Wall Street slumps as sinking British pound rattles markets

By CNN Business Staff

Updated 5:45 p.m. ET, September 26, 2022
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4:33 p.m. ET, September 26, 2022

Dow enters bear market as stocks fall

CNN Business' Nicole Goodkind

The New York Stock Exchange on September 23.
The New York Stock Exchange on September 23. (Mary Altaffer/AP)

US stocks closed lower on Monday on market fears over a strong US dollar.

The Dow dropped more than 300 points and entered a bear market—down 20% or more from its recent high—for the first time since the beginning of the pandemic.

The British pound hit a record low against the US dollar on Monday. The Federal Reserve's aggressive hiking policy and Britain's recent tax cut announcements caused the dollar to surge. The euro also hit its lowest value versus the dollar since 2002.

Investors worried about the dollar's rally, Societe Generale's Kit Juckes noted on Monday, as large surges historically occur alongside global economic crises.

The Dow closed down 326 points, or 1.1%.

The S&P 500 fell by 1%.

The Nasdaq Composite closed 0.6% lower. 

As stocks settle after the trading day, levels might still change slightly.

2:52 p.m. ET, September 26, 2022

Markets betting on more big rate hikes from the Fed

From CNN Business' Paul R. La Monica

Autumn is here. The weather's a bit cooler. Leaves will soon begin to fall. Everyone's eating and drinking pumpkin spiced treats. But one thing isn't changing on Wall Street: Investors are still banking on more aggressive rate increases from the Federal Reserve.

The Fed has already implemented three consecutive three-quarters of a percentage point interest rate hikes this year. The odds that a fourth one will be announced at the central bank's next meeting on November 2 are now nearly 80%, according to fed funds futures on the CME.

Traders are also pricing in a nearly 80% probability of a half-point hike at this year's last (scheduled, at least) Fed meeting on December 14. If both those increases occur, the Fed's key short-term rate will end 2022 at a range of 4.25% to 4.5%.

To put that into perspective, keep in mind that rates started 2022 0% to 0.25%. Back then, the Fed (and investors) still held out hope that soaring inflation would not be a persistent problem.

So much for that.

1:38 p.m. ET, September 26, 2022

Stocks at lows of the day as inflation fears mount

From CNN Business' Paul R. La Monica

Traders working on the floor of the New York Stock Exchange on Monday September 26.
Traders working on the floor of the New York Stock Exchange on Monday September 26. (Brendan McDermid/Reuters)

Stocks were broadly in the red in midday trading Monday...and at their lows of the day...as investors continued to worry about inflation around the world.

The British pound tumbled to its lowest level against the US dollar ever, and the Bank of England tried to reassure global markets that it will remain on top of rapidly changing economic developments...especially after new Prime Minister Liz Truss unveiled a new plan to cut taxes that will largely benefit the wealthy and corporations.

  • The Dow fell more than 250 points, or 0.9%.
  • The S&P 500 was also down 0.9%.
  • The Nasdaq Composite was off by 0.3%, giving up gains from earlier in the day.

12:59 p.m. ET, September 26, 2022

UK authorities try to chill out the markets

From CNN Business' Julianne Pepitone

Global markets are in a tizzy Monday after UK Prime Minister Liz Truss revealed Friday a proposal to cut taxes while ramping up borrowing. Investors panicked, worrying the unorthodox approach could feed inflation — and the British pound plunged to a new record low against the US dollar.

Now, UK policymakers are trying to calm everybody down.

As my colleague Julia Horowitz reports, the Bank of England released a statement Monday assuring it is “monitoring developments in financial markets very closely” — and that it will examine the effect Truss' plans would have on inflation at its next meeting in November, saying it would “not hesitate to change interest rates as necessary.”

The UK Treasury also joined the "keep calm and carry on" effort, releasing its own statement saying finance minister Kwasi Kwarteng will detail the government's plans to ensure the sustainability of the UK debt over the medium term on November 23.

You can't blame them for trying. But there's a lot for investors to be nervous about right now, and the dramatic market reaction only underscores just how tense things are.

“The initial reaction in the markets, with the pound falling again after it regained some ground, suggests that the issue may not be put to bed yet," Paul Dales, chief UK economist at Capital Economics, told Julia.

Read more here.

12:37 p.m. ET, September 26, 2022

Macao casino stocks soar as travel restrictions ease

From CNN Business' Paul R. La Monica

The Venetian Macao resort and casino, operated by Sands China Ltd., a unit of Las Vegas Sands Corp., left, and the Galaxy Macau casino and hotel, developed by Galaxy Entertainment Group Ltd.
The Venetian Macao resort and casino, operated by Sands China Ltd., a unit of Las Vegas Sands Corp., left, and the Galaxy Macau casino and hotel, developed by Galaxy Entertainment Group Ltd. (Billy H.C. Kwok/Bloomberg/Getty Images)

Casino owners who have properties in the Asian gambling mecca of Macao hit the jackpot Monday, thanks to news over the weekend that the city will soon start letting tourist groups from mainland China return after nearly three years of restrictions due to the Covid-19 pandemic.

Macao, which has glitzy, Las Vegas-esque casinos on its Cotai Strip, is a special administrative region of China and former Portuguese colony where gambling is legal. The news that Chinese consumers will be able to head back to the tables and slot machines later this year should give a big lift to the gaming companies that operate there.

Shares of American casino giants Wynn Resorts (WYNN) and Las Vegas Sands (LVS), which both own properties in Macao, soared nearly 12% in midday trading. Melco Resorts & Entertainment (MLCO), which is headquartered in Hong Kong but has a Nasdaq listing, skyrocketed almost 25%.

11:46 a.m. ET, September 26, 2022

Bank of England stops short of emergency rate hike

From CNN Business' Robert North

Pedestrians walk past Bank of England in London on September 22.
Pedestrians walk past Bank of England in London on September 22. (Isabel Infantes/AFP/Getty Images)

The Bank of England issued a statement Monday saying it is “is monitoring developments in financial markets very closely” after the pound hit a record low against the dollar, but stopped short of an emergency interest rate hike.

The central bank said it will make a full assessment of the government’s tax plans and the impact of the pound’s plunge at its next scheduled interest rate meeting in November and will “act accordingly."

The bank said it would “not hesitate to change interest rates as necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit.”

11:10 a.m. ET, September 26, 2022

Tech stocks rebound even as broader market sinks

From CNN Business' Paul R. La Monica

Is the worst finally over the FAANGs of tech?

The Nasdaq, which includes Facebook owner Meta Platforms (META), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google parent Alphabet (GOOGL) among its top stocks, was up nearly 1% Monday and poised to break a four-day losing streak — even as the broader market fell again.

Tech stocks have taken a beating this year, with the Nasdaq down nearly 30% in 2022 as analysts rapidly cut earnings estimates due to concerns about the slowing global economy hurting sales.

According to data from FactSet, there have been notable downward revisions for the forecasts of Meta, Alphabet and Amazon since the end of June. Meanwhile Intel (INTC) and other chip stocks have also dragged down the Nasdaq, as Wall Street has slashed earnings forecasts for semiconductors.

But the worst of the earnings slowdown just might, finally, be priced in.

FactSet also noted that analysts are predicting the biggest jump in stock prices for the communications services sector (which includes Meta and Alphabet) as well as the tech sector, a group that has Apple and Microsoft (MSFT) among its top stocks.

Analysts expect the communication services sector to soar nearly 38% over the next 12 months, according to FactSet, while the information technology sector is forecast to rise more than 31%.

11:39 a.m. ET, September 26, 2022

Roblox stock gets a boost from Walmart deal

From CNN Business' Paul R. La Monica

A screenshot showing Walmart Land, one of the immersive experiences in the Roblox metaverse launched by Walmart. 
A screenshot showing Walmart Land, one of the immersive experiences in the Roblox metaverse launched by Walmart.  (Walmart)

Roblox (RBLX) investors haven't had a lot to cheer on in the real world of Wall Street lately. The metaverse company's stock price has plunged nearly 65% this year, and it's about 75% below the all-time high it set in November 2021 just a few months after its stock market debut.

But there was one bit of good news Monday. Roblox rose almost 3% after the company announced a partnership with Walmart (WMT).

The retail giant launched two "isles" within the gaming platform:  Walmart Land and Walmart’s Universe of Play. Walmart said in a press release that the Roblox deal is being done with the "next generation of customers in mind," a clear nod to the Gen Z users and even younger Generation Alpha kids that are fans of Roblox.

But Roblox clearly needs the boost more than Walmart. The Arkansas-based retail king is a mega profitable company that is worth more than $350 billion and has annual sales that are expected to top $600 billion this fiscal year. Roblox, on the other hand, is losing money. And there are growing concerns that the metaverse may not live up to the financial hype.

10:28 a.m. ET, September 26, 2022

The British pound and US dollar may hit parity for the first time in history

From CNN Business' Allison Morrow

(Matt Cardy/Getty Images)
(Matt Cardy/Getty Images)

The pound’s fall has analysts and traders speculating that the British currency could reach parity with the US dollar for the first time ever. 

Bankers at Nomura said they expect the pound, which hit a record low of $1.03 early Monday, to reach parity by the end of November and then keep falling to 97 cents by the end of the year. 

"This is a fundamental balance of payments crisis, with politicians hoping it will eventually just calm down,” analysts said, per Reuters. “Hope is not a strategy, and markets are reflecting that.” 

Options market pricing indicates there is now a 60% probability the pound will hit $1 before the end of this year, compared to 32% on Friday, according to Bloomberg News. 

"Unless something can be done to address these fiscal concerns, or the economy shows some surprisingly strong growth data, it looks like investors will continue to shun sterling," Antoine Bouvet and Chris Turner at ING said in a research note on Friday, when the pound began its decline. "We think the market may be underpricing the chances of parity."