The Federal Reserve is expected to cut rates again before year-end, but some investors are worried that the central bank is using up its arsenal while the economy is still doing fine.
Even though a rate cut later this month would be good for the market in the short term, the unemployment rate is near a 50 – year low and markets are relatively close to record highs.
“We worry – long-term – if we do hit a recessionary period, will the Fed have used up all of its bullets?” Phil Bak of Exponential ETFs told Paula Newton on CNN Business’ digital live showMarkets Now.
Chances for a quarter percentage point rate cut at the October 30 meeting are at 81%, according to the CME’s FedWatch Tool. A week ago it was at
Shares in the healthcare industry might not be the defensive plays that they used to, as legal and political risks are overshadowing the sector, said CNN Business’ own Paul La Monica on the digital live showMarkets Now.
Three of the worst performingDowstocks of the year areWalgreens Boots Alliance(WBA),Pfizer(PFE) andUnitedHealth (********************* (UNH).
With President Donald Trump pushing for lower drug prices and Democratic presidential candidate Elizabeth Warren supporting Bernie Sanders’ Medicare For All idea, there is plenty to worry about for healthcare companies.
A case in point this week is consumer care companyJohnson & Johnson(JNJ), which was ordered to pay $ 8 billion in damages in a case involving the marketing of its anti-psychotic drug Risperdal.
Stocks are up today on hopes that the United States and China could reach a partial trade deal, but that doesn’t mean the rally is here to stay.
“The whole China story has beaten up the market a lot,” said Peter Tuchman of Quattro M Securities on the CNN Business digital live showMarkets Now.
Tuchman qualified today’s upward move as a bounce back.
“A headline or a tweet can move this market 300 points or more, “he added.
Investors are on the sidelines as long as the uncertainty about whether there will be a trade deal after all.
The good news is thatWall Street’s favorite recession signalhas gotten a bit more optimistic . The bad news is that the New York Federal Reserve’s recession model is still flashing red.
The chance of a recession in the United States over the next 12 months dropped to 35% in September, according to anupdate publishedthis week by the NY Fed.
That’s down from 38% in August, but stillabove the 30% thresholdthat typically signals trouble.
Keep in mind that this closely-watched model, which isbased on the US Treasury yield curve, was forecasting just a 15% chance of a recession a year ago.
And theNY Fed model never reached 50% before the last three recessions, not even during the 2008 meltdown.
Warning signs have beenflashing recentlyabout the sustainability of the US economic expansion, which is already the longest on record.
The trade war hashammered the US manufacturing sector, which in September suffered itsworst month since the end of the Great Recession. That pain has started to spill over into the far larger service sector, whichgrew at a three-year low last month.
Jerome Powell, the chairman of the Federal Reserve,said in a speech on Wednesdaythat although the economy “faces some risks, “it is still” in a good place. “
Gold prices are elevated despite relative optimism on the trade front that’s buoying equities.
The precious metal is a safe haven asset, just like US Treasury bonds, and demand for it rises with increased volatility and uncertainty. But gold seems to have captured investor interest irrespective of hopes for a partial trade deal between the United States and China.
The worldwide holdings in gold-backed exchange traded funds have “seen 17 consecutive days of money inflows. This has been the largest consecutive inflow since 2009, “said Naeem Aslam, chief market analyst at ThinkMarkets.
“The captivating element is that these inflows are coming while the price is still in a battle with a 1500 mark, and we can ‘ t really say that if bulls have actually won this battle, “said Aslam.
An ounce of gold last traded at $ 1, 505. 90, up 0.6%.
“What I mean by this is thatinvestors are anxious to park their funds in the safe-haven assets.“
WeWork boss Adam Neumannis hardly alone. CEO turnover spiked to an all-time high last quarter.
Outplacement firm Challenger, Gray & Christmassaid on Wednesdaythat a record 434 CEOs left their posts during the third quarter.That’s up 40% from the second quarter and 10% from the same period in 2018 The previous record was set in the final quarter of last year, when CEOs exited.
Neumann stepped down from his post in September afterWeWork’s IPO imploded. Other high-profile CEOs who said goodbye in recent months include Charlie Scharf, who leftBank of New York Mellon(BK) to joinWells Fargo( (WFC) ), andOverstock(OSTK) CEO Patrick Byrne, who left the online retailer in Augustunder unusual circumstances.
So far this year, 1, 160 CEOs have left their posts, up by 13% from this time in 2018, according to Challenger.
“Coming off a decade- long expansion, companies that started and developed during this period find themselves needing new leadership to continue to grow, “Andrew Challenger, the firm’s vice president, wrote in the report.
August job openings fell to their lowest level since March 2018, worse than experts had forecast.
Job openings fell to 7. 051 million, compared with the Refinitiv consensus forecast of 7. 191 million. July job openings were revised downward to 7. (million from the 7.) million initially reported.
New job openings in particular fell in the manufacturing and information services sectors.
US stocks opened higher as investors hope for a partial trade deal between the United States and China.
All three indexes had closed lower on Tuesday.
The earnings calendar is still rather quiet.Levi’s( (LEVI) ) reported better-than-expected earnings after the bell yesterday. Its shares opened 1.5% lower.
US stocks are bound to shoot higher at the opening bell, but the rally could be limited.
Even if the United States and China agree a partial trade deal, “a temporary solution will likely see risks remain for further blacklistings, visa restrictions, compliance on delivering agricultural purchases, “said Edward Moya, senior market analyst at Oanda.
Until a broader deal is reach, the risks of fresh tariffs will remain as lo ng President Trump is in office, “Moya said.
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