Finance

Shares of Bank Of China, Agricultural Bank of China, Industrial and Commercial Bank of China and China Construction Bank rose in early trading.
China’s sovereign wealth fund Central Huijin Investment expects to continue increasing holdings over the next six months.
Central Huijin’s move is seen as a bid to renew confidence in China’s fatiguing stock market.

Bank of China is one of the major state-owned banks in China. Pictured here is a branch in Shanghai on March 27, 2023.
Bloomberg | Bloomberg | Getty Images

China’s sovereign wealth fund, Central Huijin Investment, increased its stake in four of the country’s biggest banks late Wednesday in what is seen as a move to renew confidence in its stock market.
Bank Of China, Agricultural Bank of China, Industrial and Commercial Bank of China and China Construction Bank shares rose between 2.43% and 4.73% in early trading on Thursday, while the broader CSI 300 index gained 0.69%.

Central Huijin boosted its stake in each lender by 0.01 percentage point for the first time since 2015. It said it would continue to increase holdings over the next six months, according to filings.
“Huijin’s buying sends strong signal of the topdown view, and tends to help to shore up market confidence,” said Hao Hong, chief economist of Grow Investment Group.
Investor confidence in China’s stock markets has been shaken by turmoil in its real estate sector as property giants such as Evergrande and Country Garden struggled to repay debt. So far this year, the CSI 300 is down nearly 5%.
All eyes will now be on China’s third-quarter GDP data, which is due to be released next week. More

A box of Ozempic, a semaglutide injection drug used for treating Type 2 diabetes made by Novo Nordisk.
George Frey | Reuters

Check out the companies making big moves midday.
Novo Nordisk — The Danish drugmaker stock added 6.27% after saying late Tuesday it was halting Ozempic’s kidney disease treatment trial after a committee said an analysis showed signs of success. Eli Lilly, which makes diabetes drug Mounjaro, rose 4.48%.

DaVita, Fresenius Medical Care, Baxter International — Shares of dialysis services providers DaVita and Fresenius Medical Care sank 16.86% and 17.57%, respectively, on Novo Nordisk’s news. Baxter International, which makes products for chronic dialysis therapies, slid 12.27%.
Exxon Mobil, Pioneer Natural Resources — Exxon Mobil shares fell 3.59% after the largest U.S. oil and gas producer agreed to buy shale rival Pioneer Natural Resources for $59.5 billion in an all-stock deal, or $253 per share. Pioneer stockholders will receive 2.3234 shares of Exxon for every Pioneer share held. The deal, Exxon’s biggest since its acquisition of Mobil, is expected to close in the first half of 2024. Shares of Pioneer rose 1.44% following the news.
Humana — Shares slipped 1.39% after CEO Bruce Broussard said he will step down from his position in the latter half of 2024. The company named Jim Rechtin of Envision Healthcare as his successor.
Amgen — The biopharma stock added 4.55% following an upgrade from Leerink to outperform. Analyst David Risinger cited an expanding earnings multiple and pipeline newsflow as catalysts.
Shoals Technologies — Shares gained 5.26% after being upgraded to buy from neutral at Goldman Sachs. The investment bank cited valuation and the potential for gross margin upside.

Ally Financial — The provider of loans to midsize businesses dropped 2.12% after CEO Jeffrey Brown announced plans to step down, effective Jan. 31, 2024.
Walgreens Boots Alliance — The pharmacy chain added 0.98% after former Cigna executive Tim Wentworth was named CEO effective Oct. 23.
Coherent — The stock popped 5.23% in midday trading. Coherent announced Tuesday that Japanese companies will invest $1 billion in Coherent’s silicon carbide business. On Wednesday, B. Riley upgraded shares to buy from neutral, saying Coherent’s silicon carbide business could be worth more than the Street’s current estimate.
Plug Power — The battery company climbed 5.31% after forecasting a sharp rise in revenue to roughly $6 billion by 2027, according to a regulatory filing.
Take-Two Interactive Software — Shares gained in midday trading but closed 0.34% lower after being upgraded by Raymond James to outperform from market perform. The firm said it sees a path to more consistent video game releases and a reasonable valuation based on Take-Two Interactive’s Grand Theft Auto 6 release soon.
— CNBC’s Michael Bloom, Hakyung Kim, Yun Li and Lisa Han contributed reporting. More

Jerome Powell, chairman of the US Federal Reserve, arrives to a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, DC, US, on Wednesday, March 22, 2023. 
Al Drago | Bloomberg | Getty Images

Federal Reserve officials at their September meeting differed on whether any additional interest rate increases would be needed, though the balance indicated that one more hike would be likely, minutes released Wednesday showed.
While there were conflicting opinions on the need for more policy tightening, there was unanimity on one point – that rates would need to stay elevated until policymakers are convinced inflation is heading back to 2%.

“A majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted,” the summary of the Sept. 19-20 policy meeting stated.
The document noted that all members of the rate-setting Federal Open Market Committee agreed they could “proceed carefully” on future decisions, which would be based on incoming data rather than any preset path.
Another point of complete agreement was the belief “that policy should remain restrictive for some time until the Committee is confident that inflation is moving down sustainably toward its objective.”
The meeting culminated with the FOMC deciding against a rate hike.
However, in the dot plot of individual members’ expectations, some two-thirds of the committee indicated that one more increase would be needed before the end of the year. The FOMC since March 2022 has raised its key interest rate 11 times, taking it to a targeted range of 5.25%-5.5%, the highest level in 22 years.

Since the September meeting, the 10-year Treasury note yield has risen about a quarter percentage point, in effect pricing in the rate increase policymakers indicated then.

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10-year Treasury yield

At the same time, a handful of central bank officials, including Vice Chair Philip Jefferson, Governor Christopher Waller and regional Presidents Raphael Bostic of Atlanta, Lorie Logan of Dallas and Mary Daly of San Francisco, have indicated that the tightening in financial conditions may negate the need for further hikes. Of the group, Logan, Waller and Jefferson have votes this year on the FOMC.
“In our view the Fed has belatedly converged on the lowest-common-denominator idea that the rise in yields means there is at present no need to raise rates again,” wrote Krishna Guha, head of global policy and central bank strategy at Evercore ISI. Guha added that officials want to wait before locking themselves in to a longer-term position on rates.”
Markets waffled following the minutes release, with major sock averages slightly higher heading into the close. Traders in the fed funds futures market pared back bets on additional rate hikes — down to just 8.5% in November and 27.9% in December, according to the CME Group’s FedWatch gauge.
Members in favor of further hikes at the meeting expressed concern about inflation. In fact, the minutes noted that “most” FOMC members see upside risks to prices, along with the potential for slower growth and higher unemployment.
Fed economists noted that the economy has proven more resilient than expected this year, but they cited a number of risks. The autoworkers’ strike, for one, was expected to slow growth “a bit” and possibly push up inflation, but only temporarily.
The minutes said consumers have continued to spend, though officials worried about the impact from tighter credit conditions, less fiscal stimulus and the resumption of student loan payments.
“Many participants remarked that the finances of some households were coming under pressure amid high inflation and declining savings and that there had been an increasing reliance on credit to finance expenditures,” the minutes said.
Inflation data points, particularly regarding future expectations, generally have been indicating progress toward the central bank’s 2% target, though there have been a few hiccups.
The Fed received some bad inflation news Wednesday, when the Labor Department said that the producer price index, a measure of inflation at the wholesale level, rose 0.5% in September.
Though that was a bit lower than the August reading, it was above Wall Street estimates and took the 12-month PPI rate to 2.2%, its highest since April and above the Fed’s coveted 2% annual inflation target.
The PPI tees up Thursday’s release of the consumer price index, which is expected to show headline inflation at 3.6% in September, and core excluding food and energy at 4.1%. More

Goldman Sachs said Wednesday that it agreed to sell its fintech lending platform GreenSky to a group of investors led by private equity firm Sixth Street.
The deal, which includes a book of loans created by Goldman, will result in a 19 cents per share reduction to third-quarter earnings, Goldman said in the statement.
The New York-based bank is scheduled to disclose results Tuesday.

David Solomon, CEO of Goldman Sachs, during a Bloomberg Television at the Goldman Sachs Financial Services Conference in New York on Dec. 6, 2022.
Michael Nagle | Bloomberg | Getty Images

Goldman Sachs said Wednesday that it agreed to sell its fintech lending platform GreenSky to a group of investors led by private equity firm Sixth Street.
The deal, which includes a book of loans created by Goldman, will result in a 19 cents per share reduction to third-quarter earnings, Goldman said in the statement. The New York-based bank is scheduled to disclose results Tuesday.

The move is the latest step CEO David Solomon has taken to retrench from his ill-fated push into retail banking. Under Solomon’s direction, Goldman acquired GreenSky last year for $1.7 billion, overruling deputies who felt the home improvement lender was a poor fit. Months later, Solomon decided to seek bids for the business amid his broader move away from consumer finance. Goldman also sold a wealth management business and was reportedly in talks to offload its Apple Card operations.
“This transaction demonstrates our continued progress in narrowing the focus of our consumer business,” Solomon said in the release.
The bank is now focused on its core strengths in investment banking and trading and its push to grow asset and wealth management fees, he added.
Goldman will continue to operate GreenSky until the sale closes in the first quarter of 2024, the bank said.
The expected hit to third-quarter earnings includes expenses tied to a write down of GreenSky intangibles, as well as marks on the loan portfolio and higher taxes, offset by the release of loan reserves tied to the transaction, Goldman said.

It follows a $504 million second-quarter impairment on GreenSky disclosed in July.
The Sixth Street group includes funds managed by KKR, Bayview Asset Management and CardWorks, according to the release.
Private equity groups have played key roles in several of the banking industry’s asset divestitures since the start of the year, providing funding for the PacWest merger with Banc of California, for example.
Read more: Goldman Sachs faces big write down on CEO David Solomon’s ill-fated GreenSky deal More

The stock sell-off that hit regional banks this year has exposed lenders including Zions and Comerica to the risk of being delisted from the S&P 500 index.
The banks, each with market capitalizations of around $5 billion, were the fourth- and sixth-smallest members of the 500 company listing as of this week, according to FactSet.
That leaves the companies in a similar position to Lincoln National, which got shunted from the S&P 500 last month and placed into a small-cap index.

A customer enters Comerica Inc. Bank headquarters in Dallas, Texas.
Cooper Neill | Bloomberg | Getty Images

The stock sell-off that hit regional banks this year has exposed lenders including Zions and Comerica to the risk of being delisted from the Standard & Poor’s 500 index.
The banks, each with market capitalizations of around $5 billion, were the fourth- and sixth-smallest members of the 500 company listing as of this week, according to FactSet.

That leaves the companies in a similar position to Lincoln National, which got shunted from the S&P 500 last month and placed into a small-cap index. Blackstone, the world’s largest alternative asset manager, took Lincoln National’s spot.
This year’s regional banking crisis has already caused changes in the composition of the S&P 500, the most popular broad measure of large American companies in the investing world. Silicon Valley Bank and First Republic were removed from the benchmark after deposit runs led to their government seizure. More changes may be coming, especially if the industry faces a protracted slump, according to analysts.
“It’s absolutely a risk,” Chris Marinac, research director at Janney Montgomery Scott, said in an interview. “If the market were to further change the valuation of these companies, especially if we have higher rates, I wouldn’t rule it out.”

Banks begin disclosing third-quarter results Friday, led by JPMorgan Chase. Investors are keen to hear how rising interest rates affected bond holdings and deposits in the period.
Companies that no longer qualify as large-cap stocks are at heightened risk of demotion from the S&P 500. There were seven members valued at $6 billion or less at the end of August. Two of them were removed the following month: insurer Lincoln National and consumer firm Newell Brands.

Those that join the benchmark often celebrate the milestone. The popularity of mutual funds and ETFs based on the index means that new members typically see an immediate boost to their stock price. Those that get demoted can suffer declines as fewer money managers need to own shares in the companies.

S&P guidelines

To be considered for inclusion in the S&P 500, companies need to have a market capitalization of at least $14.5 billion and meet profitability and trading standards.
Members that violate “one or more of the eligibility criteria for the S&P Composite 1500 may be deleted from the respective component index at the Index Committee’s discretion,” according to S&P Dow Jones Indices’ methodology.
Still, that doesn’t mean Zions or Comerica are on the cusp of a delisting. The committee that decides the composition of the S&P 500 looks to minimize churn and accurately represent reference sectors, making changes only when “ongoing conditions warrant an index change,” according to S&P.

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Shares of regional banks ZIons and Comerica have tumbled this year.

For instance, after the onset of the Covid pandemic in March 2020, many retail S&P 500 companies temporarily violated the profitability rule, but that didn’t result in widespread demotions, according to a person who has studied the S&P 500 index.
S&P Dow Jones Indices declined to comment for this article, as did Comerica. Zion’s didn’t immediately return a message seeking comment.
Besides Zions and Comerica, KeyCorp and Citizens Financial are the only other S&P 500 banks with market caps below the threshold for inclusion in the index, according to an Aug. 31 Piper Sandler note. KeyCorp and Citizens, however, each have market caps of greater than $10 billion, making them less likely to be impacted than smaller banks.
After Blackstone became the first major alternative asset manager to join the S&P 500 last month, analysts said that peers including KKR and Apollo Global may be next, and they would likely replace other financial names. KKR and Apollo each have market capitalizations of greater than $50 billion.
“Perhaps more demotions of low-market cap financials are to come,” Wells Fargo analyst Finian O’Shea said in a Sept. 5 research note.
– CNBC’s Gabriel Cortes contributed to this article. More

Scott Sheffield, CEO of Pioneer Natural Resources.
Adam Jeffery | CNBC

Pioneer Natural Resources CEO Scott Sheffield said oil prices could move a lot higher if Iran gets involved in Hamas’ war on Israel.
“If Iran enters the war, we’re going to see much higher oil prices, obviously,” Sheffield said on CNBC’s “Squawk Box” Wednesday.

Iran is a major oil producer and key backer of Hamas, the Palestinian Islamist group designated by the U.S. as a terrorist organization. A wider conflict could pose a major threat to global crude supplies, which have been cut back by Saudi Arabia and Russia in recent months.
Brent crude traded slightly lower to $86.93 a barrel Wednesday, while the U.S. West Texas Intermediate (WTI) crude fell by 78 cents, or 0.91%, to $85.19. Brent and WTI had surged more than $3.50 on Monday on concern that the clash between Israel and Hamas could escalate into a broader conflict.

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U.S. West Texas Intermediate

“It’s going to be up to [Prime Minister Benjamin] Netanyahu, I believe. So depends on how much evidence he has that they’re behind it and whether or not he decides to do anything about it,” Sheffield said.
The death toll is rising in Israel as missiles rain down and hostilities head into the fifth day. The Israeli military said it is amassing troops near the Gaza Strip.
U.S. Secretary of State Antony Blinken, who is due to arrive in Israel on Thursday, said Sunday that it is not clear there was any involvement by Iran.
Exxon Mobil said Wednesday it agreed to buy shale rival Pioneer Natural Resources for $59.5 billion in an all-stock deal, or $253 per share. More

The Mobil logo and gas prices are displayed at a Mobil gas station on October 28, 2022 in Los Angeles, California.
Mario Tama | Getty Images

Check out the companies making headlines in premarket trading.
Plug Power — The battery stock added nearly 6% after the company projected a sharp rise in revenue by 2027 to roughly $6 billion, according to a regulatory filing.

Timken — Shares fell roughly 2% following a downgrade by Bank of America to underperform from neutral, with analyst Michael Feniger noting concern over inventories moving forward.
Take-Two Interactive — Take-Two Interactive Software rose around 1% after Raymond James upgraded the stock to outperform and expressed optimism about its near- and medium-term future. The firm cited a path to more consistent releases and reasonable valuation based on the company’s Grand Theft Auto 6 release soon.
DaVita, Novo Nordisk — Shares of the dialysis services provider sank 15% on the news of Ozempic’s effectiveness in Novo Nordisk’s kidney disease treatment study. Shares of Novo Nordisk added 3.1%.
Exxon Mobil, Pioneer Natural Resources – Shares of Exxon Mobil were lower by more than 1% premarket after the company agreed to buy Pioneer for nearly $60 billion, or $253 per share, in an all-stock merger. Meanwhile, Pioneer shares rose 2.5%. Exxon said production volume in the Permian Basin would more than double after the deal closes.
Humana — Shares dipped slightly after Humana said Bruce Broussard will step down as CEO in the second half of 2024.

Sherwin-Williams — Shares of the paint company fell less than 1% after the Serwin-Williams said Heidi G. Petz would assume the chief executive role beginning Jan. 1, 2024. Petz will also continue in her role as president after assuming CEO duties.
CSX — Shares added nearly 2% after an upgrade to overweight from JPMorgan. The firm said that CSX represents the “best near-term growth opportunity” among U.S. rail stocks.
Amgen — The biotech stock ticked up 0.6% following an upgrade to outperform from Leerink Partners, with analyst David Risinger highlighting long-term revenue potential of $19.3 billion. 
— CNBC’s Tanaya Macheel, Pia Singh and Michelle Fox contributed reporting More

“What we are saying is there is a recovery but it’s going to be gradual,” said Christine Peng, head of Greater China consumer sector at UBS. “Nowadays the consumption growth is still way below the pre-Covid level.”
UBS expects consumption growth to pick up to 5% or 6% toward the end of 2024, Peng said, noting there’s “no way” retail sales can go back to 9% in the near future due to low consumer confidence.
Chinese luxury spending at home and abroad in September was about 80% what it was in 2019, up from the 70% to 75% recovery seen in August, according to HSBC, citing Global Blue data for duty-free shopping.

A woman waits on her bicycle to cross an intersection outside a new shopping mall in Beijing, China, on Sept. 13, 2023.
Kevin Frayer | Getty Images News | Getty Images

BEIJING — China’s consumer spending still isn’t growing as fast as it did before the pandemic, analysts said.
Retail sales for the Sept. 29 to Oct. 5 holiday period rose by 9% from a year ago, according to state media reports of Ministry of Commerce data. The figures did not include Oct. 6, the final and eighth day of the Golden Week holiday.

While that marked a pickup in pace from August, the multi-year trend in retail sales indicates less than 3% growth a year since the start of the pandemic, according to estimates from Christine Peng, head of Greater China consumer sector at UBS.
“What we are saying is there is a recovery but it’s going to be gradual,” she told CNBC in a phone interview Tuesday. “Nowadays the consumption growth is still way below the pre-Covid level.”
China’s retail sales fell by 0.2% in 2022, according to official figures. Retail sales had grown by 8% in 2019.

Consumers have started to spend more money, but they still maintain a cautious attitude when it comes to how they are spending the money.

Christine Peng

UBS expects consumption growth to pick up to 5% or 6% toward the end of 2024, Peng said, noting there’s “no way” retail sales can go back to 9% in the near future due to low consumer confidence.
She also pointed to the impact of the property slump — since much of household wealth is in real estate — and a decline in government spending due to local debt troubles. Consumers remain uncertain about future income amid government regulatory tightening, she noted.

“Consumers have started to spend more money, but they still maintain a cautious attitude when it comes to how they are spending the money,” Peng said.
The long Chinese Golden Week holiday that ended last week saw domestic tourism rebound to around pre-pandemic levels. Overseas travel had yet to fully recover to 2019 levels.

Economic uncertainty contributed to Chinese residents’ preference to travel domestically, said Imke Wouters, partner at consulting firm Oliver Wyman. The firm surveyed more than 3,800 affluent Chinese consumers in September and found the “casual luxury shopper” was more cautious due to the economy.
However, Wouters said that when affluent consumers traveled domestically, a significant number chose Hainan. The tropical province is known for its duty-free shopping malls and natural scenery.
During the latest holiday, tourist visits to Hainan went up by 15% versus the peak year of 2021, Wouters pointed out.
China has sought in the last few years to build up Hainan as a duty-free shopping center. Prior to the pandemic, many Chinese had traveled to Europe and other countries to buy luxury goods.
Chinese luxury spending at home and abroad in September was about 80% what it was in 2019, up from the 70% to 75% recovery seen in August, according to HSBC, citing Global Blue data for duty-free shopping.
In the Asia-Pacific region, Chinese spending on luxury goods has already recovered to 2019 levels, the report said. But in continental Europe such spending is only about half of where it was prior to the pandemic, HSBC said.
In contrast, tourists from the U.S. and Middle East are spending about 250% more on luxury goods in Europe than they did prior to the pandemic, the report said.

Read more about China from CNBC Pro

Consumer spending has lagged China’s overall economic growth since the pandemic started in early 2020. The country ended its stringent Covid-19 restrictions in late 2022, but the economy’s initial recovery has slowed amid a real estate market decline and a drop in exports.
More recently, different parts of the vast economy have started to show a pickup in growth.
“Some casual dining restaurant chain[s] have been telling us that same-store sales [have] recovered to 90% of the 2019 level,” Peng said. She said that’s “a pretty meaningful acceleration” compared to the summer, when same-store sales were 70% to 80% of the 2019 level.

Peng said retailers selling toys and groceries have seen sales per store recover to 90% of the 2019 level, while sportswear brands saw about 20% to 30% sales growth versus the holiday last year.
Appliances and furniture sales were more muted, as were sales of premium products such as baijiu, Peng added. “Consumer spending has come back, but some of the categories that get exposure to corporate spending is not returning to the pre-Covid 2019 level.”
China is set to report September retail sales on Oct. 18, along with third-quarter GDP. More