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
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
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.
Meanwhile, the British pound and euro slumped against the dollar after the new U.K. government announced tax cuts to boost growth.
— Sarah Min
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
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
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
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
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
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
- Down about 3% for the week, 21.1% this year
- Sits 22% off its highs
- 2.5% above June’s closing low
- 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
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.
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
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.
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
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%.
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.
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.
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%.
CNBC Pro: Is it time to buy Treasurys? Here’s how to allocate your portfolio, according to the pros
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.
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.
— Ganesh Rao
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
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