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BIG DROP ... WHY? IS IT FED RESPONSE TO INFLATION? CNBC: Dow drops 400 points, breaks below 30,000 on fear the Fed is overdoing its inflation fight Original article: https://www.cnbc.com/2022/09/22/futures-inch-higher-following-another-day-of-losses-after-fed-rate-hike-sell-offs.html Peter Burgess COMMENTARY Peter Burgess | ||
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UPDATED FRI, SEP 23 202211:05 AM EDT
Dow drops 400 points, breaks below 30,000 on fear the Fed is overdoing its inflation fight
Samantha Subin
Alex Harring
Long-term investors should not panic, do not sell at these levels, says DCLA's Sarat SethiWATCH NOW
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Long-term investors should not panic, do not sell at these levels, says DCLA’s Sarat Sethi
Stocks slumped on Friday and were on pace for another losing week as investors feared the Federal Reserve’s aggressive hiking campaign to fight inflation will lead to an economic downturn.
The Dow Jones Industrial Average fell by 470 points, or 1.55%, while the S&P 500 slid 1.8%. The Nasdaq Composite lost 1.8%.
Friday marked the fourth negative session in a row for the major averages, with the Dow falling below its June closing low and the 30,000 mark. The Fed on Wednesday enacted another super-sized rate hike of 75 basis points and indicated it would do another at its November meeting.
Dow drops below 30,000
Bond yields have soared this week following the Fed’s actions, with the 2-year and 10-year Treasury rates hitting highs not seen in over a decade. Goldman Sachs cut its year-end S&P 500 target because of rising rates, predicting at least 4% downside from here. Stocks positioned to suffer the most in a recession have led this week’s losses with the S&P 500′s consumer discretionary sector off by 7%. Energy is down more than 8% as oil prices slump. Growth stocks including big technology names Apple, Amazon, Microsoft and Meta Platforms fell on Friday. “Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook,” wrote Goldman Sachs’ David Kostin in a note to clients. The major averages are on pace for their fifth decline in the last six weeks and on track to close out the week with losses. The Dow has given up about 3.5% this week, while both the S&P and Nasdaq have fallen 4.4% and 4.6%, respectively. In other news, the pound hit a fresh more than three-decade low against the U.S. dollar after a new U.K. economic plan that included a slew of tax cuts rattled markets. 21 MIN AGO Keep an eye on the European close, UBS’ Cashin says UBS director of floor operations Art Cashin said he would keep an eye on the market around 11:30 a.m. ET, roughly when several European markets close. “Do we start to firm up then? Does that tell us that some of this is some systemic risk coming out of Europe? If we don’t firm up then, then we know it’s equally here in the U.S.,: Cashin said on CNBC’s “Squawk on the Street.” European markets were broadly lower Friday, with the Stoxx 600 index losing more than 2%. Cashin also said he was looking to see if the major U.S. averages break key near-term support levels. “If we make lower lows, which we are on the verge of making, it would be a problem,” he said. — Fred Imbert 58 MIN AGO September flash US PMI data falls at a softer pace A contraction in U.S. manufacturing and services activity eased in September, according to S&P Global. The Flash US PMI Composite Output Index declined at a softer pace this month, falling to 49.3. That’s still up up from 44.6 in August. It’s also the index’s highest reading in three months. “While output declined in both manufacturing and services during September, in both cases the rate of contraction moderated compared to August, notably in services, with orders books returning to modest growth, allaying some concerns about the depth of the current downturn,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. — Sarah Min 1 HOUR AGO Costco sheds 2% despite better-than-expected earnings Shares of Costco slumped about 2% on Friday, despite posting fiscal fourth-quarter revenue and earnings that topped analysts’ expectations. The wholesale retailer said it’s seeing higher freight and labor costs and reported operating margins slightly below consensus expectations. — Samantha Subin 1 HOUR AGO Dollar index hits highest level since 2002 The dollar index hit its highest level since 2002. The index hit a session high of 112.427, or its highest level since May 28, 2002 when the index hit a high of 112.92. It also rose 2.74% for the week, putting it on pace for its best week since March 2020 when the index gained 4.12% Meanwhile, the British pound and euro slumped against the dollar after the new U.K. government announced tax cuts to boost growth. — Sarah Min 1 HOUR AGO Growth sectors take a hit, consumer discretionary down 7% this week Stocks focused on economic growth and a stable economy slumped in early morning trading on Friday. Consumer discretionary slumped more than 2%, with information technology and communication services down at least 1% each. Energy also plummeted 6% as oil prices slipped. Shares of travel-oriented names took the biggest leg lower, with Norwegian Cruise Line, Carnival, Caesars Entertainment, and Royal Caribbean down 4% each. Ford, Tesla and General Motors also shed about 4% each. Investors also rotated out of technology names and semiconductors, with Netflix and Amazon down about 2%. Apple and Alphabet shed more than 1%. Nvidia and Advanced Micro Devices slumped 1.5% and 2.1%, respectively. — Samantha Subin 1 HOUR AGO Stocks open lower, Dow breaches below 30,000 level Stocks opened lower on Friday, continuing the recent sell-off trend that’s hit Wall Street. The Dow Jones Industrial Average fell by 340 points, or 1.1%, touching below its June closing low and the 30,000 level. The S&P 500 slid 1.3% and the Nasdaq Composite lost 1.2%. — Samantha Subin 2 HOURS AGO Oil hits lowest trading price since January Oil hit a trading low of $79.64 per barrel Friday, marking the first time since early January it has traded below $80 per barrel. Prices shot up in tandem with Russia’s invasion of Ukraine as the country is a world leader in oil production. March posted a 2022 high at just over $130 per barrel. Americans paid an average price per gallon of $3.689 on Friday, according to AAA. That’s down about 26% from the highest recorded average that came in June when the national average hit $5.016. — Alex Harring 2 HOURS AGO Climb in Treasury yields a result of ‘technical issues,’ says Allianz’s El-Erian The moves in the Treasury market are not a signal on the economy but instead are a result of technical issues, according to Mohamed El-Erian, chief economic advisor to Allianz. The yield on the 2-year Treasury hit a new 15-year high on Friday, while the 10-year yield neared levels not seen since 2011. “A lot of people can’t get done what they want to get done, so they’re getting done what they can get done. Don’t underestimate the amount of suboptimal decisions being made right now because liquidity has become so patchy,” he said on CNBC’s “Squawk Box” Friday. The structural weakness and fragilities have been long in the making and amplified by the duration and size of the Federal Reserve’s QE, El-Erian added. “It matters because … if you can’t get what you want to get done, you will start spreading contagion around markets,” he said. — Michelle Fox 2 HOURS AGO Recession odds increasing as Fed stays aggressive, Citi’s Willer says A Federal Reserve staying hawkish in its approach to fight surging prices only heightens the risks of recession ahead, Citi’s Dirk Willer said in a note to clients Friday. “The likelihood of a US recession in 2023 is increasing given the hawkish Fed,” he wrote. “While it is widely understood that earnings estimates are too high given such recession risk, the market is unlikely to be able to look through falling earnings, as valuations also typically compress.” Willer also believes that the weak year-to-date numbers in equities and indications that the central bank is nowhere near ending its rate-hiking cycle further minimize the likelihood of a Santa Claus rally after the mid-term elections. “Our charts suggest that the case for a Nov/Dec rally crucially depends on how well the market has been doing going into year-end,” he wrote. “Only when Jan to October returns were strong has a year-end rally been in the cards. This year, Santa may not deliver.” Citi suggests investors take a defensive stance to play this uncertain market. The bank maintains a long position in healthcare, replacing its previous position in communication with utilities and staying short on financials and industrials. — Samantha Subin 3 HOURS AGO Where the major averages stand heading into Friday’s session All the major averages are slated to end the week with losses ahead of Friday’s trading session, with the Dow on track to break below its June closing low. Here’s where all the major averages stand: Dow Jones Industrial Average: Down 17.2% this year, 2.4% for the week 18.6% off its 52-week high Sits 0.5% above its June closing low S&P 500: Down about 3% for the week, 21.1% this year Sits 22% off its highs 2.5% above June’s closing low Nasdaq Composite: Down 3.3% this week, off 29.3% this year Sits 31.7% off its highs Roughly 4% above June’s low As of Thursday’s close, all the major S&P 500 sectors sit in negative territory for the year, with the exception of utilities and energy. For the week, the consumer staples sector has suffered the slimmest losses, down just 0.4%. — Samantha Subin 3 HOURS AGO Coinbase shares fall with crypto prices in premarket trading Coinbase shares slipped by about 4% in premarket trading as cryptocurrency prices fell. Although the cryptocurrency exchange has been diversifying its services and revenue streams, that business still accounts for the majority of its revenue, and trading activity tends to stall when prices are low. Data is unavailable Please contact cnbc support to provide details about what went wrong The crypto market is especially spooked along with the broader markets after the Federal Reserve this week recommitted to an aggressive rate hiking plan. — Tanaya Macheel 3 HOURS AGO Bleakley’s Boockvar sees ‘biggest financial bubble’ popping as yields surge Global government bond yields are soaring, a product of recent sharp central bank interest rate increases to control inflation. For Peter Boockvar, chief investment officer at Bleakley Financial Group, it’s more evidence of a bubble popping in sovereign debt in which real yields had been running at negative level for years. With yields moving opposite price, the capital losses for holders of those bonds are piling up as central bank are no longer able to keep rates low. “Bottom line, all those years of central bank interest rate suppression, poof, gone.” Boockvar wrote Friday morning. “These bonds are trading like emerging market bonds and the biggest financial bubble in the history of bubbles, that of sovereign bonds, continues to deflate. If the world’s central bankers didn’t decide to play god over the cost of money, we wouldn’t be now going thru the aftermath.” In the U.S., the 2-year yield, which is most susceptible to Fed rate hikes, was up 9.6 basis points Friday morning to 4.22%, up around 15-year highs. Similar surges are happening elsewhere, with 10-year gilts in the UK at 3.79%, the German 10-year bund around 2.03% and the Swiss 10-year at 2.34%. In addition to the Fed, the Bank of England, Swiss National Bank and the central banks in the Philippines and Indonesia, among others, also approved sizeable rate hikes this week. —Jeff Cox 3 HOURS AGO Stocks making the biggest moves premarket: Costco, Boeing, FedEx and more Here are some of the stocks making the biggest moves in Friday’s premarket trading: FedEx – FedEx remains on watch this morning after announcing a 6.9% increase in shipping rates and plans to cut another $4 billion in annual costs. FedEx fell 3.2% in the premarket. Costco – Costco lost 3.3% in the premarket despite reporting better-than-expected profit and sales for its latest quarter after reporting operating margins that were slightly below consensus. Boeing – Boeing lost 1.8% in the premarket after announcing it will pay $200 million to settle SEC charges that it made misleading claims about the safety risks of its 737 MAX jet after two of the planes were involved in fatal crashes. Check out the full list of stocks moving in premarket trading here. — Peter Schacknow, Samantha Subin 4 HOURS AGO Futures at their lows Stock futures are at their lows of the session having steadily declined the last four hours. As for potential catalysts for the rollover, the 2-year Treasury yield has continued its march higher, topping 4.2% in overnight trading. The U.S. dollar is also continuing to climb which could weigh on U.S. multinationals. The dollar move comes as the U.K. unveiled new economic measures to revive its economy. Oil is also falling with WTI futures now off by 3.3%. Dow futures WATCHLIST + Chart Line chart with 1378 data points. The chart has 1 X axis displaying Time. Range: 2022-09-22 11:17:00 to 2022-09-23 11:17:00. The chart has 1 Y axis displaying values. Range: 29600 to 30600. End of interactive chart. chart logo -John Melloy 5 HOURS AGO Goldman Sachs cuts S&P 500 price target to 3,600 Goldman Sachs sees the chances of a ‘hard landing’ resulting in a U.S. recession as more likely than ever following the Federal Reserve’s latest meeting and interest rate hike. That will weigh on stocks through the end of the year. The firm on Thursday slashed its year-end target for the S&P 500 to 3,600 from 4,300. The current target implies that the index will fall more than 4% through the end of the year. “The forward paths of inflation, economic growth, interest rates, earnings, and valuations are all in flux more than usual with a wider distribution of potential outcomes,” wrote David Kostin in a Thursday note. The bank also forecasts that in a recession, the S&P 500 could fall even further. Read more on CNBC Pro. —Carmen Reinicke 5 HOURS AGO Energy stocks among biggest premarket losers Energy shares were among the biggest losers in early premarket trading as crude futures rolled over on recession fears. WTI crude was down 2.5% to $81.33 a barrel. Shares of Exxon Mobil, Chevron and Schlumberger were all down more than 2% in premarket trading. -John Melloy 5 HOURS AGO Headed for a losing week Here are key market stats for the week: -The Dow is down -2.42% week-to-date, on pace for its 5th negative week in 6. -The S&P is down -2.98% WTD, on pace for its 5th negative week in 6. -The NASDAQ is down -3.33% WTD, on pace for its 5th negative week in 6. -All sectors are negative for the week, led to the downside by Real Estate, down -5.21%. Consumer Staples is the best performer, down -0.42%. -Chris Hayes 13 HOURS AGO CNBC Pro: Is it time to buy Treasurys? Here’s how to allocate your portfolio, according to the pros The latest threat to stocks now isn’t any macro risk — it’s rising 2-year Treasury yields, according to some fund managers and strategists. Short-term, relatively risk-free Treasury bonds and funds are back in the spotlight as the yield on the 2-year Treasury continues to surge. So should investors be fleeing equities and piling into bonds? Pro subscribers can read what the pros say about how to allocate your portfolio right now. — Weizhen Tan 12 HOURS AGO Nomura downgrades China’s 2023 growth outlook Nomura downgraded its forecast for China’s 2023 annual growth to 4.3% from 5.1%. Analysts cited a potentially prolonged Covid-zero policy or a spike in the nation’s infections after a possible reopening in March. The latest downgrade comes after Goldman Sachs lowered its outlook earlier this week to 4.5% from 5.3%. William Ma of Grow Investment Group told CNBC’s “Street Signs Asia” he’s optimistic on policy changes he sees coming after the People’s Party Congress in mid-October. —Jihye Lee 14 HOURS AGO CNBC Pro: Back hedge funds to outperform equities and bonds this year, UBS says As both stocks and bond prices fall simultaneously, hedge funds have broadly outperformed and are “well placed to navigate current market volatility,” according to a new report by UBS. As market volatility persists, the Swiss bank shared the types of hedge funds it prefers. Pro subscribers can read more here. — Ganesh Rao 16 HOURS AGO Costco, Scholastic shares fall after reporting earnings Scholastic and Costco both saw shares fall in post-market trading Thursday after reporting quarterly earnings. Scholastic shares fell 3.3% after sharing declines of 82% and 74% in operating income and earnings before taxes in the first quarter compared to the same period a year ago. The children’s book maker saw a 1% increase in revenue. Costco, the wholesale retail chain, was down about 2.6% after reporting its third-quarter earnings. Though the company posted expectation-beating increases in earnings per share and revenue that also marked improvements from a year ago, the company reported increases in freight and labor costs. — Alex Harring 17 HOURS AGO Futures start flat in post-market trading Stock futures were flat after another tumultuous day, as investors continue grappling with the Federal Reserve’s decision to up rates and worries about the health of the economy. Dow Jones Futures went up 41 points, or .14%, to 30,190. The S&P 500 was up 4 points, which translates to .11%, at 3,776. The Nasdaq 100 rose 10 points, .09%, to 11,575,50. — Alex Harring TRENDING NOW Alphabet CEO Sundar Pichai gestures during a session at the World Economic Forum (WEF) annual meeting in Davos, on January 22, 2020. Google CEO Pichai tells employees not to ‘equate fun with money’ in heated all-hands meeting Traders work on the floor of the New York Stock Exchange (NYSE) on January 27, 2020 in New York City. Dow drops 400 points, breaks below 30,000 on fear the Fed is overdoing its inflation fight Sterling hit its lowest level since Jul. 1, 2020. British pound plunges, bonds sink after government announces tax cuts Beatrice Fihn, Nobel laureate and executive director of the International Campaign Against Nuclear Weapons, urged political leaders to renew efforts to get rid of all nuclear weapons by signing and ratifying the Treaty on the Prohibition of Nuclear Weapons. Putin’s ‘incredibly dangerous’ nuclear threats raise the risk of an unprecedented disaster People arrive to receive Russian passports at a centre in Kherson after Russian President Vladimir Putin signed decree to make it easier for residents of Kherson and Melitopol regions to get passports, in Kherson, Kherson Oblast, Ukraine on July 21, 2022. Referendums begin in Ukraine’s occupied regions; border lines grow as Russians flee military call-up by TaboolaSponsored LinksFROM THE WEB All Natural CBD Products For Your Pets - On Sale Today Lee Hemp CBD Are sanctions on Russia working? The Economist
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