Finance

A cup of Starbucks coffee sits on a table in a cafe.
Joel Boh | Reuters

Check out the companies making headlines in midday trading.
Starbucks — Shares jumped 5.5% after the coffee chain raised its long-term financial forecast on Tuesday, and said it expects double-digit growth for revenue and per-share earnings as it makes changes to its cafes.

Nikola — Nikola leapt 6.8% after BTIG upgraded shares to buy from neutral, saying the electric vehicle company is “well positioned” to get a boost from truck decarbonization.
Nucor — Shares tumbled 11.3% after the steel producer issued disappointing guidance for its third quarter, saying that it expects earnings to be in the range of $6.30 to $6.40 per diluted share.
Twilio — Shares of Twilio rose 10% after the company said it’s laying off 11% of its workforce, according to a filing with the Securities and Exchange Commission. The cloud communications software company, which is aiming to reach profitability by 2023, said the layoffs are part of a broader restructuring plan to improve operating margins, reduce operating costs and create a better selling capacity.
Moderna — Moderna spiked 6.2% after CEO Stéphane Bancel said the company is open to supplying Covid-19 vaccines to China, according to a Reuters report.
Coterra Energy, APA — Energy companies’ shares jumped alongside rising oil prices. Coterra Energy and APA leapt 7.2% and 6.7%, respectively.

Coty — Shares of the beauty company rose 3.3% after Bank of America reinstated coverage of Coty with a buy rating, saying that it’s a “turnaround story.”
Johnson & Johnson — Shares of the health-care company rose 2.1% after announcing it will repurchase up to $5 billion of its common stock. The move comes ahead of the Inflation Reduction Act’s 1% tax on buybacks, which goes into effect in 2023. Johnson & Johnson does not expect to incur debt to fund the repurchase program, the company said.
SoFi Technologies — Shares of the consumer finance app rose 5.8% after Bank of America upgraded the stock to buy from neutral, saying it could benefit from the student loan payment moratorium ending. The bank also said SoFi’s high-profile NFL-aligned marketing investments are good for driving user growth and engagement.
Block — The payment stock dropped 1.5% after Evercore ISI downgraded Block to underperform from outperform and slashed its price target, saying challenges are mounting for the company.
Union Pacific, CSX — The two stocks slid on Wednesday as railroad companies deal with a possible strike that could limit service. Union Pacific dropped 3.7%, while CSX fell 1.1%.
Merck — Shares climbed 1.6% after Berenberg upgraded Merck to buy from hold, saying in a Tuesday note that the pharmaceutical stock is a solid “low-risk” option in its sector.
— CNBC’s Samantha Subin, Michelle Fox Theobald and Tanaya Macheel contributed reporting

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Check out the companies making headlines in premarket trading Wednesday.
Starbucks – Shares of Starbucks gained nearly 1% after the company boosted its long-term forecast and said it expects double-digit growth for revenue and earnings per share over the next three years.

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Credit Suisse upgrades Wynn Resorts, says the casino stock can nearly double

Palo Alto Networks – Cybersecurity company Palo Alto Networks rose slightly following a three-for-one stock split, which took place on Tuesday. In addition, CEO Nikesh Arora told CNBC that the company is not seeing the same macro impact slowdown on cybersecurity that other sectors are experiencing.
Nucor —Nucor fell 5% after the steel producer issued disappointing third-quarter earnings guidance. The company expects earnings per share to range between $6.30 and $6.40, well below a StreetAccount forecast of $7.56. “We expect the steel mills segment earnings to be considerably lower in the third quarter of 2022 as compared to the second quarter of 2022, due to metal margin contraction and reduced shipping volumes,” Nucor said.
Nikola — Nikola shares rose slightly after BTIG upgraded the EV maker to buy from neutral. BTIG noted that it sees “the potential for increasing demand for green hydrogen driven by increasing wind and solar power generation.”
SoFi Technologies — SoFi rose more than 2% after Bank of America upgraded the fintech stock to buy from neutral. “We see potential for a meaningful catalyst path over the next few quarters as SoFi benefits from the student loan payment moratorium ending and its high-profile NFL-aligned marketing investments drive user growth and engagement,” BofA said.
Moderna – Shares of Moderna rose 0.6% after the company’s CEO said it would be open to supplying covid vaccines to China.

Bristol-Myers Squibb – Shares of Bristol-Myers Squibb slipped 0.7% after Berenberg downgraded the company to hold from buy. The firm said the stock is running out of room to gain.
Merck & Co – Shares of Merck rose 0.7% after Berenberg upgraded it to buy from hold and boosted its price target, signaling it could climb another 17%.
Railroad stocks – Shares of railroad company stocks slumped Wednesday as the sector contends with a potential strike that could limit service. Union Pacific fell 1.9% while CSX, Norfolk Southern Corp. also slipped ahead of market open.
Correction: A previous version misspelled Norfolk Southern.

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The market’s violent reaction to hotter-than-expected inflation may usher in more losses.
Investor Peter Boockvar believes Wall Street is coming to grips with a painful reality: Inflation isn’t moderating, so the Federal Reserve won’t pivot.

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“After next week’s rate hike, we’re going to start playing a dangerous game with the state of the economy. The next rate hike is going to be only the second time in 40 years that the Fed funds rate is going to exceed the prior peak in a rate hiking cycle,” the Bleakley Advisory Group chief investment officer told CNBC’s “Fast Money” on Tuesday. “We’re getting into treacherous waters.”
According to Boockvar, a 3/4 point hike at next week’s Fed meeting is virtually a done deal — despite signs of softer commodity prices and used car prices slowing down.
“The BLS [Bureau of Labor Statistics] lags in how it captures that. So, that’s why we have this sort of two-lane highway with both sides going in opposite directions,” said Boockvar. “We rallied 200 S&P points in the four days leading into today [Tuesday] because the markets are driving on one side, and the BLS hasn’t yet captured that. Unfortunately, the Fed is also lagging in terms of how they’re reacting to things. They’re driving also with a rear-view mirror type of mentality.”
The major indexes fell to June 2020 lows after the August consumer price index [CPI] rose by 0.1% to 8.3% over the past year. A meaningful drop in gasoline prices failed to offset rising shelter, food and medical care costs. According to Dow Jones, economists thought the index would fall by 0.1%.
The inflation move higher prompted Nomura to officially changed its rate hike forecast. It now expects the Fed to raise rates by a full point at the next meeting.

Boockvar, a CNBC contributor, doesn’t expect the Fed to go that far. However, he warns investors will still have to deal with the economic consequences from wealth destruction to earnings declines.

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“If labor costs remain sticky, if they continue to rise at the same time the revenue side starts to slow in the face of this slowing economy, you’re going to have further cuts in earnings estimates at the same time,” he said. “I don’t think this market just ends with a [p/e] multiple at 17x.”
Boockvar believes multiples will ultimately be 15x or lower.
CNBC “Fast Money” trader Brian Kelly also sees more trouble for stocks and the economy, particularly housing.
“We’re just barely seeing the cracks in housing. So, as that starts to come down, people are going to feel like they had less money than they did before… And then, we don’t know what that’s going to do to the economy,” he said. “This 75 [basis point rate hike] might even be a mistake. We know there’s a lag.”
And, that could even be too much for the economy to handle.
“This is a Federal Reserve that could not raise interest rates 25 basis points in 2018 and actually turned the market into a convulsion, and ultimately they had to step back in and begin this easing process,” Tim Seymour, another “Fast Money” trader, added. “We went from a place where we could not raise rates even in good times let alone difficult times.”
The next Fed meeting is from Sept. 20 to 21.
Disclaimer

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National tourism revenue for the latest long-weekend holiday reached only 60.6% of 2019 levels, according to China’s Ministry of Culture and Tourism.
The tourism figures dropped by more than they did during the last public holiday in early June, pointed out Ting Lu, chief China economist at Nomura.
China’s Premier Li Keqiang held a meeting Thursday about the economic situation, state media reported on the last day of the holiday.

National tourism revenue for the long weekend ended Monday reached 28.68 billion yuan ($4.16 billion), only 60.6% of pre-pandemic levels in 2019, according to China’s Ministry of Culture and Tourism. Pictured here are visitors to the Nantong Intercontinental Green Expo Park in Jiangsu province on Sept. 11, 2022.
Vcg | Visual China Group | Getty Images

BEIJING — China’s tourism sector ended yet another public holiday with revenue well below what it was before the pandemic hit.
National tourism revenue for the three-day Mid-Autumn Festival reached 28.68 billion yuan ($4.16 billion) — just 60.6% of the 2019 pre-pandemic levels, the Ministry of Culture and Tourism said late Monday. The figure also marked a 22.8% decline from last year.

Tourist trips of 73.4 million were nearly 17% below last year’s figure, and had only recovered to 72.6% of 2019 levels, the ministry said.
The tourism figures dropped more than they did during the last public holiday in early June, pointed out Ting Lu, chief China economist at Nomura.
“The worsening business activity was mainly due to the tightened Covid control measures, as individuals have been advised to stay local and avoid unnecessary trips during the Mid-Autumn Festival and National Day holiday (1-7 October),” he said in a report dated Monday. China’s next public holiday will be in October.

Chinese tourism has slumped since the pandemic hit in early 2020. Domestic tourism revenue for all of last year was about half of what it was in 2019, according to the tourism ministry.
This year, figures for the first six months showed a drop of about 28% from the same period in 2021. And since Shanghai’s two-month lockdown ended in June, China has battled outbreaks across the country, including in the resort island of Hainan.

The Mid-Autumn Festival this year officially landed on Saturday, with the public holiday running through Monday.
Even if people didn’t travel far, they weren’t inclined to go to movie theaters. The long-weekend box office came in at 370 million yuan ($53.44 million), the lowest since 2017, according to data from movie ticketing site Maoyan.
The number of movie theater visits — about 9.2 million — was the lowest since 2013, despite more than triple the number of movie showings, the data showed.

Online shopping: a bright spot

However, online shopping held up, at least in terms of volume.
China’s postal authority said it handled nearly 1.8 billion packages during the holiday, similar to last year. The 2021 figures were well over 90% of 2019 levels, according to an official report. A 2019 comparison wasn’t released this year.
Last week, China’s National Health Commission encouraged people to stay put during the holidays and avoid holding large group events.
The commission emphasized that when moving between provinces, travelers need to show negative virus tests taken within the last 48 hours — as has been the general practice for at least some areas. The health authority said this Covid policy would last until Oct. 31, with subsequent adjustments as needed.

Read more about China from CNBC Pro

The capital of Beijing, which is set to host a historic political meeting next month, has reported in the last several days infections tied to two universities and a middle school in the city. Business and social activity in the city remain largely unaffected.
However, due to a local Covid infection tied to Beijing, a town in the neighboring province of Hebei said that starting Tuesday, it would essentially lock down for four days, according to state media.
This month, the southwestern city of Chengdu — known for its panda center — ordered people to stay home while authorities conducted mass virus testing. Restrictions began to loosen in the last few days, but restaurants still cannot let people dine in, according to the city government.

A government meeting around the holiday

On Monday, while the public was still celebrating the Mid-Autumn Festival, state media reported China’s Premier Li Keqiang had headed a special meeting about the economy on Thursday. All four of China’s vice premiers attended, the report said.
National economic growth has slowed — to a pace of 2.5% in the first half of the year and well below the official target of around 5.5%.
Adding to the drag from Covid controls is a slump in China’s massive real estate market. Last week, trade data for August indicated that as global demand wanes, exports would likely not support domestic growth as much as they previously did.
China is due to release August retail sales, industrial production and investment data on Friday.

Correction: This story has been updated to reflect the state media report of Premier Li’s meeting came on Monday, while the meeting itself occurred Thursday.

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Check out the companies making headlines in midday trading Tuesday.
Meta – Shares of Meta slid 9.37% as the overall market fell Tuesday. The company’s bet on Reels is facing hurdles — Instagram users are spending less than one-tenth of the 197.8 million hours TikTok users spend each day on the platform, The Wall Street Journal reported Monday. Meanwhile, Morgan Stanley reiterated its overweight rating on the stock Tuesday, saying investors should wait for more information on declining user engagement trends during the next earnings call.

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Rent the Runway – Rent the Runway plunged 38.74% after releasing disappointing second-quarter results showing slowed subscriber growth. In addition, Credit Suisse downgraded shares of the company to neutral from outperform after the earnings report.
Oatly — Oatly sank 7.27% after Credit Suisse downgraded the beverage company to neutral from outperform and cut its price target, citing greater consumer risk in Europe and Asia.
Adobe – Shares of Adobe fell 7.06% after BMO downgraded the company to market perform from outperform. The firm also lowered revenue estimates for 2022 and 2023 on long-term concerns about Adobe’s cloud product.
Dow Inc.— Dow slumped 6.01% after Jefferies downgraded the chemical company to hold from buy on demand risks and excess supply.
Corteva – Shares of Corteva rose 0.87% after the agricultural science company announced a $2 billion share repurchase plan.

SVB Financial—Shares of SVB Financial slipped 5.28% after the company cut its third-quarter guidance during a Barclays conference. It was also downgraded by multiple firms, including Oppenheimer and Piper Sandler.
Carvana – Shares of Carvana slipped 12.94% a day after the company surged 15% on an upgrade from Piper Sandler. The firm said that the company is too cheap to ignore in a Sunday note.
Braze – Shares of the cloud computing company plunged 19.27% even though Braze reported earnings that beat Wall Street’s expectations. Still, analysts are worried about the company’s future sales. Cloud stocks in general fell during the market rout.
Eastman Chemical — Eastman Chemical shares fell 11.34% after the company cut its third-quarter earnings guidance to about $2 per share. The company had previously issued guidance for “solid growth compared to Q3 2021 adjusted EPS of $2.46.” The new guidance is also below a StreetAccount forecast of $2.60 per share.
— CNBC’s Michelle Fox contributed reporting

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Investment banking revenue at JPMorgan Chase is headed for a 45% to 50% decline in the third quarter from a year earlier, president and chief operating officer Daniel Pinto said Tuesday at a conference.
JPMorgan can adjust its cost structure not only by cutting jobs, but also by reducing the size of employee bonuses, he said.
Trading has provided a welcome boost this year, however. JPMorgan said that markets revenue was headed for a 5% increase from a year earlier, as strong activity in fixed income offset lower equities trading revenue.

Daniel Pinto, JPMorgan’s chief executive of corporate and investment bank.
Simon Dawson | Bloomberg | Getty Images

The deal-making slowdown that has weighed on Wall Street this year shows no signs of letting up.
Investment banking revenue at JPMorgan Chase is headed for a 45% to 50% decline in the third quarter from a year earlier, president and chief operating officer Daniel Pinto said Tuesday during a conference.

The bank posted $3.3 billion in third-quarter investment banking revenue last year, amid what was then a bull market for IPOs, stock issuance and other deals.
Now Wall Street is grappling with steep declines in capital markets activity as IPOs slow to a crawl and mergers declined after stocks had their worst first half since 1970. A bull market for bankers has turned to bust this year, and firms are expected to cut compensation and jobs in the coming months.
Yesterday, Goldman Sachs became the first major Wall Street firm to acknowledge that it was pulling back on headcount by cutting hundreds of jobs this month.
When asked whether JPMorgan would follow suit with its own layoffs, Pinto responded that “over time” the bank will adjust its employee base to match the opportunities in global investment banking.

2020 vision

That is, in his view, about what the industry earned in 2020, he said.

The total pool of investment banking fees jumped from about $79 billion in 2019, before the pandemic, to $95 billion in 2020 and $123 billion last year, Pinto said. The fee pool is expected to shrink to $69 billion in 2022, but Pinto believes that it will eventually rebound to 2020 levels, he said.
JPMorgan can adjust its cost structure not only by cutting jobs, but also by reducing the size of employee bonuses, he said.
“The banking business has a big component of variable compensation,” Pinto said. “You can adjust not just by letting people go, you can adjust by reducing costs.”
Still, managers “need to be very careful when you have a bit of a downturn” to not cut too deeply because that will hurt the business when volumes return, he added.
Trading has provided a welcome boost this year, however.
JPMorgan said that markets revenue was headed for a 5% increase from a year earlier, as strong activity in fixed income offset lower equities trading revenue. A year ago, the division posted $6.27 billion in revenue.
Read more: Wall Street layoffs likely ahead as two-year hiring boom turns to bust

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Investor Toolkit

Four factors — inflation, interest rates, a strong dollar and the Ukraine war — are impacting markets and the economy, according to attendees at the Future Proof event in California this week.
The lesson for investors worried about recession: Get ahead of the trend by buying assets that do well in the early stages of an economic rebound, said Michael Arone, chief investment strategist for the U.S. SPDR business at State Street Global Advisors.

Avalon_studio | E+ | Getty Images

HUNTINGTON BEACH, Calif. — There are four big trends impacting the economy and stock market right now, and uncertainty around each is creating challenges for investors, market experts and investment strategists said Monday at the Future Proof wealth conference.
Those high-levels trends are inflation, the Federal Reserve’s interest-rate policy, the U.S. dollar’s strength and the Russian invasion of Ukraine, said Barry Ritholtz, chief investment officer and chairman of New York-based Ritholtz Wealth Management.

“The macro environment at present is uncertain,” Anastasia Amoroso, managing director and chief investment strategist at iCapital Network, said.
“We’ve been at this for nine months and what have we really figured out” except that inflation is longer-lasting than expected, she added.
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The Federal Reserve has steadily raised borrowing costs since March this year to tame stubbornly high inflation.
Officials at the U.S. central bank have updated their expectations for how quickly and how much they will raise the benchmark interest rate — the Federal funds rate — to achieve their goal.

That “moving target” has been the biggest challenge this year relative to price volatility in the stock market, said Michael Arone, chief investment strategist for the U.S. SPDR business at State Street Global Advisors.
The war in Ukraine has also had global ripple effects on prices for energy, food and other commodities.

And the U.S. dollar is trading at its strongest in decades relative to currencies such as the euro and the British pound. That strength can “serve as a headwind in many ways,” Arone said. For one, about 45% of the revenue of companies in the S&P 500 Index is generated outside the U.S., and a strong dollar can negatively impact those earnings, he said. Imported goods may become less expensive, but U.S. exports become more expensive for other nations.
Meanwhile, the Federal Reserve is trying to achieve a “soft landing,” whereby higher borrowing costs slow the economy and tame fast-rising consumer prices, but don’t trigger a recession or considerable unemployment.
Fed officials have repeatedly acknowledged the difficulty of that task but Amoroso believes the central bank is in the process of achieving it.

Chipping away at ‘the inflation puzzle’

“We are starting to chip away at pieces of the inflation puzzle,” she said.
U.S. gross domestic product is slowing but “isn’t falling off the cliff,” she explained. Energy prices are moderating, which should over time feed into moderating food prices, she said. (Food prices partly reflect the energy costs involved in transport.) Consumers are also starting to push back on companies for higher airline fares, food prices and other costs, Amoroso said.
“I think it’s getting harder and harder for companies to justify price increases,” she added.
Of course, “the economy isn’t the market, and vice versa,” Arone said.

Often, the stock market will begin to price in an economic recovery well before economic data hit a bottom, as investors look to better days ahead, Arone said. That happened during the pandemic, for example — the stock market hit bottom on March 23 but then swiftly rebounded even in the throes of a health crisis.
The lesson for investors worried about recession: Get ahead of the trend by buying assets that do well in the early stages of an economic rebound, Arone said. Those include value stocks, small-cap stocks and industry sectors like energy, industrials and financials, he added.
As a general theme, Amoroso also recommended buying “when it feels terrible to do so.”
“As bad as things felt and maybe still do, buying things when they’re on sale makes a lot of sense,” she said. More

The white house used to dread monthly inflation reports, each one worse than the previous, each another blow to President Joe Biden’s popularity. Now the reports are less fearsome. In the latest release on September 13th, the consumer-price index for August rose by 8.3% year on year. But in month-on-month terms, prices rose just 0.1%. These days Republican strategists are advising their party to tone down criticism of the president’s record on inflation, seeing it as less of a winning argument.For economists the newfound optimism is a harder sell. The less fearsome data mainly reflects a steep fall in oil markets: the price of crude is down a quarter from its peak in early June. Looking at a breakdown of the August price data, energy lowered the month-on-month inflation rate by nearly half a percentage point. It was the other components—food, goods and, especially, services such as rent—that pushed up prices (see chart).Stripping out volatile energy and food prices yields a core inflation rate of 0.6% month-on-month in August, which works out at an annualised rate of 7.4%—well above the Federal Reserve’s target of 2%. Investors believe the Fed will opt for its third consecutive three-quarter-point interest-rate increase when it meets later this month, making for the most aggressive pace of tightening in four decades. And even relatively faint differences can fuel big swings in sentiment. Forecasters had thought that core inflation would come in at 0.3% month-on-month in August. The 0.6% result suggests that price pressures are more persistent than expected, and will potential force the Fed to tighten by even more. The S&P 500, America’s benchmark stock index, fell by 4.4%, its worst day since mid-2020.One critical factor in explaining the persistence of high core inflation is tightness in the labour market. With roughly two jobs available per unemployed person in America, workers have strong bargaining power, which is reflected in hefty wage gains. A tracker published by the Fed’s Atlanta branch shows that in August wages rose at an annualised pace of nearly 7%. The grim conclusion for many economists is that America may require a marked increase in unemployment in order to temper wage pressures and, ultimately, inflation.The median projection of members of the Fed’s rate-setting committee is that the unemployment rate will only need to tick up slightly to 4.1% in 2024, from the current level of 3.7%. But a recent paper by Laurence Ball of Johns Hopkins University and Daniel Leigh and Prachi Mishra of the imf argues that a 4.1% level of unemployment would be consistent with core inflation of between 2.7% and 8.8% in 2024. In other words, only in the rosiest scenarios does it look like America can escape from the inflationary mire without many people losing their jobs.Nevertheless, the divergence between core and headline inflation poses an intriguing question. As far as consumers are concerned, there is no such distinction. All prices matter, and indeed prices at the petrol pump do more to capture the attention of Americans than prices anywhere else. Surveys of consumers show that their expectations for future inflation have come down sharply since June, undoubtedly thanks to the decline in oil prices.As Mr Ball and his co-authors argue, a failure to account for the pass-through from surging energy prices into core inflation was one reason why economists were wrong-footed about inflationary pressure over the past year. The hope now is that the plunge in energy prices can continue, and that the pass-through into weaker core inflation will again wrong-foot many economists. ■ More