From Wall Street to Silicon Valley, these are the top stories that moved markets and had investors, business leaders, and entrepreneurs talking this week on Cheddar.
STOCKS SOAR ON TRADE OPTIMISM
A fresh sense of optimism on U.S.-China trade negotiations helped markets recover from their early October losses, now that President Trump and China's top envoy met face to face. The negotiations had been in a stalemate for months, with both sides finally agreeing to sit down this week, achieving what Trump described as a "very substantial phase one deal" that includes a $40 to $50 billion purchase of U.S. agricultural products. Treasury Secretary Steve Mnuchin also announced tariffs that were set for October 15 have been canceled, though the decision to scrap them does not affect those slated for December 15. The meetings followed another escalation by the Trump administration, which added dozens of Chinese tech firms to the blacklist, citing human rights violations of Muslim minority groups in China. The trade war, now 15 months old, is continuing to slow the global economy. President Trump faces political pressure to ensure the U.S. economy remains relatively healthy ahead of his re-election bid.
CHINA AND CAPITALISM COLLIDE
Ongoing protests in Hong Kong are emerging as a potential tripwire for U.S. companies doing business in China. The controversies began when Houston Rockets general manager Daryl Morey retracted and apologized for a single tweet in support of the protestersーbut that action itself was criticized for bowing to China's will. It was the most prominent example of a U.S. entity succumbing to pressure from China, but far from the only one: Apple yanked a Hong Kong mapping app from its App Store after criticism from Chinese state media. The blowback over that decision became so intense CEO Tim Cook sent an internal email defending the company's actions. And video-game publisher Activision Blizzard suspended a pro gamer for shouting a pro-protest sloganーand stripped him of his prize money. Critics say that in the rush to appease Beijing (and preserve business ties there), these efforts are effectively censoring speech back at home. It's the thesis that animated a recent episode of the popular show South Park, which found itself not just bannedーbut erased from existence on China's internet after airing an episode lampooning this very phenomenon. Meanwhile, the financial capital, buffeted by months of protests, braces once against for a potentially violent weekend.
NO 737 MAX FOR THE HOLIDAYS
Maybe 2020 will be a better year for the Boeing 737 Max. United, Southwest, and American Airlines this week extended cancellations of their Max fleets until early-to-mid January. While there is still no timetable on the FAA's re-certification of the jet, American said in a statement that it expects to be given the go-ahead "later this year." The grounding of the Max since March has eaten into profits of most of the major airlines. Delta, which does not fly the Max in its fleet, is reportedly paying out record overtime to pilots as it tries to add more flights to make up for those lost on rival carriers. Meanwhile, a report from a multi-agency task force commissioned by the FAA faults both Boeing and regulators with dropping the ball on the original certification of the Max's flight-control system, known as MCAS. That piece of software was not adequately understood by either pilots or the FAA, and is believed to be behind the two fatal crashes of the Max that killed more than 300 people on two continents.
PG&E'S UNPRECEDENTED MOVE
Hundreds of thousands of Californians are still without power this weekend, days after the utility PG&E, in an unprecedented move, proactively cut electricity to 34 counties in Northern California as a proactive measure against sparking wildfires. PG&E has restored power to more than half the 800,000 or so customers who were affected at the peak of the outages, which were timed to coincide with a weather phenomenon known as the Santa Ana Winds. That's when strong, dry winds that originate inland sweep over northern and coastal California. On their own, they're not especially dangerous. But when combined with extremely arid conditions, they act as an accelerant for embers or sparks to become full-fledged wildfires. Last year's Camp Fire, which killed 85 people and essentially wiped the town of Paradise, Calif. off the map, is believed to have started when a spark from a PG&E power line got carried downwind. PG&E has been in bankruptcy protection since January over $30 billion in financial liabilities related to that fire and others. The publicly traded company has a dismal safety record: regulators say it falsified pipeline safety records for years, and it's been under a federal safety monitor since the company was convicted of felony charges in 2017. State regulators say PG&E equipment was to blame for 16 wildfires in 2018 alone.
LIBRA ON THE ROPES
Facebook's foray into cryptocurrency is not going as the company has hoped. CEO Mark Zuckerberg is now scheduled to return to Capitol Hill to testify in front of the House Financial Services Committee later this month solely about the Libra crypto coin and the Calibra digital wallet. The Libra project was announced in June to great fanfare, and even greater questions. European regulators, U.S. politicians, and even central bank chiefs all expressed concerns that Libra could cause instability in financial markets. Some have questioned whether Facebook, given its track record on privacy, could or should be trusted with involvement in a new global currency. Facebook took pains to make it clear that the currency would be run by an independent consortium, called the Libra Association, and not Facebook itself. But months after the announcement, which included partnerships with more than two dozen financial services companies, the Libra project has begun to unravel. The Libra Association's head of product, Simon Morris, departed the Geneva-based body back in August. Late last week, PayPal became the first company to bow out of the project. Now Visa, Stripe, and Mastercard are all reportedly reconsidering their involvement with Libra, under pressure from senators. Now the fate of Libra may hang on how Zuckerberg handles questions from lawmakers when he testifies on Oct. 23.
Ukrainian President Volodymyr Zelenskyy has signed an application for Ukraine's membership in the European Union, pleading with the bloc to accept this request. It comes as Russian forces push further into Ukraine, forcing at least half a million refugees to flee. Benjamin Schmitt, Postdoctoral Research Fellow at Harvard University and Senior Fellow at the Center for European Policy Analysis, breaks down the latest in Ukraine.
A growing wave of major U.S. companies have taken steps to cut ties with Russia or offer support to Ukraine, as tensions escalate in the region. Exxon, Apple and Boeing are just the latest companies to make the move, following the likes of Google, Meta and BP who have all announced plans to exit the region in response to the conflict. Courtney Vinopal, Breaking News Reporter, Quartz joined Cheddar's Opening Bell for more.
Uber is rolling out a new feature on its app called Explore that will allow users to discover things to do in their area such as dining. The new service is now available in 14 U.S. cities.
Traci Gusher, EY Americas data and analytics leader, joins Cheddar News to discuss how companies have made strides within data and analytics throughout the pandemic and what the chief information officers of today need to focus on and dedicate resources to.
Wall Street took another sharp swing Wednesday, this time back to rally mode, as stocks and Treasury yields rose even as U.S. crude oil prices climbed to the highest level in more than a decade.
The S&P 500 rose 1.9%, recouping its losses from earlier in the week, after Federal Reserve Chair Jerome Powell said he supports a more modest rise in interest rates this month than some investors had feared. He also said he still expects inflation, which is at its highest level in 40 years, to moderate through the year.
“Although we’ve had some Fed governors lately saying ‘Oh my God, this is such a huge crisis,’ the conventional wisdom is slow and steady wins the race right now,” said J.J. Kinahan, chief strategist with TD Ameritrade.
The comments helped drive the market higher, adding to modest gains from earlier in the morning. Other areas of the market also gained ground a day after worries about Russia’s invasion of Ukraine sent the S&P 500 tumbling 1.5% and prices soaring for all kinds of commodities.
Treasury yields jumped to recover some of their steep losses from the past week. Gold receded, and a measure of nervousness among stock investors on Wall Street eased after swinging sharply in recent days.
“We’ve seen wild swings, but not major changes in the indexes,” said Jeff Kleintop, chief global investment strategist at Charles Schwab. “Geopolitical conflicts can be very unsettling, but you don’t tend to get bear markets from these, just periods of volatility.”
Markets have been spinning wildly as investors try, sometimes blindly, to gauge how high Russia's attack on Ukraine will push prices for oil, wheat and other commodities where the region is a major producer. On top of that are worries about what upcoming hikes in interest rates by the Federal Reserve and other central banks around the world will do to the economy and inflation.
Powell said in testimony to Congress that the Fed is set to raise its key interest rate for the first time since 2018. But he also said the attack on Ukraine may have muddied conditions, with its impact on the U.S. economy “highly uncertain,” adding that “we're never on autopilot.”
The Fed is balancing a tightrope where it needs to raise interest rates enough to rein in the highest inflation in generations but not so much that it pushes the economy into a recession. All the while, higher interest rates tend to put downward pressure on stocks and most other investments.
The yield on the 10-year Treasury leaped to 1.89% from 1.72% late Tuesday, while the two-year Treasury surged to 1.53% from 1.31%. Yields, though, remain well below where they were before Russia’s invasion. The 10-year yield was above 2% last month, before it plunged as investors plowed into investments seen as safer amid worries about war.
The price of U.S. oil jumped another 7% to $110.60 per barrel, the highest level in just over a decade. Brent crude, the international standard, climbed 7.6% to $112.93 per barrel.
Leaders of OPEC and other major oil-producing countries decided Wednesday to stick with their plan to gradually increase oil production. The OPEC+ coalition of oil producers, made up of OPEC members led by Saudi Arabia and non-cartel members led by Russia, chose to increase oil production by 400,000 barrels per day in April.
The move follows a perhaps less impactful decision by the United States and other major governments in the International Energy Agency to release 60 million barrels from strategic reserves to boost supplies.
“Markets dismissed the notion that 60 million barrels of strategic reserves released will be consequential to the risks of Russian supply jeopardized,” Tan Boon Heng of Mizuho Bank said in a report. “Russia pumps more than that in just six days.”
In the stock market, all the uncertainty about oil prices and inflation has led to big swings not only by the day but also by the hour. The S&P 500 swung between gains of 0.4% and 2.2% Wednesday. It closed 80.28 points higher to 4,386.54.
The Dow Jones Industrial Average rose 596.40 points, or 1.8%, to 33,891.35, while the Nasdaq composite gained 219.56 points, or 1.6%, to 13,752.02.
More than 90% of stocks in the S&P 500 rose, with technology, financial and health care companies accounting for a big share of the rally. Bank stocks led the gainers, climbing 2.6%, as higher longer-term interest rates can mean bigger profits for them making loans. Energy stocks also helped lift the index as they rode higher energy prices.
Ross Stores climbed 6.1% after the retail chain reported stronger profit for its last quarter than analysts expected.
Ford jumped 8.4% after it said it was accelerating its transformation into an electric-vehicle company and split its EV and internal combustion operations into two individual businesses.
Stock markets around the world were mixed. France’s CAC 40 rose 1.6%, Germany’s DAX returned 0.7% and Japan’s Nikkei 225 fell 1.7%.
Russia’s central bank said stock trading on the Moscow exchange would remain closed Wednesday for a third day, though trading of currencies and precious metals would resume for the first time this week.
Late Tuesday, President Joe Biden announced he was joining U.S. allies in closing the country’s air space to Russian aircraft, the latest in a set of sanctions and other measures meant to isolate Russia.
But Biden also said in his annual State of the Union speech that he would try to cushion Americans against the impact of higher oil prices. “I will use every tool at our disposal to protect American businesses and consumers,” Biden said.
To kick off Women's History Month, Luminary will be hosting its first annual #InThisTogether Summit. Cate Luzio, founder and CEO of Luminary, joins Cheddar News to discuss the event.
