The bubbles shrink

When it comes to bringing down inflation, the US Federal Reserve is like an A380 pilot on approach in a tricky crosswind, the runway fence lined with plane spotters (Wall Street and the commentariat) predicting disaster. Indeed, it’s way too early to tell whether the central bank will accomplish a mythical “soft landing” for the economy. But Fed Chair Jerome Powell and his colleagues have been quietly setting the stage for one. Their monetary tightening campaign is having a major impact in deflating asset bubbles that swelled during the first years of the pandemic. The cryptocurrency market—once valued at $3 trillion—has shrunk by more than two-thirds; Investor-favored technology stocks have tumbled by more than 50%; Red-hot housing prices are falling for the first time in 10 years. And most importantly, all of this is occurring without upending the financial system. “It’s astonishing,” said former Fed governor Jeremy Stein. “If you told any one of us a year ago, ‘we’re going to have a bunch of 75 basis-point hikes,’ you’d have said, ‘Are you nuts? You’re going to blow up the financial system.’” But it hasn’t happened yet. —David E. Rovella

Elon Musk’s self-inflicted calamity at Twitter, where he’s fired more than half of the employees, may be claiming another victim—the company that made him rich. Tesla is facing increasingly urgent issues and testing the faith of Musk’s remaining fans. Weakening demand in China is forcing the electric-vehicle maker to slow production and delay hiring at its Shanghai factory. Its top executive for that market has been called in to help out at its newest plant, in Texas, which isn’t ramping up as planned. And Tesla’s stock, which has lost more than $500 billion in market value this year, is under renewed pressure as Musk’s advisers weigh using the billionaire’s shares as collateral for new loans to replace Twitter debt.

The US Federal Trade Commission is seeking to block Microsoft’s $69 billion acquisition of Activision Blizzard, saying the tie-up between the Xbox maker and popular gaming publisher would harm competition.

China is seeing Covid-19 infections pick up rapidly as its zero-tolerance curbs are relaxed. With requirements for frequent lab testing dialed back significantly, anecdotal evidence suggests undetected cases are on the rise. Some health experts are predicting actual infections will far surpass the official tally. Confirmed cases are starting to rise all over the world, including in Europe and the US. Hospitalizations in America are increasing, too. With the flu and RSV to contend with as well, there are some things you can do to protect yourself for the holidays.

After months of delay triggered by an unorthodox ruling from a federal judge, an appeals court freed up the Justice Department to resume using thousands of documents seized from Donald Trump’s home in a criminal probe over highly classified files. Aileen Cannon, a who was appointed to the bench by Trump, was forcefully reversed by the appellate panel, which said she lacked the jurisdiction to intervene in the investigation at Trump’s request. During the litigation, she repeatedly rule in his favor.

Bids have started rolling in for the chance to eat alongside billionaire investor Bill Ackman, an annual charity auction that emulates Warren Buffett’s popular philanthropic lunch.

The US House, in a bipartisan vote, passed legislation that would provide federal protection for same-sex marriages, sending the measure to President Joe Biden to sign into law. Passage of the bill is a victory for Democrats who had raised concerns that the Supreme Court could reverse rights for same-sex couples after having eliminated federal abortion rights. In a concurring opinion in the abortion decision, Clarence Thomas wrote that the court should review other “due process precedents,” theoretically putting in jeopardy a whole host of long-established protections.

Dyson is moving ahead with the launch of a pair of noise-cancelling headphones it says can purify air, moving into a crowded market with a pricey, alien-looking gadget straight out of sci-fi.

Bloomberg continues to track the global coronavirus pandemic. Click here for daily updates.

The year 2022 will be remembered as the first time people, for good or for bad, traveled farther and more freely since the beginning of the pandemic. Travelers threw precaution to the wind, venturing across the Atlantic, braving airport chaos and exploring favorite hideouts in a flood of what’s come to be known as “revenge travel.” Still, the most exciting year for reconnecting with the wider world—assuming the coronavirus doesn’t tighten its grip again—has yet to arrive. The world’s greatest festivals make a big collective comeback in 2023—and while they are on the list, it’s not just about Burning Man and Coachella.

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Bloomberg The Year Ahead at Davos: Join us for conversations with leading CEOs that map out a strategic blueprint for global business in 2023. Set against the backdrop of the World Economic Forum on Jan. 16-17, leaders from across the globe will dissect critical issues, from taming inflation and deepening geopolitical tensions to environmental priorities and the future of work. Learn more here.