Market check: Stocks fall, China stocks sell-off as central banks tighten
Yahoo Finance’s Jared Blikre breaks down how markets opened on Friday.
Video Transcript
BRIAN SOZZI: Yahoo Finance's Jared Blikre is standing by at the New York Stock Exchange for us. Jared, I would say an interesting reaction to those Powell comments. It continues to play out in the markets.
JARED BLIKRE: Excuse us while we get situated, but I'm looking at the S&P 500. I've said this too many times because we are back down at what looks to be critical support right now. We got liftoff. We broke through a trading range. And then we got a huge reversal on some of those comments yesterday, saying the employment-- this is Powell. The employment market, the job market is too hot. All right, just think about that. That's an incredible thing to say. So it's not just 50 basis points for the next three or four meetings. We're also talking about quantitative tightening. And all of that has to do with volatility and what that's going to do to the market.
I've been saying for some time now, and let's take a look at the VIX, a little bit elevated here. But another thing that we talk about is also the VVIX. That is the volatility of the VIX. We also talked about the MOVE index. That is what happens in the bond market. So the VVIX, if you take a look at what's happened over the last 10 years, has been elevated since the Fed started-- excuse me-- expanding its balance sheet again. It's almost like a new normal that we have in terms of volatility here.
What happens when the Fed puts assets on its balance sheet? It doesn't hedge them. And so that sucks volatility out of the market. Those were assets that otherwise would have been hedged. So you put it all together, my biggest fear isn't the 50 basis points going forward or even 75. It is that quantitative tightening.
And one final note here on the Japanese yen, that has been one of my go-to markets to track, the Japanese yen versus the Chinese yuan. All right, the Chinese yuan has been-- excuse me-- weakening, but also strengthening on a periodic basis. So the Chinese yuan has been strengthening for years. And now it looks like it may be set for an easing cycle. I've been warning about the Bank of China potentially doing that. So, everything coming together. We have central banks draining liquidity from the system. And I'm afraid that the people in charge here just don't understand the implications of that.
JULIE HYMAN: Well, let's talk about what's happening elsewhere as well in terms of how all these growth concerns are feeding through. In China, in particular, we have been seeing quite a sell-off this week.
JARED BLIKRE: Yes, we have. The news is just incrementally bad on all fronts. I mean, we had Didi coming out earlier in the week, saying that they didn't know if they were going to resist in any particular market after they delist in the United States. That's a huge statement of non-confidence, I guess I would say, in the capital markets. Here's a chart of Didi Global down 63% year to date.
We've had the Chinese authorities coming out at various times and just kind of knocked the market down. They have propped it up, to an extent. We've seen them come by with liquidity injections, but it hasn't been enough to nearly stem the tide of money out of these sectors. You take a look at what's happened year to date here. I'm going to put an equal weighted basis so we can see some of the biggest underperformers.
We're seeing a lot of these stocks down 50%, 60% even, and that's only year to date. You take a look at what's happened on a one-year basis, some of these stocks down over 90%. So this has just been an absolute disaster for a lot of these stocks. And it's going to stick in investors' psyches for a long period of time. And maybe it should. Maybe this isn't the emerging market to be in.
BRIAN SOZZI: Jared, what's going on down there at the floor? You're getting run over.
JARED BLIKRE: I know. Well, we've got a big tour that has landed right around station 8 here, so I guess, what? We got to share the floor. This is probably how it looked back in the day, I got to say, except the floor is a lot more clean now. There would have been a lot more ticker tapes everywhere. But nevertheless, you know, it's nice to have company down here. Some days, there's not so many people.
BRIAN SOZZI: Well, as my mom has always said, sharing is caring. Jared Blikre, thanks so much. Stay safe down there.
