U.S. Markets close in 5 hrs 4 mins

Mnuchin, Fed Officials Downplay Market Rout as Sell-Off Widens

Andrew Mayeda and Saleha Mohsin
Mnuchin, Fed Officials Downplay Market Rout as Sell-Off Widens

(Bloomberg) -- Global finance chiefs played down the economic risks posed by the biggest U.S. stock sell-off since February, with many describing the decline as a long-awaited correction.

“The fundamentals of the U.S. economy continue to be extremely strong, I think that’s why the stock market has performed as well as it has,” U.S. Treasury Secretary Steven Mnuchin told Bloomberg News at the IMF’s annual meeting in Bali, Indonesia. “The fact that there’s somewhat of a correction given how much the market has gone up is not particularly surprising.”

Mnuchin’s calm was echoed by Federal Reserve officials and other international policy makers as the fall in U.S. equities extended to Asia on Thursday.

Even so, the market tumble may capture the tone of the Bali talks, where policy makers are increasingly focused on the risks to global growth amid escalating trade tensions and the Fed’s embrace of higher interest rates.

The fund this week cut its global forecast for the first time in two years and said growth may have plateaued, citing escalating trade tensions and growing stress in emerging markets, which have been struggling with higher borrowing costs and capital outflows as U.S. rates rise.

Unprecedented Situation

IMF Managing Director Christine Lagarde also cautioned against reading too much into the sell-off. “There are ups and downs, and I think it’s fair to observe that the U.S. equity markets and stock markets in general have been extremely high,” she said on Thursday.

“We are facing a bit of an unprecedented situation,” said Lagarde, pointing to growing protectionism and tightening monetary policy in the U.S. “It’s the combination of the two that’s probably showing in some of the tensions” in markets.

The IMF isn’t seeing evidence of “contagion” from emerging markets whose currencies have fallen sharply to other countries, she added.

The stock sell-off rolled through Asia on Thursday, with benchmarks from Tokyo to Hong Kong seeing declines above 3 percent. The dollar weakened and some emerging-market currencies came under pressure.

Mnuchin said the correction doesn’t reflect a wider systemic problem. “Markets are not efficient and markets move in both directions and at times they overshoot in both directions,” he said.

Federal Reserve officials also sounded relaxed with Atlanta Fed President Raphael Bostic and Charles Evans, the Chicago Fed president, on Wednesday down playing the economic effects of the market decline.

“I won’t let a stock market move on its own reshape my view of the economy,” Bostic said. Evans said he wasn’t aware of “anything happening in the last couple of weeks that alter my basic take that financial stability conditions are reasonably moderate, and that we’re in reasonable shape at the moment.”

As markets tumble, President Donald Trump laid the blame at the feet of the Fed, which raised rates again last month. Trump on Wednesday called the tightening a mistake and accused the Fed of “going loco.”

But it’s “inevitable” to expect central banks to be tightening monetary policy at a time when their economies are doing well, said Lagarde. “It’s clearly a necessary development for markets that are now showing much improved growth, inflation that is picking up and reaching its threshold, and unemployment that is extremely low.”

Concerns about higher rates have roiled the U.S. Treasury market, where yields have risen to multi-year highs. Ten-year yields reached 3.26 percent Tuesday, a level last seen since 2011.

Money markets are cutting back predictions for how much the Fed will raise interest rates over the next year, fully pricing in only two rate increases by the end of next year and around 80 percent of a third, after having priced in more than three hikes on Tuesday.

More Volatility

Investors should expect more episodes of volatility such as the recent surge in yield on the 10-year Treasury, Tobias Adrian, head of the IMF’s monetary and capital-markets department, said in an interview in Bali.

“That’s something we could see again, and such a rise in rates could accelerate,” he said. The Fed’s effort to shrink its balance sheet is creating added uncertainty, since it’s unclear how the central bank’s reduction in its bond portfolio will affect markets, he said. “It’s never been done.”

The challenge for U.S. policymakers will be to “engineer a soft landing,” said Adrian. “Inflation will come up eventually, so monetary policy will tighten and hopefully it can be engineered that there’s a little bit of slowdown,” he said. “The problem is that in the postwar period in the U.S., that has never been achieved.”

The world remains in good economic health though downside risks have emerged mostly due to trade tensions, Jose Vinals, chairman at Standard Chartered Bank, told the Bloomberg Modern Markets summit on Thursday in Bali. The sell-off has been over-hyped, he said.

--With assistance from Enda Curran and Matthew Boesler.

To contact the reporters on this story: Andrew Mayeda in Washington at amayeda@bloomberg.net;Saleha Mohsin in Washington at smohsin2@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Jeffrey Black, Sarah McGregor

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

©2018 Bloomberg L.P.

  • Walmart is aggressively shifting away from its most legendary shopping format
    Finance
    Yahoo Finance

    Walmart is aggressively shifting away from its most legendary shopping format

    Walmart (WMT) continues to kill off the American shopping creation it’s most known for, the massive supercenter that sells everything under one roof. With the U.S. market already having more than 3,500 Walmart supercenters and a focus by CEO Doug McMillon to increase spending on eCommerce and India, Walmart said Tuesday it will open a mere 10 supercenters in 2019. The company has reduced emphasis on the store format pioneered by founder Sam Walton – which could average a gargantuan 178,000 square feet – in recent years.

  • A Look at AT&T’s Dividends
    Business
    Market Realist

    A Look at AT&T’s Dividends

    What Investors Should Know about AT&T’s Growth Prospects (Continued from Prior Part) Shareholder returns Increasing capital returns to shareholders is one of AT&T’s (T) main priorities. In the second quarter, the company returned $3.1 billion to shareholders

  • Johnson & Johnson edges past profit estimates, lifts outlook
    Business
    Reuters

    Johnson & Johnson edges past profit estimates, lifts outlook

    Shares were unchanged in premarket trading, with the company forecasting adjusted 2018 earnings per share in the range of $8.13 and $8.18, marginally up from a previous range of $8.07 to $8.17. "This is exactly how we want to start the third earnings season," BMO Capital Markets analyst Joanne Wuensch wrote in a note, referring to the overall sales number. As Remicade faces increased competition and sales of medical devices and some consumer products weaken, J&J has been relying on its new cancer drugs as well as deals like the $30 billion purchase of rare disease specialist Actelion last year.

  • Jamal Khashoggi was accidentally killed during interrogation: report
    World
    Fox Business Videos

    Jamal Khashoggi was accidentally killed during interrogation: report

    Fox Business foreign policy analyst Walid Phares on the report that Saudi journalist Jamal Khashoggi was accidentally killed.

  • Where Will NVIDIA Be in 5 Years?
    Business
    Motley Fool

    Where Will NVIDIA Be in 5 Years?

    At one time, NVIDIA (NASDAQ: NVDA) floated under the radar in the technology sector. Its graphics processing units (GPUs) were then niche tech products that appealed mainly to graphic artists and hardcore PC gamers, but that all changed over the last

  • Finance
    CNBC

    Morgan Stanley: The stock sell-off is going to get worse

    The stock market is in the middle of a rolling bear market, says Morgan Stanley's Mike Wilson. "It's being caused by a drain in liquidity and peaking growth," Wilson says. The stock market sell-off is only going to get worse, predicts Morgan Stanley's chief U.S. equity strategist, Mike Wilson.

  • Marijuana stocks to watch: Canopy Growth is the cannabis business’s $4 billion gorilla
    Business
    MarketWatch

    Marijuana stocks to watch: Canopy Growth is the cannabis business’s $4 billion gorilla

    The following article is part of a package of stories that MarketWatch is publishing to mark the start of full legalization of cannabis for adult use in Canada on Wednesday. Smith Falls, Ontario–based Canopy Growth Corp. made headlines and drove cannabis stocks to new heights over the summer when it announced that Corona brewer Constellation Brands Inc. was going to invest an additional $4 billion in the company. Billed by both companies as a strategic partnership, the additional $4 billion investment adds to the 9.9% stake that Constellation bought in October of last year and sets the company up to either be bought outright by Constellation — via warrants that could increase its stake to more than 50% — or continue to work with the beverage company to create a range of consumer-focused cannabis products that may one day appear in markets in dozens of countries.

  • Here's the Average Social Security Benefit for 2019
    Business
    Motley Fool

    Here's the Average Social Security Benefit for 2019

    Millions of seniors collect Social Security, and without it, they'd be underwater on their bills. At present, the average retiree gets $1,422 a month in Social Security benefits. There's a world of misinformation surrounding Social Security, and perhaps one of the most detrimental myths out there is the notion that the program is enough to sustain seniors by itself.

  • Brits Are All Making the Same Joke About the New Royal Baby
    News
    Time

    Brits Are All Making the Same Joke About the New Royal Baby

    Meghan Markle, the Duchess of Sussex, is expecting her first child with Prince Harry. The news, announced Monday morning by Kensington Palace, has already been greeted by hundreds of messages of congratulations for the royal couple on social media. The U.K. is set to leave the European Union on March 29, exactly two years after Prime Minister Theresa May started the formal process for doing so by invoking Article 50 of the Lisbon Treaty.

  • JCPenney Stock: Do Analysts Foresee Any Upside?
    Business
    Market Realist

    JCPenney Stock: Do Analysts Foresee Any Upside?

    Can New CEO Bring JCPenney Back on Track? (Continued from Prior Part) Consensus “hold” rating Most analysts currently have a “hold” recommendation for JCPenney (JCP) stock. The mid-tier department store chain was rated a “hold” by 75%, or 12 out of 16

  • Many U.S. mall owners say good riddance to Sears
    Finance
    Reuters

    Many U.S. mall owners say good riddance to Sears

    The real estate investment trusts that own the malls and shopping centers where many Sears stores are anchor tenants have waited years for the retailer's demise to renovate the sites and boost rent, although redevelopment costs may strain some plans. Most large U.S. malls are controlled by REITs. In recent years, the REITs have cut their exposure to Sears Holdings Corp, which filed for Chapter 11 bankruptcy on Monday.

  • Remembering Microsoft co-founder Paul Allen, dead at 65
    Business
    Yahoo Finance

    Remembering Microsoft co-founder Paul Allen, dead at 65

    Yahoo Finance’s Alexis Christoforous, Editor-in-chief Andy Serwer, Sibile Marcellus, Jared Blikre, Julia La Roche, Scott Gamm, Brian Sozzi and Heidi Chung discuss today’s top stories.  Today’s topics include: Roger McNamee reflects on the death of Paul

  • World
    CNBC

    Saudi Arabia could hike oil prices over the Khashoggi case. Here's why it would backfire

    Fears are spreading that Saudi Arabia, amid the growing global outcry caused by the disappearance of Saudi journalist Jamal Khashoggi, may hit back at potential economic sanctions by weaponizing its oil dominance. A look at history and geopolitics suggests that while a Saudi-driven oil price spike would bring pain for much of the world, it would ultimately backfire on itself. Turkish officials allege that Khashoggi, a U.S. resident and Washington Post contributor, was murdered on orders of the Saudi government.

  • 3 Top Large-Cap Stocks to Buy in October
    Business
    Motley Fool

    3 Top Large-Cap Stocks to Buy in October

    If you're looking for high-quality large-cap stocks to add to your portfolio this month, three of our Motley Fool contributors have some ideas. Here's why you should consider Berkshire Hathaway (NYSE: BRK.B), Cisco Systems (NASDAQ: CSCO), and AT&T (NYSE: T). Tyler Crowe (Berkshire Hathaway): Perhaps one of the most ridiculous investment takes out there right now is that Berkshire Hathaway's immense cash pile isn't a good thing.

  • Steelworkers reach tentative agreement with U.S. Steel
    Business
    American City Business Journals

    Steelworkers reach tentative agreement with U.S. Steel

    Members of the United Steelworkers union reached a tentative agreement Monday with United States Steel Corp. on a new master agreement that will cover 16,000 workers at facilities across the country, according to a release. US Steel owns and operates Granite City Works in Granite City, Illinois. Tom Ryan, chairman of the grievance committee at United Steelworkers Local 1899 in Granite City, told the Business Journal last week that about 1,300 members are back to work at the plant, and 20 to 25 more are being hired each week.  The union's agreement with U.S. Steel expired on Sept. 1, but members agreed to continue working as negotiations continued.

  • These are the bad things about early retirement that no one talks about
    News
    MarketWatch

    These are the bad things about early retirement that no one talks about

    For all the glamour of living an early retirement lifestyle, there are plenty of negatives I’ve come to discover since I permanently left my job in 2012. As a result, you’re repeatedly forced to will yourself into action.

  • Goldman Sachs and Raymond James cut Netflix price target ahead of earnings
    Business
    Yahoo Finance Video

    Goldman Sachs and Raymond James cut Netflix price target ahead of earnings

    Netflix getting its price target slashed by both Goldman Sachs and Raymond James ahead of its highly expected earnings report tomorrow. Both firms are concerned that rising interest rates could pinch the company’s valuation.

  • Why New Age Beverage Corp. Stock Popped Today
    Business
    Motley Fool

    Why New Age Beverage Corp. Stock Popped Today

    Shares of New Age Beverage Corp. (NASDAQ: NBEV) were climbing again today, riding a surge on marijuana stocks as growers like Tilray, Cronos Group, and Canopy Growth all jumped by double digits. Along with the bullish sentiment in the industry, a number of other factors seemed to be driving New Age shares higher, including the recent hiring of a new CFO, the upcoming legalization of recreational marijuana in Canada on Wednesday, and the market's reaction to its launch last week of a new line of beverages infused with cannabidiol (CBD). On Friday, New Age named Gregory Gould as its new CFO, a notable move as Gould brings experience from the pharmaceutical industry, which should help the beverage company as it moves into CBD products.

  • Ford releases new Territory mid-size SUV in China to boost sales
    Business
    CNBC

    Ford releases new Territory mid-size SUV in China to boost sales

    Ford (F) released an all-new mid-sized sport utility vehicle in China on Monday, as the automaker contends with an aging product line and flagging sales in the world's biggest car market. The Ford Territory is aimed at mid-sized SUV customers in small but fast growing cities across China, which Ford said is the country's fastest growing market. The vehicle was developed with Ford's local partner, Jiangling Motors.

  • Apple Earnings: The Most Important Metric to Watch
    Business
    Motley Fool

    Apple Earnings: The Most Important Metric to Watch

    Apple (NASDAQ: AAPL) earnings are coming up -- and lots of investors will be watching. Scheduled for Nov. 1, the earnings release will give investors a better idea of how sustainable the company's reinvigorated growth rates are. Both Apple's revenue and earnings-per-share growth rates have accelerated recently.

  • Paul Allen's passions: Rock n' roll, sports and philanthropy
    Tech
    Associated Press

    Paul Allen's passions: Rock n' roll, sports and philanthropy

    Personal computers, conservation, pro football, rock n' roll and rocket ships: Paul G. Allen couldn't have asked for a better way to spend, invest and donate the billions he reaped from co-founding Microsoft with childhood friend Bill Gates. Allen used the fortune he made from Microsoft — whose Windows operating system is found on most of the world's desktop computers — to invest in other ambitions, from tackling climate change and advancing brain research to finding innovative solutions to solve some of the world's biggest challenges. Allen died Monday in Seattle from complications of non-Hodgkin's lymphoma, according to his company Vulcan Inc. He was 65.

  • KMI, EPD, ETE, and OKE: Key Midstream Rating Updates
    Business
    Market Realist

    KMI, EPD, ETE, and OKE: Key Midstream Rating Updates

    MLPs Fell Last Week, Outperformed the Broader Markets (Continued from Prior Part) Credit Suisse updated its ratings Credit Suisse updated its ratings on several MLP and midstream stocks last week. Credit Suisse started coverage on Plains All American

  • Can Philip Morris’s Q3 2018 Earnings Boost Its Stock Price?
    Business
    Market Realist

    Can Philip Morris’s Q3 2018 Earnings Boost Its Stock Price?

    Can Philip Morris Outperform Analysts’ Expectations in Q3 2018? Philip Morris International (PM) is scheduled to announce its third-quarter earnings before the market opens on October 18. On October 12, the company was trading at $82.31, which represents a rise of 0.2% since the announcement of its second-quarter earnings on July 19. In the second quarter, which ended on June 30, Philip Morris posted adjusted EPS of $1.41 on revenues of $7.73 billion.

  • Better Buy: Western Digital Corporation vs. Intel Corporation
    Business
    Motley Fool

    Better Buy: Western Digital Corporation vs. Intel Corporation

    Western Digital (NASDAQ: WDC) and Intel (NASDAQ: INTC) are both mature tech companies that lead their respective industries. WD is the world's top maker of HDDs (hard disk drives), and Intel is the top manufacturer of CPUs for PCs and data centers. WD's stock tumbled 40% over the past six months, while Intel's stock slumped 15%.

  • Sears bankruptcy could make these 5 big companies multi-million-dollar losers
    Finance
    Yahoo Finance

    Sears bankruptcy could make these 5 big companies multi-million-dollar losers

    Being an unsecured creditor of Sears (SHLD) right now is not a good place to be. The 125-year old former retail icon filed for chapter 11 bankruptcy protection early on Monday, crippled from years of losses and mounting debt. Sears plans to close about