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Top 5 Things to Know in the Market on Friday, May 22nd

EconomyMay 22, 2020 06:41AM ET
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© Reuters.

By Geoffrey Smith 

xhaszzx.com -- China drops its growth target for the first time in 30 years and signals a looming crackdown on dissent in Hong Kong. Markets are falling in response, although they're still likely to end the week up, on confidence that the worst of the hit from the pandemic is over. Nvidia (NASDAQ:NVDA) stock is in focus after reporting strong earnings after the bell on Thursday, while Alibaba (NYSE:BABA) is due to report before the open. But the drumbeat of job losses around the world continues, with IBM (NYSE:IBM), Nissan (OTC:NSANY) and - most probably - Hewlett Packard Enterprise (NYSE:HPE) flagging major job cuts. 

1. China signals HK crackdown

China signalled an imminent crackdown on dissent in Hong Kong with a draft proposal for a new security law for Special Autonomous Region.

The move threatens to revive pro-democracy protests in the former U.K. colony, which had ebbed at the worst of the coronavirus pandemic but had started to pick up again in recent weeks.

It also threatens a further deterioration of relations with the U.S.: President Donald Trump promised retaliation if Hong Kong’s existing privileges were ended, while the U.S. Senate proposed a bill, with bipartisan backing, threatening sanctions on officials who implement any crackdown.

The Hang Seng stock index fell 5.6%, while mainland Chinese indices fell over 2% and the yuan weakened.

2. Beijing drops its growth target for 2020, hitting oil and metals prices

The second major development out of the annual National People’s Congress in Beijing was that the Communist Party dropped its official target for Gross Domestic Product growth this year, the first time it has done so in 30 years.

The shift in communication was taken as a warning that the economy will take longer than thought to recover from the coronavirus pandemic (around 100 million people are still locked down in China’s north-eastern regions after signs of a fresh wave of infections).

Industrial commodity prices – ripe for some profit-taking after a strong week - took the news particularly badly. U.S. crude futures fell 6.0% by 6:30 AM ET (1030) to $31.89 a barrel, while copper futures fell 2.2% to $2.38 a pound and nickel futures fell 1.7%.

3. Stocks set to open lower on Chinese news

U.S. stocks are set to open lower on the back of the news out of China, amid concern that Beijing has resigned itself to worsening relations with the U.S. and that last year’s trade war will return in a new and more potent form.

By 6:30 AM ET, the Dow Jones 30 Futures contract was down 78 points or 0.3%, while the S&P 500 futures contract was down 0.3% and the Nasdaq 100 contract was down 0.4%.  All three indices are still on course to end the week with gains of between 2% and 3%, and to achieve their highest weekly close since early March.

4. Nvidia's profit surges on demand for gaming, data-center chips; Alibaba's earnings eyed

Among the stocks in focus on Friday will be chipmaker Nvidia, which handsomely beat expectations in its quarterly report after the closing bell on Thursday.

The company’s earnings per share more than doubled on the year to $1.88, as pandemic-related lockdowns led to strong sales of gaming and data-center chips.

The company has profited from two of the major trends triggered by the pandemic, as lockdowns have driven redirected entertainment spending and accelerated the growth of demand for Cloud-based services from businesses, especially online retailers.

Alibaba’s earnings before the opening Friday will also be parsed for similar trends.

5. More job cuts coming down the line

The pandemic’s effects on other parts of the economy continues to be felt, however, with announcements of job cuts seemingly accelerating across the world.

The Japanese news service Kyodo reported Friday that Nissan plans 20,000 job cuts to bring supply into line with long-term expected demand.

IBM meanwhile announced it, too, would make permanent job cuts – the first under new CEO Arvind Krishna. While it didn’t say how many of its 350,000-odd workforce would go, The Wall Street Journal said it would be “several thousand”.

Hewlett Packard Enterprise also announced a $1 billion program of cost cuts on Thursday. It isn’t clear whether the company will be permanently cutting jobs as a result.

U.K. aero engine maker Rolls Royce (LON:RR) had announced 9,000 planned cuts on Wednesday.

Top 5 Things to Know in the Market on Friday, May 22nd
 

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Comments (12)
Pingsheng Li
Pingsheng Li May 22, 2020 12:47PM ET
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China is a big country, they should not concerned any country.only thing important is their own security and reliability.if they think about other countries too much, that will be too chicken, nobody going respect to them anymore. *******hand always win respect.
magatane maphake
magatane maphake May 22, 2020 10:27AM ET
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I am struggling to find news that really make stocks and indices fall or change direction on the market. Anyone with inputs on this?
Mohammed Shihab AB
Mohammed Shihab AB May 22, 2020 10:27AM ET
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Theres no reason for market to go up, but its still going up on hope
Bill Riley
Bill Riley May 22, 2020 9:21AM ET
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James Comey is going to prison
Pwr Strk
Pwr Strk May 22, 2020 9:21AM ET
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lol
gerry schacher
gerry schacher May 22, 2020 8:44AM ET
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Can't wait to read the Top 5 things to know in the Market every morning. Great work Geoffry.
magatane maphake
magatane maphake May 22, 2020 8:44AM ET
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Does this "top 5 things" really help with stocks and indices?
Bret Lafrance
Bret Lafrance May 22, 2020 8:42AM ET
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Why does a company, NVDA, have a PE of 80 and an enormouse market capitalization, while delivering zero EPS growth over the past two years. They generate a lot of cash, but that doesnt seem to be doing anything for the shareholders?
Ronald Warren
Ronald Warren May 22, 2020 8:42AM ET
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Should be trading for 20 bucks. Look at AMD. PE ranging upwards of 200. 50 cent paper.
Ronald Warren
Ronald Warren May 22, 2020 8:42AM ET
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Just checked. AMD's PE down to 128. Tech boom.
Emiilions Lios
Emiilions Lios May 22, 2020 8:42AM ET
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what is pe down 128
Ronald Warren
Ronald Warren May 22, 2020 8:37AM ET
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Temporary job losses becoming permanent. The socialist party is dancing a jig. How is it that they were able to shut down our economy and enlist millions dependent on government subsidies.
Bret Lafrance
Bret Lafrance May 22, 2020 8:37AM ET
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What the? 40M out of work, a global pandemic ******hundreds of thousands of people and thats your take on it.
Bret Lafrance
Bret Lafrance May 22, 2020 8:37AM ET
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Not sure why the ***** was placed in my last post, “hundreds of thousands of people dying.”
Ronald Warren
Ronald Warren May 22, 2020 8:37AM ET
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Bret. My take on it is that we could have enacted the same precautions we are going to use to reopen the economy instead of shutting it down. This piece was referring to permanent job losses that would not have occurred if we did not shut down. Citizens need employment or they become serfs of the state.
Chris Fran
Chris Fran May 22, 2020 8:37AM ET
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Ronald 90k dead in two months. without a vaccine, how do you propose to fight it Einstein?
Tre Hsi
Tre Hsi May 22, 2020 8:37AM ET
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Ronald Warren  I think the experience of Georgia clearly indicated that just because they lifted the restrictions, if the consumers are still concerned about the risks they won't go into the shops, so the narrative that the shutdown is the sole reason for the recession is flawed.....no shutdown, the death figures will be higher and consumers will be even more concerned with the risk, for a longer period, so you will still get a recession
Michael King
Michael King May 22, 2020 7:32AM ET
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Can Trump stop using China to manipulate the market anymore? This is disgusting. Because of his ignorance and stupidity in handling the COVID pandemic and economy, US is now in the worst unemployment rate and nation debt in history. Just keep your word and cut all the relation with China immediately. Plus, first cancel all the Trump brands registered in China and return all your business loans from Chinese banks right away to show you mean what you say.
Tre Hsi
Tre Hsi May 22, 2020 7:32AM ET
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I remember when president orange said he will eliminate the national debt (yes the national debt, not the budget deficit) in 8 years, this is the person now trying to tell us he can Make American Stock Markets Great Again.....
Jason Zou
Jason Zou May 22, 2020 7:29AM ET
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It is Special Administrative District;Special Autonomous Region is not a correct translation in English of what in Chinese, rather a misleading one to suit foreign meddlers taste or agenda.
Banana CHIU
Banana CHIU May 22, 2020 7:29AM ET
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I guess you have no understanding of HK. The official name of HK is HKSAR not HKSAD. Guess you are Chinese not HKer
Banana CHIU
Banana CHIU May 22, 2020 7:29AM ET
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I guess you have no understanding of HK. The official name of HK is HKSAR not HKSAD. Guess you are Chinese not HKer
Jubi Audio
Jubi Audio May 22, 2020 7:29AM ET
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Regardless whatever the political title of HK is translated into any language, i truly wish all Chinese in culture will support a strong and independent judicial branch, which can enforce the law to uphold the justice for all and lay the foundation for democracy of China.
Pwr Strk
Pwr Strk May 22, 2020 7:21AM ET
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chinese are liars, they shouldn't even be considered anymore... the world owes its current misery to the chinese virus
Show previous replies (2)
Wai Chong
Wai Chong May 22, 2020 7:21AM ET
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You need to read history. Everytime a US politician couldn't win, they blame it in the others. Chinese exclusion act was the result of the failure of a politician who couldn't provide enough jobs in California. So he blamed it on the Chinese stealing jobs. Sounds familiar huh? Wake up and learn history. Truth hurts so most white Americans don't want to learn the real history. White Americans sugarcoat it....
Jason Zou
Jason Zou May 22, 2020 7:21AM ET
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Skinny Moose Sure, really hurts those liars and cowards like US
Jubi Audio
Jubi Audio May 22, 2020 7:21AM ET
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If we have any honesty then we should agree that one of the buggest liars of the world is US Presdient Donlad Trump. If we have any intelligence then we should know there is no posibility that all people of a group could be liars. Chinese communist party (CCP) has laid frequently for sure. CCP has misled the world in the last few pandemics is also true. The other nations political parties and governments also misled in many matters and pandemics as well. We could ask the question: why Taiwan, which is less than 90 miles from China and has a very close tie with China, had handled the Covid-19 better than almost all the contries of the world? The first medical jurnal report on Lancet warned about a human-to-human transmmitable novel corona virus submiited in December 2019 and published in early January 2020. The article was arthored by Chinese researchers. The first Covid-19 outbreake in China was reported in Chinese media in mid-January 2020. Taiwan government reacted properly.
Tre Hsi
Tre Hsi May 22, 2020 7:21AM ET
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I am not sure if Trump is the right person calling out other people's lies, I mean, at this point does he even know when he is lying and when he is not?
Mark Flodin
Mark Flodin May 22, 2020 7:21AM ET
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Who is Donlad Trump? perhaps you'd prefer a senile old hack like Biden running our country. BTW, what flavor of koolade are you drinking today?
Israel Onifade
Israel Onifade May 22, 2020 7:13AM ET
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not now
Mark Bench
Mark Bench May 22, 2020 6:51AM ET
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Kind of a big deal that China doesn't even produce fake GDP data.  Apparently they know they are in such a terrible shape that the normal lying won't work.
William Chan
William Chan May 22, 2020 6:51AM ET
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Seems like the only time the market acts appropriately to economic data is when China puts it out.
Brian Helmuth
Brian Helmuth May 22, 2020 6:47AM ET
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Metals are up you liars.
omar alkhanji
omar alkhanji May 22, 2020 6:47AM ET
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Went down in the past two days, i think they speak in day to day terms
Mike Purdy
Mike Purdy May 22, 2020 6:47AM ET
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Building metals mainly are down, copper aluminum
 
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