Finance

If you can withstand the market’s wild swings, Wilmington Trust’s Meghan Shue believes it’s an ideal time to put cash to work.
It may seem counterintuitive, but she’s more comfortable investing in stocks now than earlier this summer when Wall Street was calmer.

“It’s actually more unsettling when it appears that everything is good and the skies are clear,” the firm’s head of investment strategy told CNBC’s “Trading Nation” on Friday. “It could be good to have some risks on the horizon.”
Even though she acknowledges there’s no shortage of issues from the Covid-19 delta variant surge to Federal reserve policy to inflation, Shue is confident they won’t derail the economic recovery or have a long-term negative impact on the market.
“Volatility we’ve been seeing in the market is somewhat refreshing actually because we’ve had a very, very low volatility environment,” she said. “Typically, you see a 5% to 10% pullback [each year.] It’s been over ten months since we’ve seen anything more than at 5% pullback.”
Even though the Dow, Nasdaq and S&P 500 had a positive session on Friday, the three indexes ended the week lower. The Dow broke a three day losing streak, and the tech-heavy Nasdaq saw its best day in a month.
Shue, who oversees $141 billion in assets, notes it’s crucial for investors diversify and have at least a 9 to 12 month time horizon due to the choppiness.

“We don’t think it’s really prudent to try to time the ebbs and the flows and the back and forth of that particular trade,” said Shue, a CNBC contributor.
Her top plays are financials, energy and materials because they’re positioned to profit from economic growth and should reap benefits from rising interest rates.
“We do have a tilt towards cyclicals and value,” she noted. “We expect that the first rate hike is no sooner than the end of next year or the beginning of 2023. And, I think the economy and the markets will be in a good place to handle that.”
She also sees parts of consumer discretionary getting a boost from a strong big back-to-school and holiday spending season.
“The consumer is in a very strong spot,” she said.
And, it may not be one of her top spots to invest, Shue wouldn’t forget about growth either.
“Stay in some technology and growthier parts of the market as well,” Shue said. “Spots in health care and pharma we like.”
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National park tourism has surged over the past several years. Some popular parks like Yellowstone are seeing record numbers in 2021.
Acadia, Yosemite, Glacier, Haleakalā and Rocky Mountain National Parks, as well as the Muir Woods National Monument, have adopted advance-reservation systems to limit congestion. More parks will likely follow.
The measures help protect parks and visitor experience, but may frustrate would-be travelers who can’t get one of the limited reservations.

Tourists crowd in to the Midway Geyser Basin on July 14, 2021 at Yellowstone National Park, Wyoming. Yellowstone is one of many national parks seeing record numbers of visitors this summer.
Natalie Behring | Getty Images News | Getty Images

Cadillac Mountain in Maine’s Acadia National Park is among the country’s premier spots to view a sunrise.
For half the year, visitors to the 1,530-foot peak — the tallest within 25 miles of the entire U.S. East Coast — are the first in the country to see daylight, watching as the sun’s rays gradually illuminate Frenchman Bay and its many islands in brilliant blues and purples.

That is, if they can find parking.
Until recently, it wasn’t unusual to see 500 cars vie for 150 parking spaces, according to park superintendent Kevin Schneider.

Sunrise at Cadillac Mountain in Acadia National Park, Maine.
Greg Iacurci

Park officials implemented a reservation system this year to cut congestion. Reservations cost $6 per vehicle and must be bought online in advance.
Elsewhere — Yosemite, Glacier, Haleakalā and Rocky Mountain National Parks, as well as the Muir Woods National Monument — are also using advance reservations to access the whole park or popular attractions. Zion National Park in Utah is weighing the same next year for its Angels Landing hike, which sometimes sees visitors wait hours to access the trailhead.
Other heavily trafficked parks will likely take similar measures in coming years if visitor trends continue, according to officials and travel experts.

Sunset from Taft Point in Yosemite National Park, California.
Greg Iacurci

Travelers may have difficulty claiming one of the limited spots ahead of time, or are turned away if unaware of the requirement before arrival.
“They’ve traveled thousands of miles, made tens of thousands of dollars in hotel and airfare and rental car reservations, only to see their vacation ruined because they can’t get that $2 ticket to see Glacier National Park,” Kevin Gartland, executive director of the Chamber of Commerce in Whitefish, Montana, said at a recent Senate hearing on park overcrowding.

Breaking records

Eager to travel and get outdoors after months of confinement, Americans have traveled to some parks in record numbers this year. Vacationers may also still be wary of traveling to destinations outside U.S. borders, or may not be able to due to local restrictions.
July was Yellowstone’s busiest month in park history — monthly visitors had never exceeded 1 million to the first U.S. national park, which has the highest concentration of thermal features like geysers, hot springs, mudpots and steam vents in the world.

Canary Spring in Mammoth Hot Springs, Yellowstone National Park.
Greg Iacurci

“Increases to Yellowstone’s visitation have accelerated rapidly over the past 12 months and we continue to be on pace to set record numbers for 2021,” according to park superintendent Cam Sholly.
Nearby Grand Teton National Park had its busiest-ever June, with a 20% increase in visitors over 2019. Visits to Zion are up 18% in 2021 through July relative to 2019, according to federal data. Likewise in Great Smoky Mountains National Park, the most trafficked in the system, where tourism is up over 7% this year versus 2019.
More from Personal Finance:The need for trip insurance amid the pandemic is reshaping travelVaccine passports gain traction as delta variant threatens travel reboundNew travel apps match you with trips you really want or can afford
These record numbers in some parks reflects a longer-term trend. Visits to Glacier and Yellowstone, for example, have doubled since 1980. National park visitation was about 20% greater in 2019 than in 2013.
There’s a “tension and a paradox” in this dynamic, according to Sen. Angus King, I-Maine, who chairs the Senate Subcommittee on National Parks.

The Cathedral Group in Grand Teton National Park, Wyoming.
Greg Iacurci

On one hand, it’s good that Americans are visiting public lands in record numbers. But overcrowding has led to more litter, vandalism and traffic — stressing the park’s natural resources and wildlife and negatively impacting visitor experiences.
“We can accidentally love our parks to death,” King said at a Senate hearing in July.

National park reservations

Reservations are among the many methods parks are weighing to address congestion. Their details and restrictions vary from place to place.
For example, Glacier, in northwest Montana, is only using vehicle reservations for its Going-the-Sun Road, a scenic drive that cuts through the center of the park and is one of its main attractions. The tickets cover entry for seven days from the date a visitor selects. (They cost $2 in addition to the typical park-entry pass.)

Visitors walk around the Logan Pass Visitor Center in Glacier National Park on July 26, 2018 in West Glacier, Montana.
George Frey | Getty Images News | Getty Images

As with other parks, spots are limited and may sell out quickly. About 75% of the reservations become available up to 60 days in advance, and the remaining 25% just two days ahead.
By contrast, Rocky Mountain National Park in northern Colorado is using a timed-entry reservation. Visitors must enter the park within their chosen two-hour time window.
In Yosemite, $2 reservations to enter to the park are valid for three consecutive days. However, the system may not be permanent — park officials said this year that the “temporary” system, which took effect in May, would help manage visitor levels to reduce Covid-19 related health risks.

Angels Landing in Zion National Park, Utah.
Greg Iacurci

Some travel experts expect parks to keep the systems in place even when the pandemic is no longer a threat.
“It was only a matter of time,” according to Kasey Morrissey, the president of Austin Adventures, a company based in Billings, Montana, that guides national park tours. “It’s not like Covid was going to be the only factor that brought that on.
“The parks are getting very, very busy.”

Not all parks

It’s unlikely that all — or even most — parks will adopt such systems, though.
For one, not all of them have seen a surge in traffic. Half of all recreation visits occur in the top 23 most visited parks, with “significant congestion” concentrated in the top 12 to 15, according to Michael Reynolds, a regional director at the National Park Service.
While parks like Glacier, Zion and Yosemite have limited parking in relatively small canyons or valleys, those with different geography and road systems may be able to better absorb higher traffic, Morrissey said.

And parks are exploring options beyond ticketed entries to cut congestion.
For example, Yellowstone, which doesn’t require a reservation, is exploring the feasibility of a shuttle system between Old Faithful and Midway Geyser Basin. It launched a pilot program this summer that uses free, automated shuttles to help transport people around its Canyon Village area. Visitors can book a larger number of campsites six months ahead instead of upon arrival.

Grand Prismatic Spring in Yellowstone National Park.
Greg Iacurci

Timed reservations aren’t a policy to expect anytime soon in Yellowstone, according to park spokeswoman Linda Veress.
“But it’s well within the realm of possibility in the future,” she said.  

Alternatives

While it may be “crushing” for would-be tourists who can’t secure a reservation, the systems improve experiences for those able to get them, Morrissey said.
And there are creative alternatives, she said.
For example, Acadia visitors can hike, bike or taxi to the top of Cadillac Mountain without a permit. Glacier and Rocky Mountain parks waive the requirement for tourists who have a “service reservation” like overnight lodging or a tour inside the park. (The waiver only applies to that day, though.)

Upper Cathedral Lake in Yosemite National Park.
Greg Iacurci

Motorists can also drive into parks before or after their entrance booths are staffed for the day. (At Glacier, that would be before 6 a.m. or after 5 p.m., for example.)
“There are certain ways around it if you can be a little crafty,” Morrissey said.

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NO ONE CAN accuse him of inconsistency. Over the past year Jerome Powell, chairman of the Federal Reserve, has again and again used the same phrasing to kick off his press conferences after it sets interest rates. “Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary-policy goals that Congress has given us: maximum employment and price stability.” It may not be an opening that sets pulses racing. But that is just how Mr Powell wants it: a projection of control, in terms any high schooler can understand.The simple wording belies a remarkable evolution in Fed policy and practice on his watch. Mr Powell has overseen a giant monetary response to the covid-induced slowdown. The Fed has bought more than $4trn in assets during the pandemic (equivalent to 18% of GDP), dwarfing the scale of its actions after the global financial crisis, and swelling its total balance-sheet to $8.3trn. Mr Powell has refined the way the central bank communicates, targeting his messages at ordinary Americans rather than at economists. He has led a landmark shift in the way it thinks about interest rates. And in the process, he has presided over a bold gamble, keeping policy ultra-loose even as inflation soars. To his supporters—of whom there are many—he saved America from an economic catastrophe. To his critics, he is steering it into danger.These days much of the conversation about Mr Powell focuses on whether President Joe Biden will reappoint him. His four-year term as chairman ends in February 2022. Mr Biden is expected to announce in the coming weeks whether he will renew Mr Powell’s term or nominate a replacement, giving markets time to brace for the change, if there is one. Progressives within the Democratic Party would prefer a chairperson who is tougher on banks, accusing Mr Powell of slowly dismantling rules intended to make the financial system safer. Lael Brainard, the lone Fed governor who has consistently opposed moves to, for instance, soften banks’ leverage limits, is their preferred candidate.Still, most Fed watchers expect that Mr Powell will get a second term. Betting markets assign it an 85% probability. Most Democrats and Republicans think he has done a good job in tough circumstances. The economy is recovering and stocks are near all-time highs. Why rock the boat? The politics would look good, too. Mr Biden would re-establish a precedent, broken by President Donald Trump, of reappointing Fed chiefs first chosen by a president from another party. It would also make sense to anyone tracing the arc of Mr Powell’s leadership. Over the past four years he placed his big bets. The test of whether he was right or rash will come in the next four.An assessment of Mr Powell’s record can be divided into three periods. The first was before the pandemic. His most notable achievement was arguably political. The Fed faced the gravest challenge to its independence in decades when Mr Trump railed against its interest-rate rises. Mr Powell defused it, sticking to the Fed’s agenda and patiently explaining that the president had no authority to fire him, but otherwise refusing to get drawn into a war of words. Mr Powell also displayed intellectual flexibility. When inflation dipped in 2019, the Fed swiftly reversed gear and cut interest rates—and held them low even as unemployment declined to levels that economists had assumed might lead to upward price pressures. “He let the economy push farther and farther than anyone thought it could go,” says Jason Furman, an economic adviser to President Barack Obama.The second period came with the onset of the pandemic. As the American economy came to a sudden stop in March 2020, stocks plunged and credit markets seized up. Mr Powell wasted no time in engineering a massive rescue, slashing rates to zero and buying up a wide range of assets—not just Treasuries and mortgage-backed securities but also, for the first time, corporate bonds. Within three months the Fed’s asset holdings had increased by $3trn. The third period of Mr Powell’s tenure, unfolding now, is the most contentious. Many who applauded the Fed’s stimulus during the depths of the pandemic think it should have started rolling it back. Monthly asset purchases of $120bn make little sense, and indeed may be storing up trouble, when inflation is running above 5%. Move too slowly to unwind, and financial markets could overheat (some prominent investors such as Jeremy Grantham argue that they are already red-hot). Move too quickly, and a market crash would be a self-fulfilling prophecy, rippling through the global economy. Sonal Desai of Franklin Templeton, an asset manager, calls it the “hardest high-wire balancing act we’ve seen in a long time”.Mr Powell is trying to pull it off by giving markets plenty of warning, in the hope of avoiding a repeat of the “taper tantrum”, which spooked markets in 2013. On August 27th, when he speaks at an annual Fed jamboree—usually held in Jackson Hole, Wyoming, but being conducted online for the second year running because of covid-19—Mr Powell is expected to say that a tapering of asset purchases could start later in the year. Many observers expect a three-step shift: a pre-announcement at the central bank’s rate-setting meeting in September that a tapering announcement will come at its November meeting, followed in December by actual tapering.Priced to perfectionGuesses about the tapering schedule, though, are only one element of the debate now swirling around Mr Powell’s agenda. Last year he introduced a new framework for monetary policy (building on a shift that started under his predecessors, Janet Yellen and Ben Bernanke), announcing that the Fed would target an average of 2% inflation over the longer run, while also seeking to let the economy reach full employment. He has also pledged that the Fed will not raise rates until inflation is at 2% and is forecast to stay above it for some time. Tapering can begin earlier, as long as there is “substantial further progress”—a deliberately vague phrase—towards meeting the inflation and employment targets. What he could not have foreseen was the extremely uneven recovery from the pandemic, with prices climbing but the unemployment rate still nearly two percentage points higher than at the start of 2020.“The Fed has tied its hands to be quite late to remove monetary-policy accommodation,” says William Dudley, former president of the New York Fed. Mr Dudley thinks that the Fed’s new framework is correct, but worries that the implementation has been too rigid. He says that he would have argued for less extreme conditions to taper or raise interest rates. Mr Furman warns that Mr Powell could be paving the way for unpredictable policy, which would give rise to the very market shocks he has wanted to avoid. “There’s been a bit of assuming that everything’s going to work out exactly right, and not having much public communication about what will happen if it doesn’t,” he says.Yet many other economists and Fed veterans support Mr Powell’s approach. The average-inflation framework was designed with the broader backdrop in mind: steadily lower inflation was keeping interest rates low and limiting the Fed’s monetary space. Covid-19, though an extreme challenge, is unlikely to alter these long-standing structural forces. Much of the recent surge in inflation appears to stem from ephemeral factors such as gummed-up global supply chains. David Wilcox, a former research director at the Fed, says that as long as inflation expectations remain anchored at 2%, the Fed is likely to have the patience to wait it out. “In that context an abrupt move to tighten could be a costly mistake,” he argues.If inflation persists and filters into wages a year or so from now, that would be a different story—but a modest overshoot would not necessarily be an unwelcome one. “If inflation runs to the upside, that’s a problem they want to have, and they have the tools for dealing with it,” says Alan Levenson of T. Rowe Price, an asset manager. As it stands, the central forecast of members of the Fed’s rate-setting committee is for inflation to return to roughly 2% next year. Market pricing of Treasury bonds points to much the same outcome.For all the controversy about Mr Powell’s monetary policy, it is his approach to financial regulation that has been the biggest lightning-rod for his political opponents, especially from the progressive wing of the Democratic Party. “I see one move after another to weaken regulation over Wall Street banks,” Senator Elizabeth Warren said at hearings in July. Defenders of Mr Powell say that such a characterisation is unfair. The Fed did, for instance, scrap pandemic-era limits on most banks’ stock buybacks and dividend payments at the end of June, but that was only after subjecting them to three stress tests to confirm that they had more than enough capital. In other areas, Mr Powell’s Fed has been strict. In March it rebuffed banks’ requests to extend an exemption on leverage caps that had helped them during last year’s slowdown.If Mr Biden wants to keep Mr Powell in his job but also to signal a tougher stance on regulation, he has an obvious solution. Randal Quarles’s term as the Fed vice-chairman responsible for banking supervision ends in October. Instead of nominating Ms Brainard as the next chairperson, he could choose her as Mr Quarles’s replacement. For markets, such a reshuffle would minimise the turbulence from changing personnel at such a critical juncture. Politically, it would be deft. And it would give Mr Powell a chance to answer the fundamental question posed by his policies: whether the great monetary loosening, so necessary last year, can be unwound now without doing great harm to the economy. More

The Federal Reserve’s annual Jackson Hole symposium will take place virtually this year due to Covid risks, the Kansas City Fed announced.
The Fed previously announced that Chair Jerome Powell will deliver remarks virtually.

The Federal Reserve’s annual Jackson Hole, Wyo., symposium will take place virtually this year due to Covid risks, the Kansas City Fed announced Friday.
“While we are disappointed that health conditions will prevent us from being able to gather in person at the Jackson Lake Lodge this year as we had planned, the safety of our guests and the Teton County community is our priority,” Esther George, president of the Kansas City Fed, said in a press release.

The Fed announced on Thursday that Chair Jerome Powell will deliver remarks virtually. The chairman’s speech, typically the highlight of the event, is set to be livestreamed to the public Friday morning. 
Market participants will be awaiting insights about the Fed’s “taper talks” from the symposium as many central bankers aim to move away from easy policy, namely the Fed’s $120 billion monthly bond purchases.

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Check out the companies making headlines before the bell:
Deere (DE) – The heavy equipment maker reported quarterly earnings of $5.32 per share, compared with a consensus estimate of $4.58, and its revenue beat forecasts as well. Deere was up 1.1% in premarket trading as it also raised its full-year earnings forecast on solid demand for farm equipment.

Foot Locker (FL) – Foot Locker shares surged 6.2% in the premarket after the athletic footwear and apparel maker reported better-than-expected second-quarter results. Foot Locker earned an adjusted $2.21 per share, compared with a $1.01 consensus estimate, and comparable stores sales rose 6.9%. Analysts had expected a slight decline in comp sales.
Buckle (BKE) – The fashion accessories retailer beat estimates by 18 cents with quarterly earnings of $1.04 per share, and revenue above estimates as the company benefited from more in-person shopping. The stock jumped 4.6% in premarket trading.
Spotify (SPOT) – The music streaming service announced that its board approved a $1 billion stock buyback. Chief Financial Officer Paul Vogel said the move demonstrates the company’s confidence in its business and long-term growth opportunities. Spotify added 1.1% in the premarket.
Applied Materials (AMAT) – The maker of semiconductor manufacturing equipment beat estimates by 13 cents with an adjusted quarterly profit of $1.90 per share and revenue also topping analyst predictions. It also gave a better-than-expected outlook, but Applied Materials shares fell 1.3% in premarket trading.
Ross Stores (ROST) – The discount retailer reported a quarterly profit of $1.39 per share, beating the 98 cent consensus estimate, and also reported better-than-expected revenue. However, its current-quarter and full-year earnings outlook fell short of analyst forecasts, and the stock slid 4% in premarket action.

Johnson & Johnson (JNJ) – Chief Executive Officer Alex Gorsky announced plans to step aside on Jan. 3, with company veteran Joaquin Duato taking over and Gorsky assuming the role of executive chairman.
Lordstown Motors (RIDE) – The electric vehicle maker’s shares rose 2.1% in the premarket, recovering a small part of the 9.5% Thursday drop that had sent the stock to its lowest since going public. That took place after the annual shareholder meeting that lasted only 10 minutes.
Adobe (ADBE) – The software maker announced a deal to buy cloud-based video collaboration platform Frame.io for $1.275 billion in cash. The acquisition will be used to expand the capabilities of Adobe’s Create Cloud software suite.
Petco (WOOF) – Petco added 2.1% in the premarket to Thursday’s 3.6% gain, with Credit Suisse upgrading the pet products retailer’s stock to “outperform” from “neutral”. Credit Suisse said it is more positive on the outlook for Petco’s business following the company’s upbeat earnings report.
Mosaic (MOS) – The fertilizer producer was upgraded to “buy” from “hold” at HSBC, based on expected benefits from higher fertilizer prices.

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A trader works at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 19, 2021.
Andrew Kelly | Reuters

The markets: it’s August, but it’s also covid. Normal August trading flows are being greatly complicated by the delta variant.
A third but still important complication: increasingly authoritarian action in China is causing some to reprice China’s demand for commodities, and the valuation of its entire market.

A normal August

On one level, this is a normal August: mostly low volume, followed by short bursts of downside volatility.
Many were alarmed when the CBOE Volatility Index (VIX) hit almost 25 Thursday morning, but that’s only because volatility has been abnormally low, with only a few 1% daily moves in the S&P 500 in the last few months (way below the historic average, which is about one every week).
It’s very typical for the VIX to spike at least once — and often several times — in August and September, and even into October. It was 25 at this time last year, and spiked into the 40s in October:
VIX: recent Aug-Oct. highs2020 412019 24.82018 28.8
August to September is typically strong for defensive sectors like consumer staples, health care, utilities, weak for cyclicals like energy, materials and industrials, and “less positive” for technology, according to BofA Securities.

So far, that is exactly what is happening.

Not a Normal August

On another level, this is not at all a normal August.
The primary mover of the market (the reopening story) is getting re-rated. The market is being forced to reprice the growth outlook due to the delta variant.
As a result, cyclicals sectors that are sensitive to the reopening story (energy, materials, industrials, travel/leisure) are getting hit this week:
Energy this week:Chevron: -8%EOG: -6%Hess -10%Cabot Oil -8%
Industrials/materials this week:Deere: -6%United Rentals: -6%Caterpillar -6.5%Freeport-McMoran: -15%Cleveland-Cliffs: -10%
Airlines this week:United: down 6%American: down 6%Delta: down 5%
The broader market is holding up due to the continuing rotation into defensives (health care, consumer staples, utilities) and technology, where several megacap names are hitting new highs.
Consumer staples this week:Costco: up 1.4%Pepsi: up 1.7%Kimberly-Clark up 1.8%Procter & Gamble: up 0.8%
Health care this week:Abbott: up 2%HCA: up 1.5%United Health up 1%Bristol-Meyers: up 1.7%
Technology new highs:CiscoMicrosoftAdobeJuniper Networks

Is the Fed now the marginal mover of the market?

With the markets fragile, some believe the Fed has now become very important as a wildcard. The markets are comfortable with a September announcement of a tapering timeline, with tapering starting at the end of the year, and ending sometime in the middle of next year, with rate hikes starting after that.
But if that were to suddenly change, the markets could go into a tizzy, unable to deal with earlier tapering and rate hikes and the delta variant all at once. A sudden move to a higher rate stance is historically the Great Killer of Bull Markets.
Traders have emphasized the Fed must carefully manage its message — if it does not, and rates rise suddenly, tech will sell off dramatically and what is now a modest 2% correction will quickly turn into a 10% route.

Delta variant remains the big unknown

Which is the bigger issue? Both are in play, but most feel delta is the bigger of the two risks, because the delta variant impact is far less predictable than the Fed’s likely path.
Bulls insist that once everyone gets boosters, full-steam-ahead economic activity will resume.
But there’s going to be several months where the outcome is uncertain. Until then, it’s like death from a thousand cuts.
“The worse delta gets, the more likely tapering will start later rather than sooner,” Alec Young from Tactical Alpha told me.
“You’re either going to have delta ease up and the Fed start tapering, or delta will get out of control and the Fed timeline could change,” he added. “Investors would much rather deal with well-telegraphed tapering than they would with delta spreading out of control and tanking the global economy.”

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The People’s Bank of China, along with the China Banking and Insurance Regulatory Commission, told Evergrande executives they need to implement the central government’s strategy for stable and healthy development of the real estate market.
The comments come a few days after Chinese President Xi Jinping said at a high-level economic policy meeting that the country needs to prevent major financial risks.
Evergrande has more than 240 billion yuan ($37 billion) in bills and trade payables — such as materials — to settle with contractors over the next 12 months, S&P Global Ratings said earlier this month. About 100 billion yuan, or just over 40%, is due by the end of December, S&P said.

A banner promoting the Emerald Bay residential project outside the China Evergrande Centre in the Wan Chai area of Hong Kong, China, on Friday, July 23, 2021.
Lam Yik | Bloomberg | Getty Images

BEIJING — Chinese authorities called for indebted property giant Evergrande to resolve its debt risks during a rare meeting with executives Thursday.
Shares of Hong Kong-listed China Evergrande Group have tumbled more than 60% this year to near four-year lows as investors worried about the developer’s ability to repay its debt. The stock closed 1.6% lower Friday, giving up initial gains.

The People’s Bank of China said Thursday in an online statement that it, along with the China Banking and Insurance Regulatory Commission, told Evergrande executives they need to implement the central government’s strategy for stable and healthy development of the real estate market.
The statement added Evergrande needs to “actively resolve” debt risks, support financial stability and disclose true information in accordance with regulations, according to a CNBC translation of the Chinese text.
The comments come a few days after Chinese President Xi Jinping said at a high-level economic policy meeting that the country needs to prevent major financial risks.
Evergrande confirmed the meeting with regulators in an online statement Friday and said it would comply with those specific requests.

As one of China’s largest privately run real estate conglomerates, Evergrande sits at the intersection of major concerns for Beijing: speculation in the property market, high debt levels and the sustainability of an industry that fuels more than a quarter of GDP.

Evergrande has more than 240 billion yuan ($37 billion) in bills and trade payables — such as materials — to settle with contractors over the next 12 months, S&P Global Ratings said earlier this month. About 100 billion yuan, or just over 40%, is due by the end of December, S&P said.
The ratings agency downgraded Evergrande and its subsidiaries to “CCC” from “B-” on Aug. 5 on expectations the conglomerate’s “nonpayment risk is escalating because of increased asset freezes from various commercial parties, indicating strained liquidity.”
“The negative outlook reflects Evergrande’s increasing strained liquidity and nonpayment risk. It also reflects our view that its asset disposal plan, though potentially substantial, lacks visibility or certainty,” S&P said in a note.
An analyst was not available Friday to comment on the meeting with regulators.
Chinese authorities have been trying to limit speculative activity in the property market, which, together with related industries such as construction, accounts for more than a quarter of China’s GDP, according to Moody’s estimates published in a late July report.
Beijing is particularly concerned about a buildup in debt used to fuel property development. In the last year, three “red lines” have emerged for limiting the amount of debt real estate companies can hold relative to their assets.

Read more about China from CNBC Pro

The latest developments around Evergrande reflect authorities’ focus on limiting risks in the real estate market with greater regulation for the rest of this year, said Bruce Pang, head of macro and strategy research at China Renaissance.
“A favorable regulatory environment and fine-tuning policy curb are crucial to decide whether Evergrande could ride out its crisis smoothly,” Pang said. “Investors will closely follow the potential deals for signs on how much leniency Evergrande has won from Beijing, [regarding] the property sector’s liquidity issues amid a campaign to balance between curbing financial risks and securing social stability.”
The Chinese regulators’ meeting with Evergrande comes as Beijing has accelerated its regulation of different fast-growing industries — primarily tech-related — in the last year.
In early November, the central bank, banking and insurance regulator and other departments met with Alibaba founder Jack Ma and executives of financial technology giant Ant Group. A few days later, Ant had to suspend its massive IPO, and began a series of meetings with regulators that has forced the company to restructure as a financial holding company.
Previously, in the last few years, Chinese authorities have stepped in to limit the debt-fueled expansion of conglomerates such as airline operator HNA and insurance company Anbang.

Rising household debt

Reducing property market risks is even more critical for China since the majority of household wealth is tied up in real estate, at about 70% to 80%, according to Moody’s estimates. The report added about 10% of total household income is related to property.
While authorities have repeatedly stressed that “houses are for living in, not speculation,” Chinese households’ greater preference for investing in property than stocks or other assets has contributed to rising real estate prices.
That, in turn, has caused Chinese household debt to rise.
The balance of consumer housing loans has only climbed over the last several years, to reach 36.6 trillion yuan as of the end of June, according to official data. The 13% year-on-year growth rate was slower than the 14.5% rate of 2020.
The inability of the property market to serve individual housing needs has contributed to a rapid rise in household debt, said Liu Xiangdong, deputy director of the economic research department at the China Center for International Economic Exchanges based in Beijing.
He noted China’s property issues are tied to the education system’s problems. Parents anxious to send their children to top schools have bid up nearby housing prices — which local authorities such as those in Beijing have tried to push back on.
For Evergrande, residential real estate development remains one of its major businesses, but the company has climbed into the ranks of Fortune’s Global 500 list and expanded into industries such as film and entertainment, life insurance and spring water. Evergrande backs Guangzhou’s soccer team and has an electric car unit.

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Stock futures were little changed Thursday after a choppy regular trading session ended with the S&P 500 slightly in the green.
Futures on the S&P 500 were just under the flatline. Dow Jones Industrial Average futures shed 3 points. Nasdaq 100 futures traded at the flatline.

The S&P 500 snapped a two-day losing streak in Thursday’s regular trading session while the Dow ended its third-straight day in red.
After volatile trading, the S&P 500 closed 0.1% higher. The Nasdaq Composite added 0.1%. The Dow bucked the trend and shed 66.57 points.
All three major stock indexes are on track to close the week lower. The S&P 500 and the Dow are both on track to post their worst weekly performances since June, while the Nasdaq is set to see its worst week since May.

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“Against a backdrop of thin liquidity as investors take summer vacations, minor stock market corrections are to be expected in a market that is pricing in peak earnings, extended price-to-earnings ratios and elevated economic growth expectations,” Richard Saperstein, chief investment officer at Treasury Partners, said.
The second quarter earnings season is largely in the rearview mirror, but a few companies are still on deck. Deere and Foot Locker are set to provide quarterly updates on Friday before the market opens.
—CNBC’s Pippa Stevens contributed reporting.

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