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Dow Dips 100 Points, Stocks Gyrate After Hot Inflation Report

Rebekah Fuller

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Stocks slipped on Wednesday after June inflation data came in hotter-than-expected, contributing to growing fears that the Federal Reserve will get more aggressive in its fight to tame rising prices.

The Dow Jones Industrial Average dropped 150 points, or 0.51%, while the S&P 500 fell 0.3%. The Nasdaq Composite dipped 0.1% after a short-lived bounce.

“There’s no spinning this, other than the Fed has to get more aggressive near term and crush demand. That cements a recession now, ” said Liz Ann Sonders of Charles Schwab. “I think a recession is an inevitability.”

The consumer price index rose 9.1% on a year-over-year basis in June, coming in even higher than May’s 8.6% reading, which was the biggest increase since 1981. Economists surveyed by Dow Jones had anticipated an 8.8% print.

Core CPI, which excludes food and energy prices, came in at 5.9% and above the 5.7% estimate.

All major S&P 500 sectors declined on Wednesday, with the exception of consumer discretionary boosted by gains in tech. Shares of Boeing, Dow and Walgreens slid more than 1% each, dragging the Dow into negative territory.

Battered tech shares Amazon and Tesla staged a comeback on Wednesday, rising more than 1% each despite mounting growth concerns. The move briefly brought the tech-heavy Nasdaq into positive territory. Twitter’s stock rose 6.4% as the social media company sued Elon Musk.

Along with the inflation report, investors continued to monitor second-quarter earnings for clues into the health of U.S. companies. Delta Air Lines shares dropped 6.3% after posting mixed results.

Amid the news, United and American Airlines dipped 2% and 5%, respectively. Struggling cruise stocks Norwegian, Royal Caribbean and Carnival each fell about 2%.

Bigger Fed rate hikes?

June’s hot inflation reading could prompt the central bank to hike another 75 basis points during this month’s meeting or raise expectations of an even larger increase to tame surging prices. Last month, the Fed raised its benchmark interest rate three-quarters of a percentage point to a range of 1.5%-1.75% in its most aggressive hike since 1994.

“The core is chugging along at a frightening clip,” said Michael Schumacher at Wells Fargo.

Fed funds futures are now pricing in an 81 basis points rate hike for July. That would indicate that some in the market expect a rate hike of more than 75 basis points, and 100 could happen, he added.

“With core running this strong, the Fed can’t ignore that. This is a bad number,” he said.

Wednesday’s hot inflation reading left many investors questioning whether inflation has in fact reached its peak. Headline CPI was up 1.3% and core CPI rose 0.7% on a monthly basis, compared with estimates of 1.1% and 0.5%, respectively. Monthly rental costs climbed 0.8% in June, the biggest increase since April 1986.

“Even if you don’t believe this is the last hot number, the market is in a place where you’ve had enough of a valuation reset that on days like today when you see a significant decline, you try to find opportunity,” Joe Terranova of Virtus Investment Partners told CNBC’s “Halftime Report” on Wednesday.

Treasury yields and the dollar surged after the report. The 10-year rate added 7 basis points to trade at 3.03%, while the 2-year jumped 11 basis points to 3.16% before paring back those gains as the euro fell below parity with the U.S. dollar.

Rising recession fears

Fears of a recession have climbed as inflation rises. Bank of America economists said Wednesday they are forecasting a mild recession later this year as real GDP growth declines and anticipate that the unemployment rate will jump to 4.6% in 2023.

During the first quarter, GDP declined by 1.5% and it is expected to fall 1.2% in the second, according to the latest estimates from the Atlanta Fed’s GDPNow tracker. By definition, two consecutive quarters of negative GDP is often considered a recession.

“It could be the case that we’re in a recession, but a very mild one,” said Cliff Corso, president and chief investment officer at Advisors Asset Management. “We are heading to a recession, it could very well just be a mild recession because we’re starting from a decent place,” since consumers still have excess cash as a cushion.

Whether that recession is enough to bring inflation down to the Fed’s target of 2% will remain in focus, he said.

Along with negative GDP, the cost of borrowing continues to rise. At the same time, job growth remains strong with the latest data showing a 372,000 increase in nonfarm payrolls last month, according to the Bureau of Labor Statistics. Real wage growth is rising, albeit at a slower pace than inflation, which could spell further trouble for the economy.

“We really need to restore price stability to get inflation back down to 2%, because without that we’re not going to be able to have a sustained period of maximum employment where the benefits are spread very widely and where people’s wages aren’t being eaten up by inflation,” wrote Wolfe Research’s Chris Senyek.

In other news, investors are looking ahead to results from major banks including JPMorgan and Morgan Stanley slated for Thursday.

— CNBC’s Patti Domm contributed reporting

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Original Source: cnbc.com

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Ukraine’s Zelenskyy Tells Davos Supplies of Western Tanks Must Outpace Another Russian Offensive

Rebekah Fuller

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“Mobilization of the world must outpace a next military mobilization of our joint enemy,” Zelenskyy said via videoconference at the World Economic Forum in Davos, Switzerland.
Bloomberg | Bloomberg | Getty Images

Ukrainian President Volodymyr Zelenskyy on Wednesday said the supplies of Western tanks must outpace another Russian attack, reviving Kyiv’s push for the delivery of heavily armored vehicles amid fears the Kremlin could soon launch a new mobilization drive.

“Mobilization of the world must outpace a next military mobilization of our joint enemy,” Zelenskyy said via videoconference at the World Economic Forum in Davos, Switzerland.

“The supplying of Ukraine with air defense systems must outpace Russia’s next missile attacks. The supplies of Western tanks must outpace another invasion of Russian tanks.”

“The restoration of security and peace in Ukraine must outpace Russia’s attacks on security and peace in other countries. A tribunal for military crimes must prevent new ones,” Zelenskyy said.

His comments come amid speculation that Russian President Vladimir Putin may be poised to announce another mobilization round.

Analysts at the Institute for the Study of War, a U.S.-based think tank, said Tuesday that Putin may announce “a second mobilization wave in the coming days, possibly as soon as January 18.”

Zelenskyy and senior Ukrainian officials have repeatedly urged Western allies to provide heavy military vehicles and weapons in order to help defeat Russia’s nearly year-long onslaught.

Poland, France and the U.K. have recently pledged to send tanks to the Ukrainian military, while Finland says it could also donate a small number of German-made Leopard 2 tanks to help Kyiv protect itself.

Germany’s government said last week, however, that it has no plans to provide Ukraine with the Leopard 2 tanks.

‘Another horrible day for Ukraine’

Earlier on Wednesday, the three main figures of Ukraine’s Interior Ministry died in a helicopter crash in a suburb of the capital Kyiv.

The helicopter fell near a kindergarten and a residential building in Brovary with the cause of the crash being investigated.

Ukraine’s Interior Minister Denys Monastyrskyi, First Deputy Minister Yevhenii Yenin and the Interior Ministry’s State Secretary Yurii Lubkovych were among those killed in the crash.

Ukrainian authorities said at least 14 people died in the crash. Initially, reports indicated 18 people had died in the crash, although this has since been revised.

Zelenskyy described the incident as a “tragedy” and led delegates at Davos in a minute’s silence “to honor the memory of every person Ukraine has lost.”

Separately, Ukrainian first lady Olena Zelenska said at a news conference that it was “another horrible day for Ukraine.”

— CNBC’s Holly Ellyatt contributed to this report.

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Holiday Sales Fall Short of Expectations, Set Stage for Tougher 2023 for Retailers

Rebekah Fuller

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Shoppers walk through the Urbanspace Holiday Shops at Bryant Park in New York, U.S., on Sunday, Dec. 12, 2021.
Gabby Jones | Bloomberg | Getty Images

Holiday sales fell short of industry expectations, as shoppers felt pinched by inflation and rising interest rates, according to data from the National Retail Federation.

Sales during November and December grew 5.3% year over year to $936.3 billion, below the major trade group’s prediction for growth of between 6% and 8% over the year prior. In early November, NRF had projected spending of between $942.6 billion and $960.4 billion.

The sales forecast excludes spending at automobile dealers, gasoline stations and restaurants.

The gains include the impact of inflation, too, which drives up total sales. The consumer price index, which measures the cost of a broad mix of goods and services, was up 6.5% in December compared with a year ago, according to the Labor Department.

For retailers, the shopping season’s results reflect the challenges ahead. As Americans continue to pay higher prices for groceries, housing and more month after month, they are racking up credit card balances, spending down savings and having fewer dollars for discretionary spending.

This is breaking news. Please check back for updates.

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Microsoft, Amazon and Other Tech Companies Have Laid Off More Than 60,000 Employees in the Last Year

Rebekah Fuller

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Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event in Seoul on Nov. 15, 2022.
SeongJoon Cho | Bloomberg | Getty Images

The job cuts in tech land are piling up, as companies that led the 10-year bull market adapt to a new reality.

Microsoft said Wednesday that it’s letting go of 10,000 employees, which will reduce the company’s headcount by less than 5%. Amazonfresh round of job cuts Wednesday that are expected to eliminate more than 18,000 employees and become the largest workforce reduction in the e-retailer’s 28-year history.

The layoffs come in a period of slowing growth, higher interest rates to battle inflation, and fears of a possible recession next year.

Here are some of the major cuts in the tech industry so far. All numbers are approximations based on filings, public statements, and media reports:

Microsoft: 10,000 jobs cut

Microsoft is cutting 10,000 employees through March 31 as the software maker braces for slower revenue growth. The company is also taking a $1.2 billion charge.

“I’m confident that Microsoft will emerge from this stronger and more competitive,” CEO Satya Nadella announced the move in a memo to employees that was posted on Microsoft’s website Wednesday. The move will reduce Microsoft’s headcount by less than 5%, and some employees will find out this week if they’re losing their jobs, he wrote.

Amazon: 18,000 jobs cut

Earlier this month, Amazonsaid the company was planning to lay off more than 18,000 employees, primarily in its human resources and stores divisions. It came after Amazon said in November it was looking to cut staff, including in its devices and recruiting organizations. CNBC reported at the time that the company was looking to lay off about 10,000 employees.

Amazon went on a hiring spree during the Covid-19 pandemic. The company’s global workforce swelled to more than 1.6 million by the end of 2021, up from 798,000 in the fourth quarter of 2019.

Alphabet (Verily): 230 jobs cut

Google parent company Alphabet15% of employees from its health sciences division Verily. Google itself has not undertaken any significant layoffs as of Jan. 18, but employees are increasingly growing worried that the axe may soon fall.

Crypto.com: 500 jobs cut

Crypto.com announced plans to lay off 20% of its workforce Jan. 13. The company had 2,450 employees, according to PitchBook data, suggesting around 490 employees were laid off.

CEO Kris Marszalek said in a blog post that the crypto exchange grew “ambitiously” but was unable to weather the collapse of Sam Bankman-Fried’s crypto empire FTX without the further cuts.

“All impacted personnel have already been notified,” Marszalek said in a post.

Coinbase: 2,000 jobs cut

On Jan. 10, Coinbasecut about a fifth of its workforce as it looks to preserve cash during the crypto market downturn.

The exchange plans to cut 950 jobs, according to a blog post. Coinbase, which had roughly 4,700 employees as of the end of September, had already slashed 18% of its workforce in June saying it needed to manage costs after growing “too quickly” during the bull market.

“With perfect hindsight, looking back, we should have done more,” CEO Brian Armstrong told CNBC in a phone interview at the time. “The best you can do is react quickly once information becomes available, and that’s what we’re doing in this case.”

Salesforce: 7,000 jobs cut

Salesforce is cutting 10% of its personnel and reducing some office space as part of a restructuring plan, the company announced Jan. 4. The company employed more than 79,000 workers as of December.

In a letter to employees, co-CEO Marc Benioff said customers have been more “measured” in their purchasing decisions given the challenging macroeconomic environment, which led Salesforce to make the “very difficult decision” to lay off workers.

Salesforce will record charges of $1.0 billion to $1.4 billion related to the headcount reductions, and $450 million to $650 million related to the office space reductions, the company said.

Meta: 11,000 jobs cut

Facebook parent Metamost significant round of layoffs ever in November. The company said it plans to eliminate 13% of its staff, which amounts to more than 11,000 employees.

Meta

The tech giant’s cuts come after it expanded headcount by about 60% during the pandemic. The business has been hurt by competition from rivals such as TikTok, a broad slowdown in online ad spending and challenges from Apple’s iOS changes.

Twitter: 3,700 jobs cut

Shortly after closing his $44 billion purchase of Twitter in late October, new owner Elon Musk cut around 3,700 Twitter employees, according to internal communications viewed by CNBC. That’s about half the staff. Since then, significantly more employees have quit after Musk changed some company policies around working from home and wrote that he expected all employees to commit to a “hardcore” work environment.

In a tweet on Nov. 4, Musk said there was “no choice” but to lay off employees, as the company was losing $4 milion per day.

Lyft: 700 jobs cut

Lyft announced in November that it cut 13% of its staff, or about 700 jobs. In a letter to employees, CEO Logan Green and President John Zimmer pointed to “a probable recession sometime in the next year” and rising rideshare insurance costs.

For laid-off workers, the ride-hailing company promised 10 weeks of pay, healthcare coverage through the end of April, accelerated equity vesting for the Nov. 20 vesting date and recruiting assistance. Workers who had been there for more than four years will get an extra four weeks of pay, they added.

Stripe: 1,100 jobs cut

Online payments giant Stripe announced plans to lay off roughly 14% of its staff, which amounts to about 1,100 employees, in November.

CEO Patrick Collison wrote in a memo to staff that the cuts were necessary amid rising inflation, fears of a looming recession, higher interest rates, energy shocks, tighter investment budgets and sparser startup funding. Taken together, these factors signal “that 2022 represents the beginning of a different economic climate,” he said.

Stripe was valued at $95 billion last year, and reportedly lowered its internal valuation to $74 billion in July.

Shopify: 1,000 jobs cut

In July, Shopify announced it laid off 1,000 workers, which equals 10% of its global employees.

In a memo to staff, CEO Tobi Lutke acknowledged he had misjudged how long the pandemic-driven e-commerce boom would last, and said the company is being hit by a broader pullback in online spending. The company’s stock price is down 78% in 2022.

Netflix: 450 jobs cut

Netflixtwo rounds of layoffs. In May, the streaming service eliminated 150 jobs after Netflix reported its first subscriber loss in a decade. In late June, Netflix announced another 300 layoffs.

In a statement to employees the company said, “While we continue to invest significantly in the business, we made these adjustments so that our costs are growing in line with our slower revenue growth.”

Snap: 1,000 jobs cut

In late August, Snap announced it laid off 20% of its workforce, which equates to over 1,000 employees.

Snap

Robinhood: 1,100 jobs cut

Retail brokerage firm Robinhood cut 23% of its staff in August, after slashing 9% of its workforce in April. Based on public filings and reports, that amounts to more than 1,100 employees.

Robinhood CEO Vlad Tenev blamed “deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash.”

Tesla: 6,000 jobs cut

In June, TeslaElon Musk wrote in an email to all employees that the company is cutting 10% of salaried workers. The Wall Street Journal estimated the cuts would come to about 6,000 employees, based on public filings.

“Tesla will be reducing salaried headcount by 10% as we have become overstaffed in many areas,” Musk wrote. “Note this does not apply to anyone actually building cars, battery packs or installing solar. Hourly headcount will increase.”

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