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US

Biden team readies wider economic package after virus relief

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WASHINGTON (AP) — Looking beyond the $1.9 trillion COVID relief bill, President Joe Biden and lawmakers are laying the groundwork for another top legislative priority — a long-sought boost to the nation’s roads, bridges and other infrastructure that could run into Republican resistance to a hefty price tag.

Biden and his team have begun discussions on the possible outlines of an infrastructure package with members of Congress, particularly mindful that Texas’ recent struggles with power outages and water shortages after a brutal winter storm present an opportunity for agreement on sustained spending on infrastructure.

Republicans say if the White House approach on the COVID relief bill — which passed the House Saturday on a near party-line vote and now heads to the Senate — is a sign of things to come for Biden’s plan on infrastructure and other initiatives, it could be a difficult road ahead in Congress.

A White House proposal could come out in March.

“Now is the time to be aggressive,” said Transportation Secretary Pete Buttigieg, a former South Bend, Indiana, mayor who knows potholes.

At a conference with state and local highway officials Thursday, he referred to the often-promised, never-achieved mega-initiative on roads, bridges and the like from the Trump administration.

“I know you are among those who are working and waiting most patiently, or maybe impatiently, for the moment when Infrastructure Week will no longer be a kind of Groundhog’s Day promise — but actually be something that delivers generational investments,” he said.

Much of America’s infrastructure — roads, bridges, public drinking and water systems, dams, airports, mass transit systems and more — is in need of major restoration after years of underfunding, according to the American Society of Civil Engineers. In its 2017 Infrastructure Report Card, it gave the national infrastructure an overall grade of D+.

Both chambers of Congress will use as starting points their unsuccessful efforts to get infrastructure bills through the last session.

Democrats passed a $1.5 trillion package in the House last year, but it went nowhere with the Trump administration and the Republican-led Senate. A Senate panel approved narrower bipartisan legislation in 2019 focused on reauthorizing federal transportation programs. It, too, flamed out as the U.S. turned its focus to elections and COVID-19.

Biden has talked bigger numbers, and some Democrats are now urging him to bypass Republicans in the closely divided Congress to address a broader range of priorities urged by interest groups.

During the presidential campaign, Biden pledged to deploy $2 trillion on infrastructure and clean energy, but the White House has not ruled out an even higher price tag.

Pointing to the storm in Texas as a “wake-up call” for the need to improve energy systems and other infrastructure, Gina McCarthy, Biden’s national climate adviser, told The Associated Press that Biden’s plan will specifically aim at green and other initiatives that promote job creation. She cited as an example federal investments to boost “workers that have been left behind” by closed coal mines or power plants, as well as communities located near polluting refineries and other hazards.

“He’s been a long fan of investing in infrastructure — long outdated — long overdue, I should say,” White House press secretary Jen Psaki said Thursday. “But he also wants to do more on caregiving, help our manufacturing sector, do more to strengthen access to affordable health care. So the size — the package — the components of it, the order, that has not yet been determined.”

Sen. Bernie Sanders, I-Vt., chairman of the Senate Budget Committee, recently told the White House that he’s ready to use the budget maneuver known as reconciliation to pass a broad economic recovery package with only Democratic votes. That drew stern warnings from Republicans, who have already closed ranks against Democrats’ COVID-19 relief bill.

“They made a conscious decision not to include us,” said Sen. Bill Cassidy, R-La., on Sunday, calling the White House’s assertion that the views of Republicans were taken into account with the COVID bill a “joke.”

Cassidy, one of 10 centrist Republicans who met with Biden in early February about getting bipartisan support on that bill, said Biden “so far has been about rhetoric” when it comes to his pledge of seeking unity and bipartisanship. He called it worrisome for other legislative initiatives.

“Republicans remain willing and are working on issues that require bipartisan cooperation,” he told CNN’s “State of the Union.”

West Virginia Sen. Shelley Moore Capito, a Republican who will be helping to craft legislation on the Senate side, said there’s bipartisan support for ambitious steps on infrastructure. But that “should not extend to a multitrillion-dollar package that is stocked full with other ideologically driven, one-size-fits-all policies that tie the hands of our states and our communities,” said Capito, the ranking member on the Senate Environment and Public Works Committee.

Rep. Peter DeFazio, chairman of the House Transportation and Infrastructure Committee, told the AP that he foresees a comprehensive House package that will go beyond roads, bridges and public transit. He also expects it to have money for water systems, broadband and the power grid — addressing a weak infrastructure laid bare after the crippling blackouts in Texas.

He’s not ready to talk overall costs yet. DeFazio, D-Ore., said it will be up to the Biden administration and the House Ways and Means Committee to figure out how to pay for it.

DeFazio said General Motors’ recently announced goal of going largely electric by 2035 demonstrates the need for massive spending on charging stations across the country. Biden campaigned on a plan to install 500,000 charging stations by the end of 2030.

“I’m totally willing to work with (Republicans) if they’re willing to recognize climate change,” DeFazio said, “or if they don’t want to recognize climate change, they can just recognize that electric semis and electric vehicles are a flood on the horizon and we’ve got to get ahead of it.”

Gov. Gretchen Whitmer, D-Mich., expressed a similar sentiment, urging strong action on carbon emissions and the vehicle charging stations to help achieve a “full transition to electric.” She also wants states to have more federal grants for infrastructure repairs after natural disasters and extreme weather.

At the Senate hearing where she spoke, Republican Gov. Larry Hogan of Maryland said there’s bipartisan support among governors for relieving congestion, cutting red tape, leveraging private sector investment and ensuring projects can better withstand cyber attacks and natural disasters.

Democratic Sen. Tom Carper of Delaware, the new chairman of the Senate Environment and Public Works Committee, said his goal is for his committee to pass an infrastructure bill by Memorial Day.

In the House, Rep. Sam Graves, the top Republican on the transportation panel, said Republicans would be open to a larger package as long as it didn’t greatly add to the national debt.

But many lawmakers oppose an increase in the federal gas tax, one way to help pay for the spending, while groups such as the Chamber of Commerce argue against increasing taxes on companies during a pandemic.

White House aide Cedric Richmond, a former congressman from Louisiana, told state transportation officials the president intends for most of the spending to be paid for, not added to the debt. In part, this would be by reversing some of the Trump administration tax cuts.

Ed Mortimer, a vice president at the U.S. Chamber of Commerce, said removing items in last year’s infrastructure bill for renovating schools and low-income housing could lower the price tag, because the COVID relief measure passed by the House already has hundreds of billions of dollars for those purposes.

“Affordable housing, school construction, very meritorious, but we’re not sure that that’s a key focus that’s going to get a bill signed into law,” Mortimer said.

___

Yen reported from Austin, Texas. AP writer Matthew Daly contributed to this report.

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Business

JPMorgan says two factors could drive up oil prices by another $5 to $10 per barrel

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SINGAPORE — JPMorgan says crude prices could see further upside ahead as oil continues to see strong gains so far this year.

It comes against the backdrop of an improving global outlook as major economies press ahead with their ongoing coronavirus vaccination campaigns.

“I think there’s room for oil prices to move a little bit higher in this environment but, you know, not thinking about a price of $80 or $90 a barrel. Maybe it goes up by $5 or $10 more from here,” Kerry Craig, global market strategist at JPMorgan Asset Management, told CNBC’s “Street Signs Asia” on Friday.

In the afternoon of Asia trading hours on Friday, international benchmark Brent crude futures were at $62.91 per barrel. U.S. crude futures changed hands at $59.34 per barrel. Both Brent and West Texas Intermediate crude futures have risen more than 20% each so far in 2021.

Oil prices have moderated in recent days after surging to their highest in more than a year.

Just this week, a deadly winter storm in southern U.S. resulted in days of power outages in Texas, wrecking havoc on the state’s energy infrastructure and taking millions of barrels per day of oil production offline. Energy prices popped as a result of that development.

Key drivers for higher oil prices

There are two things that will likely drive oil prices going forward, according to Craig.

Firstly, demand for oil is expected to pick up as the global economy recovers from the hit of the coronavirus pandemic, he said. However, that will be “curtailed to a certain extent” due to the low likelihood of international travel coming back in a big way soon. Travel is an “important source of demand,” he added.

On the supply side, he said: “We’re still relying on those OPEC+ members to keep that supply relatively curtailed and I think there’s still a question about that in terms of the amount of supply coming on relative to demand.”

OPEC and its allies, known collectively as OPEC+, have sought to navigate their way through a historically tumultuous period that has included an unparalleled collapse in oil prices as well as a major fuel demand shock amid the pandemic.

— CNBC’s Sam Meredith, Jeff Cox and Pippa Stevens contributed to this report.

Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

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Business

High asset prices ‘might have been affected’ by Robinhood, WallStreetBets

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TipRanks

The Bottom Is in for These 2 Stocks? Analysts Say ‘Buy’

Today, we’re looking at two small-cap biotech firms whose stocks have struck a rut. Each company has hit a recent clinical setback that sent the share price falling, erasing previous gains and sending it back down to low levels. Setbacks of this sort are not uncommon in the biotech industry, and in fact highlight the risk and speculative nature of the industry. So what should investors do, when a stock collapses? Is this a matter of poor fundamentals? And has the stock’s price found its low point yet? That’s where the Wall Street pros come in. Noting that each is set to take back off on an upward trajectory, some 5-star analysts see an attractive entry point for both. Using TipRanks’ database, we found out that these two tickers have earned Moderate or Strong Buy consensus ratings from the analyst community, and boast strong upside potential. Cortexyme, Inc. (CRTX) The first beaten-down name we’re looking at is Cortexyme, a clinical-stage biopharma company focused on degenerative diseases, especially Alzheimer’s. The company’s lead candidate is COR388, also called atuzaginstat. Atuzaginstat is currently under investigation in the GAIN trial, a study of its efficacy against Alzheimer’s disease. The trial is fully enrolled, with 643 patients, and the company was moving toward an open label enrollment (OLE) section of the Phase 2/3 study. During a routine regulatory update, Cortexyme announced that the OLE phase would be halted, although the primary GAIN study will continue, with results due to be released in Q4 2021. The announcement of the partial halt triggered a 35% drop in share price. The partial hold was prompted by adverse events on the liver during the atuzaginstat trial. The hepatic symptoms were reversible and showed no long-term lasting effects. The FDA reviewed these records, and in collaboration with Cortexyme the decision was made to hold the OLE while continuing with GAIN. This decision allows the main thrust of the program to continue, while working out a new protocol for the OLE. The purpose of the OLE is to test long-term efficacy and tolerability of the drug. In a review of Cortexyme after the announcement, HC Wainwright’s 5-star analyst Andrew Fein noted, “Cortexyme’s announcement of a partial clinical hold on the OLE study of atuzaginstat is disappointing, but the reversible nature of the liver toxicity might provide some ray of hope for Cortexyme. We believe that the pivotal trial’s continuation suggests that the drug-induced liver injury might not be severe enough to halt the program.” Turning to the near-term, Fein adds, “Continuation of the GAIN trial is encouraging despite the partial hold on OLE. It suggests that FDA plans to wait for the additional data from the pivotal trial before coming to any conclusion. Management shared that nearly one-third of the GAIN patients have completed the study and way past the 12-week time point, suggesting that they are out of risk.” To this end, Fein rates CRTX a Buy, and his $76 price target indicates confidence in a 147% growth potential. (To watch Fein’s track record, click here) Overall, Cortexyme has a Moderate Buy rating from the analyst consensus, with 6 recent reviews breaking down 4 to 1 to 1, Buy-Hold-Sell. The stock’s $83.60 average price target suggests that Wall Street sees a high potential here, on the order of ~170% upside from the trading price of $30.74. (See CRTX stock analysis on TipRanks) Immunovant (IMVT) Next up is Immunovant, a clinical stage biopharmaceutical research firm, focused on developing treatments for patients with autoimmune disorders, a class of diseases in which the immune system attacks the patient’s own body. The firm’s lead drug candidate, IMVT-1401, is undergoing trials as a treatment for thyroid eye disease, myasthenia gravis, and warm autoimmune hemolytic anemia. The drug described as “a novel, fully human anti-FcRn monoclonal antibody,” delivered by subcutaneous injection. On February 2, Immunovant’s stock plunged 42%, and it has been falling ever since. The precipitating factor was an announcement by the company that IMVT-1401 has had its Phase 2b clinical trial, for thyroid eye disease, halted temporarily, due to patients experiencing dangerous rises in their LDL levels. LDLs are the potentially harmful form of cholesterol, which have been connected to cardiovascular disease. Despite the clinical setback, Stiffel’s 5-star analyst Derek Archila reiterated a Buy rating on IMVT shares, along with a $28 price target. This figure suggests a 52% upside potential from current levels. (To watch Archila’s track record, click here) “Interestingly, increases have only been seen in TED patients, and our review of the literature suggests a few things: (1) it’s likely this is TED specific given the biology- see below for details, but we don’t think similar LDL increases will be seen in other indications outside TED; and (2) other anti-thyroid therapies used in Graves/TED also see similar increases in LDL, which end up being transient. We think IMVT-1401, in away, is replicating this mechanism,” the analyst noted. Archila summed up, “While we will need to see additional data from the company to confirm… we don’t think this program is dead.” Overall, the Strong Buy analyst consensus view on IMVT would suggest that Wall Street generally agrees with Archila’s assessment. This rating is derived from 8 recent reviews, which include 7 Buys and only a single Hold. The average price target here stands at $40.38, implying ~121% upside for the next 12 months. (See IMVT stock analysis on TipRanks) To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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World

Saudi Arabia Set to Raise Oil Output Amid Recovery in Prices

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Saudi Arabia plans to increase its oil output in the coming months, reversing a recent big production cut, say advisers to the Kingdom, a sign of growing confidence over an oil-price recovery.

The world’s largest oil exporter surprised oil markets last month when it said it would unilaterally slash 1 million barrels a day of crude production in February and March in an effort to raise prices.

But the Kingdom plans to announce a reversal of those cuts when a coalition of oil producers meet next month, the advisers said, in light of the recent recovery in prices. The output rise won’t kick in until April, given the Saudis already have committed to stick to cuts through March.

The advisers cautioned the plans still could be reversed if circumstances change, and the Saudis’ intention hasn’t yet been communicated to the Organization of the Petroleum Exporting Countries, said the people and OPEC delegates.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency,” Prince Abdulaziz bin Salman, the Saudi energy minister, said at a conference Wednesday. “The uncertainty is very high, and we have to be extremely cautious.”

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Business

Despite surging stocks and home prices, U.S. inflation won’t be a problem for some time

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When America’s amusement parks and baseball stadiums no longer must serve as COVID-19 mass vaccination sites, some investors believe that households pocketing pandemic financial aid from the government might start to splurge.

While a consumer splurge could initially boost the parts of the economy devastated by the pandemic, a bigger concern for investors is that a sustained spending spree also could cause prices for goods and services to rise dramatically, dent financial asset values, and ultimately raise the cost of living for everyone.

“I don’t think inflation is dead,” said Matt Stucky, equity portfolio manager at Northwestern Mutual Wealth Management Company. “The desire by key policy makers is to have it, and it’s the strongest it’s ever been. You will see rising inflation.”

Wall Street investors and analysts have become fixated in recent weeks on the potential for the Biden Administration’s planned $1.9 trillion fiscal stimulus package that targets relief to hard-hit households to cause inflation to spiral out of control.

Economists at Oxford Economics said on Friday they expect to see the “longest inflation stretch above 2% since before the financial crisis, but it’s unlikely to sustainably breach 3%.”

Severe inflation can hurt businesses by ratcheting up costs, pinching profits and causing stock prices to fall. The value of savings and bonds also can be chipped away by high inflation over time. 

Another worry among investors is that runaway inflation, which took hold in the late 1970s and pushed 30-year mortgage rates to near 18%, could force the Federal Reserve to taper its $120 billion per month bond purchase program or to raise its benchmark interest rate above the current 0% to 0.25% target sooner than expected and spook markets.

At the same time, it’s not far-fetched to argue that some financial assets already have been inflated by the Fed’s pedal-to-the-metal policy of low rates and an easy flow of credit, and might be due for some cooling off.

U.S. stocks, including the Dow Jones Industrial Average
DJIA,
+0.09%,
S&P 500 index
SPX,
+0.47%
and Nasdaq Composite
COMP,
+0.50%
closed on Friday at all-time highs, while debt-laden companies can now borrow in the corporate “junk” bond, or speculative-grade, market at record low rates of about 4%.

Read: Stock market stoked by stimulus hopes — what investors are counting on

In addition to rallying stocks and bonds, home prices in the U.S. also have gone through the roof during the pandemic, despite the U.S. still needing to recoup almost as many jobs from the COVID-19 crisis as during the worst of the global financial crisis in 2008.

This chart shows that jobs lost to the pandemic remain near to levels seen in the aftermath of that last crisis.

Job losses need to be tamed


LPL Research, Bureau of Labor Statistics

Fed Chairman Jerome Powell said Wednesday that he doesn’t expect a “large or sustained” outbreak of inflation, while also stressing that the central bank remains focused on recouping lost jobs during the pandemic, as the U.S. looks to makes serious headway in its vaccination program by late July. 

Treasury Secretary Janet Yellen on Friday reiterated a call on Friday that the time for more, big fiscal stimulus is now.

“Broadly, the guide is, does it cost me more to live a year from now than a year prior,” Jeff Klingelhofer, co-head of investments at Thornburg Investment Management, said about inflation in an interview with MarketWatch.

“I think what we need to watch is wage inflation,” he said, adding that higher wages for upper income earners were mostly flat for much of the past decade. Also, many lower-wage households hardest hit by the pandemic have been left out of the past decade’s climb in financial asset prices and home values, he said.

“For the folks who haven’t taken that ride, it feels like a perpetuation of inequality that’s played out for some time,” he said, adding that the “only way to get broad inflation is with a broad overheating of the economy. We have the exact opposite. The bottom third are no where near overheating.”

Klingelhofer said it’s probably also a mistake to watch benchmark 10-year Treasury yields for signs that the economy is overheating and for inflation since, “it’s not a proxy for inflation. It’s just a proxy for how the Fed might react,” he said.

The 10-year Treasury yield
TMUBMUSD10Y,
1.209%
has climbed 28.6 basis points in the year to date to 1.199% as of Friday.

But with last year’s sharp price increases, is the U.S. housing market at least at risk of overheating?

“Not at current interest rates,” said John Beacham, the founder and CEO at Toorak Capital, which finances apartment buildings and single family rental properties, including those going through rehabilitation and construction projects.

“Over the course of the year, more people will go back to work,” Beacham said, but he added that it’s important for policy makers in Washington to provide a bridge for households through the pandemic, until spending on socializing, sporting events, concerts and more can again resemble a time before the pandemic.

“Clearly, there likely will be short-term consumption increase,” he said. “But after that it normalizes.”

The U.S. stock and bond markets will be mostly closed on Monday for the Presidents Day holiday.

On Tuesday, the only tidbit of economic data comes from the New York Federal Reserve’s Empire State manufacturing index, followed Wednesday by a slew of updates on U.S. retail sales, industrial production, home builders data and minutes from the Fed’s most recent policy meeting. Thursday and Friday bring more jobs, housing and business activity data, including existing home sales for January.

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Business

Silver prices hit highest since 2013 as Reddit army turns to commodities

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Price of silver rose by more than10% on Monday. Photo: Leonhard Foeger/Reuters

The price of silver (SI=F) rocketed more than 10% to its highest since February 2013 on Monday, briefly trading over the $30 (£ ) per ounce mark, as retail investors piled in on the commodity.

It became the latest target after a retail frenzy last week saw the likes of heavily-shorted GameStop (GME) and AMC Entertainment (AMC) surge in revolt to large institutional investors.

Recently amateur traders have been buying stocks and assets that Wall Street funds bet against. Similarly, traders are looking to squeeze silver shorts.

There have been thousands of Reddit posts with multiple mentions of the hashtag #silversqueeze, and a string of videos on YouTube encouraging small investors to buy the precious metal.

The surge sent silver miner Fresnillo (FRES.L) almost 20% higher in early trading in London, while Glencore (GLEN.L), BHP (BHP.L) and Anglo-American (AAL.L) also rose.

Users in the Reddit forum Wallstreetbets argued that silver is a heavily manipulated market, and that a rise in the silver price could hurt large financial services companies.

“Think about the Gainz. If you don’t care about the gains, think about the banks like JP Morgan you’d be destroying along the way,” a Reddit user posted.

“Whether it will be quite so easy to shunt around silver as it was GameStop remain to be seen,” Russ Mould, AJ Bell investment director, said.

“You can understand why silver is attracting the attentions of the social media traders who are looking to vent their fury upon, and profit from, short sellers. Allegations about, and fines for, investment banks rigging precious metal markets have abounded for some time. More fundamentally, money supply is surging, markets more generally are watching carefully for any signs of inflation and precious metals are traditionally seen as a potential hedge here.

“In addition, gold currently trades at 70 times the silver price, against the long-run average of 58 times, so on paper silver is the cheaper of the precious metals. This will be an interesting test of the conspiracy theories that precious metals prices have been kept artificially low.”

READ MORE: How the tale of Reddit, GameStop, Robinhood is really about 5 big trends

The world’s largest silver-backed exchange traded fund, iShares Silver Trust (SLV), posted almost $1bn (£730m) in inflows on Friday, according to data from BlackRock, the fund’s sponsor. It was the biggest one-day rise since the ETF started trading in April 2006.

Meanwhile, US bullion broker APMEX said it saw demand hit as much as six times a typical business day and more than 12 times a normal weekend day on Friday.

“Combined with the extremely high demand levels, we are also seeing a surge in new customers. On Saturday alone, we added as many new customers as we usually add in a week,” it said.

In November, around $6bn worth of silver traded hands in the silver market, according to the latest statistics from the London Bullion Market Association. London’s vaults hold around 33,500 tonnes of silver, valued at some $24bn.

WATCH: Dissecting the swampy backstory to GameStop stock controversy

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Technology

A New Lawsuit Accuses Valve of Abusing Its Power to Keep PC Game Prices High

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A new lawsuit filed by five gamers in California federal court accuses Valve of abusing its power to keep PC game prices high.As reported by THR, this lawsuit claims that Valve does not maintain its dominance over the PC market by offering better prices on Steam than other platforms, but does so by abusing its power to require developers to enter what is known as a ‘Most Favored Nations’ clause.

“Valve Corporation’s Steam platform is the dominant platform for game developers to distribute and sell PC games in the United States,” states the complaint being handled by attorneys at Vorys, Sater, Seymour, and Pease. “But the Steam platform does not maintain its dominance through better pricing than by rival platforms. Instead, Valve abuses the Steam platform’s market power by requiring game developers to enter into a ‘Most Favored Nations’ provision contained in the Steam Distribution Agreement whereby the game developers agree that the price of a PC game on the Steam platform will be the same price the game developers sell their PC games on other platforms.”

The Best Modern PC Games (Summer 2020 Update)

The lawsuit also alleges that, because Valve requires developers to enter this ‘Most Favored Nations’ clause, it “hinders innovation by creating an artificial barrier to entry for platforms” and keeps prices high on other digital storefronts like the Epic Games Store and the Microsoft Store.

“The Steam MFN also hinders innovation by creating an artificial barrier to entry for platforms,” adds the complaint. “When a market, such as this one, is highly concentrated, a new entrant can benefit consumers by undercutting the incumbent’s prices. The ability to provide PC games to consumers at lower prices is one way a firm or new entrant could gain market share. If this market functioned properly—that is, if the Steam MFN did not exist and platforms were able to compete on price—platforms competing with Steam would be able to provide the same (or higher) margins to game developers while simultaneously providing lower prices to consumers.”

CD Projekt S.A., CD Projekt, Inc., Ubisoft Entertainment S.A., Ubisoft, Inc., Ubisoft L.A., Inc., kChamp Games, Inc., Rust, LLC, and Devolver Digital, Inc. are also included as defendants on the lawsuit, with the plaintiffs accusing these companies of agreeing with the Steam platform to the Steam MFN.This new class action lawsuit follows Valve, Capcom, Bandai Namco, Focus Home, Koch Media, and ZeniMax being fined $9.4 million by the European Commission over the practice of “geo-blocking.”

Have a tip for us? Want to discuss a possible story? Please send an email to newstips@ign.com.

Adam Bankhurst is a news writer for IGN. You can follow him on Twitter @AdamBankhurst and on Twitch.



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Technology

Microsoft Quickly Cancels Plan to Raise Xbox Live Gold Subscription Prices

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On Friday, Microsoft (NASDAQ:MSFT) announced a set of price raises for its Xbox Live Gold online gaming service, then reversed itself hours later after a wave of criticism.

The IT giant originally announced that Gold would cost $1 more for a one-month membership, lifting its cost to $10.99. A three-month membership was set at $29.99 (formerly $24.99). The longest term currently available, six months, would have increased to $59.99 (formerly $39.99). Microsoft is no longer offering a one-year option.

There would be no immediate price change for Gold subscribers with existing six- or 12-month memberships.

In its original announcement about the price hikes, Microsoft pointed out that in many of its markets, those rates had not changed in years. 

Image source: Getty Images.

There was considerable speculation that Microsoft’s move was an attempt to convince subscribers to upgrade to the top online gaming tier, Xbox Game Pass Ultimate. This bestows access to over 100 games, confers exclusive discounts, and provides other perks, of top of the benefits of Gold membership. Microsoft was to keep Ultimate’s price unchanged at $14.99 per month.

The outcry over the price raises was swift and, at times, vociferous. In response, shortly before midnight ET on Friday, Microsoft canceled the decision in an edit to its original announcement, writing that “We messed up today and you were right to let us know. Connecting and playing with friends is a vital part of gaming and we failed to meet the expectations of players who count on it every day.”

In addition to leaving Gold pricing unchanged in the end, Microsoft said that free-to-play titles will be accessible on Xbox without a Gold subscription, as previously required. It said it hopes to implement this change in the next few months.



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