Investing.com - Top 5 things that rocked U.S. markets this week:
1. Turkish Currency Weakness Hits Global Bank Stocks
As we’ve seen with Greece and other countries, a national economic crisis can quickly turn into a global economic problem. And now social media can add to those worries in an instant.
The Turkish lira hit an all-time low against the dollar Friday. The currency was already struggling when U.S. President Donald Trump tweeted he was doubling down on tariffs on the country.
USD/TRY hit an all-time high of 6.6170 during Friday’s session.
“I have just authorized a doubling of tariffs on steel and aluminum with respect to Turkey as their currency, the Turkish lira, slides rapidly downward against our very strong dollar!” Trump proclaimed via his Twitter account, noting that the tariff on aluminum would now be 20%, while the levy on steel would rise to 50%.
The currency’s decline raised fears about how much exposure banks have to Turkey. European banks have the most exposure, but U.S. banks are owed about $18 billion, according to the Bank of International Settlements.
Analysts, however, were quick to downplay the impact on European banks, citing most of the exposure was to Turkish equity, and not a falling lira.
U.S. financial stocks struggled as a result and the overall market finished the day in the red.
2. Elon Musk Tweet Leads Tesla on a Wild Ride
Speaking of tweets that shook markets, Tesla (NASDAQ:TSLA) shares had a wild ride this week after co-founder and CEO Elon Musk tweeted (out of the blue) he was considering taking the company private and had the funding to do so.
On Tuesday, during market hours, Musk wrote: "Am considering taking Tesla private at $420. Funding secured."
Musk issued a public statement to employees later in the day making the case for a private Tesla, calling wild stock price swings a “major distraction,” saying hitting quarterly objectives might not be good long-term decisions and adding that the large short position gives people incentives to “attack” the company.
The next day, the Tesla board confirmed there was a discussion about taking the company private, which would be a deal worth about $72 billion. On Friday, Reuters reported that the board had not received a detailed financing plan from Musk.
With all this news, the stock, while jumping around sharply through the week, ended barely higher for the week.
Shares closed Friday at $355.49, compared with the Friday Aug. 3 close of $348.17.
3. Inflation Numbers Still Support Fed Plan
Inflation measures dominated the economic calendar this week and, overall, there was little to change the market’s belief that the Federal Reserve will raise interest rates two more times this year.
The market expects a rate hike at the September and December meetings, according to Investing.com’s Fed Rate Monitor Tool.
Those worried about overheating prices could relax some Thursday, when the producer price index (PPI) came in flat, month over month, confounding expectations for a rise.
But consumer price data out Friday raised some red flags, with the core consumer price index (CPI) hotter than expected year over year.
“The annualized core figure is now at its highest level since 2008,” Marvin Loh, senior global market strategist at BNY Mellon, wrote in a note.
Stagnant wages in the face of rising prices were also a concern.
“The recent gains in inflation have essentially outstripped any wage gains, even as the unemployment rate is likely to hit low levels not seen since the 1960 in the coming months,” Loh wrote.
4. Oil Posts Another Loss for the Week
Oil prices fell to a sixth-straight weekly loss, as bearish data overcame concerns about a global supply shortage.
Inventories of U.S. crude fell by 1.351 million barrels for the week ended Aug. 3, missing expectations for a draw of 2.800 million barrels, according to data from the Energy Information Administration (EIA) on Wednesday.
On Friday, the International Energy Agency (IEA) raised its estimate of world oil demand growth next year to 1.5 million barrels a day (bpd) from 1.4 million bpd.
The IEA also warned that upcoming oil sanctions against Iran could bring turmoil to the market later in the year. U.S. sanctions targeting Iranian oil are expected in early November and could increase the potential of a global energy supply shortage.
"As oil sanctions against Iran take effect, perhaps in combination with production problems elsewhere, maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion," the IEA said.
But the IEA also said non-OPEC production would continue to rise, led by U.S. producers. The IEA raised its estimate for growth in non-OPEC oil output next year to 1.9 million bpd day, from 1.8 million bpd in its previous report.
5. Snap Can’t Snap Social Media’s Bad Streak
Snap (NYSE:SNAP) was the latest social media company to disappoint Wall Street when it reported numbers this week.
The operator of Snapchat’s quarterly loss was narrower than expected and the company beat revenue forecasts. That was enough to boost shares just after it reported after hours.
But by the time the stock opened, pessimism had taken over. Daily active users were down in the second quarter, compared with the first, and also missed estimates.
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