What's moving markets today: May 29, 2019
What's worse than a trade war? A trade war that comes at a bad time for the market.
The economy could take a turn for the worse if the United States isn't careful, said David Kelly of JPMorgan on CNN Business' Markets Now live show today.
Kelly noted that the economic expansion is a decade in the making, as is the stock market bull run. The economy is fragile.
"I think the economy can get derailed for a little while because this trade war is more damaging for the rest of the world than the United States," he said. "This is a very old expansion. It needs to be treated with tender love and care. This will have negative effects over the long term."
"We've had a very long bull market," said David Kelly of JPMorgan on CNN Business' Markets Now live show today. "It's not going to be like this going forward. We won't have the same kind of gains."
Kelly said the stock market will still go up, but investors will get annual gains of 5% not 10% a year as they've become accustomed to over the past decade.
"People will have to adjust their expectations," he said.
But don't get out of the market: Kelly believes the low interest rate environment is going to persist for a very long time. That makes it hard to get out of stocks.
So where should you put your money? Not in the United States.
"The biggest mistake people are making is people are getting out of international," Kelly says. "We see a slowdown in population growth. It isn't going to sustain 3% growth. It doesn't have the growth prospects EM has."
Near-term Treasury yields are higher than longer-term yields. That's a bad omen for the economy.
"Banks lend based off that yield curve. They lend at the short end and make money at the long end. If you take away that incentive, they won't lend money and the economy freezes," explained Keith Bliss, head of investment at Cuttone & Co., on CNN Business' Markets Now live show today.
But Bliss said investors shouldn't freak out. Credit hasn't yet tightened. And political winds are in the market's favor
"No sitting president has been voted out of office while the economy is expanding, so they'll do everything possible to keep it expanding," he said.
That's why Bliss believes the market is vastly oversold now. The Dow is down more than 300 points.
Wall Street's headaches are growing. The US-China trade war is getting scary. A recession indicator is flashing red. And oil prices are plunging.
The Dow slumped 350 points, or 1.4%, on Wednesday afternoon. The index was briefly down more than 400 points, sinking below 25,000. The Dow hasn't closed below that level in four months.
It's currently down 25% and is "on pace for its worst day in nearly two decades," according to Eikon.
Today's losses also wiped out the retailer's year-to-date gains.
Capri Holdings (CPRI) stock sank 10% in early trading after it released a mixed earnings report. The company owns luxury brands Michael Kors, Jimmy Choo and Versace.
In its earnings call earlier, Capri said it's closing 50 Michael Kors stores this year and warned there could be more.
Michael Kors previously closed 100 stores beginning in 2017 because of slowing sales.
It also cut its outlook because of costs associated with its $2 billion acquisition of Versace.
The US stock market continues to get hit by trade war and economic jitters.
Investors remain worried about plunging Treasury bond yields and how the US-China trade war will slow the global economy and ding corporate profits.
The recent trade escalation has also led to fears that China will retaliate against US tariffs by taking more extreme steps, including placing restrictions on rare-earth exports.
The market slide comes after the Dow dropped 238 points on Tuesday. The S&P 500 has declined more than 5% since closing at a record high on April 30.
Abercrombie & Fitch (ANF) plunged 20% on disappointing earnings and outlook. Canada Goose (GOOS) tumbled 17% on a sales miss. Dick’s Sporting Goods (DKS), however, climbed 2% on strong guidance and upbeat results.
The retailer said on Wednesday that it appointed four new directors to its board in cooperation with the activist funds.
Under pressure, Bed Bath & Beyond has previously appointed five new directors, a new board chair and launched a business transformation committee in recent months. The company's veteran CEO also stepped down earlier this month.
The proxy fight kicked off in March, when three activist funds built a roughly 5% stake in Bed Bath & Beyond and attempted to replace the company's entire board of directors and its CEO.
The activist group previously blamed cluttered stores and a confusing pricing strategy for Bed Bath & Beyond's prolonged slump.
Abercrombie & Fitch (ANF) shares plummeted 25% in early trading after a dismal earnings report, where it reported lower-than-expected sales in stores open more than a year.
The retailer also said it's shutting down three Abercrombie & Fitch flagship stores and one Hollister store.
Abercrombie & Fitch closures:
- Copenhagen will close later this quarter.
- Milan will close by the end of this year.
- Fukuoka, Japan will close in the second-half of 2020.
- SoHo location in Manhattan will close in the second quarter of this year.
The closures are part of its plan to "pivot away from large format stores to smaller ... brand experiences," the company said.