What's moving markets today: May 23, 2019
An outbreak of African swine fever in China and other Asian nations could lead to higher pork prices. That would be bad news for fans of Chipotle's carnitas -- not to mention Chipotle investors.
BMO Capital markets analyst Andrew Strelzik downgraded Chipotle's stock to an "underperform" -- basically a sell -- due to worries that Chipotle will have to pay more for pork if the highly contagious and lethal (to pigs) African swine fever is not contained. That will hurt profits.
Chipotle (CMG) shares fell 6% on the news, but they are still up nearly 54% this year.
The good news for consumers is that the disease does not pose a risk to people, the way the E. coli outbreak at Chipotle in 2015 did. The United States Department of Agriculture says "ASF is not a threat to human health and cannot be transmitted from pigs to humans. It is not a food safety issue."
But Strelzik is concerned the outbreak will lead to a shortage in hog supplies that could have a ripple effect on the price of pork and other proteins for several years. As such, he estimated that Chili's owner Brinker International (EAT), Texas Roadhouse (TXRH) and Bloomin' Brands (BLMN) could also suffer. Their stocks all tumbled Thursday as well.
This might wind up being good news for plant-based food maker Beyond Meat (BYND) though. Its sizzling stock shot up about 3%.
Update: Laurie Schalow, the chief corporate reputation officer for Chipotle, took issue with Strelzik's downgrade.
"The cost of our pork represents less than 2% of Chipotle’s total food costs," Schalow told CNN Business. "Since we purchase higher quality, more expensive pork than commodity pork, and we have pricing agreements in place, we don’t expect a significant impact on our costs."
CNN Business' Christine Romans says that trade wars are not easy to win, even though President Donald Trump once tweeted that they are.
Watch below as she explains why analysts think the trade war could cause a global recession and what it means for you, your company and even your job.
Want to learn more? Read her story about the topic here.
The boom-to-bust oil market is suddenly in another tailspin.
US oil prices plummeted 4% to $58.80 a barrel on Thursday morning. It's the first time crude has broken below $60 since late March.
The selloff comes as financial markets broadly tumble, with the Dow sliding 400 points, or 1.6%.
Oil's recent slide -- it's down 11% since closing at $66.30 on April 23 -- has been driven by two major factors.
- The deepening trade war threatens to badly slow economic growth around the world, hurting demand for crude along the way.
- Recent government reports show that oil stockpiles have unexpectedly jumped.
"The US-China trade war continues to weigh on sentiment, as does a weakening economic backdrop," said Matt Smith, director of commodity research at ClipperData.
The most striking thing about the oil slump is that it's taking place during a time when OPEC members Iran and Venezuela have been sidelined by US sanctions.
Stocks weren't the only thing tumbling on Thursday. The yield on the benchmark 10-Year US Treasury fell as well -- another sign that investors are growing increasingly nervous about the impact that trade tension with China will have on America's economy.
The 10-Year Treasury was yielding about 2.35% Thursday morning. That's its lowest level since December 2017. Bond yields tend to fall when investors are worried about sluggish growth.
Low rates are a global phenomenon. German 10-Year bund yields are trading in negative territory because of worries about weak economic data in Germany and the rest of Europe. Yields are negative in Japan as well and the rate on the 10-Year British gilt fell below 1%.
Bond investors are clearly betting that if the US and China don't come to a trade deal soon, the world's two largest economies could suffer. And that could drag down the global economy. That might finally push the Federal Reserve to lower interest rates -- even though the Fed indicated in the minutes of its most recent meeting released Wednesday that it had no plans to do so just yet.
Stock market losses have accelerated: The Dow has fallen 400 points.
The Nasdaq is off 1.5% and the S&P is down 1.3%.
Deutsche Bank (DB) stock fell nearly 3% to a new record low Thursday as the annual meeting of Deutsche Bank shareholders heard CEO Christian Sewing and chairman Paul Achleitner pledge new cost cuts but stop short of announcing a more dramatic overhaul.
Shares have plummeted roughly 40% in the past year.
Patience with the troubled bank is running thin.
Revenue at Deutsche Bank is falling faster than it can trim expenses, and legal and regulatory scrutiny continue to generate negative headlines in Europe and the United States.
The Dow fell 250 points as investors grow increasingly worried about the US-China trade war. Every Dow stock was lower at the open.
Tech stocks felt the brunt of the pain, as the technology sector could be particularly hard-hit if the trade war escalates.
- Nasdaq slipped 1.2%
- S&P 500 dropped 0.9%
US oil fell 3%, tumbling below $60 a barrel, as trade war concerns and bearish inventory data weighed on oil prices.
Best Buy (BBY) fell 5% after warning it may have to raise prices because of the trade war.
L Brands (LB) soared 10% on a better-than-expected sales at Victoria’s Secret.