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Business Highlights: GDP data, JetBlue buying Spirit

July 28, 2022 GMT

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US economy shrinks for a 2nd quarter, raising recession fear

WASHINGTON (AP) — The U.S. economy shrank from April through June for a second straight quarter, contracting at a 0.9% annual pace and raising fears that the nation may be approaching a recession. The decline in the gross domestic product — the broadest gauge of the economy — followed a 1.6% annual drop from January through March. Consecutive quarters of falling GDP constitute one informal, though not definitive, indicator of a recession. The report comes at a critical time. Consumers and businesses have been struggling under the weight of punishing inflation and higher borrowing costs. On Wednesday, the Federal Reserve raised its benchmark interest rate by a sizable three-quarters of a point for a second straight time.

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Biden shrugs off recession talk, talks up fighting inflation

WASHINGTON (AP) — President Joe Biden and his administration are going all out to play down a sobering new economic report. Instead, the president is highlighting legislative progress on measures he says will help tame inflation, reflecting political tensions sure to keep playing out in the runup to the midterm elections. Republicans say Thursday’s report showing the economy shrank for the second consecutive quarter is evidence of a “Biden recession.” Biden pointed to near-record-low unemployment and signs of continued business investment in the economy. And he celebrated congressional passage of a bill to boost the U.S. semiconductor industry and a Democrats-only proposal to lower prescription drug costs and tackle climate change.

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JetBlue agrees to buy Spirit for $3.8B after bidding war

NEW YORK (AP) — JetBlue Airways is buying Spirit Airlines for $3.8 billion in a deal that could increase competition at the top end of the U.S. airline industry while eliminating the largest discount airline for travelers on a tight budget. The agreement announced Thursday capped bidding war that began in April, and it came one day after Spirit’s attempt to merge with rival discount carrier Frontier Airlines fell apart. JetBlue and Spirit would become the fifth-largest U.S. carrier. The only major obstacle remaining is the U.S. Justice Department. Antitrust regulators in the Biden administration have been critical of mergers, which they believe hurt consumers by limiting competition. The Justice Department sued to block a partnership between JetBlue and American Airlines.

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Congress OKs bill to aid computer chip firms, counter China

WASHINGTON (AP) — The House has passed a $280 billion package to boost the semiconductor industry and scientific research in a bid to create more high-tech jobs in the United States and help it better compete with international rivals, namely China. The House approved the bill by a solid margin of 243-187. The measure now goes to President Joe Biden to be signed into law, and it provides the White House with a major domestic policy victory. The GOP leadership in the House recommended a vote against the bill, arguing the semiconductor industry didn’t need “government handouts.” But some GOP lawmakers viewed passing the legislation as important for national security

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Apple still thriving as economy slows, despite 3Q profit dip

BERKELEY, Calif. (AP) — Apple’s profit slipped during the past quarter, but the world’s largest technology company is holding up better than many of its peers as the economy teeters on the edge of a recession. While grappling with manufacturing headaches and inflation pressures that have vexed a wide range of businesses, Apple saw its profit for the April-June period decline by 10% while revenue edged up 2%. Both figures were better than analysts projected. The results for the April-June period weren’t a shock. That’s because Apple had already warned that its revenue would be depressed by supply chain problems that have been compounded by pandemic-related shutdowns in China factories.

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Amazon post 2Q loss but revenue tops estimates, stock jumps

NEW YORK (AP) — Amazon has reported its second-consecutive quarterly loss but its revenue topped Wall Street expectations, sending its stock sharply higher. The Seattle-based e-commerce giant Amazon lost $2 billion, or 20 cents per share, in the three-month period ended June 30, driven by a $3.9 billion write-down of the value of its stock investment in electric vehicle start-up Rivian Automotive. It posted revenue of $121.2 billion, topping Wall Street expectations of $119 billion. The results came as the company attempts to navigate shifting consumer demand and higher costs, while curtailing the glut of warehouses it acquired during the COVID-19 pandemic. Its stock rose 12% in after-hours trading.

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Facebook ends funding for US news partnerships program

MENLO PARK, Calif. (AP) — Meta Platforms says it will no longer pay U.S. news organizations to have their material appear in Facebook’s News Tab as it reallocates resources in the economic downturn. The company said Thursday that most of its users do not come to Facebook for news. It said it does not make business sense for it to invest in areas that don’t align with its users’ preferences. Meta, then called Facebook, launched the partnerships in 2019. The “News Tab” section in the Facebook mobile app only displays headlines — and nothing else — from The Wall Street Journal, The Washington Post, NBC, and the Los Angeles Times, among others.

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The S&P 500 rose 48.82 points, or 1.2%, to 4,072.43. The Dow Jones Industrial Average gained 332.04 points, or 1%, to 32,529.63. The Nasdaq added 130.17 points, or 1.1%, to 12,162.59. The Russell 2000 index of smaller companies advanced 24.69, or 1.3%, to 1,873.03.