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Markets

European stocks climb as global markets look for rebound; Stoxx 600 up 1%

LONDON — European stocks advanced on Friday as global markets looked to regain some ground after a bruising week, with investors assessing the outlook for inflation and interest rates.

The pan-European Stoxx 600 added 1% in early trade, with banks climbing 1.9% to lead gains as all sectors and major bourses entered positive territory.

European markets fell on Thursday as investors remained concerned about slowing growth, interest rate hikes and red-hot April inflation data from the United States, which sparked concerns that a path of aggressive interest rate hiking lies ahead.

US Federal Reserve Chairman Jerome Powell said Thursday that he could not guarantee a so-called “soft landing” that tempers inflation without pushing the economy into recession.

Global stocks have endured a rollercoaster week but look set to regain some ground on Friday. Shares in Asia-Pacific advanced by mid-afternoon with Japan’s Nikkei 225 leading the way on a 2.6% climb.

Meanwhile, US stock futures were higher in early premarket trade as investors hope the S&P 500 can avoid sliding into bear market territory, with the index closing down more than 18% from its all-time high on Thursday, just 2% shy of an official bear market.

The tech-heavy Nasdaq is already in a bear market, closing Thursday down more than 29% from its all-time high, while the Dow Jones Industrial Average has failed for six consecutive trading sessions.

The Stoxx 600 in Europe began Friday’s session down 13% since the beginning of the year.

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Investors are also monitoring the geopolitical fallout from the war in Ukraine. Russia on Thursday threatened retaliation against Finland after Finnish leaders said the northern European nation must apply to join NATO “without delay.”

European leaders are also facing a race to secure alternative gas suppliers after Moscow announced sanctions on European subsidiaries of its majority state-owned corporation Gazprom. The move came after Ukraine’s state-owned grid operator suspended Russian flows into Europe through a key entry point.

On the data front, French inflation was confirmed at an annual 5.4% in April.

Euro area industrial production readings for March are due on Friday morning.

In terms of individual share price movement, British investment company Bridgepoint Group jumped more than 10% following its annual general meeting, while Finnish state-owned energy company Fortum climbed 9.9% in early trade.

Shares of Belgian pharmaceutical company UCB fell 13% after the US Food and Drug Administration said it cannot approve a key psoriasis drug.

Swedish industrial company Atlas Copco dropped 75% due to recalculation after a share split which came into effect on Friday, whereby one share was replaced by four new ordinary shares and one redemption share.

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Markets

Enterprise and desktop PCs still ‘a healthy market’ as personal PCs see slowdown, says Micron CEO

Micron chief executive Sanjay Mehrotra told CNBC’s Jim Cramer on Thursday that the market for enterprise and desktop PCs remains healthy despite the personal PCs market experiencing a slowdown.

“It’s not like anything is falling off the cliff,” Mehrotra said in an interview on “Mad Money.”

“Yes, while consumer PCs lately are not experiencing the same kind of growth where they experienced in [the] last two years … enterprise PCs and desktop PCs continue to be a healthy market,” he added.

As people return to the office and to in-person learning this year, PC sales have receded. Gartner said in April that it estimates shipments of PCs slid 7.3% from a year earlier. Canalys noted a 3% dip in shipments during the first three months of this year.

The losses come after 2021 saw a huge boom in the PC market – PC sales experienced its fastest growth in 20 years during the first quarter of 2021 and saw a 15% growth overall that year.

The Micron CEO also chimed in on handsets, which he says have seen stabilized growth but also remain healthy.

“With respect to handsets, in China, with certain smartphone manufacturers, their end demand due to Covid lockdowns is somewhat weak. So some inventory adjustments by certain handset manufacturers in China [have been made],” he said. “What is important is, overall handsets … continues to be a large market,” he added.

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Personal Finance

Personal finance education is gaining momentum across the US

Nine-year-old student Roberto Nieves Fernandez studies personal finance topics on his laptop using online resource center SmartPath.

SMARTPATH

More states are requiring students to take personal finance education courses before they graduate high school.

There are currently 23 states that mandate a personal finance course for students, according to the 2022 Survey of the States released Thursday from the Council for Economic Education.

Since 2020, the last time the survey was published, two states — Nebraska and New Mexico — have passed legislation ensuring that all students will take a personal finance course before they graduate high school.

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“While we’re encouraged by some progress in our latest survey, all young people across the country need more and deserve better,” said Nan Morrison, president and CEO of the Council for Economic Education.

unequal progress

There’s been consistent momentum in states adding personal finance education in various ways for more than two decades. The number of states that include personal finance in their education standards has jumped to 47 in 2022, from 21 in 1998.

Of course, what is offered and required in those 47 states varies widely, the report found. While 27 states offer a personal finance course in high school, only 23 mandate that students must take one to graduate.

And, of those, only nine courses are a stand-alone personal finance course — the remaining ones are integrated into another class.

“The state of financial education offered to students in the US varies significantly,” said Worku Gachou, head of North America, inclusive impact & sustainability, at Visa, which today with the Council for Economic Education launched FinEd50, a coalition of private, public and nonprofit leaders that will promote guaranteed access everywhere to these essential courses.

“Where students live should not impact whether they have access to knowledge that will help them learn how to make informed financial decisions in their lives,” Gachou added.

These differences matter because without broader guidelines, students from lower-income families and people of color often don’t have the same access to personal finance education, said Morrison.

“If we don’t get requirements passed, it just exasperates the gaps that are already there,” Morrison said.

Economics courses falling behind

The report also found that while there’s been consistent momentum in adding personal finance education and requirements to high school curriculums in recent years, guidelines for economics courses have stagnated.

Since 2011, only three states have added a requirement that students must take an economics course to graduate.

While economics sometimes overlaps with personal finance education, both are important courses of study, Morrison said. Studying economics gives students the opportunity to think about and analyze a lot of topics relevant to the world such as the environment, housing and employment.

Personal finance courses, on the other hand, help students learn to manage their own money and make solid choices, given what’s happening in the world.

“In my ideal world, every kid would have at least a semester of econ and at least a semester of personal finance to give them a good set of skills,” she said.

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Business

Jim Cramer says investors shouldn’t allow a tumultuous market to prevent them from finding ‘better opportunities’

CNBC’s Jim Cramer on Thursday said that while investors should tread carefully as the stock market continues to be stormy, they also shouldn’t be afraid to make moves to strengthen their portfolios.

“We want to be very careful to buy stocks with stories that can handle a slowdown. … A good portfolio manager never sells his winners to fund his losers, even if it’s embarrassing. You’ve got to give the losers the boot,” the “Mad Money” host said.

The Dow Jones Industrial Average fell 0.33% on Thursday while the S&P 500 dropped 0.13%. The tech-heavy Nasdaq Composite inched up 0.06%.

“But we’re not complacent, either way. We are very worried about the wealth destruction, for instance, in crypto. We hang our heads on the once-great FAANG stocks. But we can never stop looking for opportunity,” he added , referring to his acronym for stocks of Facebook-parent Meta, Amazon, Apple, Netflix, and Google-parent Alphabet.

Cramer’s comments come after cryptocurrencies saw a sell-off that shed over $200 billion from the entire market in a day. Bitcoin dropped below $26,000 for the first time in over a year.

Ether, the second-largest digital currency, dropped below $2,000 for the first time in almost a year. The Terra project’s UST stablecoin lost around 75% of its value on Wednesday before gaining slightly while its sister token, luna, lost around 98% of its value over the last week.

Stablecoins are seen as safe havens by digital currency investors when the market is tumultuous, but UST has teetered in value.

In his analysis of the stock market, Cramer emphasized its unpredictability, noting that Thursday appeared to be a perfect opportunity for a rally.

“The market should’ve bounced hard today because interest rates were down and there was no real bad news,” he said.

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Business

Stock futures fall slightly with S&P 500 teetering on edge of a bear market

Stock futures dipped on Thursday evening as investors geared up for the S&P 500 to potentially slide into official bear market territory.

Futures tied to the Dow Jones Industrial Average shed 68 points, or 0.2%. S&P 500 futures lost 0.2% and Nasdaq-100 futures fell 0.3%.

On Wednesday, the S&P 500 and Dow bounced off their intraday lows but still fell 0.1% and 0.3%, respectively. The S&P closed down more than 18% from its all-time high, and will be in an official bear market if that loss deepens to 20%. The Dow has declined for six straight trading sessions.

The Nasdaq squeaked out a gain of less than 0.1% on Wednesday, but the tech-heavy index is already in a bear market, down more than 29% from its all-time high.

The stock market has been slumping for months, starting with high-growth unprofitable tech stocks late last year and spreading to even companies with healthy cash flows stocks in recent weeks. On Thursday, Apple fell into a bear market of its own, becoming the last of the Big Tech names to succumb to the sell-off.

The decline has wiped much of the rapid gains stocks enjoyed off their pandemic lows in March 2020.

“Large deviations from long-term price trends have been used for bubble identification. We find that US equities have been in a bubble based on this metric, and are now exiting it,” Citi strategist Dirk Willer said in a note to clients on Thursday .

One reason that stocks have struggled in recent months is high inflation, and the Federal Reserve’s attempts to contain prices by raising rates. Fed Chair Jerome Powell told NPR on Thursday that he couldn’t guarantee a “soft landing” that brought down inflation without causing a recession.

Though stocks enjoyed a two-week rally after the Fed’s first rate hike in March, those gains were quickly erased by a brutal April and the selling has continued in May. There are some signs, such as investor sentiment surveys and some stabilization in the Treasury market this week, that the market could be near, but many investors and strategists say the market may need to take another sizable step down.

“You’re getting this market that really is begging for a bottom, for a relief rally. But, at the end of the day, there really hasn’t been a capitulation day,” said Andrew Smith, chief investment strategist at Delos Capital Advisors.

Developments in cryptocurrencies have also unnerved Wall Street this week, with bitcoin falling well below $30,000 and stablecoins struggling to hold their peg.

On the economic data front, Friday features a read on April import prices and an early look at May consumer confidence.

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Mobile

Why it’s bad news for the entire market when Apple has a big drop

Apple stock is down over 8% this week, wiping off about $200 billion in value, and dragging down the Dow and Nasdaq indexes. Apple is now officially in a bear market alongside other technology megastocks.

Apple has failed during a bad week for equity markets, which are selling off stocks in nearly every industry on fears of Fed rate hikes, weakening consumer confidence, rising inflation, and supply chain challenges around the world. The Nasdaq Composite is down over 7% so far this week and is on pace for a six-week losing streak.

Apple faces some supply chain challenges, but the outlook for its business hasn’t markedly changed this week.

The company has typically been viewed as a “safe” place for investors to park their money. The fact that it’s selling off alongside everything else is a bad sign for other stocks, and a sign of deteriorating investor confidence.

Renaissance Macro Research’s Jeff DeGraff told CNBC on Thursday that in a bear market, there’s nowhere to hide — and that includes Apple.

“For tech, when they start taking out the leadership in tech, that’s a better sign that they’re starting to take everything,” DeGraff said.

“Our assumption is that the AAPL selloff will continue, not because we know anything about this quarter’s iPhone shipments or revenue services, but because we believe that once investors start selling best-of-breed names they are rarely done in one day,” he said Datatrek co-founder Nick Colas on Thursday.

It’s a remarkable reversal from last November, when growth-heavy tech stocks began to fall and Apple often attracted investors who seek a lower-risk bet on tech.

Apple still has prodigious cash flow, which enables it to endure slowdowns and return profits to shareholders. It generated $28 billion in operating cash flow in the March quarter on total sales of $97.3 billion. It said it spent $27 billion during the quarter to repurchase its own shares and pay dividends.

Weakening consumer confidence has not started to hurt iPhone sales — in fact, in the March quarter, every single one of Apple’s businesses grew except for iPads (which Apple blamed on a chip shortage.)

When CEO Tim Cook was asked about the effects of macroeconomic conditions and inflation on his business in an earnings call last month, he said the company’s bigger problem was making enough iPhones and Macs to meet global demand — not a slowdown in demand.

“Right now, our main focus, frankly speaking, is on the supply side,” Cook said.

But even if Apple were to start to feel the effects of deteriorating macroeconomic conditions, it remains a company with a globally famous brand, premium profit margins, stores in key shopping centers, and an collection of related products and services that appeal to wealthy consumers around the world.

If growth slows, Apple will continue to generate enormous profits and sales — even if it’s no longer the most valuable company in the world.

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Categories
Markets

These stocks should let you ‘sleep at night,’ Bank of America says

UnitedHealth Group signage is displayed on a monitor on the floor of the New York Stock Exchange.

Michael Nagle | Bloomberg | Getty Images

As the market churns, Bank of America found steady stocks for investors to ride out market volatility.

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Categories
Markets

Hedge fund winners and losers emerge in brutal tech-driven sell-off

The stock market is going through a period of uncertainty and volatility, but some sectors could benefit from that.

Timothy A Clary | AFP | Getty Images

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A wide divergence of performance has formed in the hedge fund industry amid the stock route on Wall Street this year.

Tech-focused investors like Brad Gerstner and Tiger Global are getting crushed as growth stocks became the epicenter of the market carnage in the face of rising rates. Meanwhile, some value, macro and international oriented players are reaping sizable gains despite the market bloodbath.

Macro funds were a standout winner in April with a 5% surge, extending its 2020 rally to 15.5% thanks to strong performance in commodity, fundamental discretionary and trend-following strategies, according to data from HFR. On the flip side, technology-heavy hedge funds were among the biggest losers last month with a near 5% loss overall, HFR data said.

“If you owned growth stocks this year – like we did at Altimeter – you got your face ripped off,” Altimeter Capital’s CEO Gerstner said in a Twitter post Thursday. “As a hedge fund we expect to lose less than the indexes on the way down – this year we have lost more… Markets moved fast- we moved too slow.”

Altimeter’s four biggest holdings — Snowflake, Meta, Microsoft and Uber — are all down from 20% to as much as 60% year to date. The technology sector, especially unprofitable firms and richly valued software names, have been hit the hardest as of late. The Nasdaq Composite slid more than 13% in April, dropping almost 30% from its all-time high.

Chase Coleman’s growth-focused flagship fund at Tiger Global tumbled 15% last month, pushing its 2022 route to 44% and wiping out nearly all of its gains since 2019, according to Bloomberg News. Its biggest holdings as of the end of 2021 included JD.com, Microsoft and Sea Ltd, which are all down double digits this year.

Still, many players managed to dodge the brutal sell-off and overcome the extreme volatility on Wall Street.

Citadel’s multistrategy flagship fund Wellington rallied 7.5% last month, bringing its year-to-date performance to 12.7%.

New York-based activist and event-driven hedge fund manager Coast Capital is also beating the market this year as they looked for out-of-favor value names in Europe. Its Engaged fund is up 4% in April, advancing over 15% in 2022, according to a person familiar with the returns.

“Some of these companies we buy have lower valuations and lower share prices than they did in March 2009,” said James Rasteh, CIO of Coast. “When we turn our companies around, there’s often an important improvement in the margins and profitability of the companies. We make money even in declining markets.”

The overall hedge fund community dipped 0.9% in April, compared to the S&P 500’s near 9% loss for its worst month since March 2020, according to HFR. The S&P 500 is edging closer to bear market territory, down 18% from its record high, as the Federal Reserve’s aggressive tightening spurred recession worries.

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Categories
Business

GameStock jumps more than 20% in odd trading; AMC shares also pop

A screen displays the logo and trading information for GameStop on the floor of the New York Stock Exchange (NYSE) March 29, 2022.

Brendan McDermid | Reuters

Shares of two meme stocks emerged on Thursday, adding an unexpected wrinkle for a stock market that has been dropping in choppy trading for more than a month.

GameStop jumped more than 20% and was halted for volatility multiple times. The stock of theater chain AMC Entertainment popped 18%.

GameStop and AMC turned heads early last year when a band of retail investors coordinated trades on online chatrooms to create massive short squeezes in these stocks widely hated by hedge funds and other players. The meteoric rallies inflicted huge pains for many hedge funds and other short sellers involved in these speculative names.

Since then, the stocks have retreated from their peak prices, and short-sellers have started to build positions once again. According to FactSet, AMC has short interest of 19.5%, while GameStop sits at 21.4%. Short interest is a measure of what portion of a company’s available shares, or float, is sold short.

Those large bets against the company can sometimes lead to dramatic one-day moves in a stock, as hedge funds move to close out their short positions when a stock rises, thus creating more buying pressure. This process is known as a short squeeze.

Even with Thursday’s big moves, the stocks remain well below their heights from the first half of 2021. GameStop, which rose as high as $483 per share on an intraday basis last January, was trading between $90 and $100 per share on Thursday.

AMC, which hit an intraday of $72.62 last June, was at around $12 per share on Thursday.

Because the market caps of the companies have failed so much, it is easier for just a few trading shops, or even one large fund, to force a new short squeeze.

In 2021, both AMC and GameStop took advantage of their temporarily elevated share prices to sell additional stock and raise capital. AMC CEO Adam Aron has made a major effort to embrace the retail investors who participated in the rally, answering questions from small-dollar traders on earnings calls and introducing shareholder perks at the physical movie theaters.

AMC has used the cash it raised in part to buy up other theaters around the country. However, the company also bought a stake in a small gold mining company earlier this year that has a shaky financial history.

— CNBC’s Yun Li contributed to this report

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Categories
Markets

5 things to know before the stock market opens Thursday, May 12

Here are the most important news, trends and analysis that investors need to start their trading day:

1. Stock futures drop after Wall Street extends its multiday losing streak

Traders on the floor of the NYSE, May 11, 2022.

Source: NYSE

US stock futures dropped Thursday as the broad sell-off and revaluation of risk assets continued with little place to hide. Confirmation on somewhat moderate inflation did not move the needle.

  • The morning after earnings, the Dow component Disney dropped nearly 5% to $100 per share in the premarket.
  • Apple, recently slumping with the rest of the market, has been dethroned as the world’s most valuable company by oil giant Saudi Aramco.
  • Ford and General Motors both fell sharply in the premarket. Wells Fargo downgraded both stocks two notches to underweight from overweight, saying 2022 could be “peak profits” for legacy automakers.
  • Bitcoin and the entire crypto market’s recent downturn intensified Thursday.
  • Treasury prices, which move inversely to yields, jumped as investors sought the perceived safety of bonds.
  • The Dow Jones Industrial Average, the S&P 500 and the Nasdaq on Wednesday fell 1%, more than 1.6% and nearly 3.2%, respectively, as multiday losses mounted.

2. Wholesale inflation rose 11% in April as producer prices keep accelerating

People work at the Rivian Automotive electric vehicle factory in Normal, Illinois, April 11, 2022.

Kamil Krzaczynski | Reuters

The producer price index, this week’s second major inflation report, rose 0.5% in April, as expected. The core rate, which excludes food and energy prices, gained a less-than-expected 0.4%. Year-over-year, April PPI was up 11% and core was up 8.8%. On Wednesday, April consumer prices logged another strong advance, albeit at a slightly slower rate.

  • A read on the second pillar of the Federal Reserve’s dual mandate of fostering price stability and maximum employment was also out before the opening bell Thursday. Initial jobless claims for the week ended May 7 rose slightly to 203,000. Estimates had called for fewer first-time claims for last week.
  • While lower early Thursday, bond yields have been rising to multiyear highs, with the 10-year Treasury yield topping 3%, as traders revolt against the Fed, worrying that inflation will remain high even as the economy slows.

3. Bitcoin plunges to 16-month lows while the entire crypto market slumps

Bitcoin slipped at one stage to below $27,000 on Thursday for the first time in more than 16 months, as the cryptocurrency market extended its losses, in part, on fears over rising inflation. Bitcoin, touted as a store of value like gold by proponents, has been trading in tandem with tech stocks and the Nasdaq recently. The world’s largest crypto has failed 60% since its all-time high in November.

  • Tether, the world’s largest stablecoin, broke below its $1 peg Thursday, adding to market concern after the downfall of stablecoin protocol Terra. TerraUSD, or UST, is also supposed to mirror the value of the dollar, but it plummeted to less than 30 cents Wednesday, shaking investor confidence in decentralized finance. TerraUSD was trading around 45 cents Thursday.

4. Disney sinks as CFO warns streaming won’t be as strong later this year

In this photo illustration, a hand holding a TV remote control in front of the Disney Plus logo on a TV screen.

Raphael Henrique | Soup Images | lightrocket | Getty Images

Shares of Disney initially rose in after-hours trading Wednesday. But they quickly turned lower after the company’s CFO acknowledged that the second half of the year may not be quite as strong relative to the first half when it comes to streaming. Disney+ ended its fiscal second quarter with 137.7 million subscribers, up 7.9 million from a year ago and better than estimates. Investors were keen to see those Disney+ numbers after Netflix last month reported a decline in paid subscribers for the first time in more than 10 years.

  • Disney’s fiscal second-quarter revenue rose 23% to $19.25 billion, helped by strong theme park sales. Revenue would have been $1 billion higher, if not for the early termination of some licensing agreements to make more content available for streaming. Disney reported adjusted earnings of $1.08 per share.

5. Beyond Meat plummets after wider-than-expected quarterly loss, revenue miss

Ethan Brown, founder, president and CEO of Beyond Meat.

Adam Jeffrey | CNBC

Beyond Meat shares tumbled 25% in Thursday’s premarket, the morning after the maker of plant-based meat alternatives reported a wider-than-expected quarterly loss and lower-than-expected revenue. The company cited a number of areas that were a drag on results, including steeper discounts and cheaper prices for international consumers and the launch of the company’s plant-based jerky, which weighed heavily on margins.

  • Looking to soothe investors, management said the just-reported first quarter is expected to be the low point for margins in 2022, and jerky production should be much more efficient by the second half of this year. Beyond Meat did reiterate its full-year revenue forecast of $560 million to $620 million.

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