Wall Street rally gains momentum, with Dow up 500 points as Treasury yields tumble
Stocks hit session highs midday as British pound rises
Stocks hit session highs in midday trading, with the Dow Jones Industrial Average up more than 400 basis points, as the British pound recovered.
The British pound reached a session high of $1.0875 against the dollar, up about 1%, around noontime Wednesday after falling to as much as $1.0541 earlier in the session.
Those moves come after the Bank of England said it would buy long-dated bonds as a temporary measure to stabilize the currency.
Investors should buy stocks now, not wait for market bottom, Rubenstein says
Investors shouldn’t be afraid of snapping up stocks trading at a discount now, even if the market may have a bit further to fall, David Rubenstein said during CNBC’s Delivering Alpha Investor Summit Wednesday.
That’s because stocks are much closer to the bottom than they are to the top, The Carlyle Group co-founder said.
“It’s a fools’ errand to find the bottom in the market or the top in the market,” he said. “Trying to wait to the absolute bottom is probably a mistake, in my view.”
There are investing opportunities everywhere right now, says JPMorgan’s Erdoes
Staying invested in this turbulent market means finding the right opportunities.
“There is alpha everywhere,” Mary Callahan Erdoes, JPMorgan Asset & Wealth Management CEO, said at CNBC’s Delivering Alpha Investor Summit in New York City Wednesday. “It’s in stocks. It’s in bonds. It’s in currencies. It’s in real estate. It’s in private markets. It’s in public markets. It’s everywhere, because we are in such a state of change.”
Erdoes likes U.K. banks, saying they might be “the most interesting thing you can invest in.”
“Last week people said don’t invest in a single thing in the U.K. That is exactly when people like us, and people in the room, think, ‘Let’s go look right there,‴ she said.
To read more of her investing ideas from the Delivering Alpha Summit, as well as those of her fellow panelists, click here.
— Michelle Fox
Market can’t count on short-covering help, Strategas says
While the stock market attempts to rally after a dramatic sell-off, it is unlikely to get significant help from hedge funds covering their short positions, according to Strategas.
When stocks fall dramatically, there can sometimes be short-term relief as big funds that bet against the stock close out those positions, creating a short-term buying bump. But strategist Chris Verrone said in a note to clients on Wednesday that the market’s biggest stocks do not have much short interest, limiting the benefit of any short covering.
“We were asked by a client yesterday if a ‘short covering rally’ was likely from here – the market is certainly very short-term oversold, but there’s really not much short interest among the high profile names (MSFT 0.6% of float, AMZN 0.9%, PG 0.6%, HD 0.9%, MA 0.5%, etc.),” the Strategas note said.
Other notable stocks with short interest below 1% include Apple, Berkshire Hathaway, UnitedHealth Group, Exxon Mobil and Coca-Cola, according to Strategas.
— Jesse Pound, Michael Bloom
Eli Lilly notches all-time high, 33 S&P 500 stocks hit fresh lows
At least 33 stocks notched fresh lows in early morning trading on Wednesday while shares of Eli Lilly traded near all-time highs dating back to 1952.
Here are some of the names that hit fresh lows:
- Paramount trading at lows not seen since May 2020
- Warner Bros. Discovery trading at lows not seen since July 2009
- Caesars Entertainment trading at lows not seen since August 2020
- Domino’s Pizza trading at lows not seen since April 2020
- Hasbro trading at lows not seen since May 2020
- YUM Brands trading at lows not seen since March 2021
- Church & Dwight trading at lows not seen since June 2020
- Kraft Heinz trading at lows not seen since February 2021
- Kimberly-Clark trading at lows not seen since March 2020
- Mondelez trading at lows not seen since March 2021
- McCormick trading at lows not seen since April 2020
- Altria trading at lows not seen since February 2021
- Tyson Foods trading at levels not seen since February 2021
- Walgreens Boots Alliance trading at lows not seen since November 2012
- Abbott Labs trading at lows not seen since July 2020
- Organon trading at all-time lows back to its spin-off from Merck in June 2021
- Intel Corporation trading at lows not seen since August 2015
- MasterCard trading at lows not seen since October 2020
- Qualcomm trading at lows not seen since October 2020
- Digital Realty Trust trading at lows not seen since December 2016
- Visa trading at lows not seen since May 2020
— Chris Hayes, Samantha Subin
Apple slump on iPhone news is a buying opportunity, Keybanc says
Shares of Apple are slipping Wednesday following a report that the company is pulling back production of its new iPhone as demand falters.
That could be an opportunity for investors to snap up shares, said Brandon Nispel of Keybanc.
“We view this as negative for AAPL today, however, believe it is neutral to consensus expectations and would take advantage by buying on the pullback,” he wrote in a Wednesday note.
Keybanc data suggests that hardware revenue for the iPhone is still strong, and that Apple’s market share is solid and possibly improving.
“Further, AAPL was hoping to ramp up iPhone 14 units, though if the higher level of demand never materialized, it likely represents no change to consensus expectations,” Nispel wrote. He added that Apple has done this before – last October, the company cut iPhone 13 production citing chip shortages.
Going forward, Nispel expects iPhone 14 mix to shift to higher end models, a positive in the longer-term.
“By no means is it surprising to us, or should be to investors, that iPhone 14 unit productions may get cut as wait times for the iPhone 14 have been effectively zero, as opposed to a couple week wait time for iPhone 14 Pro/Max,” he said. “The iPhone 14 just did not receive the same level of upgrades vs. the iPhone 13 as the iPhone 14 Pro/Max received vs. the iPhone 13 Pro/Max.”
Stanley Druckenmiller says he sees ‘hard landing’ in 2023 with a possible deeper recession
Billionaire investor Stanley Druckenmiller believes the Federal Reserve’s aggressive tightening measures will tip the U.S. economy into a recession.
“Our central case is a hard landing by the end of ’23,” Druckenmiller said at CNBC’s Delivering Alpha Investor Summit in New York City Wednesday. “I will be stunned if we don’t have recession in ’23. I don’t know the timing but certainly by the end of ’23. I will not be surprised if it’s not larger than the so called average garden variety.”
And the legendary investor who has never had a down year in the markets fears it could be something even worse. “I don’t rule out something really bad,” he said.
— Yun Li
Short-seller Carson Block says some ESG companies are ‘money grabs’
Famed short-seller Carson Block told CNBC on Wednesday that many ESG-focused companies are “money grabs” taking advantage of the U.S. government and some investors.
“I would like to save the world,” he said during an interview with “Squawk Box” outside CNBC’s Delivering Alpha conference. “I believe that we do have problems. However, these companies that I’ve seen, are not the ones who are going to save us. Many of these are just money grabs, dressed up — clad in green.”
CNBC Pro subscribers can read the full story here.
— Samantha Subin
S&P 500 opens higher
The S&P 500 bounced slightly off the new 2022 low on Wednesday following the Bank of England’s bond-buying plan to stabilize the falling British pound.
The Dow Jones Industrial Average gained 37 points, or about 0.13%. The S&P 500 rose 0.11%, and the Nasdaq Composite was down 0.12%.
— Sarah Min
Treasury yields retreat, market expectations for Fed come off highs after Bank of England move
Treasury yields fell hard after the Bank of England ended plans to sell gilts and instead announced it would temporarily buy bonds to calm markets. Expectations for Federal Reserve rate hikes also declined in the futures market.
“We’ve gone from QE to QT back to QE,” said Greg Faranello of AmeriVet Securities. The U.K. 10-year was at 4.02%, from a high of 4.58%. QE refers to quantitative easing, or central bank bond buying, while QT refers to central banks ending purchases and potentially selling bonds instead.
“When rates move like this very, very quickly, liquidity comes into question,” said Faranello. “It means collateral, it means margins, it means the potential for further dislocation…It tells you there’s a problem with the plumbing. There’s a problem under the hood.”
Faranello said fed funds futures pointed to a terminal rate of 4.35% Wednesday morning, below the Fed’s own target of 4.6% for an end point for its fed funds rate. The futures market in recent sessions had been pricing a high water mark of 4.75% for fed funds by early next year, he noted.
“We’re taking froth off of Fed rate increases moving forward. It doesn’t mean they’re going to stop. It doesn’t mean they’re going to blink,” he said. “Maybe the Fed doesn’t stop, but they take a more measured approach.”
Sterling lower after Bank of England announces long-dated bond buying
The British pound slumped, falling 1.32% against the dollar to $1.0612, Wednesday morning after the Bank of England announced it would begin temporarily buying long-dated bonds in an attempt to keep financial markets stable.
“Some might argue this is even more inflationary, so the GBP should collapse,” wrote Dennis DeBusschere in a Wednesday note of the BOE’s announcement. “But that is probably only true if the BoE doesn’t follow through with aggressive rate hikes.”
That means that even more short rate increases are now necessary, and how the GBP trades from today will be telling, DeBusschere wrote.
“If the GBP holds up, tail risk will be reduced,” he said, noting that the GBP’s move lower since the news is not good so far.
“Bottom line, macro uncertainty is becoming even more elevated, which will keep correlations high,” said DeBusschere.
Stocks making the biggest moves premarket
These companies are making headlines before the bell:
- Biogen (BIIB) – Biogen soared 45.6% in premarket trading after Biogen and Japanese partner Eisai said their experimental Alzheimer’s drug dramatically slowed the disease’s progression in a study, reducing cognitive and functional decline by 27%.
- Thor Industries (THO) – Thor Industries gained 3.6% in the premarket after the recreational vehicle maker reported better-than-expected profit and revenue for its latest quarter. Thor saw particular strength in its motorized RV segment, with a 24.5% gain over the prior year.
- Lyft (LYFT) – Lyft said it would freeze hiring through the end of this year. That follows the ride-hailing company’s previous statement that it would slow hiring “dramatically” as it seeks to cut costs. Lyft slid 2.5% in premarket trading.
— Peter Schacknow
Apple shares fall
Shares of Apple were down nearly 4% in premarket trading after a Bloomberg report, citing people familiar with the matter, said the tech company is ditching plans to increase new iPhone production after demand fell short of expectations.
Apple reportedly was aiming to increase assembly of the iPhone 14 product family by as much as 6 million units in the second half of this year before telling suppliers to stand down.
The move in Apple, which has an outsized weighting in the S&P 500 given its $2.4 trillion market cap, will likely make it difficult for markets to bounce back.
British pound briefly pops after Bank of England announcement
The British pound got a brief boost Wednesday after the Bank of England said it would buy long-dated UK government bonds in an effort to stabilize the country’s currency.
The pound recently hit a record low against the dollar around $1.03. On Wednesday, sterling traded 0.6% lower at $1.0672.
European markets slide as global stocks retreat
European stocks were sharply lower on Wednesday as global markets sold off on economic concerns surrounding inflation and the growth outlook.
The pan-European Stoxx 600 fell 1.9% by mid-morning, with banks and insurance stocks plunging 4.2% to lead losses. Healthcare was the only sector in positive territory, adding 0.7%.
The negative trade in Europe comes after a torrid night for markets in the Asia-Pacific.
CNBC Pro: Credit Suisse says now’s the time to buy two green hydrogen stocks — and gives one over 200% upside
Credit Suisse says it’s time to enter the green hydrogen sector, with a number of catalysts set to drive the clean energy powerhouse.
“Green hydrogen is a growth market — we increase our 2030 market estimates by [over] 4x,” the bank said, forecasting that green hydrogen production will expand by around 40 times by 2030.
It names two stocks to play the boom — giving one upside of more than 200%.
— Weizhen Tan
U.S. 10-year Treasury yield breaches 4% for the first time since 2010
CNBC Pro: Asset manager reveals what’s next for stocks — and shares how he’s trading the market
Neil Veitch, investment director at Edinburgh-based SVM Asset Management, says he expects the macro landscape to remain “quite difficult” for the remainder of the year.
Speaking to CNBC Pro Talks last week, Veitch named the key drivers that could help the stock market to turn “more constructive” and shared his take on growth versus value.
— Zavier Ong
Earnings questions, potential recession mean more selling could be ahead
The Dow and S&P 500 have fallen for six straight days, with many of those seeing broad selling typical of so-called “washout” days.
That can sometimes be a contrarian buy signal on Wall Street, but many investment professionals are skeptical that the selling is over. One reason is that earnings expectations for next year still show solid growth, which would be unlikely in the event of a recession.
“We know that if we start seeing a turnaround in the 2-year yields … and if we start seeing a turnaround in the dollar, that gives us the ability to bounce from these extremely oversold conditions,” said Andrew Smith, chief investment strategist of Delos Capital Advisors in Dallas. “But I have a hard time reconciling in my mind that the earnings story is going to be as good as we expect.”
Additionally, the dramatic moves in the bond and currency markets means that “something broke” and it may be smart to wait for that information to shake out, Smith said.
On the positive side, Smith pointed to a strong labor market and signs of continued spending on travel as a sign that the U.S. economy may be able to avoid a major recession.
— Jesse Pound
Futures open higher
Stock futures rose slightly after trading began at 6 p.m. Dow futures rose more than 60 points at one time, though those gains have since shrunk.
Nasdaq 100 futures had the biggest early jump of three, suggesting that tech may continue to outperform on Wednesday.
— Jesse Pound
S&P 500 takes out June low on Tuesday
Though Tuesday’s closing levels showed relatively modest daily moves, the S&P 500 fell below its previous intraday low for the year during the session. That move was seen by many as confirmation that the summer rally for stocks has failed.
The S&P 500 is now 24.3% off of its record high, and the Dow is also in bear market territory, down roughly 21.2%. The Nasdaq Composite, whose decline dates back to last November, is 33.2% below its high-water mark.
The next key metric for investors in the days ahead could come from the bond market, where the 10-year Treasury yield has surged to just below the 4% level.
— Jesse Pound, Christopher Hayes