Blog

By Pete Schroeder

WASHINGTON (Reuters) -Rapid adoption of artificial intelligence (AI) could create new risks for the U.S. financial system if the technology is not properly supervised, a panel of regulators warned on Thursday.

The Financial Stability Oversight Council, which comprises top financial regulators and is chaired by Treasury Secretary Janet Yellen, flagged the risks posed by AI for the first time in its annual financial stability report.

While the group said AI could spur innovation or efficiencies at financial firms like banks, the rapidly advancing technology requires vigilance from both the companies and their watchdogs.

“AI can introduce certain risks, including safety and soundness risks like cyber and model risks,” the group said in its annual report published Thursday, adding it recommended firms and their regulators “deepen expertise and capacity to monitor AI innovation and usage and identify emerging risks.”

The panel also flagged the growing role of nonbanks and private credit as meriting close attention, and said financial institutions and regulators should continue to try to better gauge risks stemming from climate change.

Some AI tools can be hugely technical and opaque, making it hard for institutions to explain or properly monitor them for shortcomings. If companies and regulators do not fully understand AI tools, then it is possible they could miss biased or inaccurate results, the report said.

It also noted that AI tools increasingly rely on large external datasets and third-party vendors, which pose their own privacy and cybersecurity risks.

Some regulators including the Securities and Exchange Commission, which sits on the panel, are scrutinizing how firms use AI, while the White House recently issued an executive order aimed at mitigating AI risk.

Elsewhere in the report, the FSOC noted that the U.S. banking system remains resilient, despite large bank failures this year. But it urged regulators to keep a close eye on uninsured bank deposits, the rapid flight of which triggered the failures.

(Reporting by Pete Schroeder; Editing by David Gregorio)

By Nidal al-Mughrabi and Fadi Shana

CAIRO/GAZA (Reuters) -A U.S. security envoy discussed with Israeli officials on Thursday how to better protect civilians during their war against Hamas in Gaza and President Joe Biden appealed for lives in the Palestinian territory to be saved.

Israel pounded the 25-mile (40-kilometer) length of Gaza, killing families in their homes as the more than two-month-old conflict raged across the entire enclave, causing a humanitarian catastrophe with little end in sight.

“It will last more than several months – but we will win and we will destroy them,” Israeli Defence Minister Yoav Gallant told visiting White House national security adviser Jake Sullivan.

Sullivan said in an Israeli TV interview that he spoke to Prime Minister Benjamin Netanyahu about when Israel will shift from high-intensity military operations to a more precise, more targeted phase.

Sullivan did not provide a specific timeline or elaborate on what such operations would look like, although he said Israel was expected to continue its military campaign for some time.

“The issue really is, when does Israel shift from the high-intensity military operations that are under way today to a different phase of this conflict. One that’s more precise, more targeted,” Sullivan said on Israel’s Channel 12 television.

The occupied West Bank and the Gaza Strip need to be connected under a “revamped and revitalized” Palestinian Authority government, Sullivan said.

On Friday, Sullivan would discuss revamping the Palestinian Authority and holding “extremist” Jewish settlers accountable for violence against Palestinians when he visits Palestinian President Mahmoud Abbas in Ramallah, a U.S. official said.

U.S. President Joe Biden, asked whether he wanted Israel to scale back its assault on the Gaza Strip by the end of the year, said: “I want them to be focused on how to save civilian lives, not stop going after Hamas but be more careful.”

Washington has been pushing Israel for weeks to do more to protect civilians in Gaza’s population of 2.3 million.

Israel launched its campaign in retaliation for a rampage by Hamas, the Iran-backed group that rules Gaza, whose fighters killed 1,200 Israelis and seized 240 hostages in a cross-border raid on Oct. 7.

Since then, Israeli forces have besieged the coastal strip and laid much of it to waste, with nearly 19,000 people confirmed dead, according to Palestinian health officials, and thousands more feared buried under the rubble.

PEOPLE JAMMED IN MAKESHIFT TENTS

In the Rafah area, jammed with people in makeshift tents on Gaza’s southern edge, people wept at a morgue near bodies wrapped in bloodied shrouds.

Residents picked forlornly through the rubble of the adjacent homes of the Abu Dhbaa and Ashour families where Gaza health authorities said 26 people had been killed.

Neighbour Fadel Shabaan rushed to the area after the bombing. “It was difficult because of the dust and people’s screams,” he said. “This is a safe camp, there is nothing here, the children play soccer in the street.”

With Europe on alert for Islamist threats linked to the war, authorities in Denmark, Germany and the Netherlands said seven people, including four suspected Hamas members, were arrested on suspicion of planning attacks on Jewish institutions.

Hamas official Sami Abu Zuhri denied Hamas members were arrested, saying the reports were meant to erode support for Palestinians in Europe.

In further possible international fallout from the war, Danish company Maersk said a cargo ship was targeted by a missile off Yemen. A Maersk spokesperson said the vessel was not hit, denying a claim by Yemen’s Iran-aligned Houthi movement that the militia made a drone strike on a Maersk vessel sailing towards Israel.

Maritime security company Ambrey said a Malta-flagged, Bulgarian-owned bulk carrier was reportedly boarded in the Arabian Sea near the Yemeni island of Socotra.

Yemen’s Houthi group, which has warned cargo ships in the Red Sea to avoid travel toward Israel, has attacked vessels and fired drones and missiles at Israel since the Gaza war began.

Nearly all of Gaza’s residents have been forced from their homes, many several times.

The U.N. Palestinian Refugee Agency said hungry people were stopping trucks and eating food aid immediately. “We meet more and more people who haven’t eaten for one, two or three days,” its head Philippe Lazzarini told reporters in Geneva.

People in Gaza described begging for bread, paying 50 times more than usual for a single can of beans and slaughtering a donkey to feed a large family.

‘REVENGE’

Israel has extended its ground campaign from the north to the south this month.

In the main southern city Khan Younis, where advancing Israeli forces reached the centre this week, a whole city block was bombed overnight to dust. Though most people fled after Israeli warnings, neighbours digging with a hand shovel believed four people were inside. One body was recovered.

“May God take revenge on them,” said Nesmah al-Byouk, returning to the ruins of the home she had fled three days ago. “We came and saw everything destroyed … Where we can we go to now?”

In the north, fighting has escalated even after Israel announced its troops had largely completed their military objectives last month.

The Israeli military said its troops had dismantled a Hamas operating site in a school in the Shejaia area and destroyed two tunnel shafts, a rocket launch pit and a weapons storage facility in Khan Younis.

Elsewhere in the north in Jabalia, Gaza’s health ministry said Israeli forces had stormed a hospital, detaining and abusing medical staff and preventing them from treating wounded patients, at least two of whom had died.

Israel’s military said fighters had been operating inside the hospital, 70 of whom had surrendered.

(Reporting by Nidal al-Mughrabi in Cairo; Fadi Shana and Mohammed Salem in Gaza, Dan Williams, Ilan Rosenberg and Frank Jack Daniel in Jerusalem, Andrea Shalal in Washington and other Reuters bureaux;Writing by Peter Graff, Andrew Cawthorne and Grant McCool; Editing by Angus MacSwan, Mark Heinrich, William Maclean, Sharon Singleton and Cynthia Osterman)

KYIV (Reuters) – Ukraine’s Air Force said Russian MiG-31K fighter jets carrying Kinzhal hypersonic missiles struck targets in central Ukraine just 10 minutes after their takeoff from Savasleyka airbase sparked a national alert on Thursday.

The Air Force said it shot down one Kinzhal missile over Kyiv region, while another two hit Starokostiantyniv district, location of an air base in Khmelnytskyi region west of Kyiv that has been repeatedly attacked during the 21-month-old war.

Kyiv regional governor Ruslan Kravchenko said no casualties were reported, nor damage to critical and civilian infrastructure, after explosions were heard by a Reuters correspondent near the capital.

The Air Force said on the Telegram messaging app that Russian forces used three Kinzhals launched from three fighter jets in Russia’s central Tula region, and that its anti-aircraft missile unit shot down one of the missiles in the Kyiv region.

“Of course, we do not comment on the consequences of hits/non-hits by enemy missiles in the Khmelnytskyi region,” it added.

Local authorities said earlier that emergency services were working at the two crash sites, but no injuries or damage were recorded.

Overnight, Russia launched 42 drones and 6 missiles at Ukraine, with 11 people injured and buildings and warehouses damaged by falling debris. The Ukrainian military said it destroyed 41 drones.

(Reporting by Tom Balmforth and Pavel Polityuk in Kyiv, Elaine Monaghan in Washington, writing by Max Hunder, Yuliia Dysa and Elaine Monaghan; Editing by Alex Richardson and Bill Berkrot)

By Andrea Shalal

BETHESDA, Md. (Reuters) -The Biden administration said on Thursday it had identified 48 drugs in the Medicare program whose prices rose quicker than inflation during the fourth quarter of the year and may require their makers to pay rebates.

President Joe Biden’s signature Inflation Reduction Act (IRA) includes a provision to penalize drugmakers who work with Medicare, a government program for people aged 65 and older or who are disabled.

The 48 drugs it identified fall under Medicare Part B, which covers treatments administered at a health facility.

Medicare recipients could benefit by a reduction in their co-insurance payment for any of the drugs by $1 to $2,786 per average dose, according to a government statement.

The president, in remarks at the National Institutes of Health, said big pharmaceutical companies, in the year before the law was passed, “jacked up” prices nearly four times faster than inflation went up.

“They’re ripping off Medicare. They’re ripping off the American people,” Biden said. “We’re going to save taxpayers money and discourage companies from raising prices in the first place.”

The White House is eager to emphasize the benefits of the IRA in bringing drug prices down ahead of the 2024 election, when Biden, 81, is running for a second term.

In total, prices of 64 drugs increased faster than inflation over the last four quarters, the White House said in a statement.

The IRA aims to save $25 billion annually by 2031 by requiring drugmakers to negotiate the prices of selected expensive drugs with the U.S. Centers for Medicare and Medicaid Service, which oversees Medicare.

The Biden administration last week announced it would create guidelines for when and how it could seize patents for medicines developed with government funding, including considering when their prices are too high.

(Additional reporting by Manas Mishra and Mrinmay Dey in Bengaluru and Jeff Mason in Washington; Editing by Christina Fincher, Arun Koyyur and Aurora Ellis)

Microsoft (MSFT) could see higher highs.

All thanks to the artificial intelligence boom, say analysts at Truist, which just initiated coverage with a buy rating, with a $600 price target. “Their early investments in artificial intelligence have positioned them to take a leadership position in what we view as the fastest growing multi-billion-dollar market in technology,” they said, as quoted by Barron’s.

“Though their early execution in the generative AI market has been impressive, we believe that MSFT is poised to deliver further upside to expectations as projects go into production.”

Even better, according to Next Move Strategy Consulting, the AI market – currently valued at about $100 billion – could grow twenty-fold by 2030 to more than $2 trillion. 

All while the technology massively disrupts everything about everything.

Plus, generative AI could add between $2.6 trillion and $4.4 trillion a year to the global economy. That’s according to a new McKinsey report, which also said it could have a significant impact across all industry sectors.  

Even Goldman Sachs says generative AI could drive a 7% (or almost $7 trillion) increase in global GDP and lift productivity growth by 1.5 percentage points over a 10-year period. 

In short, there’s a good deal of potential further upside for MSFT.

The tech giant last traded at $374.45, and could test $425, we believe, before the year is over.

By Granth Vanaik

(Reuters) -Costco Wholesale topped Wall Street estimates for quarterly sales and profit on Thursday, as more customers turned to its stores to shop for cheaper groceries and essentials, offsetting slowing demand for discretionary items.

Costco has increased its sales thanks to its strategy of maintaining low prices on basic essentials as well as a devoted membership base that benefits from incentives offered like yearly 2% reward on qualified purchases at its warehouses.

The one-stop retailer has seen sales surge for its consumable categories like fresh food and sundries as well as its private-label brand Kirkland Signature, even as non-food categories including sports goods and office supplies have come under pressure due to persistent inflation.

The upbeat results come at a time when several U.S. retailers including bellwether Walmart, Dollar General and Best Buy have taken a cautious stance on consumer spending during the holiday season.

“Costco is in a strong position heading into 2024 after delivering a solid first quarter and continuing to hold its membership fee trump card in its back pocket,” said Insider Intelligence analyst Zak Stambor.

Costco’s quarterly revenue from memberships, priced between $60 and $120 per year and which account for most of the warehouse operator’s gross margin, rose to $1.08 billion from $1 billion a year ago.

Total revenue at the company rose 6.1% to $57.8 billion in the first quarter, compared to analysts’ estimates of $57.72 billion, according to LSEG data.

Costco’s per-share profit was $3.58, above expectations of $3.42.

The membership-only retail chain’s shares were up about 1% at $635.59 after the bell.

The company also announced a special cash dividend on its common stock of $15 per share payable Jan. 12 to shareholders.

(Reporting by Granth Vanaik in Bengaluru; Editing by Maju Samuel)

(Reuters) -Boeing on Thursday named sustainability chief Chris Raymond as the new head of its aftermarket business, succeeding Stephanie Pope, who was announced as the planemaker’s chief operating officer on Monday.

Raymond takes over as CEO of Boeing Global Services on Jan. 1, after serving as the company’s first chief sustainability officer since October 2020.

While Boeing’s commercial aerospace and defense segments have posted negative margins for the first nine months of 2023, Global Services has remained a profitable beacon for the U.S. aerospace giant, responsible for revenues of $17.6 billion in 2022.

Boeing shares closed up 2.1%.

Boeing has estimated mid-single digit revenue growth as the services division approaches the 2025-2026 timeframe.

Raymond is seen as an influential engineer and trouble-shooter who started his career on the iconic C-17 airlifter and later oversaw fighter sales campaigns and efforts to develop autonomy in Boeing’s defense unit.

Following two fatal 737 MAX jet crashes which plunged Boeing into its worst crisis in 2018 and 2019, Raymond was brought in to drive efforts to rescue its reputation and win back trust.

He was vice president of integration with the civil arm of Brazil’s Embraer during a proposed joint venture, which collapsed following the outbreak of COVID-19 in 2020, and was previously vice president for sustainability, strategy and corporate development.

“He commands an audience,” a colleague said.

Raymond will be succeeded in the top sustainability job by Brian Moran, currently Boeing’s vice president of global sustainability policy and partnerships.

Moran also springs from the world of defense, having cut his teeth on contracts for the F/A-18 warplane and as chief of staff to then-Boeing Defense chief Jim Albaugh, his LinkedIn profile showed, before handling press for the jetliner unit.

Based in Europe, he has held a senior sustainability role since 2021 and is familiar with the regulatory environment in Brussels where aviation is under mounting pressure to do more to cut emissions.

(Reporting by Abhijith Ganapavaram in Bengaluru, Valerie Insinna in Washington and Tim Hepher in Paris; Editing by Sriraj Kalluvila, Lisa Shumaker, Jonathan Oatis, Richard Chang and David Gregorio)

WASHINGTON (Reuters) – New York Republicans have picked Ethiopia-born former Israeli paratrooper Mazi Melesa Pilip as their candidate for the U.S. House of Representatives seat vacated by George Santos’ ouster, the Queens County Republican Party said on Thursday.

Pilip, a county legislator, will face Democratic former U.S. Representative Tom Suozzi in the Feb. 13 special election, which is expected to be highly competitive and could erode Republicans’ already slim 221-213 House majority.

Pilip moved to Israel as part of Operation Solomon as a child. In 2021, she was elected to the county legislature in Nassau County, just east of New York City and part of the district she would represent if elected to Congress.

Pilip had not been among the 19 people who had previously filed to run for Santos’ seat. Other Republican contenders had included a retired NYPD detective, a personal-injury lawyer and a former bank vice president. Party leaders had interviewed 20 people over four days, a senior party official said.

The House early this month moved in a bipartisan 311-114 vote to expel Santos, after he fabricated significant portions of his biography on the campaign trail and was indicted for corruption charges.

Santos, who served 11 months of a two-year term, was the sixth lawmaker in U.S. history to be expelled. He pleaded not guilty to the 23 charges against him filed by federal prosecutors, with his trial scheduled to start Sept. 9, 2024, but a court filing this week showed he was in plea talks with U.S. prosecutors.

(Reporting by Makini Brice; Editing by Daniel Wallis)

By Andrew Goudsward

WASHINGTON (Reuters) -A U.S. judge on Wednesday paused the federal case accusing Donald Trump of attempting to illegally overturn the results of the 2020 election while the former president mounts an appeal claiming he is immune from the charges.

U.S. District Judge Tanya Chutkan said Trump’s ongoing appeal temporarily halts all activity that would move the case toward trial, which is currently scheduled to begin in March 2024.

Trump is appealing Chutkan’s ruling earlier this month rejecting Trump’s bid to dismiss the case based on an argument that he could not be prosecuted for official actions he took as president.

“This is a big win for President Trump and our rule of law,” Trump spokesperson Steven Cheung said in a statement, adding that the ruling “derails” Special Counsel Jack Smith’s “rush to judgment strategy of interfering in the 2024 presidential election.”

A spokesperson for Smith declined to comment. Prosecutors have previously denied allegations of political bias.

Both Trump and Smith have acknowledged that the former president cannot face trial while his appeal remains ongoing. But Smith sought to keep some aspects of the case active, arguing that the judge could still conduct certain pretrial business in the case.

Chutkan ruled that she could enforce her past rulings, including the gag order that limits Trump’s statements about prosecutors and witnesses, while the case is paused. The judge said she would revisit whether to move the trial date once the appeal is resolved.

Trump has pleaded not guilty to four felony counts accusing him of attempting to defraud the United States and obstruct Congress through schemes to overturn his loss to President Joe Biden.

Trump’s appeal is viewed as his best opportunity to achieve his aim of pushing the trial until after the November 2024 election, where he is the frontrunner to face Democrat Joe Biden. His lawyers have accused Smith of attempting to rush the case to trial to damage Trump’s campaign.

Smith has asked the U.S. Supreme Court to bypass a federal appeals court and immediately rule on the immunity claim, an unusual move designed to blunt Trump’s attempts to stall the case.

(Reporting by Andrew Goudsward; Editing by Scott Malone, Mark Porter and Daniel Wallis)

By Brendan Pierson

(Reuters) – The New Mexico Supreme Court, based on arguments it heard on Wednesday, appeared poised to block several local ordinances in the state that aim to restrict distribution of the abortion pill.

However, the high court appeared unlikely to rule that the state’s constitution includes a right to abortion, as the state’s Attorney General Raul Torrez, a Democrat, had urged, leaning instead toward deciding the case on narrower legal grounds.

The arguments before the New Mexico Supreme Court came on the same day the U.S. Supreme Court took up the Biden administration’s appeal of a U.S. appeals court decision that would curb how the pill, called mifepristone, is delivered and distributed, barring telemedicine prescriptions and shipments of the drug by mail.

Mifepristone is taken with another drug called misoprostol to perform medication abortion, which accounts for more than half of all U.S. abortions.

Abortion is legal in New Mexico, which has become a destination for women seeking abortions from nearby states, like Texas, that have banned it following the U.S. Supreme Court ruling last year ending its recognition of a constitutional right to abortion.

Following that ruling, New Mexico’s Roosevelt and Lea Counties and the towns of Clovis and Hobbs, all on the Texas border, passed ordinances seeking to stop abortion clinics from receiving or sending mifepristone or other abortion-related materials in the mail.

The ordinances invoked the federal Comstock Act, a 19th century law against mailing abortifacients, and said that clinics must comply with the law.

Torrez filed an emergency petition with the state Supreme Court seeking to block the ordinances, saying the state’s constitution included a right to abortion. In March, the state passed a law explicitly blocking local governments from interfering with access to abortion care.

The high court’s five justices, all elected as Democrats or appointed by a Democratic governor, on Wednesday signaled that the state law was enough to decide the case.

“(The ordinance) is designed to prevent any provider or clinic from offering reproductive healthcare unless your client says it is consistent with what we view to be a moral doctrine,” Chief Justice Shannon Bacon told Valerie Chacon, a lawyer for the town of Hobbs. “It by definition is interference.”

Chacon had argued that the ordinance was part of the county’s “inherent right to create ordinances that regulate business,” and was not directly related to abortion.

At the same time, the court seemed hesitant to address abortion rights.

“Generally we don’t reach constitutional issues unless absolutely necessary,” Justice Briana Zamora told Torrez early in the argument.

Torrez said a ruling guaranteeing abortion rights was necessary because, “those who attempt to limit access to women’s healthcare have not and will not stop attempting to do so.”

The court did not say when it would rule.

(Reporting By Brendan Pierson in New York, Editing by Alexia Garamfalvi and Bill Berkrot)