Market rout: August 14, 2019
The department store's profit fell 48% during its spring quarter compared with the same period a year ago and it lowered its profit expectations for the remainder of the year. Macy's stock is down 45% for the year.
Shares of rival retailers also dropped sharply:
They all report earnings in the coming weeks.
Mortgage rates are lower than they've been in years, causing a tsunami of refinancing.
The average rate on a 30-year fixed rate mortgage fell to 3.93% last week for loans of $484,000 or less — the first time those loans have been below 4% in nearly three years, according to the Mortgage Bankers Association, the industry trade group. Rates are even lower on larger mortgages and on 15-year loans.
That sparked a 37% jump in the number of refinancing loans last week compared to the previous week, said the MBA. Compared to a year ago, the rate of refinancing has nearly tripled.
The Dow slid more than 400 points after the bond market, for the first time in over a decade, flashed a warning signal that has an eerily accurate track record for predicting recessions.
The 10-year Treasury bond yield fell near 1.6% Wednesday, dropping just below the yield of the 2-year Treasury bond. It marked the first time since 2007 that 10-year bond yields fell below 2-year yields, a phenomenon that has preceded every recession in the modern era.
US stocks fell as investors sold stock in companies and moved it into bonds.
- The Dow was about 1.5% lower
- The broader S&P 500 was down 1.5%
- The Nasdaq sank 1.6%
The bond market is flashing a big neon caution sign.
Yields on 2-year US Treasury bonds dipped below the yield on the US 10-year bond Wednesday morning. It was the first time the 10-year yield was below the 2-year yield since 2007 — just before the Great Recession. Both were hovering around 1.62%.
In another worrisome sign, the yield on the 30-Year US Treasury fell to a record low Wednesday of about 2.06%.
This is significant. When shorter-term rates are higher than longer-term bond yields, that is known as an inverted yield curve. The 3-month US Treasury already inverted versus the 10-year this spring.
Yield curve inversions have often preceded recessions and are a sign of just how nervous investors are about the immediate outlook for the economy. They are demanding higher rates for short-term loans, which is not normal.
Typically, investors expect to get paid a higher rate of return when they are lending money for a longer period of time, because the risks are higher.
WeWork's parent company, The We Company, publicly filed paperwork on Wednesday to raise $1 billion in an initial public offering.
The amount is a placeholder and will probably be substantially higher. It will trade under the ticker symbol "WE."
The company is moving forward with its plans to go public despite losing a staggering $1.9 billion last year, according to its IPO prospectus, an unprecedented amount for a company about to go public.
The We Company continued to burn through money this year. In the first half of 2019, the company lost $904 million, a roughly 25% increase from the same period in the prior year. But its business is growing fast too. Revenue roughly doubled to $1.5 billion in the first six months of the year.
Dow futures slid nearly 200 points Wednesday after the bond market, for the first time in over a decade, flashed a warning signal that has an eerily accurate track record for predicting recessions.
Here's what happened: The 10-year Treasury bond yield fell to 1.627% Wednesday morning, below the 1.632% yield of the 2-year Treasury bond. It marked the first time since 2007 that 10-year bond yields fell below 2-year yields.
CNN Business' Fear and Greed Index signaled investors were fearful:
US stock futures point lower Wednesday following weak economic data out of Germany and China:
- The Dow could open down 200 points, or 0.8% lower.
- The Nasdaq could drop 0.9%.
- The S&P 500 could fall 0.8%.
Stocks in Asia finished higher, helped along by the US rally during the previous session. Japan's Nikkei rose 1%. Hong Kong's Hang Seng gained 0.1% after two days of protests disrupted flights at the city's airport.
The United States and China have called another truce in their trade war.
But Mohamed El-Erian, chief economic adviser with Allianz, thinks it would be a mistake to assume that a deal is definitely in the cards.
But investors don't yet appreciate what will almost certainly come next: another trade war escalation. Any cease fire between the United States and China will would be short-lived, El-Erian told CNN Business on Tuesday.
"The likelihood is for a further escalation of the China-US tensions and a slow-but-widening process of de-globalization which would test some long-standing conventional wisdoms about international investing," El-Erian said.