The Dow is down 650 points, on pace for one of its worst point drops in history.
Yet it is down only 2.5% today. That’s far, far from its worst day on a percentage basis. That took place on October 19, 1987, “Black Monday,” when the Dow lost 22.6% in a single day.
Here are the worst point drops on record:
Date … Change
02/05/2018 … -1,175.21
02/08/2018 … -1,032.89
10/10/2018 … -831.83
12/04/2018 … -799.36
09/29/2008 … -777.68
08/05/2019 … -767.27
10/15/2008 … -733.08
03/22/2018 … -724.42
09/17/2001 … -684.81
12/01/2008 … -679.95
10/09/2008 … -678.91
02/02/2018 … -665.75
01/03/2019 … -660.02
12/24/2018 … -653.17
08/08/2011 … -634.76
04/14/2000 … -617.77
05/13/2019 … -617.38
06/24/2016 … -610.32
10/24/2018 … -608.01
11/12/2018 … -602.12
The Fed made a big mistake by raising rates in December, said Mohamed El-Erian, chief economic adviser at Allianz told CNN Business anchor Julia Chatterley on the “Markets Now” live show.
Markets freaked out, and they priced in a bunch of rate cuts to correct the December rate hike. Now the Fed has to regain control of its message, El-Erian said.
“The Fed lost control of the narrative. If they don’t [lower rates], it will cause market turmoil,” he said, predicting another rate cut next month.
“What they should do is regain the narrative,” he added. “But it’s going to end up doing what the markets want it to do – but it won’t help the economy or the markets, by the way.”
The Trump administration delayed action on some tariffs Tuesday, relieving tech companies, which would have been hit particularly hard by the particular import taxes set to go into effect September 1.
After the delay, they’ll go into effect December 15.
Trump “blinked,” Mohamed El-Erian, chief economic adviser at Allianz, told CNN Business anchor Julia Chatterley on the “Markets Now” live show.
The administration realized that tariffs going into effect on September 1 would have hurt holiday sales, pushing up the prices of computers, smartphones, toys and shoes. Now, those price hikes will go into effect later – perhaps after the new year.
The yield curve inverted, warning investors that a recession is coming. That’s worrying.
But there’s some wackiness with this latest yield curve inversion, sending some mixed signals to investors, Mohamed El-Erian, chief economic adveriser at Allianz told CNN Business anchor Julia Chatterley on the “Markets Now” live show.
“We should be concerned about what’s pushing yields down, and that is very weak economic data out of China and Germany,” El-Erian said. “That is real: The global economy is weakening.”
But he noted that the US economy remains healthy. The yield curve is also inverting because the Fed is lowering rates and the global economy is so weak compared to the United States.
Hold onto your hats. Stock market losses are accelerating.
The yield curve inverted. Germany is close to a recession. China’s economy is in a major slump. The trade war continues to loom large.
Investors are rushing to safe havens: Bonds are soaring. Gold is up 1%.
It’s that kind of day.
Macy’s (M) stock sank 16% after reporting rough earnings.
The department store’s profit fell 48% during its spring quarter compared with the same period a year ago and it lowered its profit expectations for the remainder of the year. Macy’s stock is down 45% for the year.
Shares of rival retailers also dropped sharply:
They all report earnings in the coming weeks.
Coca-Cola (KO) is the only stock moving higher on the Dow 30 list, our Paul R. La Monica notes:
Mortgage rates are lower than they’ve been in years, causing a tsunami of refinancing.
The average rate on a 30-year fixed rate mortgage fell to 3.93% last week for loans of $484,000 or less — the first time those loans have been below 4% in nearly three years, according to the Mortgage Bankers Association, the industry trade group. Rates are even lower on larger mortgages and on 15-year loans.
That sparked a 37% jump in the number of refinancing loans last week compared to the previous week, said the MBA. Compared to a year ago, the rate of refinancing has nearly tripled.
The Dow slid more than 400 points after the bond market, for the first time in over a decade, flashed a warning signal that has an eerily accurate track record for predicting recessions.
The 10-year Treasury bond yield fell near 1.6% Wednesday, dropping just below the yield of the 2-year Treasury bond. It marked the first time since 2007 that 10-year bond yields fell below 2-year yields, a phenomenon that has preceded every recession in the modern era.
US stocks fell as investors sold stock in companies and moved it into bonds.
The bond market is flashing a big neon caution sign.
Yields on 2-year US Treasury bonds dipped below the yield on the US 10-year bond Wednesday morning. It was the first time the 10-year yield was below the 2-year yield since 2007 — just before the Great Recession. Both were hovering around 1.62%.
In another worrisome sign, the yield on the 30-Year US Treasury fell to a record low Wednesday of about 2.06%.
This is significant. When shorter-term rates are higher than longer-term bond yields, that is known as an inverted yield curve. The 3-month US Treasury already inverted versus the 10-year this spring.
Yield curve inversions have often preceded recessions and are a sign of just how nervous investors are about the immediate outlook for the economy. They are demanding higher rates for short-term loans, which is not normal.
Typically, investors expect to get paid a higher rate of return when they are lending money for a longer period of time, because the risks are higher.
WeWork’s parent company, The We Company, publicly filed paperwork on Wednesday to raise $1 billion in an initial public offering.
The amount is a placeholder and will probably be substantially higher. It will trade under the ticker symbol “WE.”
The company is moving forward with its plans to go public despite losing a staggering $1.9 billion last year, according to its IPO prospectus, an unprecedented amount for a company about to go public.
The We Company continued to burn through money this year. In the first half of 2019, the company lost $904 million, a roughly 25% increase from the same period in the prior year. But its business is growing fast too. Revenue roughly doubled to $1.5 billion in the first six months of the year.
Read here about how its losses stack up against other tech companies
Dow futures slid nearly 200 points Wednesday after the bond market, for the first time in over a decade, flashed a warning signal that has an eerily accurate track record for predicting recessions.
Here’s what happened: The 10-year Treasury bond yield fell to 1.627% Wednesday morning, below the 1.632% yield of the 2-year Treasury bond. It marked the first time since 2007 that 10-year bond yields fell below 2-year yields.
CNN Business’ Fear and Greed Index signaled investors were fearful:
US stock futures point lower Wednesday following weak economic data out of Germany and China:
European markets dropped in early trading. Britain’s FTSE 100 dipped 0.7%, while Germany’s DAX shed 1.1%.
Stocks in Asia finished higher, helped along by the US rally during the previous session. Japan’s Nikkei rose 1%. Hong Kong’s Hang Seng gained 0.1% after two days of protests disrupted flights at the city’s airport.
Tuesday’s close: The Dow closed up 1.4%, the S&P 500 rose 1.5%, and the Nasdaq gained 2%.
The United States and China have called another truce in their trade war.
But Mohamed El-Erian, chief economic adviser with Allianz, thinks it would be a mistake to assume that a deal is definitely in the cards.
The Dow soared Tuesday after the Trump administration delayed some tariffs on Chinese goods set to begin on September 1. It now plans to put those tariffs in place on December 15.
But investors don’t yet appreciate what will almost certainly come next: another trade war escalation. Any cease fire between the United States and China will would be short-lived, El-Erian told CNN Business on Tuesday.
Investor jitters have a lot to do with the fact that German’s economy is shrinking while pressure builds in China.
Germany said Wednesday that GDP for the three months ended June contracted 0.1% compared to the previous quarter, in line with analyst expectations. That’s down from 0.4% growth in the first three months of the year.
The world’s fourth largest economy, and Europe’s biggest, has been hit by what analysts describe as a “perfect storm” of negative factors, including the trade war, weak global auto sales and fears of a disorderly Brexit.
CBS (CBS) and Viacom (VIA) are merging, putting two of the biggest brands in entertainment back under one corporate banner.
The deal will create a company with more than $28 billion in revenue. Its businesses include CBS’ broadcast network, the movie studio Paramount and cable networks like Showtime, MTV, Nickelodeon, BET and Comedy Central.
The two companies used to be one, but split in 2006. Shari Redstone, the president of CBS parent company National Amusements, has been trying for years orchestrate a reunion.
Shares of CBS are down 2% in premarket trading, while Viacom stock is off 0.4%.
