Traders work on the floor of the New York Stock Exchange on January 18. (Angela Weiss/AFP/Getty Images)
US stocks had a rough Wednesday. The market sank as investors ignored good news (the continuing moderation of inflation) and focused on bad news (weak retail sales and low industrial production figures) instead.
Worries are growing that the economy may be heading towards a more pronounced slowdown as a result of last year's aggressive rate hikes by the Federal Reserve.
The Nasdaq's seven-day winning streak came to an end, too. Shares of tech bellwether Microsoft (MSFT) fell after the software giant announced it was laying off 10,000 workers.
As stocks settle after the trading day, levels might still change slightly.
3:57 p.m. ET, January 18, 2023
The Fed's Beige Book shows the labor market remains tight
From CNN's Alicia Wallace
The Federal Reserve on Wednesday dropped its first Beige Book for 2023, and the latest report card from the central bank's dozen districts shows that economic activity has been "relatively unchanged" since November and that businesses and consumers expect "little growth in the months ahead."
Below are some notable findings:
New York was the only district to report a significant economic decline, primarily due to a sharp weakening in manufacturing activity during the final weeks of 2022. But tourism is picking up in NYC, with hotel occupancy rates now reaching 80%, versus 60% a year ago.
While consumer spending did increase slightly overall, some districts said turnout was sluggish, with one fast food operator in the Cleveland district saying her sales went up because consumers "dined down" due to inflation.
The labor market remained strong, with only the Kansas City districtreporting a slowing in hiring. Some employers also said they were cutting employee hours — another sign of cooling labor demand. Others said they hesitated to lay off staff.
In terms of prices, retailers were finding it harder to pass along higher costs to increasingly price-sensitive customers. Businesses across the 12 districts said they expected future price growth to moderate this year.
Housing markets continued to weaken, and commercial activity slowed slightly, on average. In the Boston district, home sales were down 20% to 30% year over year.
3:16 p.m. ET, January 18, 2023
Stocks slip near lows of the day after Beige Book
From CNN Business' Paul R. La Monica
A general view of the New York Stock Exchange on Wall Street on January 18. (Angela Weiss/AFP/Getty Images)
The US economy is in a bit of a funk. The Federal Reserve said in its latest Beige Book report that Americans "generally expected little growth in the months ahead."
Investors, of course, were not pleased by that assessment. Stocks fell near their lowest levels of the day Wednesday afternoon following the release of the report.
The big problem for the markets right now: While traders are happy to see news that will allow the Fed to keep raising interest rates by only a quarter of a point at a time, there are growing fears that the Fed's previous (much larger) rate hikes are already starting to grind the economy to a halt.
Instead of a soft landing or mild recession, investors are nervous that a coming downturn could be more severe — like the 2008 Great Recession.
Stocks took a nasty turn for the worse after opening slightly higher. Investors were initially excited by data showing continued slowdown in inflation — but then surprisingly weak readings for retail sales and industrial production stoked fears that the economy may be cooling more quickly than expected.
Just two Dow components were trading higher Wednesday afternoon: Goldman Sachs (GS) and insurance giant Travelers (TRV). Both were losers on Tuesday due to weak earnings and outlooks, but they rebounded a bit Wednesday.
A trader seen working on the floor of the New York Stock Exchange during opening bell today. (Angela Weiss/AFP/Getty Images)
So much for a market rally. Stocks opened higher following the latest data on inflation and retail sales, but the Dow was down more than 275 points, or 0.8%, in late morning trading. The S&P 500 was off 0.5% and the Nasdaq was down 0.3%.
There were no clear catalysts for the market pullback. But disappointing earnings from regional banking giant PNC (PNC) and brokerage giant Charles Schwab (SCHW) weighed on financial stocks.
10:54 a.m. ET, January 18, 2023
Fed Chair Powell tests positive for Covid
From CNN’s Kate Trafecante
Jerome Powell during a Central Bank Symposium at the Grand Hotel in Stockholm, Sweden on January 10. (Claudio Bresciani/TT News Agency/AFP/Getty Images)
Federal Reserve Chair Jerome Powell has Covid, the Federal Reserve said Wednesday.
"Federal Reserve Board Chair Jerome H. Powell tested positive for Covid-19 and is experiencing mild symptoms," the central bank said in statement on Wednesday.
The Fed added that the 69-year-old Powell is up to date with all his vaccines, and that he is isolating at home and working remotely, per guidance from the Centers for Disease Control and Prevention.
The Fed’s next two-day policy meeting kicks off January 31.
10:25 a.m. ET, January 18, 2023
IMF: Global economy showing signs of 'resilience' and inflation is peaking
From CNN's Rob North
The global economy is showing signs of resilience, even as growth slows in 2023, according to the Managing Director of the IMF.
Speaking to Julia Chatterley at the World Economic Forum in Davos, Kristalina Georgieva said, “We said that 2023 would be difficult but what we are saying now is that it will not be as bad as feared.”
On inflation, she explained “we have seen the peak in headline inflation … indicators are that inflation is trending downwards and that is a reason to celebrate”.
But she cautioned that it's too soon to claim victory: “While inflation is trending down it is way, way above the target of 2%”.
10:16 a.m. ET, January 18, 2023
United posts strong earnings and sees even better times ahead
From CNN's Chris Isidore
A Boeing 737-700 United Airlines flight landing at the new Terminal A at Newark Liberty International Airport in Elizabeth, N.J., on Thursday, January 12. (Ted Shaffrey/AP)
United Airlines posted better-than-expected earnings and revenue for the fourth quarter and gave very bullish forecasts for the current quarter and full year results.
The Chicago-based airline had adjusted income of $811 million, or $2.46 a share in the quarter. Analysts surveyed by Refinitiv had forecast earnings per share of $2.10 in the quarter. The profit gave United its first profitable year since the start of the pandemic.
Revenue reached $12.4 billion, topping not only forecasts of $12.2 billion, but a 14% increase from revenue of $10.9 billion in the fourth quarter of 2019, ahead of the pandemic. Its revenue grew even though its capacity, as measured by available seats, adjusted for miles traveled, was still nearly 10% below the fourth quarter of 2019. But the amount passenger paid for each mile flow rose by 25%.
United said it expects to adjusted earnings per share of 50 cents to $1 in the first quarter, typically the weakest period of the year, and full year EPS of $10 to $12, allowing it to quadruple the 2022 EPS of $2.52 and putting the it within reach of the $12.05 per share it earned in 2019. All those projections from United beat analysts' consensus forecasts of 46 cents a share for the first quarter and EPS of $6.92 for the full year.
Despite the strong results and guidance shares of United were little changed in early trading Wednesday.
9:35 a.m. ET, January 18, 2023
Microsoft is laying off 10,000 employees
From CNN's Catherine Thorbecke
People make their way past a Microsoft store on October 26, 2022 in New York City. (Leonardo Munoz/VIEWpress/Getty Images)
Microsoft plans to lay off 10,000 employees as part of broader cost-cutting measures, the company said in a securities filing on Wednesday, making it the latest tech company to rethink staffing amid economic uncertainty.
The company said the cuts come “in response to macroeconomic conditions and changing customer priorities.”
Speaking before the layoff announcement at the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday, Microsoft CEO Satya Nadella said that the company was not immune to a weaker global economy.
