Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, United States, on November 16, 2023.
Brendan McDiarmid | reuters
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U.S. stocks had a mixed finish on Thursday, with the only major index falling, the Dow Jones Industrial Average, snapping a four-day winning streak. The pan-European Stoxx 600 index fell 0.72%. Oil and gas stocks fell 2.7%, leading losses. Meanwhile, shares in Hotel Chocolate rose 160% after US food giant Mars said it would buy the British chocolate maker for £534 million ($662 million).
no ray of hope
Alibaba is not going to list its cloud division as a separate and publicly traded company, backing down from a plan announced in May. The Chinese e-commerce giant blamed US chip export restrictions for creating “uncertainties for Cloud Intelligence Group’s prospects.” US-listed shares of Alibaba It fell 9.14% on the news. But Alibaba still intends to list its Cainyao branch, a logistics division, in Hong Kong.
Amazon will allow auto dealers to sell cars on its site starting next year, launching a partnership with South Korean automaker Hyundai. As part of the deal, Amazon’s Alexa voice assistant will come with Hyundai cars starting in 2025. Shares of used car dealers retreated after the announcement. (However, there is no word yet on whether the cars will be eligible for Amazon’s same-day delivery.)
Gala dinner with Xi
After meeting US President Joe Biden, Chinese President Xi Jinping attended a dinner with about 400 business leaders on Wednesday night. Guests included Apple CEO Tim Cook, Tesla chief Elon Musk and Blackstone’s Steve Schwarzman. In a speech at the dinner, Xi said the US and China could be rivals or partners without a middle ground.
[PRO] ‘Ozempic effect’
A new class of anti-obesity drugs, known as GLP-1 drugs, have proven so effective that they have taken the market by storm. One analyst also estimated that airlines could save millions due to fewer overweight passengers. It is also arguable that the gym industry would suffer from the “Ozympic effect”. On the contrary, according to analysts and gym owners, it may benefit gyms.
There is further evidence that inflation pressures are easing: Weekly unemployment claims rose more than expected last week; Import prices for the month fell 0.8% versus the expected 0.3%; US oil prices fell 5%. Walmart CEO Doug McMillon even believes that prices on some grocery items “could drop lower in the coming weeks and months.”
Despite this, stocks had a disappointing day, with mild moves in either direction without much confidence. The S&P 500 rose 0.12% and the Nasdaq Composite rose 0.07%. But the Dow Jones Industrial Average slipped 0.13%, snapping four straight sessions of gains.
Investors may be finding that they were somewhat optimistic about the likelihood of rapid rate cuts by the Federal Reserve, and that inflation will fall below 2% without the economy going into recession.
BTIG analyst Jonathan Krinsky believes a recession could be coming. Signs of a hard landing include “ Slow macro data, company-specific commentary, and continued weakness of the average stock,” he wrote. Krinsky also warned that stock rallies happen before recessions appear.
Meanwhile, Cleveland Federal Reserve Chair Loretta Mester told CNBC she was not entirely convinced by this week’s economic data. “We need to see further evidence that the time is right for inflation to return to 2%.”
To that end, Meister doesn’t see a rate cut on the horizon. On the contrary, he is open to increasing rates. He said, “My feeling is that this is not really about cutting rates. This is really about how long we will remain in a restrictive stance and given what is happening in the economy “Maybe we need to go to a higher level.”
In short, none of these scenarios are pretty. This doesn’t mean that soft landings are completely out of the picture. In a speech in San Francisco, Fed Governor Lisa Cook said, “a soft landing is possible.” But, like everything in the markets, “it’s not guaranteed.” Perhaps investors shouldn’t be so confident about an imminent rate cut either.