Pre-marketing: why are stocks falling? Hint: Jerome Powell is involved


What’s happening: The Fed said on Wednesday it would keep rates at or near zero until 2023 and tightened its economic projections. The central bank now expects a median unemployment rate of 7.6% this year, compared to 9.3% expected in June. GDP – the broadest measure of the economy – is expected to contract 3.7%, from 6.5%.

Even so, it is clear that the economy is not out of the woods, warned Fed Chairman Jerome Powell.

“Global activity remains well below its pre-pandemic level and the way forward remains very uncertain,” he said at a press conference.

These comments help to lower stocks. The S&P 500 is down 1.1% pre-market after falling 0.5% on Wednesday.

Societe Generale strategist Kit Juckes attributes the drop in part to investors clamoring for more support, even though the Fed has just announced it will take a more relaxed approach to inflation, allowing monetary policy to continue. flexible in the months and years to come.”It’s only been a few weeks since the market applauded the Fed’s plan to target average inflation and allow the economy to heat up for a significant period before even thinking of raising rates,” Juckes said. in a research note Thursday. “Now the petulant crowd is disappointed that there is nothing new to feed them. ”

Confusion over the vaccine schedule also blurs the picture. Dr Robert Redfield, director of the U.S. Centers for Disease Control and Prevention, told Congress on Wednesday that a Covid-19 vaccine may not be widely distributed until next summer.

President Donald Trump disputed this claim at a press conference later today. He said Redfield was “confused” and “made a mistake”. Trump insists a vaccine will be available soon, possibly as early as next month.

JPMorgan strategist Mislav Matejka warned in a recent note to clients that investors may be overly optimistic in their expectations about the arrival of a vaccine.

He noted that while governments have cut red tape to facilitate development, a recent ethical pledge from nine drugmakers suggesting they would not seek premature government approval for Covid-19 vaccines could “potentially delay the deployment “.

Frayed Sino-U.S. Ties Could Sink These Deals

Worsening relations between Washington and Beijing are creeping more and more into the realm of deal-making, weighing on investment and threatening to scuttle lucrative ties or force new fallout.

Latest: Trump will be briefed on Thursday of a ByteDance proposal to partner with Oracle in the United States. The deal is designed to address the government’s national security concerns regarding the TikTok video app.

But Trump, whose involvement in negotiating the deal is extremely unusual, might not give his stamp of approval. He told reporters on Wednesday that he had not seen the details of the deal, but that “conceptually” he would oppose an arrangement that left ByteDance in majority control.

“Conceptually, I can tell you that I don’t like it,” he said. “If so, I won’t be happy with it. ”

That’s not all: The battle between the United States and China over critical technology could also doom a record-breaking deal for British chip designer Arm, reports my CNN Business colleague Sherisse Pham.

China, which is due to approve California-based Nvidia to buy SoftBank-owned Arm for $ 40 billion, has said it may not sign. An op-ed this week in The Global Times, a state-run Chinese tabloid, called the deal “disturbing” for Chinese and European technology companies that rely on the company’s advanced chip designs.

” And [Arm] falls into the hands of the United States, Chinese tech companies would certainly be at a disadvantage in the market, ”the editorial read. Chinese regulators have not spoken publicly about the deal, but state media is often seen as a sentiment barometer for senior officials.

Look at this space: the costs of bilateral tensions are rising. U.S.-Chinese capital flows fell to their lowest level in nearly a decade in the first half of 2020, according to a new report from consulting firm Rhodium Group.

Is the Snowflake request a warning sign?

One of the hottest debuts of the year on Wall Street caused a stir.

Shares of Snowflake, a cloud-based data warehousing company backed by Salesforce and Warren Buffett’s Berkshire Hathaway, more than doubled on their first day of trading in the largest software IPO ever. , reports my CNN Business colleague Paul R. La Monica.

Remember: Snowflake valued its IPO Tuesday night at $ 120 a share – well above the expected range of $ 100 to $ 110. But demand was so strong that stocks opened Wednesday afternoon at $ 245 a share and quickly climbed above $ 300, a gain of 150%. The stock fell slightly over the day, but still ended the session up nearly 112%.

At its closing price of just under $ 254, Snowflake is valued at $ 70 billion.

Why it matters: At this valuation, Snowflake is worth more than established S&P 500 companies like Bank of New York Mellon and Hershey.

But even though the company is growing rapidly in the face of increased demand for cloud services, it is still not profitable, raising concerns that it is over-excited, especially as competitors like Amazon and Microsoft occupy an important place.

“There have been a few pretty foamy IPOs over the past decade, but today we saw what must be the most uncontrollable exuberance for a new show to date,” he told reporters on Wednesday. Bespoke Investment Group clients.

The question on everyone’s mind: is this the tech bubble of the early 2000s again?


Initial U.S. jobless claims for the week ending September 12 are mailed at 8:30 a.m. ET, along with housing starts and building permits data for August.

Coming tomorrow: How is consumer spending holding up? New US and UK data will provide some clues.


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