This week was hardly bullish. Here’s what investors witnessed:
Oil prices gave back most of their OPEC+ production cut gains.
The Philadelphia Fed manufacturing index reached a new low for this economic cycle and missed consensus estimates. Other indicators from the Conference Board’s Leading Economic Index also fell.
Initial jobless claims surprised to the upside for the fourth straight week.
Weak earnings and more caution emerged from freight operators JB Hunt and Union Pacific as well as from auto retailer AutoNation. Netflix and Taiwan Semiconductor, a key Apple supplier, issued guidance warnings too.
Tesla reported a quarterly gross margin miss on recent price cuts.
The bottom line is that there is an ongoing negative shift in economic data, likely as interest rate hikes take further hold in the economy. That’s a red flag.
Oddly enough, though, investors don’t appear to be picking up on it judging by the resilience in the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average.
“The latest data is another piece of evidence suggesting there’ll be a U.S. recession soon, which fits with our own view at DB Research that expects one later in the year,” Deutsche Bank strategist Jim Reid wrote in a client note.
Good words of wisdom right now.
Tesla head Elon Musk talks to one visitor as he arrives to have a look at the construction of the Tesla Gigafactory on September 03, 2020, near Gruenheide, Germany. (Photo by Maja Hitij/Getty Images)
3 things you may have missed
1. The mood among AmEx cardholders: I caught up with American Express CEO Stephen Squeri, and he struck an upbeat tone on demand trends.
“The economy is definitely bifurcated, and I think at the lower end of the economy, you are seeing some stress, but we just don’t have that,” Squeri said, adding he is seeing strong demand for travel this spring and summer. The travel call-out is in line with what we have heard this earnings season from Delta and United Airlines.
2. Elon Musk goes storm-watching: One interesting highlight from Tesla’s earnings call was when Elon Musk said he doesn’t see the economy improving until 2024. The CEO predicted “economic stormy weather” for another year before “things start getting sunny around spring next year.”
Musk joins the likes of JPMorgan CEO Jamie Dimon in using weather to describe the economic outlook.
3. About that cost of credit: In a Yahoo Finance Live exclusive, Cleveland Fed President Loretta Mester told Jenn Schonberger that there is only one direction for interest rates in the near term: higher.
“I do think that, given how stubborn inflation is and given the still-strong labor market, I do think that rates are going to have to move up to above that 5% level,” Mester said.
Loretta J. Mester, president and CEO of the Federal Reserve Bank of Cleveland, looks on at Teton National Park where financial leaders from around the world gathered for the Jackson Hole Economic Symposium outside Jackson, Wyoming, U.S., August 26, 2022. REUTERS/Jim Urquhart
C-Suite Quote of the Week
“We’re not seeing a lot of trade down [among consumers],” Procter & Gamble (PG) CEO Jon Moeller told Yahoo Finance Live. “We’re seeing, if anything, more careful usage of the product that they have bought. So they might use a half a sheet of a Bounty paper towel as opposed to a whole sheet. But generally, again, just looking at the numbers, the consumer is holding up extremely well.”
Chart of the Week
For those investors ignoring the potential impending debt ceiling risk, here’s a helpful reminder from the macroeconomic team at Goldman Sachs on how markets priced the 2011 debt ceiling debate:
Remember the 2011 debt ceiling debacle?
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
