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Business

Dow and S&P 500 updates: Stock market news

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New York
CNN
 — 

The good vibes on Wall Street are fading fast: US slid tumbled yet again on Friday as investors come to grips with a souring economy.

The Dow ended the day down 282 points, or 0.9%. The S&P 500 fell 1.1%, and the Nasdaq Composite was 1% lower.

The sell-off has been broad, but the real estate and consumer discretionary sectors were been hit the hardest, down more than 3% and 1.8%, respectively.

Is the Fed to blame? Sentiment on Wall Street can change on a dime, and this week is evidence of that: The Dow has tumbled about 1,050 points just since the Federal Reserve’s dour policy update at 2 p.m. ET Wednesday.

CNN Business’ Fear and Greed Index, a measure of market sentiment, finally dipped into “Fear” Friday. The market has been in “Greed” mode for weeks.

Stocks had been riding high this month on weaker-than-expected inflation and a number of stronger-than-expected reports on the broad economy and the job market. Investors were hopeful that the Federal Reserve could slow its historic pace of rate hikes and inflation could right itself sometime next year without tipping the economy into a recession.

That excitement continued right up until Fed Chair Jerome Powell crashed Wall Street’s party Wednesday with some tough news: Economists at the Fed believe US gross domestic product, the broadest measure of America’s economy, will barely grow next year.

And they predict the US unemployment rate will rise to 4.6% by the end of 2023, which means roughly 1.6 million more Americans will be out of work.

Compounding fears from those Fed forecasts was a worse-than-expected retail sales report Thursday that sent stocks plunging. The Dow lost 765 points Thursday, or 2.3%, the index’s worst day in three months. The S&P 500 lost 2.5% and the Nasdaq tumbled 3.2%, their worst days in a month.

Now, economists at Moody’s Analytics predict America’s economy will grow at an annualized rate of just 1.9% in the fourth quarter, down from its previous estimate of 2.7%. Weak manufacturing and retail reports spooked Moody’s analysts, who also lowered their 2023 GDP forecast to just 0.9%, much lower than 2022’s 1.9% estimate.

“This leaves little room for anything to go wrong,” Moody’s economist Matt Colyar wrote in an analysis.

Not helping stocks: It’s December. Many traders are on vacation, volume is low and tiny moves can get exacerbated.

As my colleague Matt Egan notes, the market may be in a lose-lose situation. Good economic news has been bad news for investors, because the Fed is trying to cool down the economy as part of its inflation-fighting campaign. But bad economic news is also bad for investors – and everyone – because it raises the risk of a recession.

Adobe

(ADBE) and Facebook parent company Meta are the markets largest gainers today, up 3% and 2.8%, respectively. Adobe

(ADBE) shares soared after the company reported better-than-expected quarterly earnings and guidance. Meta, which is still down nearly 65% for the year, saw a tick after JPMorgan upgraded shares of the company to neutral from overweight.

– CNN’s Nicole Goodkind and Matt Egan contributed to this report

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Business

China markets tank as protests erupt over Covid lockdowns

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Hong Kong
CNN Business
 — 

China’s major stock indices and its currency have opened sharply lower Monday, as widespread protests against the country’s stringent Covid-19 restrictions over the weekend roiled investor sentiment.

Hong Kong’s Hang Seng

(HSI) Index fell as much as 4.2% in early trading. It has since pared some losses and last traded 2% lower. The Hang Seng

(HSI) China Enterprises Index, a key index that tracks the performance of mainland Chinese companies listed in Hong Kong, lost 2%.

In mainland China, the benchmark Shanghai Composite briefly fell 2.2%, before trimming losses to 0.9% lower than Friday’s close. The tech-heavy Shenzhen Component Index dropped 1.1%.

The Chinese yuan, also known as the renminbi, plunged against the US dollar on Monday morning. The onshore yuan, which trades in the tightly controlled domestic market, briefly weakened 0.9%. It was last down 0.6% at 7.206 per dollar. The offshore rate, which trades overseas, dropped 0.3% to 7.212 per dollar.

The plunging yuan suggests that “investors are running ice cold on China,” said Stephen Innes, managing partner of SPI Asset Management, adding that the currency market might be “the simplest barometer” to gauge what domestic and overseas investors think.

The markets tumble comes after protests erupted across China in an unprecedented show of defiance against the country’s stringent and increasingly costly zero-Covid policy.

In the country’s biggest cities, from the financial hub of Shanghai to the capital Beijing, residents gathered over the weekend to mourn the dead from a fire in Xinjiang, speak out against zero-Covid and call for freedom and democracy.

Such widespread scenes of anger and defiance, some of which stretched into the early hours of Monday morning, are exceptionally rare in China.

Asian markets were also broadly lower. South Korea’s Kospi lost 1%, Japan’s Nikkei 225

(N225) shed 0.6%, and Australia’s S&P/ASX 200 fell by 0.3%.

US stock futures — an indication of how markets are likely to open — fell, with Dow futures down 0.5%, or 171 points. Futures for the S&P 500 were down 0.7%, while futures for the Nasdaq dropped 0.8%.

Oil prices also dropped sharply, with investors concerned that surging Covid cases and protests in China may sap demand from one of the world’s largest oil consumers. US crude futures fell 2.7% to trade at $74.19 a barrel. Brent crude, the global oil benchmark, lost 2.6% to $81.5 per barrel.

On Friday, a day before the protests started, China’s central bank cut the amount of cash that lenders must hold in reserve for the second time this year. The reserve requirement ratio for most banks (RRR) was reduced by 25 percentage points.

The move was aimed at propping up an economy that had been crippled by strict Covid restrictions and an ailing property market. But analysts don’t think the move will have a significant impact.

“Cutting the RRR now is just like pushing on a string, as we believe the real hurdle for the economy is the pandemic rather than insufficient loanable funds,” said analysts from Nomura in a research report released Monday.

“In our view, ending the pandemic [measures] as soon as possible is the key to the recovery in credit demand and economic growth,” they said.

Innes from SPI Asset Management said China’s economy is currently caught in the midst of a tug-of-war between weakening economic fundamentals and increasing reopening hopes.

“For China’s official institutions, there are no easy paths. Accelerating reopening plans when new Covid cases are rising is unlikely, given the low vaccination coverage of the elderly,” he said. “Mass protests would deeply tilt the scales in favor of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.”

In the near term, he said, Chinese equities and currency will likely price in “more significant uncertainty” around Beijing’s reaction to the ongoing protests. He expects social discontent could increase in China over the coming months, testing policymakers’ resolve to stick to its draconian zero-Covid mandates.

But in the longer term, the more pragmatic and likely outcome should be “a quicker loosening of [Covid] restrictions once the current wave subsides,” he said.

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Business

Stocks: Dow on track for best month in more than 45 years

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New York
CNN Business
 — 

The Dow fell about 80 points in mid-afternoon trading Monday, but it’s still up 14% this month — putting it on track for its best monthly gain since January 1976.

The blue chips remain off by nearly 10% this year, though. Meanwhile, The S&P 500, which was down about 0.6% Monday, has dropped nearly 20% in 2022. The tech-heavy Nasdaq, which was almost 1% lower Monday, has plunged 30% this year.

Still, it’s fitting that on Halloween, candy maker Hershey

(HSY) is trading at an all-time high and is up 25% this year. But overall, there haven’t been too many sweet Kisses for investors this year: Despite a ferocious rally so far in October, there are a lot more losers than winners on Wall Street in 2022.

Big techs, industrials and consumer discretionary stocks have been hit hard in 2022. Intel

(INTC), Nike

(NKE), Salesforce

(CRM), Microsoft

(MSFT), 3M

(MMM), Boeing

(BA), Disney

(DIS), Walgreens

(WBA), Home Depot

(HD), Cisco

(CSCO) and Verizon

(VZ) are all down more than 25% in 2022. That’s nearly half of the Dow stocks.

Tech is getting crushed in the S&P 500 too. Facebook owner Meta Platforms has plunged more than 70% this year and is now trading at its lowest level since January 2016. PayPal

(PYPL), chip giant Nvidia

(NVDA) and Netflix

(NFLX) have all lost more than half their value as well.

But there are some other winners besides Hershey. Oil stocks and health care companies are leading the market, with Chevron

(CVX), Merck

(MRK) and Amgen

(AMGN) topping the Dow leaders list.

Chevron is even trading near an all-time high. So is rival (and former Dow component) Exxon Mobil

(XOM). Big Pharma leader Eli Lilly

(LLY) and health insurers Cigna

(CI) and Humana

(HUM) are also at record highs.

It’s not just energy and health care stocks posting solid gains this year. Several consumer staples firms — companies that sell food and beverages — are thriving as well. McDonald’s

(MCD), Pepsi

(PEP) and cereal makers General Mills

(GIS) and Post

(POST) recently hit record highs.

Also in the all-time high club: defense contractors Lockheed Martin

(LMT) and Northrop Grumman

(NOC), insurers Metlife

(MET) and Progressive

(PGR), auto parts retailers Autozone

(AZO) and O’Reilly Automotive

(ORLY) and wireless giant T-Mobile

(TMUS).

There’s a saying on Wall Street that there’s always a bull market somewhere. This list of well known, brand-name stocks trading at record highs is further proof of that point.

Yet the broader market is undeniably struggling this year due to concerns about inflation and the fact that the Federal Reserve has raised interest rates significantly to try and defeat the scourge of rising prices.

There are growing worries that the Fed was too late to start fighting inflation and now risks sending the economy into a recession next year as it seems to be playing catch-up with its series of aggressive rate hikes.

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Business

China GDP: Hong Kong stocks plunge 6% as fears about Xi’s third term trump data

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Hong Kong
CNN Business
 — 

Hong Kong stocks had their worst day since the 2008 global financial crisis, just a day after Chinese leader Xi Jinping secured his iron grip on power at a major political gathering.

Foreign investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese equities and the yuan despite the release of stronger-than-expected GDP data. They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.

Hong Kong’s benchmark Hang Seng

(HSI) Index plunged 6.4% on Monday, marking its biggest daily drop since November 2008. The index closed at its lowest level since April 2009.

The Chinese yuan weakened sharply, hitting a fresh 14-year low against the US dollar on the onshore market. On the offshore market, where it can trade more freely, the currency tumbled 0.8%, hovering near its weakest level on record, even as the Chinese economy grew 3.9% in the third quarter from a year ago, according to the National Bureau of Statistics. Economists polled by Reuters had expected growth of 3.4%.

The sharp sell-off came one day after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.

A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States. Those pushed aside included Premier Li Keqiang, Vice Premier Liu He, and central bank governor Yi Gang.

“It appears that the leadership reshuffle spooked foreign investors to offload their Chinese investment, sparking heavy sell-offs in Hong Kong-listed Chinese equities,” said Ken Cheung, chief Asian forex strategist at Mizuho bank.

The GDP data marked a pick-up from the 0.4% increase in the second quarter, when China’s economy was battered by widespread Covid lockdowns. Shanghai, the nation’s financial center and a key global trade hub, was shut down for two months in April and May. But the growth rate was still below the annual official target that the government set earlier this year.

“The outlook remains gloomy,” said Julian Evans-Pritchard, senior China economist for Capital Economics, in a research report on Monday.

“There is no prospect of China lifting its zero-Covid policy in the near future, and we don’t expect any meaningful relaxation before 2024,” he added.

Coupled with a further weakening in the global economy and a persistent slump in China’s real estate, all the headwinds will continue to pressure the Chinese economy, he said.

Evans-Pritchard expected China’s official GDP to grow by only 2.5% this year and by 3.5% in 2023.

Monday’s GDP data were initially scheduled for release on October 18 during the Chinese Communist Party’s congress, but were postponed without explanation.

The possibility that policies such as zero-Covid, which has resulted in sweeping lockdowns to contain the virus, and “Common Prosperity” — Xi’s bid to redistribute wealth — could be escalated was causing concern, Cheung said.

“With the Politburo Standing Committee composed of President Xi’s close allies, market participants read the implications as President Xi’s power consolidation and the policy continuation,” he added.

Mitul Kotecha, head of emerging markets strategy at TD Securities, also pointed out that the disappearance of pro-reform officials from the new leadership bodes ill for the future of China’s private sector.

“The departure of perceived pro-stimulus officials and reformers from the Politburo Standing Committee and replacement with allies of Xi, suggests that ‘Common Prosperity’ will be the overriding push of officials,” Kotecha said.

Under the banner of the “Common Prosperity” campaign, Beijing launched a sweeping crackdown on the country’s private enterprise, which shook almost every industry to its core.

“The [market] reaction in our view is consistent with the reduced prospects of significant stimulus or changes to zero-Covid policy. Overall, prospects of a re-acceleration of growth are limited,” Kotecha said.

On the tightly controlled domestic market in China, the benchmark Shanghai Composite Index dropped 2%. The tech-heavy Shenzhen Component Index lost 2.1%.

The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, plunged 9.7%.

Shares of Alibaba

(BABA) and Tencent

(TCEHY) — the crown jewels of China’s technology sector — both plummeted more than 11%, wiping a combined $54 billion off their stock market value.

The sell-off spilled over into the United States as well. Shares of Alibaba and several other leading Chinese stocks trading in New York, such as EV companies Nio

(NIO) and Xpeng, Alibaba rivals JD.com

(JD) and Pinduoduo

(PDD) and search engine Baidu

(BIDU), were all down sharply.

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Business

Moody’s lowers UK’s outlook to negative

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London
CNN Business
 — 

Moody’s Investor Service on Friday changed the United Kingdom government’s ratings outlook to “negative” from “stable.”

Moody’s attributed the change in the outlook to “heightened unpredictability in policymaking amid weaker growth prospects and high inflation; and risks to the UK’s debt affordability from likely higher borrowing and risk of a sustained weakening in policy credibility.”

However, the ratings agency affirmed the country’s credit rating. The affirmation of the Aa3 rating is a reflection of the UK’s economic resilience, Moody’s said in a statement.

Credit ratings are essentially credit scores for governments and companies. They express an opinion about the capacity and willingness of large borrowers to repay their debts. Germany, Canada, Switzerland, Australia and the United States have some of the best credit ratings in the world, while Argentina, Nigeria, Pakistan and India have some of the lowest ratings.

The UK is in the midst of suffering from a string of blows to its economy, which the Bank of England has said may already be in recession. Soaring food costs drove the annual rate of inflation to 10.1% in September, returning it to July’s 40-year high.

That may prompt the central bank to hike interest rates more aggressively when it meets on November 3 in order to tame rising prices.

On Thursday, Liz Truss resigned as Prime Minister after six disastrous weeks in office. Truss and former Finance Minister Kwasi Kwarteng’s “mini” budget upended UK financial markets. Investors immediately rejected their plans for unfunded tax cuts, spiking government bond yields, sinking the pound and forcing the Bank of England to make three successive interventions to rescue overstretched pension funds.

While most of those measures have since been rescinded by Britain’s new Finance Minister Jeremy Hunt — calming markets and restoring a sense of stability — the government’s credibility has been damaged and volatility could persist.

As well as driving up borrowing costs for the government and adding pressure to public spending, any credit ratings downgrade would only weaken investor appetite for UK assets.

The last time Moody’s downgraded the United Kingdom’s credit rating was in October 2020, citing lower than expected growth following Brexit, rising government debt and a weakening of the UK’s institutions that it said had led to a “fractious policy environment.”

— Julia Horowitz and Alicia Wallace contributed to this report.

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Business

Dow rallies more than 1,500 points in two days as fear begins to fade

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New York
CNN Business
 — 

Is the worst really over on Wall Street? It’s too soon to say. But stocks rose sharply again Tuesday following Monday’s big rally.

The Dow surged 825 points, or 2.8%. The Dow has soared more than 1,500 points in the past two days. It is now back above the key 30,000 milestone and is about 18% off its most recent record high, meaning that is no longer in a bear market.

The S&P 500 and Nasdaq gained 3.1% and 3.3%, respectively. But both of those indexes remain in bear territory, at more than 20% off their all-time highs.

It appears that the market bears may be going into hibernation, at least temporarily. Not even the news of North Korea firing a missile over Japan was enough to stop the bulls from celebrating.

“It almost feels like a panic rally. The market mood got way too sour and people started to jump in,” said Callie Cox, US investment analyst with eToro. “But this rally feels random. It’s great to see stocks go up but these moves are a little disorienting. I’m being cautious.”

The market’s mood has improved due to renewed hopes that banking giant Credit Suisse

(CS) will be able to avoid a financial meltdown similar to Wall Street firm Lehman Brothers 14 years ago.

There have been growing fears that Credit Suisse is in serious trouble. But the bank’s stock price has rebounded in the past two days and the cost to insure Credit Suisse’s bonds fell too. That’s a sign that investor anxiety about the bank’s future has subsided somewhat.

Major European stock exchanges have rallied in the past few days as well as jittery investors relax a bit. One fund manager noted that there are more companies that look attractive lately given the large pullback in global markets so far this year.

“There are opportunities within Europe. There are some companies we have admired from afar that are getting interesting,” said Louis Florentin-Lee, a manager with the Lazard International Quality Growth Portfolio.

In other corporate news, semiconductor stocks got a boost after chip giant Micron

(MU) announced plans to spend $100 billion over the next two decades to build a new plant in upstate New York. Shares of Micron

(MU) gained 4%. Fellow semiconductor companies Intel

(INTC), Nvidia

(NVDA) and AMD

(AMD) rallied as well.

Shares of Twitter

(TWTR) surged 22% after Elon Musk once again offered to buy the social media site for $44 billion, or $54.20 a share. The stock was halted earlier in the day following reports of the Musk deal.

A smaller than expected interest rate hike by the The Reserve Bank of Australia also is lifting spirits on Wall Street. Central banks around the world are boosting rates to fight inflation. But economic and market uncertainty could lead the Federal Reserve and other banks to slow the pace of rate increases.

The worry is that overly aggressive rate hikes could lead to a significant recession. CEOs surveyed by KPMG US are predicting a downturn in the next 12 months and they are worried that it won’t be mild or short.

But bond investors are now starting to price in the possibility that the Fed will pull back on its rate hiking spree. The benchmark 10-year US Treasury yield, which briefly spiked to 4% and hit its highest level since 2008 last week, has since tumbled and is now back around 3.6%.

Investors no longer seem as nervous about the future as they did just a week ago either. The VIX

(VIX), a key indicator of volatility on Wall Street, fell about 3% Tuesday.

The CNN Business Fear & Greed Index, which looks at the VIX and six other measures of market sentiment, moved out of Extreme Fear territory as well. But it remains at Fear levels.

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World

British pound plummets to record low against the dollar

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CNN Business
 — 

The British pound fell to a new record low against the US dollar of $1.035 on Monday, plummeting more than 4%.

The slide came as trading opened in Asia and Australia on Monday, extending a 2.6% dive from Friday — and spurring predictions the pound could plunge to parity with the US dollar in the coming months.

The unprecedented currency slump follows British Chancellor of the Exchequer Kwasi Kwarteng’s announcement on Friday that the United Kingdom would impose the biggest tax cuts in 50 years at the same time as boosting spending.

The new tax-slashing fiscal measures, which include scrapping plans for rising corporation tax and slashing the cap on bankers’ bonuses, have been criticized as “trickle-down economics” by the opposition Labour party and even lambasted by members of the Chancellor’s own Conservative party.

Former Tory chancellor Lord Ken Clarke criticized the tax cuts on Sunday, saying it could lead to the collapse of the pound.

“I’m afraid that’s the kind of thing that’s usually tried in Latin American countries without success,” Clarke said in an interview with BBC radio.

The pound has been hammered by a string of weak economic data, but also the steep ascent of the US dollar, a safe haven investment that sees inflows in times of uncertainty.

The euro also hit a 20-year low of 0.964 per dollar.

But the economic outlook in the UK means the pound is suffering more than most, in the face of a disastrous energy crunch and the highest inflation among G7 nations.

The previous record low for the British pound against the US dollar was 37 years ago on February 25, 1985, when 1 pound was worth $1.054.

“Should there be any escalation to the war in Ukraine…we would see further sharp downside in the Pound as well as the Euro,” said Clifford Bennett, chief economist at ACY Securities, an Australian brokerage firm.

“One should not underestimate the crisis that is all of Europe at the moment and the Pound is more vulnerable than most,” he said.

The soaring US dollar also sent major Asian currencies tumbling on Monday.

China’s yuan slid 0.5% on the onshore market to the lowest level in more than 28 months. The offshore yuan fell 0.4%.

The rapid declines prompted the People’s Bank of China to impose a risk reserve requirement of 20% on banks’ foreign exchange forward sales to clients, starting Wednesday. The move would make it more costly for traders to buy foreign currencies via derivatives, which might slow the pace of the yuan’s declines.

Elsewhere in the region, the Japanese yen dropped 0.6% against the dollar to 144. Last Thursday, the Japanese central bank intervened in the currency market for the first time since 1998 to prop up the yen. The yen rebounded slightly following the intervention, but soon resumed the slide.

The Korean won also plunged 1.6% on Monday versus the greenback, falling below the 1,420 level for the first time since 2009.

Stock markets in the region were in a turmoil on Monday, after US stocks sold off on Friday as recession fears grow.

South Korea’s Kospi declined 2.7%, Japan’s Nikkei 225

(N225) dropped 2.4%, and Australia’s S&P/ASX 200 was down 1.4%. China’s Shanghai Composite Index dipped 0.1%.

“Risk sentiments have been dealt a major blow by the Fed’s latest policy action and guidance,” said DBS analysts in a research report on Monday.

The Federal Reserve on Wednesday approved a third consecutive 75-basis-point hike in an aggressive move to tackle white-hot inflation that has been plaguing the US economy.

Even without the Fed action, Europe is looking at a recession due to the war in Ukraine, and China is looking at “a substantially weak growth dynamic” because of a variety of domestic factors, the DBS analysts said.

“Add on top of that a sharp decline in US dollar liquidity and sharply higher US interest rates, the world economic outlook looks particularly precarious,” they added.

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