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NYSE trader: Here's why stocks are dropping like a stone again today

Matthew Cheslock joins Yahoo Finance's Seana Smith from the floor of the New York Stock Exchange to discuss the latest market moves.

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    (Bloomberg) -- Vodafone Group Plc shares fell as much as 8.3% after Chief Executive Officer Nick Read’s strategy showed higher capital expenditure on network investments will hit free cash flow.Although Read’s message is “spend more to grow more,” the “prospect of the improved growth may take longer for investors to absorb,” said Berenberg analyst Carl Murdock-Smith.Vodafone said it can increase margins in the medium-term and guided for adjusted earnings before interest, tax, depreciation and amortization after leases between 15 billion and 15.4 billion euros ($18.8 billion) in 2022, with adjusted free cash flow of at least 5.2 billion euros.Organic service revenue rose 0.8% in the fourth quarter versus an average analyst estimate of 0.4% compiled by Bloomberg.Key InsightsRead wants to do more with less. He’s sold some of the telecom group’s farther-flung units like New Zealand while cutting costs and consolidating operations in Europe and Africa.The centerpiece of this asset-squeezing strategy has been carving out and listing Vodafone’s masts in the form of Vantage Towers AG, which reported earnings in line with guidance on Monday.The Newbury, England-based telecom group will focus on fixed and mobile connectivity in Europe, and mobile data and payments in Africa, the company said in a statement Tuesday. That will mean upgrading fixed and wireless networks.In Africa, the group had 84.9 million data users and mobile money platform M-Pesa handled 15.2 billion transactions in 2021, an increase of 25%.Vodafone has been the subject of press reports and speculation about potential consolidation deals as rivals around Europe merge: Liberty Global Plc is set to combine its U.K. operations with Telefonica SA’s O2, while Spanish rival Masmovil Ibercom SA is snapping up Euskaltel SA.Market ContextVodafone shares have risen 5.4% in the 12 months to Tuesday versus a 13.1% rise in the Stoxx Europe 600 Telecommunications Index.Of 26 analysts surveyed by Bloomberg, 23 rate Vodafone buy, 1 hold and 2 sell.Get MoreStatementNOTE, May 17: Vantage Towers FY Adj. EBITDA AL EU524M Vs. EU513M Y/yNOTE, Apr. 30: Ethiopia Pledges to Allow Mobile Money for New Telecom Entrants(Updates with analyst reaction, shares, and M-Pesa details)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Credit Traders Have No Room for Error in Dot-Com Bubble Redux

    (Bloomberg) -- A growing chorus of analysts is warning that high-quality company debt may have nowhere to go but down as investment-grade spreads approach levels last seen in the lead-up to the dot-com bubble.“The best days are behind” for corporate credit, Morgan Stanley strategists led by Srikanth Sankaran wrote in a May 16 midyear outlook. “The combination of extended valuations, less favorable technicals and a slower pace of balance sheet repair suggests that credit markets have progressed to a mid-cycle environment.”Spreads on BBB rated bonds, which account for more than half of the high-grade universe, narrowed to an average of 106 basis points over Treasuries on Monday, fueled by investor demand for the lowest-rated yet highest-yielding part of the asset class. Should spreads breach 100 basis points, it would be the first time since the dot-com era of the late 1990s.Morgan Stanley is calling for 17 basis points of widening for U.S. investment-grade bonds through the first half of 2022, and downgraded its credit outlook to neutral.Meanwhile, Bank of America Corp. expects another stretch of rising Treasury yields will “lead the market to price in a much faster rate-hiking cycle,” strategists led by Hans Mikkelsen wrote in a note distributed Monday. That will cause spreads to widen in the coming months as investors are pushed to either sell or sit on the sidelines.Still, some say BBBs, the best performing tier of high-grade credit this year, may continue to enjoy a tailwind despite the tight spreads. Citigroup Inc. notes that President Joe Biden’s bailout of multi-employer pensions may spur tens of billions of dollars in demand for corporate bonds with the lowest investment-grade ratings.Morgan Stanley’s bearish forecast for credit overall also favors BBBs due to their marginally higher yields, with expectations that returns will now be driven “by carry and credit-picking rather than beta and capital appreciation.”And duration is also working in the rating bucket’s favor. With shorter average maturities than higher-rated corporate debt, BBBs are less exposed to losses from rising rates.U.S.Seven companies are looking to sell fresh debt in the U.S. investment-grade bond market Tuesday, including Charter Communications and Microchip Technology. Monday’s session saw the week kick off with almost $20 billion in new sales from 10 issuers.Borrowers are growing increasingly frustrated at a perceived failure by banks to explain their Libor transition plans and offer products tied to replacement rates.For the first time since January 2020, U.S. bankruptcy courts saw no large Chapter 11 bankruptcy filings last week.Eric Cole’s Warlander Asset Management will combine with Ellington Management Group as the investment firms seek to expand their corporate credit capabilities, according to an investor letter seen by Bloomberg.For deal updates, click here for the New Issue MonitorFor more, click here for the Credit Daybook AmericasEuropeA triple-tranche sale from American Tower and the final SURE offering from the EU led a jam-packed day for deals in Europe’s bond market.Credit Suisse Group AG on Monday issued its first euro and sterling notes since the collapse of Greensill Capital and Archegos Capital Management. While the sales left demand for the bank’s debt in no doubt, they also highlighted increases in the bank’s funding costs since March.Lender calls for Carnival, Solera and Vocus term loans were Tuesday, while commitments were due for Azelis.AsiaChina Huarong Asset Management Co. has transferred funds to repay a $300 million bond maturing Thursday, according to a person familiar with the matter.Still, bondholders in the bad-debt manager may face significant losses, with China planning an overhaul that would hit both domestic and foreign creditors, according to a New York Times report.As the Huarong saga increases scrutiny of ‘bad bank’ debt globally, India’s version will keep a tight leash on its own debt financing, according to a top official of the association helping to finalize the details.Global banks are losing share in the $186 billion lending market for Chinese borrowers offshore, falling behind local rivals boosting their presence just as the nation’s corporate sector recovers from the pandemic.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Stocks fall with tech shares; dollar touches lowest since late February

    Wall Street stocks fell on Tuesday, with technology shares turning lower in late New York trading, while the U.S. dollar touched its lowest level since late February. The Nasdaq also reversed course to end the day lower, while the Dow and S&P 500 added to declines late in the session. The S&P 500 technology index was the biggest drag on the benchmark S&P 500.

  • U.K.’s Largest Peacetime Deficit Creates Rate-Hike Conundrum

    (Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.As Bank of England officials consider how to unwind their emergency pandemic-era stimulus, markets have already made up their minds about what the first step will be. The conclusion could spell trouble for Chancellor of the Exchequer Rishi Sunak.Investors are penciling in the BOE’s first 15-basis-point interest-rate hike for September 2022, reversing its last cut, just nine months after the central bank is scheduled to wrap up its latest round of buying, and too soon to have allowed for any significant balance-sheet reduction.That would have major consequences for Sunak, who has run up the U.K.’s biggest-ever peacetime deficit to fund crisis aid, and relied on BOE stimulus to keep borrowing costs under control.The BOE slashed rates to 0.1% and more than doubled its asset-purchase target to 895 billion pounds ($1.26 trillion) during the crisis. Now, officials led by Governor Andrew Bailey are discussing whether their previous guidance -- that they’d hold onto to those bonds until interest rates hit 1.5% -- is still suitable.“The world has changed hugely” since the BOE last reviewed its stance on tightening, Bailey said following the central bank’s May decision. “It’s appropriate to review that again.”While the review is yet to be completed, Bailey himself last year suggested he was open to a major shift, and was prepared to reduce the institution’s balance sheet before raising interest rates.Aaron Rock, an investment director at Aberdeen Standard Investments, is holding to the view that rate hikes will precede any reduction of the balance sheet. He expects the BOE to halve the policy rate at which balance sheet reduction will be considered to around 0.75%, a level currently anticipated to be reached only in the second half of 2024.Flexible OptionHowever, Rock flagged a risk the review may decide on a more flexible option, allowing the balance sheet to be reduced “starting next year at the same time they are hiking policy rates from 0.1%.”The BOE’s holdings of bonds are financed at its key interest rate, and the massive expansion of quantitative easing since the pandemic began has left the nation twice as sensitive to a one-point move, according to the Office for Budget Responsibility.Even a small increase would immediately filter through to debt-servicing costs, with the buying having shortened the median maturity of public debt to less than two years, from more than seven before the financial crisis, according to the OBR.“I still believe that hikes are a long way off,” said Mike Riddell, portfolio manager at Allianz Global Investors. He doesn’t expect the central bank to ever reduce its balance sheet, despite this being its intention a decade ago.“Now that we have even more debt, which makes the economy even more sensitive to higher rates, then I’d be surprised if the U.K. or global economic backdrop is such that quantitative tightening would be deemed necessary,” Riddell said.That’s not the view of Goldman Sachs Group Inc., which expects balance-sheet reduction to push the first rate hike out as far as 2025.“We expect the Monetary Policy Committee to reverse the previous exit sequencing and adopt a ‘last in, first out’ approach for the process of monetary tightening,” wrote Goldman Sachs economists including Jari Stehn.The Treasury was happy to reap the rewards from QE, so “when the bank begins to tighten policy, it should be prepared to live with the consequences,” Nick Macpherson, former Permanent Secretary at the Treasury, said in a video seminar on Tuesday.(Adds former official’s comment in fina paragraph)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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