Good Friday. Want this by email? Sign up here.
A glimmer of hope after another day of market declines
Wall Street tumbled again on Thursday. Broad selling left every sector of the S. &P. 500 down, with the index falling 2.1 percent. That followed Wednesday’s 3.3 percent loss, which was the bench mark’s biggest decline in eight months.
As DealBook’s Peter Eavis pointed out, the plunge seems out of sync with the strong economy. But the good news, he writes, “had caused investors to underestimate a number of concerns,” and now they are worried “that Mr. Trump’s bellicose trade policy will disrupt corporate America’s supply chains and push up costs.” (Another factor in the rout: Some of the market’s biggest buyers, American companies buying back their own shares, are on the sidelines.)
The Fed, which President Trump has said repeatedly is to blame, hasn’t blinked. Instead, according to the WSJ, it is confident in its long view that America’s strengthening economy requires pushing rates higher.
There is reason to be cautiously optimistic that the decline won’t continue. In Asia, stocks have rebounded from their lows, and futures markets tracking U.S. stocks are rising. Today may be a little calmer.
Another slide: Cryptocurrencies also dropped yesterday, losing a combined total of $6 billion in value.
Businesses start cutting ties with Saudi Arabia
The deepening controversy over the disappearance of the Saudi dissident Jamal Khashoggi has strained Saudi Arabia’s efforts to strengthen relations with the global business community.
Several businesses and prominent individuals said that they would cut ties with Saudi projects. Richard Branson said he had stopped talks to have Saudi funds invest $1 billion in his space companies, and the lobbying firm Harbour Group said it would stop representing the Saudi Embassy in Washington.
And Dara Khosrowshahi of Uber said he wouldn’t attend a conference in Saudi Arabia known as Davos in the Desert later this month. “Unless a substantially different set of facts emerges, I won’t be attending,” he said in a statement. It’s a notable show of leadership, given that the country’s sovereign wealth fund is a major investor in Uber and sits on its board.
Others calling off appearances at the conference:
• Bob Bakish of Viacom
• Steve Case, the AOL co-founder
• Media organizations, including the NYT, The Economist and the LA Times. Andrew, who also canceled his attendance, tweeted that he was “terribly distressed” by the situation.
Other corporate leaders plan to walk a fine line. Steve Schwarzman of Blackstone and Jamie Dimon of JPMorgan Chase still plan to attend the Saudi conference this month, and some lobbying firms may keep working for the kingdom.
Saudi Arabia’s wealth, which has been spent freely on Wall Street and in Washington and Silicon Valley, is hard to walk away from. Unless definitive proof emerges that top kingdom officials played a role in Mr. Khashoggi’s disappearance, many companies — and President Trump — may be loath to cut ties.
Facebook clamps down on U.S.-made disinformation
The social network has taken down 559 pages and 251 accounts — most of which originated in the U.S. — because they were spreading false or misleading political content ahead of the midterm elections. Among them were the page Right Wing News and left-wing outfits like Reverb Press.
More from Sheera Frenkel of the NYT:
Facebook said this amounted to the most domestic pages and accounts it had ever removed related to influence campaigns. The company said it had discovered the activity as part of its broader effort to root out election interference. Also, the pages had become more aggressive in using tactics like fake accounts and multiple pages to make themselves appear more popular.
Facebook said that the removed content violated its rules about online spam, and that it was likely making money for its publishers via ads. “Today, sensational political content seems to be a more effective way for people to build an audience for their pages and drive traffic to their websites, which earn them money for every visitor to the site,” said Nathaniel Gleicher, Facebook’s head of security.
Big banks report earnings. JPMorgan Chase, Wells Fargo and Citigroup will all announce third-quarter results today. Analysts expect lower taxes and higher interest rates to have lifted their net income. Here’s what to watch for.
China’s trade surplus with the U.S. hit a record high
President Trump probably won’t be amused by China’s latest trade figures. Chinese exports to the U.S. in September rose 14.5 percent from a year earlier, to a record high of $34.13 billion. That flies in the face of Mr. Trump’s tariffs, which are intended to reduce the trade deficit.
A weaker renminbi has made Chinese goods more attractive despite the tariffs. But the surge may have been spurred by a rush of shipments from China before a wave of tariffs went into effect on Sept. 24. Even if Chinese exports fall in October, expect Mr. Trump to be displeased.
Quarterly earnings reports are here to stay, for now
President Trump has suggested that American companies should report earnings twice a year instead of four times. The head of the S.E.C. says that’s not likely, at least not anytime soon.
Jay Clayton, the commission’s chairman, said at an event in Washington yesterday that big companies would have to stick with the current schedule. (Smaller companies may get to test out reduced reporting requirements.) “What does the market expect?” he asked rhetorically — before answering that investors seem satisfied with the status quo.
But he added that he understands the concern: “The president did touch on a nerve, which is: Are people running their companies too much for the short term in response to pressures?”
Geopolitics could make a global recession intractable
The U.S. economy is riding high. But emerging markets are struggling and their troubles could lead to a worldwide recession. That could pose problems, as the global ability to combat a downturn is more limited than ever.
Part of the problem is that interest rates around the world generally remain low, leaving central banks little room to maneuver. The Economist argues that politics may be an even bigger worry:
Unprecedented cross-border cooperation was needed to fend off the crisis in 2008. But the rise of populists will complicate the task of working together. The Fed’s swap lines with other central banks, which let them borrow dollars from America, might be a flash point. And falling currencies may feed trade tensions. This week Steve Mnuchin, the treasury secretary, warned China against “competitive devaluations.” Mr. Trump’s belief in the harm caused by trade deficits is mistaken when growth is strong. But when demand is short, protectionism is a more tempting way to stimulate the economy.
A Brexit deal may be in sight
The FT reported that Prime Minister Theresa May of Britain briefed her cabinet last night on how a deal to leave the E.U. is near. But several elements of the Brexit plan are likely to rankle Mrs. May’s allies in Parliament:
• Britain would remain in a temporary customs union with the E.U. with no agreed end date
• Northern Ireland would remain part of the E.U.’s single market for a transition period, avoiding a hard trade barrier in the middle of the Irish landmass.
Several Conservative Party ministers are said to have concerns about the customs union proposal. And Northern Ireland’s Democratic Unionist Party, a crucial part of Mrs. May’s governing coalition, has long opposed the single market strategy. Expect tense negotiations within the party ahead of meetings with E.U. representatives next week.
Dina Powell of Goldman Sachs is no longer a candidate to replace Nikki Haley as the American ambassador to the U.N.
HSBC hired Greg Guyett, a former JPMorgan Chase banker, as a co-head of investment banking.
Bird has hired Dennis Cinelli, who was most recently Uber’s head of finance of global rides, and Yibo Ling, previously Uber’s director of corporate development, for similar roles at the scooter company.
The speed read
• Tencent Music, LeasePlan and Sonae have all delayed or called off I.P.O.s amid the recent market turmoil. (Bloomberg)
• Sears has been negotiating with lenders on a financial restructuring plan as it prepares to file for bankruptcy protection. (CNBC)
• The C.E.O. of T. Rowe Price sees more consolidation coming for the investment management industry. (Barron’s)
• MedMen, a high-end cannabis dispensary chain, agreed to buy a rival, Pharmacann, for $682 million. (Business Insider)
Politics and policy
• White Americans gained most from President Trump’s tax overhaul. (NYT)
• Mr. Trump is reportedly weighing candidates to replace Jeff Sessions as attorney general. (WSJ)
• Sheldon Adelson is said to be spending millions more to help Republicans keep control of Congress. (Politico)
• Mr. Trump signed into law the biggest overhaul of copyright law in decades. (Verge)
• Kanye West met with President Trump. Topics included North Korea, Mr. Trump’s “hero’s journey” and a hydrogen-powered replacement for Air Force One. (NYT)
• President Trump strengthened controls on exports of nuclear technology to China. (WSJ)
• Treasury Department officials reportedly concluded that China isn’t manipulating its currency. (Bloomberg)
• The I.M.F. says the trade war could cut China’s growth by nearly two percentage points over two years. (CNBC)
• Why Mr. Trump’s saber-rattling at the W.T.O. may improve the organization. (Bloomberg)
• Canada reportedly sees little hope of a quick end to American tariffs on metals. (Reuters)
• Walmart is pushing deeper into entertainment offerings to challenge Amazon. (NYT)
• The Senate Commerce Committee has criticized Google for not disclosing details of its Google Plus data vulnerability earlier. (WSJ)
• Amazon is developing picking robots for its warehouses. (Information)
• How Wall Street is trying to automate investment banking. (Bloomberg)
• WikiLeaks revealed the secret locations of some of Amazon’s data centers. (Axios)
• Uber asked the S.E.C. to let it give equity to drivers. (Axios)
Best of the rest
• Manhattan prosecutors dropped one charge against Harvey Weinstein amid signs that a detective coached a witness to stay silent on potentially exculpatory evidence. (Bloomberg)
• The creator of the failed Fyre Festival was sentenced to six years in prison for wire fraud. (NYT)
• A man whose name appeared on a crowdsourced list of “media men” said to be guilty of sexual harassment or misconduct sued the lists’s creator. (NYT)
• Britain may require companies to report a race pay gap. (NYT)
• The auto parts billionaire Frank Stronach sued his daughter, Belinda, for nearly $400 million, claiming she mismanaged the family’s fortune. (Bloomberg)
• How the tequila boom could crater. (Bloomberg)
• New York offices are getting makeovers to appeal to millennials. (FT)
Thanks for reading! We’ll see you next week.
We’d love your feedback. Please email thoughts and suggestions to [email protected].