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Mortgage Rates Going Up; Holiday Spending Beat Expectations; South Korea Impeaches Acting President; Top 10 Business Stories of 2024. Aired 8:30-9a ET

Aired December 27, 2024 - 08:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[08:30:00]

MILES O'BRIEN, CNN AVIATION ANALYST: Causing harm to the - to the flight.

As for Delta, you would think after what happened three weeks ago or I guess it was around Thanksgiving, on that flight to Paris, that - where the individual actually made it to Paris, having flown across the Atlantic without a ticket, you would think they would have upped their game a little bit. You know, it seems to me that that busy jetway entrance at the time of flight is boarding, with one individual being responsible for making sure the right person gets on at the right time, that is definitely a weak spot in the - in the web of security.

And not just Delta. All airlines need to really take a look at that and think if there are better ways. I know Delta, in many cases, is now using facial recognition at those checkpoints. Maybe that's something they need to do more of.

KATE BOLDUAN, CNN ANCHOR: Yes, that's a good point because we have seen Delta implementing that.

It is great to see you, Miles. Thank you so much.

Coming up - well, coming up for us, shoppers flocking to stores, spending even more than expected this holiday season. What the end of the year spending spree says about the economy to come in 2025.

And it's been one big nightmare. That is how one animal sanctuary is describing the last few weeks. Twenty big cats killed. What they're trying to do now to find out how all of those animals contracted bird flu.

(COMMERCIAL BREAK)

[08:35:29]

SARA SIDNER, CNN ANCHOR: Mortgage rates are going up for the second week in a row, even though the Fed has cut interest rates in their last three meetings. The average 30 year fixed mortgage rate is once again nearing 7 percent, higher than the rates were at the beginning of the year. Back with us now is CNN's Matt Egan bringing the pain.

Thank you for being here, Matt, but this is annoying to so many people who are trying to see if they can afford to buy. And every time you see, like, oh, they've lowered the interest rates, OK, you know, the mortgage rates are going to come down, it's going to be a little bit better.

What is going on?

MATT EGAN, CNN REPORTER: Yes, Sara, this is so frustrating for homebuyers, but also for everyone who had been hoping to refinance their mortgage rates.

SIDNER: Right.

EGAN: So, as you mentioned, the Fed has slashed interest rates by a full percentage point since September and yet mortgage rates are going the other way. The latest average is 6.85 percent. That is the highest since July, nearly triple where rates were at this point in 2020. Of course that was during Covid.

So, why is this happening? Well, first, it's really important to stress that the Fed controls short term interest rates, but it's really the bond market that calls the shots for longer term rates on stuff like a 30-year mortgage. And the bond market has sent long term rates sharply higher since the end of the summer for three things, right? They're anticipating faster economic growth, fatter budget deficits to potentially pay for Trump tax cuts, and also potentially hotter inflation due to the Trump agenda. And if there's hotter inflation, that would force the Fed to keep rates higher for even longer.

But no matter the reason, Sara, unfortunately, mortgage rates are ending 2024 on a high note, and there's really no guarantee that there's going to be dramatic improvement next year.

SIDNER: All right, so, the affordability, this crisis that we're in with housing, this isn't helping I'm assuming.

EGAN: No. No, Sara. This is really the last thing that people needed because it's not just that borrowing costs are high, it's that home prices are high.

SIDNER: Right.

EGAN: There's just too many people chasing too few homes. And so prices have nowhere to go but up. We've seen this across the country. In the northeast, home prices are up by 8 percent year over year to almost half a million dollars. That's the median. In the west, the median home price is above $600,000. That's just the median. That means half of them are well above that price.

SIDNER: Right.

EGAN: Of course, this cuts both ways, right? If you already own your home, you're sitting pretty.

SIDNER: Right.

EGAN: You're smiling every time you're checking the value of your home on Zillow because its padding your net worth and it's giving you some more financial flexibility potentially to do a home equity loan or a home equity line of credit. But we know that so many people just can't afford to buy right now.

Oxford Economics has found that to buy a home, and to afford property taxes and the cost of insurance, you need to make $108,000 a year as a household. That is almost double where this income level was supposed to be back before Covid. Back then you needed to make $56,000 to afford to buy a home. Only one in three households today, Sara, actually make enough to afford to buy a home. And this is going to continue to be a problem until, not just mortgage rates come down, but the supply of homes increases significantly.

SIDNER: That is an insane number that it almost doubled in that short a period of time.

EGAN: Yes. A lot.

SIDNER: Matt Egan, thank you so much, I think, for bringing us that.

EGAN: Thanks, Sara.

SIDNER: Thanks for the great explanation, though. Really.

Kate.

BOLDUAN: Also, the numbers are in and holiday spending surged this year, blowing past expectations leading up to the season and even outpacing consumer spending over the gift buying season last year. This is coming from a new analysis by Mastercard. They found that holiday retail sales rose almost 4 percent this year, and online spending was up even more compared to 2023, almost 7 percent. The boost exceeding the expectations that economists had laid out heading into this season.

So, what is going on here? All the answers will be provided by none other than CNN global economic analyst, associate editor for the "Financial Times," Rana Foroohar.

It's great to see you, Rana.

Let's start with this holiday spending. Why do you think it's so big? Does it indicate anything about economic recovery and anything about what it could look like in 2025?

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Yes, great questions.

[08:40:01]

Well, first, Kate, I mean, I got to just say, hats off to the American consumer. You know, we - we think that - that there's going to be a stop to the spending, but that

there never is.

And I have to say, I was a little surprised by these numbers, in part because that safety, security savings cushion that had been built up during Covid really has been spent down. So, to me, what these numbers say is that consumers are feeling OK about their jobs, they're feeling good about where the economy is going to be in 2025. There - I think there is some excitement of animal spirits, let's say, with the election of President Trump. There are expectations that tax cuts and deregulation may - may buoy business, which then in turn would, you know, keep job growth going. I think all of that is in play.

But I also want to say, and, you know, not to be a Cassandra here, but to sound a note of caution, we are overdue by historical standards for a recession. And the kind of behavior you're seeing now is often the kind of behavior you see when you're at the top of a market cycle. You know, that's when you see, oh, wow, it's so great, and it can't get any better, and that may be true. So, I just want to sound a little note of caution there.

BOLDUAN: If it feels like it can't get any better, it won't. Let's just put it that way.

FOROOHAR: Maybe you can.

BOLDUAN: Maybe you can. You know, we'll be the anti-Cassandra.

Listen, Matt Egan's reporting, I wanted to get your take on that. Mortgage rates continuing to go up, hitting the highest point since July despite the rate cuts coming from the Fed.

What do you make of this?

FOROOHAR: Yes, well, you know, Matt's reporting actually dovetails with what we just talked about. So, animal spirits, huge. People are spending. But that's inflationary, right? And he pointed out that the bond market, the long term bond market is saying, we think inflation is going to be higher. We think rates are going to be sharply higher. So that says, this economy, which has been strong, is - is very strong coming into the Trump administration, may potentially, in the short term, get even stronger. There's going to be a lot of spending. You know, tax cuts could essentially keep the markets high. Again, that's all inflationary. And it's - again, it's great until it isn't.

And I just want to say, you know, what goes up, comes down. I mean this is how business cycles work. So, I do think we're going to be in for a higher for longer inflationary environment. And if I were a consumer right now, I'd be looking at paying down debt, you know, getting - getting lower interest rates, locking them in on anything that I can because I think in the next few years you're looking at higher rates.

BOLDUAN: So, this actually, again, dovetails into what I wanted to ask you about as well, looking at a 2025, like what Donald Trump is going to do to bring down prices as he's talked - he campaigned relentlessly on grocery prices, right, in the site - in the 2024 race. He vowed to bring down costs very quickly for the American - for the American people. I want to play just something he said on the campaign trail, just as a reminder.

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), FORMER U.S. PRESIDENT AND 2024 PRESIDENT-ELECT (August 14, 2024): From today and from the day I take the oath of office, we will rapidly drive prices down and make America affordable again.

No matter what you pay. But prices will come down. You just watch. They'll come down and they'll come down fast.

(END VIDEO CLIP)

BOLDUAN: He's couching that now, though, more recently in speaking in this interview with "Time Magazine" that was just earlier this month. He was asked about bringing grocery prices down. And he says, if you look at them, it's going - they - I'd like to bring them down. It's hard to bring things down once they're up. You know, it's very hard.

What's the reality of this?

FOROOHAR: Yes. Well, you know, this incoming president has always been a great storyteller, and he told a good story on the campaign trail about being able to do all the things, you know, bolster the economy, spend whatever needed to be spent, put tariffs on - inflationary tariffs or inflationary, and bring down inflation. You can't do it all at once.

There's a lot going into grocery prices. Part of it has to do with the things we've talked about, more spending, fiscal stimulus, you know, a lot of the things that we know about. But part of it is the fact that there's still been supply chain issues. You have big concentrations of power in - in different kinds of the food supply chains. You know, these are complicated topics.

And I'll say, Kate, one of the things that I think we give presidents too much credit and too much blame, I mean, they don't have as much power as one might think to do things like control the economy, because the economy is global. There's a lot of levers in play here. I don't think that grocery prices are going to be coming down fast anytime soon.

BOLDUAN: It's great to see you, Rana. Thank you so much for jumping on.

Sara.

SIDNER: She stole so many packages one Boston neighborhood started calling her the Tom Brady of package thieves.

[08:45:01]

But this morning, she's been caught.

And, top tippers. A group of friends work together to make a real difference for one server. You got to see this story, coming up. (COMMERCIAL BREAK)

SIDNER: Breaking overnight, South Korea's parliament voted just hours ago to impeach the country's acting president. This is happening not even two weeks after lawmakers there impeached the president and stripped him of his powers after he temporarily ordered martial law earlier this month. Now, South Korea has its second acting president in less than 14 days.

CNN international correspondent Hanako Montgomery is joining us now.

What kind of impacts is this political turmoil having on South Korea?

HANAKO MONTGOMERY, CNN INTERNATIONAL CORRESPONDENT: Hi, Sara, it's good to see you.

I think if there were a word that encapsulates what a lot of South Koreans are feeling right now it would be uncertainty, because there's really no way of knowing what's going to happen next in South Korean politics.

[08:50:08]

And, frankly, Sara, we're going through uncharted territory right now. And again, there are still lots of questions that remain to be answered in this political saga. For instance, what's going to happen with its constitutional court? According to South Korean law, a constitutional court ruling is needed in order to formally conclude an impeachment process.

But an issue facing South Korea right now is the fact that they don't actually have enough judges within its constitutional court to issue such rulings. That's why we're seeing a deadlock for the impeachment process of the president, Yoon Suk Yeol, and also the acting president, Han Duck-soo.

Now, in terms of impact, we've seen a massive, massive impact that this martial law has had on South Korea's economy. The South Korean stock market has taken a massive toll, and the U.S.-won exchange rate has hit its lowest level since the 2009 financial crisis.

And, Sara, there's also the question of how this martial law crisis will impact U.S.-South Korean relations. Like many countries around the world, South Korea is preparing to engage with a new Trump administration. But there are serious concerns about how South Korea will be able to properly engage in diplomacy if its own political leadership is so unstable.

Now, in terms of South Korea's future, next in line to step in as the acting president is the finance minister. But, Sara, for how long, who knows?

SIDNER: That is the big question since this is all unfolding within two weeks of the initial impeachment.

I do want to thank you, Hanako Montgomery, there for us, giving us the very latest on what's happening there in South Korea. Appreciate it.

Kate.

BOLDUAN: Some other headlines.

Twenty big cats at one animal sanctuary in Washington state have died in just the last few weeks, all from contracting bird flu. Among the animals, bobcats, cougars, lynxes. Is that how you say the plural of a lynx? And a Bengal tiger? The people running the sanctuary say it is not clear how the animals all became infected. They describe the last few weeks, though, as just a nightmare. They do hope to reopen the sanctuary in the new year.

Now, a woman in south Boston, who residents have dubbed the Tom Brady of stealing packages, is now in jail. Police say Kerry Flynn got the nickname because she was so good at stealing packages and stole so many in the area in the last few weeks. The officers were handing out toys on Christmas Eve when they spotted her and arrested her. Authorities say Flynn had two bags filled with unopened packages with her at the time. Her lawyer says she denies stealing any packages. Tom Brady could not be reached for comment.

An IHOP server in Iowa received the trip of a lifetime on Christmas Eve. Just look at that. Thanks to 70 generous donors. The server, Kaylie, you see right there, was handed $1,700 in cash as a tip while at work. The background here is, for the past five years, one woman, that delightful woman, and her family and others in Iowa have been surprising a deserving person with a generous tip around the holidays. Kaylie says she is raising two young children and will use the money to help pay for nursing school.

Rock stars, amazing. Exactly.

SIDNER: I love it.

BOLDUAN: I love it, Sara.

SIDNER: That was beautiful.

All right, this year, not so beautiful. A port strike threatened global trade. One of the largest retailers in the United States went dark. And the richest man in the world went full MAGA. CNN's Vanessa Yurkovich counts down the top business stories of 2024.

(BEGIN VIDEOTAPE)

VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT (voice over): Number ten.

It's the end of free loading. Costco cracks down on membership moochers.

BOLDUAN: Costco is adding a brand new layer of checks to make sure that you are using your own membership.

YURKEVICH (voice over): Costco cardholders now have to scan membership cards at the door, and may be asked to show proof of photo I.D. Membership fees are the bulk of Costco's profits, bringing in $4.6 billion in 2023.

And Disney cracked down on password sharing.

JULIA CHATTERLEY, CNN ANCHOR: Disney CEO Bob Iger is pivoting from a bruising proxy fight to a new challenge, the password sharing blight. Iger saying Thursday that the Disney Plus streaming service will begin cracking down on pilfered passwords.

YURKEVICH (voice over): Disney started limiting how often customers can share their login information outside their households for their streaming services. The move came after rival Netflix did its own crackdown and saw 100,000 new daily signups for the two days following the announcement.

Number nine. For the first time in nearly 50 years, dock workers on the east and gulf coast ports went on strike.

HAROLD DAGGETT, HEAD OF INTERNATIONAL LONGSHOREMEN'S ASSOCIATION: Now you start to realize who the longshoremen are, right?

UNIDENTIFIED MALE: Nobody cares about -

[08:55:01]

DAGGETT: People never gave a (EXPLETIVE DELETED) about us until now.

YURKEVICH: The International Longshoremen's Association was on strike for three days before it reached a deal on wages with the United States Maritime Alliance. With a new strike deadline set for January 15th, the union and the alliance agreed to 62 percent in wage increases over six years.

And at Boeing, workers were on strike for seven weeks, the first time in 16 years, before they reached a deal. The company lost billions of dollars and will lay off 17,000 employees. Members of the International Association of Machinists voted down two contracts before they accepted a deal, which includes more than 43 percent in pay increases for workers over four years.

Number eight. The blue light special now just a dim glow of nostalgia as the last full size brick and mortar Kmart closed its doors this year in Bridgehampton, New York.

JOHN BERMAN, CNN ANCHOR: This marks the end of an era for Kmart's full-size stores.

YURKEVICH (voice over): Kmart had a disastrous merger with Sears, where very little was invested in the brand, while at the same time being beat out by more successful, bigger box retailers like Walmart and Target.

YURKEVICH: The brand was founded in 1962 and once had more than 2,300 stores. Kmart still has its online store. YURKEVICH (voice over): Number seven, President-elect Donald Trump took Truth Social public in March. The stock initially surged 56 percent at the open but has had a bumpy ride. The stock was halted twice on Election Day as it soared by 17 percent and then tanked.

Trump also launched a crypto business, World Liberty Financial, with his family. Trump made the rounds courting crypto voters.

DONALD TRUMP (R), FORMER U.S. PRESIDENT AND 2024 PRESIDENT-ELECT: The United States will be the crypto capital of the planet.

YURKEVICH (voice over): And he's surrounded himself with crypto friendly advisers, like Elon Musk and his SEC chair pick, Paul Adkins.

Number six.

UNIDENTIFIED FEMALE: Oh, no trouble, just sandwiches and Campbell's chicken noodle soup.

KIDS: Yay!

YURKEVICH (voice over): An iconic favorite losing its soup? No, not quite. But after 155 years, Campbell's Soup Company is dropping "soup" from their name to reflect the brand's full portfolio. The Campbell's Company also owns snack brands like Goldfish, Cape Cod and Pepperidge Farms. While the soup will always be iconic, its sales grew by 3 percent last year versus snacks, which grew by 13 percent.

Number five.

JAKE TAPPER, CNN ANCHOR: TikTok dealt another loss today in its attempt to keep the app alive in the United States.

YURKEVICH (voice over): A U.S. appeals court denied TikTok's argument that a U.S. ban was unconstitutional. Instead, it upheld a law that says TikTok cannot operate in the U.S. unless it's sold by its Chinese parent company, ByteDance, by January 19, 2025. TikTok has since filed an injunction to block it. TikTok has more than 170 million American users, many who have built entire businesses on the platform.

UNIDENTIFIED FEMALE: And at least two of these to your cart.

YURKEVICH (voice over): Elected officials are calling for the ban over the belief the Chinese government can use TikTok to spy on Americans and collect user data.

UNIDENTIFIED MALE: Rest assured, we aren't going anywhere. We are confident, and we will keep fighting for your rights in the courts. The facts and the Constitution are on our side and we expect to prevail again.

YURKEVICH (voice over): Number four.

JULIA CHATTERLEY, CNN ANCHOR AND BUSINESS CORRESPONDENT: The first rate cut in four years. The most talked about cut I think ever. YURKEVICH (voice over): The Federal Reserve made its first rate cut in

September by a surprising half a point. The first since before the pandemic. The cut signaled a sense of urgency to provide Americans with relief from elevated borrowing costs.

JEROME POWELL, FEDERAL RESERVE CHAIRMAN: The U.S. economy is in good shape. It's growing at a solid pace. Inflation is coming down. The labor market is in a strong pace. We want to keep it there. That's - that's what we're doing.

YURKEVICH: Inflation cooled to 2.4 percent that same month after 11 rate hikes in 2022 and 2023. And the Fed is closer to the ever elusive soft landing and circling its 2 percent target.

YURKEVICH (voice over): Number three.

UNIDENTIFIED MALE: Red Lobster's endless shrimp, it's kind of a big deal.

YURKEVICH (voice over): A big deal that got a little too big. Too much shrimp is not always a good thing. Red Lobster's annual $20 endless shrimp was successful for 20 years until they made it an everyday thing.

UNIDENTIFIED FEMALE: They shouldn't have done the all you can eat shrimp. You don't know how many people are pigs and they'll just keep eating.

YURKEVICH (voice over): The company accounted for a 20 percent increase in customer traffic, but it ended up being 40 percent. It cost the company $11 million, and they filed for bankruptcy.

Number two.

BRIANNA KEILAR, CNN ANCHOR: Well, the real estate world will never be the same after today's seismic court settlement.

[09:00:01]

UNIDENTIFIED MALE CNN ANCHOR: That 6 percent commission real estate agents get for buying or selling a home is now no more.

YURKEVICH (voice over): In a landmark case, the National Association of Realtors eliminated the rules on commision.