Stock market battered: Dow Jones down as banks suffer, economic concerns grip investors

Stock market battered: Dow Jones down as banks suffer, economic concerns grip investors

Stocks are falling sharply in early trading on Wall Street Monday, joining a global tumble for markets as the S&P 500 sinks nearly 2%. Neither. Wall Street is not as partisan as you think. Despite the name, “Snowflake’s” IPO started out hot, got hotter — and then burned a lot of investors. (Bloomberg) — Stocks slumped to a two-month low on concern over tighter coronavirus restrictions, cloudy prospects for more economic stimulus and a report detailing suspicious transactions at global banks. Treasuries and the dollar climbed.The S&P 500 fell as much as 2.7% Monday — approaching the threshold Hong Kong shares of HSBC fell to their worst level since 1995 on Monday (September 21) after reports that it and other financial institutions had allegedly moved large sums of illicit money over two decades.
They revolve around documents leaked to Buzzfeed and shared with a global network of invetigative journalists.
Buzzfeed and other news outlets say it involves moving money for the likes of terrorists, drug kingpins and corrupt leaders.
The leak is reportedly made up of over 2,100 suspicious activity reports filed by banks and other financial firms with the U.S Treasury's Financial Crimes Enforcement Network, or Fincen.
The so-called Fincen Files allegedly show more than $2 trillion dollars worth of transactions from 1999 to 2017, all of it flagged as suspicious by the banks' own compliance departments.
The activity reports aren't necessarily proof of wrongdoing, but the leak paints a picture of a banking system that allows for vast amounts of money laundering.
Among the alleged activity are funds handled by JPMorgan for potentially corrupt individuals and companies in Venezuela, money from an investment scam, or Ponzi scheme, moving through HSBC and money linked to a Ukrainian billionaire processed by Deutsche Bank.
Five global banks appeared the most in the documents; HSBC, JPMorgan, Deutsche Bank, Standard Chartered and Bank of New York Mellon.
In a statement to Reuters, HSBC said the information was "historical" and that as of 2012, "HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime."
Deutschebank also called the reports "historic issues" and that the bank had "devoted significant resources to strengthening" their controls.
Standard Chartered and JP Morgan both said they took the issue of fighting financial crime seriously, while BNY Mellon said it fully complies with laws and regulations.

NEW YORK (AP) — Stocks are falling sharply in early trading on Wall Street Monday, joining a global tumble for markets as the S&P 500 sinks nearly 2%.

Losses began in Asia as soon as trading opened for the week, and they accelerated in Europe on worries about the possibility of tougher restrictions on public life due to rising coronavirus counts there, before knocking U.S. stocks and Treasury yields lower.

The losses were widespread, with almost all the stocks in the S&P 500 lower. The index was down 1.7% after earlier being down 2.1%.

The Dow Jones Industrial Average was down 591 points, or 2.1%, at 27,065, as of 9:49 a.m. Eastern time, and the Nasdaq composite was down 1.2%. In another sign of the increased worry, the yield on the 10-year Treasury fell to 0.65% from 0.69% late Friday.

Wall Street has been shaky this month, and the S&P 500 has pulled back about 9% since hitting a record Sept. 2 amid a long list of worries for investors. Chief among them is fear that stocks got too expensive when coronavirus counts are still worsening, U.S.-China tensions are rising, Congress is unable to deliver more aid for the economy and a contentious U.S. election is approaching.

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Bank stocks had sharp losses Monday morning after a report alleged that several of them continue to profit from illicit dealings with criminal networks despite being previously fined for similar actions.

The International Consortium of Investigative Journalists said documents indicate JPMorgan Chase moved money for people and companies tied to the massive looting of public funds in Malaysia, Venezuela and the Ukraine, for example. Its shares fell 2.8%.

Big Tech stocks were also struggling again, much as they have since the market’s momentum turned early this month. Amazon, Microsoft and other companies had soared as the pandemic accelerates work-from-home and other trends that boost their profits. But critics said their prices simply climbed too high, even after accounting for their explosive growth.

Amazon fell 1.2% and Microsoft lost 1.6%.

Tech’s losses have helped drag the S&P 500 to three straight weekly losses, the first time that’s happened in nearly a year.

Shares of electric and hydrogen-powered truck startup Nikola plunged 18.9% after its founder resigned amid allegations of fraud. The company has called the allegations false and misleading.

General Motors, which recently signed a partnership deal where it would take an ownership stake in Nikola, fell 5.6%.

Investors are also worried about the diminishing prospects that Congress may soon deliver more aid to the economy. Many investors call such stimulus crucial after extra weekly unemployment benefits and other support from Capitol Hill expired. But partisan disagreements have held up any renewal.

“With 43 days to the U.S. election, fingers crossed may be what little one can do when it comes to the fiscal stimulus hopes,” said Jingyi Pan of IG in a report.

Partisan rancor only continues to rise in the country, with a vacancy on the Supreme Court the latest flashpoint after the death of Justice Ruth Bader Ginsburg.

Tensions between the world’s two largest economies are also weighing on markets. President Donald Trump has targeted Chinese tech companies in particular, and the Department of Commerce on Friday announced a list of prohibitions that could eventually cripple U.S. operations of Chinese-owned apps TikTok and WeChat. The government cited national security and data privacy concerns.

A U.S. judge over the weekend ordered a delay to the restrictions on WeChat, a communications app popular with Chinese-speaking Americans, on First Amendment grounds. Trump also said on Saturday he gave his blessing on a deal between TikTok, Oracle and Walmart to create a new company that would satisfy his concerns.

Oracle rose 3.3%, and Walmart gained 1.1%, among the few companies to rise Monday.

Layered on top of it all the concerns for the market is the continuing coronavirus pandemic and its effect on the global economy.

On Sunday, the British government reported 4,422 new coronavirus infections, its biggest daily rise since early May. An official estimate shows new cases and hospital admissions are doubling every week.

The FTSE 100 in London dropped2.9%. Other European markets were similarly weak. The German DAX lost 3.2%, and the French CAC 40 fell 2.9%.

In Asia, Hong Kong’s Hang Seng dropped 2.1%, South Korea’s Kospi fell 1% and stocks in Shanghai lost 0.6%.

___

AP Business Writer Joe McDonald contributed.

Source: www.usatoday.com


Opinion | Is the Stock Market Rooting for Trump or Biden?

Opinion | Is the Stock Market Rooting for Trump or Biden?

Opinion|Is the Stock Market Rooting for Trump or Biden?

Neither. Wall Street is not as partisan as you think.

Mr. Sharma is a contributing opinion writer.

  • Sept. 21, 2020, 5:00 a.m. ET

For months the S&P 500 rose this year — despite a deadly pandemic, the resulting economic devastation and the rise of a Democratic Party increasingly sympathetic to democratic socialism. Then, this month, with Joe Biden doing well in the polls, stock prices finally stumbled.

If polls continue to point to a Biden victory in the 2020 presidential election, pundits will be tempted to see any further tremors in the stock market as expressing a concern about the economic priorities of a Democratic president. But the idea that the market favors a particular candidate or party, though widespread, is wrong.

My research, which reaches back to the 1860s, when the two-party political system began to dominate, shows that the market has no clear bias in favor of either party and that market volatility in the run-up to an election is perfectly normal.

The market is an economic barometer, not a political one. To be sure, its collective mind pays attention to presidential politics, but as just one of many factors that can influence the direction of the economy. The leader that the market listens to most carefully is the head of the Federal Reserve, not the president. When states started imposing lockdowns in March, the market suffered a drastic crash, but then the Fed and the Treasury rushed in with promises of trillions of dollars to keep businesses afloat, and the market bounced back.

This month’s market tremors are best explained by growing concern about Congress’s failure to pass a new spending bill and about the prospect of a contested election — not the prospect that Mr. Biden might win.

Indeed, the market seems to like a fresh face in the White House. Since the late 1860s, nine presidents have been elected to consecutive terms and have served at least five years. Eight of them saw higher market returns in their first term than in their second, often much higher. (Ronald Reagan was the exception.) First-term returns averaged 83 percent, second-term returns just 28 percent. This finding is consistent with research on the “second-term curse,” which shows that underlying economic conditions tend to decline in a president’s second term.

Likewise, there have been 16 elections since 1869 in which an incumbent finished a full term, and was fighting for a second. In general the markets do much better after an incumbent loses.

It’s worth noting that underlying economic conditions, including G.D.P. growth and inflation, have tended to be more favorable under Democratic presidents, which can make it seem as if markets prefer a Democrat in the White House. Since 1869, the average market return over the course of a full presidential term was 68 percent under a Democratic president and 52 percent under a Republican.

But the connection between economic health and a Democrat in the White House is largely coincidental. Politicians can influence but not control the business cycle. Economic factors, not partisan bias, provide the best explanation for why markets have performed better under Democrats.

Another clear pattern, based on data going back to the 1920s, is that markets grow more volatile in the three months before an election. Whatever upset the market this month, the volatility started right on time, historically speaking.

All of this casts doubt on the widespread assumption that Wall Street is rooting for a Trump win. The related notion, that Wall Street is rooting against a Biden win because of his party’s leftward drift, also does not jibe with what many leading investors are saying and writing.

These investors believe that despite Mr. Biden’s left-leaning campaign rhetoric, he will govern more moderately when in office, raising taxes and regulation while decreasing tensions over immigration, global trade and China. That mix would have some effect on which economic sectors do best during a Biden presidency, but little effect on the market’s overall direction.

More important, the market cares less about who leads the free world than who leads the Fed. Low interest rates make stocks look more attractive, so the Fed’s policies in recent years have been turbocharging stock prices. The U.S. stock market is currently more expensive than at any time other than the dot-com bubble of 1999 to 2000, according to some measures.

What happens next in the market depends mainly on the direction of the economy and on interest rates. If over the coming months the economy keeps recovering but long-term interest rates start to rise rapidly, the market could actually decline — a mirror image of this year’s market boom and economic bust.

Many traders, eager to see the market rally continue, are arguing that if Mr. Biden wins he will bring in leadership at the Fed that will be even more aggressive about keeping interest rates low. That’s another reason Wall Street isn’t too worried about who will be the next president, and more than anything else just wants the election to be over.

Ruchir Sharma is the chief global strategist at Morgan Stanley Investment Management, the author, most recently, of “The Ten Rules of Successful Nations” and a contributing opinion writer. This essay reflects his opinions alone.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.

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Source: www.nytimes.com

Author: Ruchir Sharma


Why Investing in IPOs is Risky: Snowflake Edition

Why Investing in IPOs is Risky: Snowflake Edition

Ever since it filed its paperwork to go public, I was interested in data warehousing company Snowflake (NYSE:SNOW). I even thought about participating in the IPO.

28 million shares were up for grabs, so I figured there’d be plenty for the taking. And Snowflake was planning to sell its shares in a range of $75 to $85. Just 48 times trailing sales — what a bargain!

But that’s when everything started to go wrong.

Words Common Mistakes written on a notepad

Image source: Getty Images.

First, the news broke that Warren Buffett was getting involved in Snowflake’s IPO, sinking as much as $573 million worth of Berkshire Hathaway’s (NYSE:BRK.A) (NYSE:BRK.B) cash into the IPO before it began trading.

News that the Oracle of Omaha was backing Snowflake’s play (confirmed by data from S&P Global Market Intelligence) had an immediate effect. In no time at all, an IPO that was expected to cost about $80 jumped to $120 a share.

Snowflake had become 50% more expensive — and it hadn’t even begun trading yet. 

And that was the good news. As it turned out, Buffett’s interest did more than just inflate Snowflake’s IPO price. It also attracted the attention of thousands (if not millions) of investors looking to buy the stock once it began trading.

By the time IPO Day rolled around, bids were coming in fast and furious in pre-market trading. And when trading opened, by the time outside investors were finally able to buy the stock, Snowflake cost … $245!

That’s right. Three times the advertised price.

Even so, investors were still interested in owning the stock. Snowflake started its first trading day at a valuation of nearly 150 times trailing sales — let alone earnings — and yet the skyrocketing price seemed only to excite the momentum traders. Over the course of this first day of trading, Snowflake stock rose as high as $319, before turning tail and heading back down, eventually closing the day just under $254 a share.

And so it turned out that, despite all the hype, from first trade to last, shares of Snowflake managed to rise less than 4%. True, investors like Buffett who managed to “get in on the IPO” before trading began made out like bandits. But everyone else, I suspect, ended up rather underwhelmed — and the trading news remained grim for the next two days.

On Thursday, Snowflake stock fell 10%. And while it regained some of those losses Friday, the stock still closed the week at just $240 a share — $5 below the best price most investors were able to get it for on IPO Day.

So what is the takeaway for investors?

At a minimum, I see three key lessons for investors to keep in mind as they contemplate upcoming IPOs in popular stocks such as Robinhood, Palantir, and Airbnb later this year:

  • IPOs are risky, and the advertised price may not be the price you ultimately pay.
  • Part of the reason Snowflake’s IPO was so popular was because of the relatively low $80 share price at which its IPO was first announced. Had Snowflake actually IPOed at that price, the entire company would have been valued at just $22 billion and change, and could have been an arguable bargain relative to pricier cloud computing stocks such as Okta ($25 billion) or Twilio ($32 billion) or Atlassian ($42 billion).

    As it turned out, by the time most investors got a chance to invest in this IPO, Snowflake cost three times as much, and was clearly overvalued.

  • The more you pay, the less you get.
  • Everyone knows the old investing saw: “Buy low, sell high.” But as Snowflake stock got more and more expensive before trading even began, the chance to “buy low” slipped away. By the time trading began at $245, this train hadn’t just left the station — it was already in the next state.

    After paying such a high price to “get in” on the IPO, there weren’t a lot of gains left to be had. That’s why, by the time trading ended on Wednesday, most investors were sitting on a profit of less than 4%.

  • An overpriced IPO needs a plentiful supply of “greater fools” to resell shares to. When that supply runs dry, look out below.
  • Despite the fact that Snowflake stock began trading at ridiculously expensive levels, the stock still went up — at first. But it wasn’t rising because Snowflake was becoming more valuable. (The stock was less than one day old! It hadn’t had any time to get more valuable!) Instead, Snowflake’s stock price ran up because traders, who had no intention of owning Snowflake for the long term, tried to make a quick buck selling the stock back and forth to each other.

    Once that game ended, though, the game was up for Snowflake, too — and the stock fell.

    This, in a nutshell, is why most Snowflake investors ended last week with nothing but losses.

    Source: www.fool.com

    Author: Rich Smith


    Stocks Slump to Two-Month Low on Bank Probe, Virus: Markets Wrap

    Stocks Slump to Two-Month Low on Bank Probe, Virus: Markets Wrap

    Stocks Slump to Two-Month Low on Bank Probe, Virus: Markets Wrap

    (Bloomberg) — Stocks slumped to a two-month low on concern over tighter coronavirus restrictions, cloudy prospects for more economic stimulus and a report detailing suspicious transactions at global banks. Treasuries and the dollar climbed.

    The S&P 500 fell as much as 2.7% Monday — approaching the threshold that many investors consider to be a market correction. Commodity, industrial and financial shares led the gauge to a fourth straight decline, its longest since February, with JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. sinking at least 3.4%. Carnival Corp. and American Airlines Group Inc. paced losses in travel companies on worries that an increase in virus cases around the world could prompt further lockdown measures. Nikola Corp. plunged as its founder stepped down in the wake of regulatory probes and a short seller’s allegations that the electric-truck startup misled investors.

    Read: Dot-Com Valuation Flashback Doomed Stock Market to Swift Retreat

    Equities extended their September selloff as a new investigation by the International Consortium of Investigative Journalists says some big global banks “kept profiting from powerful and dangerous players” in the past two decades even after the U.S. imposed penalties. Meanwhile, the eruption of a partisan battle over replacing Supreme Court Justice Ruth Bader Ginsburg damaged already-slim prospects for another round of U.S. fiscal stimulus. Speaker Nancy Pelosi and U.S. House Democrats released a stopgap government funding bill without support from the White House or Senate Republicans — raising the risk of a federal shutdown at the end of the month.

    As U.S. deaths related to Covid-19 approached 200,000, former Food and Drug Administration Commissioner Scott Gottlieb said he expects the nation to experience “at least one more cycle” of the virus in the fall and winter. Germany’s health minister warned that the trend of cases in Europe is “worrying” amid expectations that restrictions could soon be extended to London.

    “Maybe there are worries we will see another wave of lockdowns. We also have U.S. political risk rising,” according to Jeffrey Kleintop, chief global investment strategist at Charles Schwab Corp. “There are some concerns there could be more fines in place on financial-services institutions,” and that could further hit earnings estimates, he said.

    Elsewhere, oil slid after Libya signaled the resumption of some crude exports. Silver and gold tumbled.

    Speculative investors are souring on the outlook for U.S. technology stocks. Positioning in Nasdaq-100 mini futures is the most bearish since April 2008, the latest Commodity Futures Trading Commission data show. High-flying tech shares could remain under pressure until lingering optimism still evident in options bets normalizes, according to Julian Emanuel, a strategist at BTIG LLC.

    These are some of the main moves in markets:

    Stocks

    The S&P 500 dipped 2.5% as of 2:57 p.m. New York time.The Stoxx Europe 600 Index sank 3.2%.The MSCI Asia Pacific Index slid 1.1%.

    Currencies

    The Bloomberg Dollar Spot Index jumped 0.8%.The euro decreased 0.7% to $1.1754.The Japanese yen weakened 0.2% to 104.82 per dollar.

    Bonds

    The yield on 10-year Treasuries declined three basis points to 0.66%.Germany’s 10-year yield fell five basis points to -0.53%.Britain’s 10-year yield declined three basis points to 0.157%.

    Commodities

    West Texas Intermediate crude dipped 4.3% to $39.33 a barrel.Gold depreciated 2.2% to $1,907.47 an ounce.Silver sank 9.1% to $24.36 per ounce.

    For more articles like this, please visit us at bloomberg.com

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    ©2020 Bloomberg L.P.

    Source: finance.yahoo.com

    Author: Rita Nazareth and Claire Ballentine


    'FinCEN' reports say big banks moved dirty money

    ‘FinCEN’ reports say big banks moved dirty money

    Hong Kong shares of HSBC fell to their worst level since 1995 on Monday (September 21) after reports that it and other financial institutions had allegedly moved large sums of illicit money over two decades.

    They revolve around documents leaked to Buzzfeed and shared with a global network of invetigative journalists.

    Buzzfeed and other news outlets say it involves moving money for the likes of terrorists, drug kingpins and corrupt leaders.

    The leak is reportedly made up of over 2,100 suspicious activity reports filed by banks and other financial firms with the U.S Treasury’s Financial Crimes Enforcement Network, or Fincen.

    The so-called Fincen Files allegedly show more than $2 trillion dollars worth of transactions from 1999 to 2017, all of it flagged as suspicious by the banks’ own compliance departments.

    The activity reports aren’t necessarily proof of wrongdoing, but the leak paints a picture of a banking system that allows for vast amounts of money laundering.

    Among the alleged activity are funds handled by JPMorgan for potentially corrupt individuals and companies in Venezuela, money from an investment scam, or Ponzi scheme, moving through HSBC and money linked to a Ukrainian billionaire processed by Deutsche Bank.

    Five global banks appeared the most in the documents; HSBC, JPMorgan, Deutsche Bank, Standard Chartered and Bank of New York Mellon.

    In a statement to Reuters, HSBC said the information was “historical” and that as of 2012, “HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime.”

    Deutschebank also called the reports “historic issues” and that the bank had “devoted significant resources to strengthening” their controls.

    Standard Chartered and JP Morgan both said they took the issue of fighting financial crime seriously, while BNY Mellon said it fully complies with laws and regulations.

    – Hong Kong shares of HSBC fell to their worst level since 1995 on Monday, after reports that it and other financial institutions had allegedly moved large sums of illicit money over two decades. They revolve around documents leaked to BuzzFeed and shared with a global network of investigative journalists. BuzzFeed and other news outlets say it involves moving money for the likes of terrorists, drug kingpins, and corrupt leaders.

    The leak is reportedly made up of over 2,100 suspicious activity reports filed by banks and other financial firms with the U.S. Treasury’s Financial Crimes Enforcement Network, or FINCEN. The so-called FINCEN files allegedly show more than two trillion worth of transactions from 1999 to 2017, all of it flagged as suspicious by the bank’s own compliance departments. The activity reports aren’t necessarily proof of wrongdoing, but the leak paints a picture of a banking system that allows for vast amounts of money laundering.

    Among the alleged activity are funds handled by JPMorgan for potentially corrupt individuals and companies in Venezuela, money from an investment scam or Ponzi scheme moving through HSBC, and money linked to a Ukrainian billionaire processed by Deutsche Bank. Five global banks appeared the most in the documents, HSBC, JPMorgan, Deutsche Bank, Standard Chartered, and Bank of New York Mellon. In a statement to Reuters, HSBC said the information was, quote, historical, and that as of 2012, quote, HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime. Deutsche Bank also called the report’s, quote, historic issues and that the bank had, quote, devoted significant resources to strengthening their controls. Standard Chartered and JPMorgan both said they took the issue of fighting financial crime seriously, while BNY Mellon said it fully complies with laws and regulations.

    Source: news.yahoo.com


    Stock market battered: Dow Jones down as banks suffer, economic concerns grip investors


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