What's moving markets today: May 6, 2019
American retailers warned of higher prices on consumers and job losses if President Donald Trump follows through on his threat to raise tariffs on $200 billion of Chinese goods from 10 to 25%.
The National Retail Federation, the trade association for retailers, released a statement on Sunday criticizing Trump's plan.
A sudden tariff increase with less than a week’s notice would severely disrupt U.S. businesses, especially small companies that have limited resources to mitigate the impact. If the administration follows through on this threat, American consumers will face higher prices and U.S. jobs will be lost.
One retail analyst, Greg Melich of Evercore ISI, estimated that if tariffs rise to 25%, it would wipe out retail earnings growth for the next 12 months.
On Monday, most retail stocks fell during early afternoon trading.
Glenview Capital Management's Larry Robbins said US hospitals are a good buy during his presentation at the Sohn Investment Conference.
HCA is only up 0.4% this year, while UHS has climbed 6.5%, according to Refinitiv. Tenet, meanwhile, is up more than 29%. For reference, the S&P 500 has gained nearly 17%.
Luckin Coffee, Starbucks' biggest rival in China, is looking to raise more than half a billion dollars when it goes public in the United States, according to a filing the company issued with the Securities and Exchange Commission Monday.
The company announced plans for a US IPO last month.
But Luckin is catching up quickly — Luckin locations may soon outnumber Starbucks stores in China.
Luckin, which is about 18 months old, has opened more than 2,300 stores across China and plans to open another 2,500 by the end of this year. Most Luckin locations are "pick-up stores" with limited seating that are designed to let customers pick up their orders and leave quickly.
The chain has previously raised hundreds of millions dollars from big international investors including Blackrock (BKCC). Following the company's April fundraising round, it was valued at about $2.9 billion.
— CNN's Daniel Shane contributed to this report.
President Donald Trump, who last year called himself "Tariff Man," was likely emboldened to reignite the trade war by recent signs of strength from the US economy.
The stock market, meanwhile, has raced back to life after suffering its worst December since the Great Depression.
When the market hits all-time highs, Tariff Man is released from his lair," analyst Chris Krueger wrote.
The good news is that analysts don't believe renewed trade tensions will last long. They are just too costly for both sides.
Experience from last year shows that higher tariffs are costly for the US markets and Trump's voter base, though more so for the Chinese markets and public sentiment," Barclays economists wrote in a note.
In other words, while trade fears may be driving markets lower on Monday, a prolonged market and economic slump would eventually force Washington and Beijing to strike a deal.
At the Sohn Investment Conference, Greenlight's David Einhorn was up first, starting out by reassuring the crowd that he still didn't like Tesla (TSLA).
Einhorn started out with a slideshow of Tesla CEO Elon Musk's statements about his electric car company and concluded by saying "that's horses**t".
He didn't say whether he was short Telsa.
Meanwhile, Einhorn said he believes aircraft leasing company AerCap (AER) is a good bet. AerCap is the industry leader with 11% market share, he said. As aircraft manufacturers Airbus and Boeing (BA) have backlogs of multiple years, aircraft leasing companies step in to fill the gap as air travel continues to increase around the globe.
Einhorn said his fund was short GATX (GATX), the market-leading stand-alone railcar leasing company.
Greenlight Capital had its worst year ever in 2018: Its investments were down 34%. The S&P 500 fell just over 6% last year.
- The markets plunged at the open, with the Dow losing 450 points. But stocks have clawed back some of their losses and the Dow is now roughly down 200 points.
- The VIX (VIX), a measure of volatility that often skyrockets during times when Wall Street is scared, soared more than 30% Monday to its highest level since late January.
- The price of gold, which tends to rise when investors are nervous, moved slightly higher.
- Only four of the thirty Dow stocks are higher: McDonald's (MCD), Chevron (CVX), Dow Chemical (DOW) and Disney (DIS).
- These are the Dow's worst performers: Nike (NKE) is down 3%, Apple (AAPL) and 3M (MMM) are right behind Nike — they are down about 2%.
- In the S&P 500, investment manager Affiliated Managers Group (AMG) is faring the worst — down 10% — after missing first quarter earnings projections.
- One wacky stock: Sinclair Broadcast Group (SBGI) soared 30% after it announced its deal to snap up 21 regional sports networks from Disney.
Stocks have recovered from their initial lows today, but they are still solidly in the red an hour and a half into trading.
Sinclair Broadcast Group (SBGI) shares are moving way higher in a sea of declines.
The stock is up nearly 30% the first trading day after it announced its $9.6 billion acquisition of 21 regional sports networks from Walt Disney Company (DIS) on Friday.
Investors appear to be bullish on the local TV owner's plan to double down on live sports and news as it future-proofs itself against streaming competitors.
"While consumer viewing habits have shifted, the tradition of watching live sports and news remains ingrained in our culture," Sinclair CEO Chris Ripley said in a release.
Monday's stock selloff wiped out some three weeks of gains in the Dow.
The Dow dropped 450 points at the open before recovering some of its losses. At mid-morning it was down roughly 280 points, or 1.1%.
Despite this dramatic start to the week, the Dow remains up 13.6% for the year. So for anyone who invested on December 31, these gains still look pretty good.