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    China's property sales are set to plunge 30% — worse than in 2008, S&P says

    China’s property sales will likely drop by about 30% this year — nearly two times worse than their prior forecast, S&P Global Ratings said, citing a growing number of Chinese homebuyers suspending their mortgage payments.
    Such a drop would be worse than in 2008 when sales fell by roughly 20%, Esther Liu, director at S&P Global Ratings, said in a phone interview Wednesday.
    The latest developments have delayed a recovery in China’s real estate sector to next year from this year, she said.

    Most apartments in China are sold before developers finish building them. Pictured here on June 18, 2022, are people selecting apartments at a development in Huai’an, Jiangsu province, near Shanghai.
    Future Publishing | Future Publishing | Getty Images

    BEIJING — China’s property sales are set to plunge this year by more than they did during the 2008 financial crisis, according to new estimates from S&P Global Ratings.
    National property sales will likely drop by about 30% this year — nearly two times worse than their prior forecast, the ratings agency said, citing a growing number of Chinese homebuyers suspending their mortgage payments.

    Such a drop would be worse than in 2008 when sales fell by roughly 20%, Esther Liu, director at S&P Global Ratings, said in a phone interview Wednesday.
    Since late June, unofficial tallies show a rapid increase in Chinese homebuyers refusing to pay their mortgages across a few hundred uncompleted projects — until developers finish construction on the apartments.
    Most homes in China are sold before completion, generating an important source of cash flow for developers. The businesses have struggled to obtain financing in the last two years as Beijing cracked down on their high reliance on debt for growth.
    Now, the mortgage strike is damaging market confidence, delaying a recovery of China’s real estate sector to next year rather than this year, Liu said.

    If there is a sharp decline in home prices, this could threaten financial stability.

    S&P Global

    As property sales drop, more developers will likely fall into financial distress, she said, warning the drag could even spread to healthier developers “if the situation is not contained.”

    There’s also the potential for social unrest if homebuyers don’t get the apartments they paid for, Liu said.

    Limited spillover outside of real estate

    Although the number of mortgage strikes increased rapidly within a few weeks, analysts generally don’t expect a systemic financial crisis.
    In a separate note Tuesday, S&P estimated the suspended mortgage payments could affect 974 billion yuan ($144.04 billion) of such loans — 2.5% of Chinese mortgage loans, or 0.5% of total loans.
    “If there is a sharp decline in home prices, this could threaten financial stability,” the report said. “The government views this as important enough to quickly roll out relief funds to address eroding confidence.”
    Chinese policymakers have encouraged banks to support developers and emphasized the need to finish apartment construction. Authorities have generally expressed more support for real estate since mid-March, while maintaining a mantra of “houses are for living in, not speculation.”

    “What worries us is the scale of those support is not big enough to save the situation, [which] now turns to [a] worse direction,” Liu said.
    However, critically, Liu said her team doesn’t expect a sharp decline in house prices due to local government policy to support prices. Their projection is for a 6% to 7% decline in home prices this year, followed by stabilization.
    And while S&P economists estimate about a quarter of China’s GDP is affected directly and indirectly by real estate, only part of that 25% is at a risk level, Liu said, noting the firm doesn’t have specific numbers on the impact of the mortgage strikes on GDP.

    A bigger problem to unravel

    China’s real estate sector has been intertwined with local governments and land use policy, making the industry’s problems difficult to resolve quickly.
    In analysis published Tuesday, Xu Gao, director of the China Chief Economist Forum, pointed out the amount of residential floorspace completed annually has actually not grown on average since 2005, while the amount of land area sold has declined on average during that time.
    The contraction stands in contrast with rapid growth in both land area sold and completed residences before 2005, when a new bidding process for land fully took effect, he said. The new bidding process tightened the supply of land and real estate, pushing up housing prices more than speculation did, Xu said.

    Read more about China from CNBC Pro

    Investors should only consider the best developers among high-yield China property debt, Goldman Sachs said in a report Tuesday. “We see relative value in their lower dollar priced longer duration bonds.”
    But overall it’s a story of uncertainty in one of China’s largest sectors.
    “To us, the continued stresses in the property sector coupled with the uncertainties related to COVID measures suggest a murkier outlook for China,” wrote credit strategist Kenneth Ho.
    A possible scenario he laid out is one in which credit worries remain elevated but without real systemic concerns, creating a negative overhang for investor sentiment on high-yield credit markets.

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    Stock futures tick up ahead of key Fed decision

    Stock futures ticked up in overnight trading as traders await the Federal Reserve’s latest interest rate decision, scheduled to be announced Wednesday afternoon.
    Futures on the Dow Jones Industrial Average rose by 66 points, or 0.21%. S&P 500 futures gained 0.55% and Nasdaq 100 futures increased 1.06%. Shares of Enphase Energy gained about 6% after the bell on solid quarterly earnings. Chipotle also added 8% in after-hours trading following its mixed second-quarter earnings release.

    Stocks slumped Tuesday as earnings season continued. Walmart cut its earnings forecast, sending other retailers such as Kohl’s, Target, Macy’s, Nordstrom and Ross Stores lower on fears that high inflation has prompted consumers to pull back on discretionary spending.
    E-commerce stocks were also down in Tuesday’s session, pulled lower by inflation sentiment and news that Shopify would slash 10% of its workforce. Amazon, Square parent Block and PayPal all fell.
    Companies reported mixed earnings, showing how they’re grappling with headwinds such as economic uncertainty, foreign exchange pressures, supply chain disruptions and high inflation. General Motors shares dipped after the auto giant missed Wall Street’s earnings estimates. Coca-Cola, McDonald’s, 3M and General Electric jumped on solid results.
    “The stubbornness of inflation could turn out to be a problem,” Dennis Lockhart, an economist and former president of the Federal Reserve Bank of Atlanta, said on CNBC’s “Fast Money” on Tuesday.
    There are more major earnings reports to come. On Wednesday, Boeing and Shopify are expected to release their quarterly results before the bell. Qualcomm, Ford and Meta Platforms will report at the end of the day.
    Investors are also awaiting a key announcement from the Federal Reserve. The central bank will announce its latest interest rate decision on Wednesday afternooon. Markets widely expect a three-quarter percentage point increase in the benchmark rate.

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    Wait for the market to decline more before putting cash to work, Jim Cramer says

    Monday – Friday, 6:00 – 7:00 PM ET

    CNBC’s Jim Cramer on Tuesday told investors to wait for the market to retreat more before doing any buying.
    “The stock market, in its entirety, is still too high, so we have to let the averages come in before putting more money to work,” the “Mad Money” host said.

    CNBC’s Jim Cramer on Tuesday told investors to wait for the market to retreat more before doing any buying.
    “The stock market, in its entirety, is still too high, so we have to let the averages come in before putting more money to work,” the “Mad Money” host said. “But it might be worth doing so because there are so many good things that can ultimately happen.”

    All the major averages declined on Tuesday but are still on track for their best month of the year. Spooked investors sold off retail holdings after Walmart slashed its quarterly and full-year profit estimates due to inflation.
    The Federal Reserve’s expected rate increase announcement set for Wednesday and a jam-packed slate of earnings from mega-cap tech names this week threaten to rock the market.
    Skyrocketing inflation, the Russia-Ukraine war and Covid lockdowns in China also continue to weigh on the market.

    Stock picks and investing trends from CNBC Pro:

    Cramer said that investors likely won’t have any insight into where the market’s headed until after the Fed announces its rate increase and they should tread carefully in the meantime – especially as companies continue to report earnings.
    “The treacherous thing about this market is that if you see even one stock coming down hard in a particular sector, you know the rest of them are gonna implode, too, perhaps coming down even harder than the original culprit,” he said.

    Disclosure: Cramer’s Charitable Trust owns shares of Walmart.

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    Walmart's slashed profit outlook sends warning about state of the American consumer

    The big-box retailer said everyday necessities are eating up more of household budgets and leaving shoppers less money to spend on items they want, such as new clothing.
    The announcement raised concerns about shifting consumer behavior and whether inflation has brought pandemic-fueled shopping sprees to an end.
    Major retailers including Walmart and Macy’s are scheduled to report earnings in mid-August.

    A Walmart Inc. logo is displayed on a sign that reads “Everyday Low Price” at a store in Burbank, California, U.S., on Tuesday, Nov. 26, 2019.
    Patrick T. Fallon | Bloomberg | Getty Images

    Shares of retailers including Macy’s, American Eagle and Amazon fell Tuesday, a day after Walmart slashed its profit forecast and warned that surging prices for food and gas are squeezing consumers.
    The big-box retailer, which is the country’s largest grocer, said everyday necessities are eating up more of household budgets and leaving shoppers less money to spend on items they want, such as new clothing. Walmart said it will have to offer deep discounts to get rid of general merchandise, hurting its profit margins.

    For Wall Street, the announcement served as another warning. It heightened concerns about shifting consumer behavior and whether inflation has brought pandemic-fueled shopping sprees to an end. Major retailers including Walmart and Macy’s are scheduled to report earnings in mid-August.

    “This is a sneak peek inside the challenges and the decision making that’s happening inside of the household,” said Steph Wissink, a retail analyst for Jefferies.
    Even though economists have not declared a recession, Wissink said “we appear to be firmly in a ‘discretionary goods recession.'”
    Walmart’s updated outlook comes as investors sift through months of conflicting data points. The labor market has remained strong, but consumer sentiment has weakened. Inflation has grown at the fastest pace in decades, yet airports are bustling with summer travelers. Thousands of Netflix customers have canceled subscriptions, but McDonald’s and Coca-Cola say people have been willing to pay more for burgers and sodas so far.
    Other factors have complicated the picture, too. Retailers are lapping a period when shoppers had extra money from stimulus checks and savings from what they typically spent on services like gym memberships, hotels and dining out. Pandemic-related purchases surged as people sprang for new kitchen gadgets, workout equipment and leisurewear — categories that have now largely fallen from favor.

    Craig Johnson, founder of retail consultancy Customer Growth Partners, said the slump in discretionary spending is due to lower-income households spending more on essentials because of inflation. In addition, he said higher earners are spending more on services such as travel and entertainment instead of products coming out of the pandemic.
    “Walmart’s pre-announcement was hardly a surprise, and will be the first of several similar pre-announcements,” he said.
    Target was one of the first companies to signal choppy waters ahead. It cut its forecast for profit margins twice, saying it would have to cancel orders and increase markdowns to get rid of unwanted merchandise. It chalked up the problem to having the wrong inventory, such as TVs, bikes and household appliances that were popular during the pandemic, and said it wanted to clear space for back-to-school goods and holiday shopping.
    Kohl’s, Gap, Bath & Body Works and Bed Bath & Beyond issued profit warnings in the past few weeks. And several companies, including online styling service Stitch Fix, video game retailer GameStop and e-commerce company Shopify have announced layoffs.
    Mall-based retailers — which sell a lot of discretionary merchandise like apparel and home goods — are expected to get caught in the crosshairs.
    Analysts at Deutsche Bank said they expect full-year guidance reductions from all of the apparel retailers the bank covers, as many had been forecasting an acceleration in sales and margins in the back half of the year.
    Credit card data from Bank of America shows sales of clothing in the U.S. have been declining since the week ended March 12, and were down 15.6% from year-earlier levels during the week ended July 2.
    Lorraine Hutchinson, an analyst for Bank of America Securities, said in a note to clients on Tuesday that her firm is cutting its earnings estimates across the apparel industry as inventories pile up and discounts are becoming rampant.
    Hutchinson said niche retailers that cater to higher income shoppers, such as Lululemon, could still perform well. LVMH, which owns high-end brands like Dom Perignon and Louis Vuitton, also signaled Tuesday that higher income shoppers might still be willing to splurge. The company said its sales climbed 19% in the second quarter year over year when stripping out currency changes, led by growth in its fashion and leather goods segment.
    For discounters, an upside of surging inflation is that price-sensitive customers may visit their stores more often in search of cheaper household staples. Walmart’s share of U.S. grocery dollars, for example, was 21% as of the end of June, up from 18% six months earlier, according to research firm Numerator.
    But groceries have lower profit margins than discretionary items, such as electronics and apparel. That’s the reason why Walmart slashed its profit forecast, even while raising its forecast for same-store sales.

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    WWE at crossroads as Vince McMahon's retirement and scandals heighten sale speculation

    Vince McMahon’s retirement from his WWE executive roles has heightened sale speculation, causing shares to rise.
    A deal may happen before the company’s TV rights renewal, likely to occur around mid-2023.
    The company isn’t currently in sale talks, according to a source familiar with the matter.

    World Wrestling Entertainment Inc. Chairman Vince McMahon (L) and wrestler Triple H appear in the ring during the WWE Monday Night Raw show at the Thomas & Mack Center August 24, 2009
    Ethan Miller | Getty Images Entertainment | Getty Images

    World Wrestling Entertainment’s annual report for 2021 lists a risk factor specifically about the consequences of Vince McMahon’s retirement — an event that happened last week.
    “The unexpected loss of the services of Vincent K. McMahon could adversely affect our ability to create popular characters and creative storylines or could otherwise adversely affect our operating results,” WWE wrote in the corporate filing, dated Dec. 31. “The loss of Mr. McMahon due to unexpected retirement, disability, death or other unexpected termination for any reason could have a material adverse effect on our ability to create popular characters and creative storylines or could otherwise adversely affect our operating results.”

    That sounds bad for WWE shareholders. So, what happened to WWE shares when McMahon announced his unexpected retirement after the bell Friday? They shot higher, rising more than 8% Monday.
    The spike was driven by heightened investor sentiment that a sale is coming. Newly appointed co-CEO Nick Khan openly discussed the concept of selling already this year, months before McMahon stepped down amid a Wall Street Journal investigation that revealed payouts to women who claimed sexual misconduct and infidelity. The WWE has since confirmed $14.6 million in previously unrecorded expenses paid personally by McMahon.
    “As we say, we’re open for business,” Khan said in March on The Ringer’s “The Town” podcast.

    Potential buyers

    The timing of a deal could hinge on the WWE’s upcoming U.S. TV rights renewal, loosely scheduled for mid-2023. An acquirer may decide it makes more sense to buy the company than strike a temporary rights deal. Fox owns the rights to “Smackdown” and NBCUniversal owns the rights to “Raw,” the two WWE TV properties. The deals both end in the fourth quarter of 2024.

    Speaking to Matthew Belloni of “The Town,” Khan singled out Comcast’s NBCUniversal as a potential buyer. NBCUniversal’s Peacock currently owns the exclusive live streaming rights for WWE.

    “If you look at what does NBCU/Comcast lack that they need, and I think it’s a factual statement, they don’t have the intellectual property that some other companies have. They certainly don’t have the Disney treasure trove of IP, nor should they,” said Khan. “I think they look at us as an entity that has a treasure trove of intellectual property. A lot of it has not been exploited yet….Now it’s up to us to monetize it properly and show the community exactly what we have.”
    Global media companies are on the hunt for intellectual property they can use as the basis for recurring TV series and films and theme park attractions, for those that own them. WWE is also attractive as an acquisition because a media owner can sell real-time advertising on live programming and potentially keep audiences paying for traditional pay-TV, a diminishing but lucrative revenue stream. WWE’s “Raw” currently airs on USA Network, an NBCUniversal cable network. To compare, the National Football League nearly doubled its projected TV revenue in its most recent rights renewal deal last year.
    WWE has consistently grown annual revenue through the last decade on the strength of its media deals and live events. It announced Monday second-quarter revenue is currently expected at $328 million for the quarter, up 23% from a year ago, with operating income of about $70 million, a 52% increase from a year earlier.
    There aren’t many entertainment companies with global scale that come up for sale with an easily digestible price tag for many potential suitors. WWE isn’t engaged in sale talks, according to a person familiar with the matter. But McMahon’s retirement may open the flood gates on offers that could be too good for the company to turn down. WWE, whose shares have climbed about 40% this year contrary to broader stock declines, has a market valuation of about $5 billion. The stock closed down more than 3% on Tuesday, after The Wall Street Journal reported McMahon’s payments were being investigated by federal authorities.
    Comcast, Disney, Warner Bros Discovery, Paramount Global, Apple, Amazon and Netflix all make sense an acquirer, given their streaming ambitions, MKM Partners analyst Eric Handler wrote in a note to clients.
    A WWE spokesperson declined to comment.

    Jumping the gun?

    It’s also possible that the new executive leadership – Khan; co-CEO and McMahon’s daughter Stephanie McMahon; Stephanie’s husband, Paul “Triple H” Levesque – will see this as a time to reform WWE.
    While it strains credulity to think that Vince McMahon, still the biggest shareholder in WWE, won’t be involved in the company’s major decisions, Levesque, who took over creative control from McMahon, may have an opportunity to freshen storylines and introduce new talent. McMahon, who turns 77 in August, no longer has any executive title at the company.
    McMahon may also view selling now as moving out of weakness, which he may see as antithetical to his public persona as someone who is always in charge.
    “We suspect the Street will interpret Mr. McMahon’s retirement as a precursor to an eventual sale of WWE,” Citi analyst Jason Bazinet said in a note to clients. “We’re not sure that is a reasonable conclusion since WWE will still be a controlled company with 100% of the Class B shares held by the McMahon family.”
    Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.

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    Adidas cuts 2022 outlook on slower China recovery, potential for a global slowdown

    Adidas on Tuesday cut its financial forecast for 2022 as the sneaker and athletic brand suffers from a slower recovery in China.
    The company also warned of the potential for a slowdown in other markets.
    The announcement comes a day after Walmart sent shock waves across the retail sector

    Pedestrians walk by a large Adidas logo inside the German multinational sportswear shop.
    Miguel Candela | SOPA Images | LightRocket via Getty Images

    Adidas on Tuesday cut its financial forecast for 2022 as the sneaker and athletic brand suffers from a slower recovery in China and warned of the potential for a slowdown in other markets.
    The announcement comes a day after Walmart sent shock waves across the retail sector when it cut its quarterly and full-year profit guidance. Walmart said inflation is causing shoppers to spend more on necessities such as food and less on items like clothing and electronics.

    Adidas said Tuesday that it now expects revenue in Greater China to decline at a double-digit rate for the remainder of the year, given continued widespread Covid-related restrictions in the region. It also said it will have to work to clear excess inventories through the end of the year, and those efforts will weigh on profits.
    The Germany-based retailer now forecasts total currency-neutral revenues for the company to grow at a mid-to-high single-digit rate in 2022, compared with previous growth estimates of between 11% to 13%.
    Adidas now expects its gross margin to be around 49% in 2022, down from prior guidance of 50.7%, and net income from continuing operations to reach around 1.3 billion euros, down from a prior range of 1.8 billion euros to 1.9 billion euros.
    Adidas noted that while it has not experienced a meaningful slowdown in sales nor significant cancellations of wholesale orders in any other market, its adjusted outlook is accounting for a potential slowdown of consumer spending globally.

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    Cramer's lightning round: I like Blackstone over Apollo Global

    Monday – Friday, 6:00 – 7:00 PM ET

    It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

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    Tilray Brands Inc: “Those will cost you about $3, which is the price of the stock. But if you wait long enough, it’ll only cost you $2.”

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    Cheniere Energy Inc: “Buy, buy, buy it.”
    Disclosure: Cramer’s Charitable Trust owns shares of Halliburton and Johnson & Johnson.

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    Logitech CEO says customers will come back in the fall after first-quarter earnings miss

    Monday – Friday, 6:00 – 7:00 PM ET

    Customers who are spending their summers traveling will come back to purchase tech equipment in the fall, Logitech CEO Bracken Darrell told CNBC’s Jim Cramer on Tuesday.
    “I think everybody’s doing something this summer, so this is a period when people are out. Our gaming business is down, but I don’t think that’s terribly surprising,” he said on “Mad Money.”

    Customers who are spending their summers traveling will come back to purchase tech equipment in the fall, Logitech CEO Bracken Darrell told CNBC’s Jim Cramer on Tuesday.
    “I think everybody’s doing something this summer, so this is a period when people are out. Our gaming business is down, but I don’t think that’s terribly surprising,” Darrell said in an interview on “Mad Money.”

    “When people come back in the fall, and they’re really getting back to work and getting back at it and they’ve spent their money on the big vacation, I think we’ll see ourselves come back over time. And I’m very optimistic about the secular trends,” he added.
    Logitech, like other firms in the office supply and equipment space, saw a boom during the height of the pandemic as Americans shifted to working remotely and sought to upgrade their home workspaces.
    The maker of PC peripherals such as keyboards, webcams and speakers missed on its first-quarter earnings on Monday, earning an adjusted 74 cents per share compared with an estimated 85 cents, according to Refinitiv. 
    The Swiss-American company made $1.16 billion in revenue, a 12% drop in U.S. dollars from the same quarter a year before. Gaming sales declined 16 percent in U.S. dollars compared with the year-earlier period. 
    Shares of Logitech closed up 3.17% on Tuesday.

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