles total customer base. Boatwright says this segment of customers is dining out less often due to concerns about the economy and inflation. However, another segment of Chipotle customers is also having a large negative impact on Chipotles revenue as they cut back on visits, too. This segment comprises younger people aged 25 to 35. Boatwright says this cohort is facing particular economic challenges, leading them to pull back on discretionary spending. Those challenges include unemployment, increased student loan repayment and slower real wage growth. We believe that this trend is not unique to Chipotle, Boatwright noted, and is occurring across all restaurants as well as many discretionary categories. At the same time, Chipotle may rely more heavily on younger diners than other chains. “We tend to skew younger and slightly over-indexed to this group relative to the broader restaurant industry,” Boatwright said. Forging ahead with new store openings Despite projecting full-year 2025 sales declines, Chipotle says it will expand its physical store footprint significantly in 2026. While the opening of new stores increases operational expenses, it could also help the company boost sales by expanding into new markets where no Chipotle stores exist or where the company is underrepresented. In 2025, Chitpotle said it will open between 315 and 345 locations by the end of the fiscal year. In 2026, the company said it expects to open even more stores. We anticipate opening between 350 and 370 new restaurants, Boatwright revealed. The CEO noted that these will include 10 to 15 new partner-operated restaurants outside of North America. Countries where these restaurants are expected to open include South Korea, Singapore, and Mexico, as well as parts of the Middle East. Chiptole also expects to open one or two company-owned stores in Europe. CMG share price plummets But investors seem to care little about Chipotles continued expansion and are instead focused on the companys lowered sales forecast. As of the time of this writing, CMG shares have declined 19% in premarket trading to $32.21 per share. Thats a low that Chipotle’s stock price hasn’t seen since 2023. As of yesterdays share price close of $39.76, CMG stock had declined more than 33% since the beginning of the year. At just above $32 per share in premarket trading this morning, Chipotles share price is now nearly half of what it was on the first trading day of 2025.
Category:
E-Commerce
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