The U.S. stock market plunged on Tuesday after President Trump threatened to impose fresh tariffs on European trading partners over the weekend, one of the latest developments in his bid to acquire the island of Greenland.
The Dow Jones Industrial Average dropped 870 points, or 1.8%, to close at 48,489, while the S&P 500 fell 143 points, or 2.1%, to close at 6,797.
Major tech stocks took a hit, with the Nasdaq Composite sinking 2.4%. Nvidia and Amazon shares dropped 3.6% and 3.7%, respectively.
The rocky day on Wall Street came after President Trump said on Saturday on Truth Social that he would impose a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland beginning in February. Trump said the tariffs would rise to 25% on June 1 and apply to imports from NATO countries until a deal is reached for the purchase of Greenland.
European markets and markets in Asia also fell on Tuesday.
The European Union accounts for a large share of U.S. imports, with annual shipments from its member nations exceeding those from Mexico and China combined.
Mr. Trump linked his aggressive stance on Greenland to last year’s decision not to award him the Nobel Peace Prize, telling Norway’s prime minister that he no longer felt “an obligation to think purely of Peace,” in a text message released Monday.
Mr. Trump’s message to Jonas Gahr Støre appeared to ratchet up a standoff between Washington and its closest allies over his threats to take over Greenland, a self-governing territory of NATO member Denmark.
Mr. Trump’s threats have sparked outrage and a flurry of diplomatic activity across Europe, as leaders consider possible countermeasures, including retaliatory tariffs and the first-ever use of the European Union’s anti-coercion instrument.
Davos meeting
U.S. Treasury Secretary Scott Bessent, speaking on the sidelines of the World Economic Forum annual meeting in Davos, Switzerland, asserted that America’s relations with Europe remain strong. He urged trading partners to “take a deep breath” and let tensions driven by the tariff threats over Greenland “play out.”
“Geopolitical events will remain in focus today, particularly any talks that may take place in Davos,” said Michael Brown, a senior research strategist at Pepperstone, referring to the World Economic Forum.
Wedbush Securities analyst Dan Ives said the new tariff threat “is clearly an overhang on the conference,” but that it would likely simmer over time.
“Our view is just like over the last year the bark will be worse than the bite on this issue and tariff threats as negotiations take place and tensions ultimately calm down between Trump and EU leaders,” Ives wrote in a note to clients.
This week will bring more U.S. corporate earnings and the latest inflation measurement that’s preferred by the Federal Reserve for making policy decisions.
The U.S. Federal Reserve’s next policy meeting is in two weeks. Interest rate traders currently place a 95% likelihood that the benchmark interest rate unchanged, according to CME Group’s FedWatch tool. The Bank of Japan has a monetary policy board meeting ending later this week.
Silver and gold both rose to records again as investors sought safety amid heightened geopolitical tensions. Gold prices surged 3.7% and silver prices soared 6.9%.
The price of U.S. crude oil rose 1.5% to $60.34 per barrel. The price of Brent crude, the international standard, rose 1.3% to $64.76.
The U.S. stock market scaled new heights in 2025, as investors largely tuned out concerns about the Trump administration’s sharply higher tariffs and shrugged off fears of a financial market bubble among artificial intelligence companies.
The S&P 500 stock index is up roughly 15% this year through Dec. 17— a strong performance, although lower than the heady 23% jump posted by the broad-based index in 2024. The S&P 500 has climbed an average of 13% per year over the last decade, according to Mark Luschini, chief investment strategist at wealth management firm Janney Montgomery Scott.
The Nasdaq Composite, which includes tech heavy-hitters such as Alphabet, Microsoft and Nvidia, has climbed more than 18% this year, while the blue-chip Dow Jones Industrial Average is up more than 13%.
The key question: Will such investor exuberance spill over into 2026, especially as concerns about an AI bubble percolate?
“I think conditions remain relatively fertile for stock prices to do OK overall,” Luschini told CBS News. “The big risk is that the whole AI narrative starts to lose a little of its viscosity.”
Other forecasters are also expecting a strong stock market performance in 2026. David Lefkowitz, head of U.S. equities at UBS Global Wealth Management, expects the S&P 500, which closed Monday trading at 6,816 points, to reach 7,300 points by June of next year and 7,700 by the end of 2026. That would represent a roughly 15% gain over the next year.
J.P. Morgan said in a November research report that it expects the S&P 500 to rise 13% to 15% next year, boosted by robust corporate earnings growth, and to carry that strength into 2027.
What will drive stocks in 2026?
Several catalysts are expected to drive the stock market in 2026. Among them is another year of strong corporate earnings, particularly in tech, analysts say. BofA Global Research expects overall earnings to grow in the mid-double digits next year.
“Multiple expansion and earnings growth both pushed the S&P 500 up 15% this year,” the securities firm said in a market forecast. “In 2026, earnings will do the lift.”
The AI boom should also help fuel the stock market, with a wave of capital investments likely to drive up tech stocks, analysts note. AI capital expenditures from major tech companies including Alphabet, Amazon, Meta, Microsoft and Oracle are expected to approach $520 billion in 2026, Jeff Buchbinder, chief equity strategist for LPL Financial, said in a research note.
Another area expected to benefit from the AI boom is the industrials sector, which is supplying the equipment necessary for data centers.
Growth, however, won’t be limited to tech or AI-adjacent sectors. Indeed, Bret Kenwell, a U.S. investment and options analyst at eToro, said a broadening of the bull market could be in the cards, with all 11 sectors in the S&P 500 expected to rise next year.
“If it happens, it’ll have been five years since we’ve seen it,” he said.
Adam Crisafulli, head of Vital Knowledge, and Luschini both expect a good year for financial services stocks. Banks have traded very well this year amid an easier regulatory backdrop and a jump in mergers and acquisitions.
Another tailwind for the stock market could be softer monetary policy and a more dovish Federal Reserve, Kenwell said, with President Trump soon expected to nominate a new central bank chief before Jerome Powell’s term ends in May.
“It’s kind of a when, not if, rate-cut situation with the Fed,” Kenwell said.
Still, analysts and major banks expect a slowdown in the pace of interest rate cuts. In a November report, J.P. Morgan forecasts one more interest rate cut in January before an extended pause and said that if the central bank further eases monetary policy, the S&P 500 could surpass 8,000 points in 2026.
Is my money safe?
The biggest shadow looming over the stock market next year is what will happen with artificial intelligence.
AI and tech stocks have been the propelling force behind equity gains this year, with earnings growth from the “Magnificent Seven” far outpacing other companies in the S&P 500. That strength has been accompanied by a boom in capital expenditures, as investors rush to invest in data center construction and other technology infrastructure to meet rising demand for AI.
“Robust demand for cloud services and data center capacity shows no signs of slowing,” Janus Henderson portfolio manager Jeremiah Buckley said in his company’s 2026 outlook on capital investment.
Amid all the hype, some investors are concerned about whether AI’s ascendance could start to falter next year, leading to a market correction or the bursting of what some consider to be an AI bubble.
In its 2026 outlook, Vanguard said it expects U.S. technology stocks to maintain momentum given the rate of investment and anticipated earnings growth. At the same time, the investment management company noted that “risks are growing” amid all of the AI optimism.
Crisafulli said tech gains have historically moved in unison, but that started to splinter in November, when Alphabet shares surged 14% following the release of Google Gemini 3, while the rest of the Nasdaq slumped. The continued fracturing of the AI narrative is one of the headwinds he expects investors will have to face in 2026.
“It’s not so much the bubbles bursting,” he said. “It’s more just people looking at it in a more nuanced way.”
Still, as usual investors should expect some turbulence. Minor pullbacks or flat trading periods are possible, especially after several months of consecutive growth in the S&P 500, according to Kenwell.
“When we look at 2025, it was a good reminder that volatility is in play, and that’s something that certainly can be back in the cards in 2026,” he said.
Stocks gained in a short Friday session to close near a record high, capping a five-day rally that helped the S&P 500 index erase nearly all its losses from earlier in the month.
The S&P 500 rose 36 points, or 0.5%, to close at 6,849, 42 points shy of its Oct. 28 record. The Dow Jones Industrial Average increased 289 points, or 0.6%, to close at 47,716. The tech-heavy Nasdaq Composite rose 0.7% on Friday but ended November with a decline of 1.5% because of losses for some big tech stocks.
Stock indexes closed at 1 p.m. EDT on Friday due to the Thanksgiving holiday.
The multi-day rebound came after a largely volatile month for stocks, sparked by concerns about a possible bubble in artificial intelligence and tech stocks. AI chipmaker Nvidia lost 1.8% Friday and closed the month with a double-digit loss. Oracle tumbled 23% in November while Palantir Technologies sank 16%.
“The market needs to prove it can sustain this momentum, but right now, the weakness after Nvidia’s earnings looks like it could be more of a short-term AI-selling climax than a sign of heightened bearishness,” Chris Larkin, Managing Director of trading and investing at E*TRADE from Morgan Stanley, said in an email.
Some investors have expressed worry that an AI bubble could burst, triggering devastating financial losses. Bubbles occur when stocks surge on inflated growth expectations that ultimately prove to be disconnected from a company’s underlying fundamentals.
Some tech stocks did notch monthly gains, most notably Alphabet, which rose nearly 14%, due to excitement about its recently released Gemini AI model.
The market turned around on hopes that the Federal Reserve would again cut interest rates at its meeting next month. Recent comments from Fed officials have given traders more confidence that the central bank will again cut interest rates at its meeting that ends Dec. 10.
Traders are betting on a nearly 87% probability that the Fed will cut next month, according to data from CME Group.
The central bank, which has already cut rates twice this year in hopes of shoring up the slowing job market, is facing an increasingly difficult decision on interest rates as inflation rises and the job market slows. Cutting interest rates further could help support the economy as employment weakens, but it could also fuel inflation. The latest round of corporate earnings reports was mostly positive, but economic data has been mixed.
The minutes of the Fed’s most recent meeting in October indicate there are likely to be strong divisions among policymakers about the Fed’s next step.
Investors also had their eye on retail stocks as they wait to see if shoppers rushed to take advantage of the annual Black Friday sales event. Macy’s fell 0.3% while Kohl’s gained 1.4%. Dick’s Sporting Goods dropped 0.5%. Among specialty retailers, Abercrombie & Fitch rose 2.9% and American Eagle Outfitters gained 0.7%.
Amid the volatility in tech stocks, traders moved money into other parts of the market. Pharmaceutical companies Eli Lilly and Merck each rose more than 20% for the month. Travel-related companies such as Marriott and Expedia also posted strong monthly gains.
Earlier, futures for the Dow Jones Industrial Average, S&P 500 and Nasdaq were halted for hours due to a technical issue at the Chicago Mercantile Exchange. CME said the problem was tied to an outage at a CyrusOne data center.
Treasury yields rose slightly, with the 10-year yield at 4.02%.
What’s behind the dip in the stock market and what does it mean for you? – CBS News
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The Dow, S&P 500 and Nasdaq all dropped around 1% at Monday’s close. It comes as tech giants and retailers are set to release earnings reports. CBS News business analyst Jill Schlesinger explains what it means for your wallet.
Wall Street rebounded on Friday, with gains from Nvidia and other technology companies helping pare earlier losses.
After dropping 1.3% early in the session, the S&P 500 erased its losses and rose 15 points, or 0.2%, in afternoon trading. The Nasdaq Composite index also recovered from a morning dip to gain 101 points, or 0.4%, while the Dow Jones Industrial Average trimmed its losses on the day to 196 points, or 0.4%, after earlier shedding 600 points.
Stocks were buoyed by gains from Nvidia, the world’s leading chipmaker, which was up more than 1% in afternoon trading. Nvidia is set to report profits on Nov. 19.
“We believe Nvidia’s earnings next week will be another major validation moment for the AI Revolution and be a positive catalyst for tech stocks into year-end, as investors continue to underestimate the scale and scope of AI spend,” Wedbush analyst Dan Ives said in a report.
Tesla shares also made a comeback from losses yesterday, rising 1.4%.
If it falls short of analysts’ expectations, more drops could be on the way. That would have a huge effect on the market because Nvidia has grown to become Wall Street’s largest stock by value and briefly topped $5 trillion. That gives Nvidia’s stock movements a bigger effect on the S&P 500 than any other’s.
The gains came after the stock market had one of its worst days on Thursday since April.
In a note to investors, analyst Adam Crisafulli of Vital Knowledge said on Friday that investor concerns about the strength of AI company stocks have flared this week, while noting that growth in the sector remains solid.
“There’s a lot of emotion involved with AI, and people are getting spooked by the sloppy price action in prominent AI-linked stocks, but actual fundamentals in the industry remain very strong,” he said.
Stocks have also cooled because investors are less confident about another Federal Reserve interest rate cut when the central bank meets for the final time this year on Dec. 9-10.
Reset “overdue”
The Fed lowered rates in September and October, but some policymakers have signaled their hesitation about cutting rates in December. Fed Chair Jerome Powell said last month that another cut isn’t “a foregone conclusion.”
Investors put the likelihood of a Fed rate cut in December at 53%, according to CME FedWatch.
The market reset this week was overdue, Mark Luschini, chief investment strategist at Janney Montgomery Scott, told CBS News, noting that stocks have risen steadily this year and only recently were trading at lofty prices.
“We have not had as much as a 5% correction off the early April lows after about a 43% move in the S&P 500,” Luschini said.
Stock futures slid ahead of the start of trading in U.S. financial markets on Friday as investors fret about the health of technology companies and the path of interest rates.
S&P 500 futures were down 1.1%, or 71 points, as of 8:30 a.m. EDT, and Dow Jones Industrial Average futures dropped 0.7%, or 316 points. Nasdaq Composite futures declined 1.5%, or 373 points.
On Thursday, the stock market had one of its worst days since a springtime sell-off. The S&P 500 sank 1.7% on the day, falling further from its all-time high set late last month.
Markets have pulled back this week among growing investor doubts that the Federal Reserve will cut its benchmark interest rate at its next meeting on Dec. 9-10. Although the central bank moved to lower rates in September and October, Fed Chair Jerome Powell said last month that another cut isn’t “a foregone conclusion.”
“The near-term Fed conversation continues to shift in a less dovish direction as officials signal hesitancy about cutting rates (even if they do wind up cutting the Funds Rate on 12/10, it’s likely the forward guidance that day is incrementally hawkish),” analyst Adam Crisafulli of Vital Knowledge said in a note to investors.
Traders see a roughly 53% chance that the Fed will trim rates by a quarter of a percentage point in December, according to CME FedWatch.
Investors also appeared skittish over whether tech stocks can retain their momentum after making spectacular gains this year.
Perplexity CEO Aravind Srinivas previously worked at OpenAI. Saul Loeb/AFP via Getty Images
Perplexity AI, a startup that has previously come under fire from online publishers, is attempting to rebuild trust with media players through revenue-sharing agreements. But that effort hasn’t stopped complaints about how the company surfaces content. Its latest challenge comes from Japanese media groups Nikkei and Asahi Shumbun, which today (Aug. 26) filed a joint lawsuit accusing Perplexity of copyright infringement.
Co-founded in 2022 by CEO Aravind Srinivas, Perplexity has quickly become a leader in A.I.-powered search and is currently valued at $18 billion. Unlike traditional search engines that return links, Perplexity responds to queries by summarizing information found online, accompanies by citations.
Perplexity did not respond to Observer requests for comment on the lawsuit.
Nikkei, which owns the eponymous Japanese newspaper and the Financial Times, and Asahi Shumbun claim that Perplexity has been storing and resurfacing their articles since at least June 2024, a practice the publishers describe as “free riding” on journalists’ work. The lawsuit, filed in a Tokyo District Court, demands that the A.I. company delete stored articles, stop reproducing publisher content, and pay each media company 2.2 billion Japanese yen ($15 million) in damages.
The suit also alleges that Perplexity ignored robot.txt safeguards implemented by the news publishers to block unauthorized crawling and sometimes presented articles alongside incorrect information, a move the publishers argue “severely damages the credibility” of their newspapers.
This is not Perplexity’s first clash with news publishers. Earlier this month, Yomiuri Shimbun, another major Japanese newspaper, filed its own lawsuit against the company. U.S. outlets have also raised challenges.
Last year, Condé Nast, Forbes and The New York Times all threatened legal action over alleged copyright infringement. Perplexity is currently battling a 2024 lawsuit from Dow Jones and The New York Post—both owned by Rupert Murdoch’s News Corp—claiming that the startup misused content to train A.I. models. A court recently rejected Perplexity’s bid to dismiss that case.
For now, the media industry remains divided on how to handle the rise of A.I. Some, like the Associated Press, Vox Media and The Atlantic, have signed licensing deals with OpenAI. Others remain wary. The New York Times is suing OpenAI and Microsoft over unauthorized use of its content, while Canadian startup Cohere was hit with a similar lawsuit this year from more than a dozen news publishers. Thompson Reuters has also accused A.I. platform Ross Intelligence of copyright infringement in a case that dates back to 2020.
President Trump’s move to fire Federal Reserve governor Lisa Cook could roil financial markets, raise uncertainty for investors and heighten concerns that the White House is trying to wrest control of the historically independent central bank, according to Wall Street analysts.
Mr. Trump announced her removal in a letter posted Monday night on Truth Social, citing allegations that she had engaged in mortgage fraud.
Cook denies Mr. Trump has the legal authority to fire her and pledged on Tuesday not to resign. “I will continue to carry out my duties to help the American economy as I have been doing since 2022,” she said in a statement. Cook’s lawyer also vowed to fight the firing in court.
Asked by CBS News chief White House correspondent Nancy Cordes on Tuesday whether the Trump administration is effectively weaponizing government by digging into the mortgage records of public officials, Mr. Trump responded, “No. They’re public.”
Cook has not been charged with a crime. Federal Housing Finance Agency head Bill Pulte, who leveled the initial accusations against Cook, has called on the Department of Justice to investigate Cook.
Cook was appointed to a 14-year term on the Fed’s Board of Governors in 2022 and also serves on the Federal Open Market Committee (FOMC), which sets short-term interest rates in the U.S.
A Federal Reserve spokesperson said in a statement Tuesday that the central bank will “continue to carry out its duties as established by law.” The Fed also pointed to Cook’s statement that she plans to contest her firing in court and said it “will abide by any court decision.”
“Congress, through the Federal Reserve Act, directs that governors serve in long, fixed terms and may be removed by the president only ‘for cause.’ Long tenures and removal protections for governors serve as a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people,” the Fed said.
More influence over the Fed?
Financial markets were subdued on Tuesday in digesting Mr. Trump’s effort to oust Cook. Yet the decision was the talk of Wall Street, with multiple analysts saying Cook’s dismissal could open the door to Mr. Trump gaining control of the Fed’s seven-member board.
“President Trump’s decision to fire Lisa Cook as a Fed governor gives him the ability to gain a majority at the Federal Reserve Board and to influence the broader composition of the FOMC,” Jaret Seiberg, an analyst with TD Securities, said in a report to investors, referring to the central bank’s rate-setting panel.
The White House didn’t respond to a request for comment on whether firing Cook could impact financial markets and compromise the Fed’s independence.
Mr. Trump has also nominated Stephen Miran, who heads the White House’s Council of Economic Advisers, to serve on the Fed board. Mr. Trump is slated to name a nominee to succeed Fed Chair Jerome Powell whose term ends in May of 2025; Powell is scheduled to continue serving on the Fed board until January of 2028 and could continue to serve in that role after stepping down as Fed chair.
If Cook were to leave the Fed board, Mr. Trump could ultimately end up with five appointees on the panel by mid-2026, giving the White House more leverage to influence monetary policy, according to investment advisory firm Capital Economics.
During a meeting Tuesday, Mr. Trump demurred when asked by a reporter who he’s considering to replace Cook on the Fed board. “We’ll have a majority very shortly so that will be great,” he said.
Mr. Trump has repeatedly assailed Powell for the central bank’s decision to hold off in cutting interest rates, with policy makers remaining cautious about reducing borrowing costs so long as inflation remains above the Fed’s 2% target. Powell signaled last week that a rate cut could be on the horizon during a speech at the Jackson Hole, Wyoming, economic symposium.
No guarantee of lower interest rates
The 12-member FOMC is made up of seven members of the Fed Board of Governors; the president of the Federal Reserve Bank of New York; and four of the 11 Fed bank presidents, who serve on a rotating basis for one-year terms.
That interlocking relationship suggests that even stacking the Fed board with loyalists wouldn’t guarantee the interest rate cuts that Mr. Trump has demanded, Gregory Daco, chief economist at strategy consulting firm EY-Parthenon, told CBS MoneyWatch.
“It’s not just about the administration nominating individuals and Congress confirming those individuals — it’s also about how these individuals perceive their role and value their independence,” he said.
Analysts with Capital Economics noted that Mr. Trump’s appointees would need to persuade other FOMC members about setting monetary policy in ways that align with the White House’s economic objectives. That “could be difficult if those others felt compelled to defend the Fed from political attacks,” they said in a report.
For decades, investors have seen the Fed as a generally neutral arbiter guided by its mandate to keep inflation in check and the job market humming. As a result, any perception that Mr. Trump is undermining the Fed’s autonomy could rattle markets, according to Nigel Green, CEO of global financial advisory firm deVere Group.
“Investors are reacting because the independence of the central bank is critical to market stability, and any sign of political capture raises alarm bells everywhere,” Green said in an email.
Meanwhile, the question of whether Cook can be removed from the Fed board remains unresolved. Under the Federal Reserve Act of 1913, the president has authority to remove Fed appointees before their term ends, but only for “cause.” Analysts said the legal dispute over Cook’s removal could wind up in the Supreme Court.
“The situation is extremely fluid,” Daco said. “So until we get some clarity as to the exact conviction, you’re not necessarily going to see much significant movements in markets.”
Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.
U.S. financial markets were steady Tuesday after President Trump said he had removed Lisa Cook from the Federal Reserve’s Board of Governors, an unprecedented move that analysts say could rattle investors.
As of 9:45 a.m. EST, the S&P 500 was down 2 points, or 0.1%. Meanwhile, the Dow Jones industrial Average gained 2 points. The tech heavy Nasdaq Composite shed 56 points. But this muted start to morning trading in the U.S. contrasted with sharp declines on global markets, as investors digested news of a potential Fed shakeup that could reshape the composition of the Board of Governors.
The nonplussed start to morning trading came as investors digested news of a potential Fed shakeup that could reshape the composition of the Board of Governors.
Mr. Trump made his announcement in a letter posted on Truth Social on Monday evening, accusing Cook of mortgage fraud. The president said the move was “effective immediately.”
Mr. Trump was repeating allegations against Cook first leveled earlier this month by Federal Housing Finance Agency Director Bill Pulte. The senior housing official, who runs the agency that regulates mortgage giants Fannie Mae and Freddie Mac, alleged earlier this week that Cook falsified bank and property records to “obtain more favorable loan terms.”
“I have determined that there is sufficient cause to remove you from your position,” Mr. Trump wrote on Monday in the letter addressed to Cook. The president had previously called on the Fed official to resign.
Cook responded to the Monday post with a statement saying that Mr. Trump has no authority to fire her and that she will not resign, setting up a potential legal showdown that will test the president’s authority to fire a member of the central bank. Under the Federal Reserve Act, the president can only remove a Fed official “for cause.” Fed board members serve for 14-year terms.
Mr. Trump “purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so. I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022,” Cook said in a statement.
Global markets tumbled after the President’s announcement. In Asian trading, most benchmarks declined. Germany’s DAX lost 0.3%, while the CAC 40 in Paris slumped 1.4%. Britain’s FTSE 100 gave up 0.5%.
Meanwhile, U.S. Treasury yields were mixed, with longer-term yields rising and lower-term yields edging lower. The 30-year Treasury yield rose to 4.92% on Tuesday morning, up two basis points from 4.90%. The yield on the 10-year Treasury also inched higher to 4.93%.
While Mr. Trump’s move to fire Cook could be a source of unease for investors, it did not appear to shake their faith in a September rate cut. Traders see an 86% chance that the central bank will cut interest rates by a quarter of a percentage point, according to data from CME Group this morning.
Ulrike Hoffmann-Burchardi, CIO Americas and global head of equities at UBS Global Wealth Management expects the Fed to lower rates by a total of 1 percentage point over the central bank’s next four meetings.
During a speech last week at the Jackson Hole, Wyoming economic forum Fed Chair Jerome Powell signaled a rate cut could be on the horizon. The Fed will “proceed carefully,”Powell said, but added that the shifting balance of risks “may warrant adjusting our policy stance.”
Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.
The Dow Jones Industrial Average(DJINDICES: ^DJI) has 30 industry-leading components that act as representatives of the U.S. economy. The index’s rich history has made it a go-to destination for investors looking for quality names that can help them generate dividend income.
Over time, the composition of the Dow has changed to reflect the growing influence of technology on the economy, which has helped the Dow produce impressive gains in recent years. But even stodgy Dow names like Coca-Cola, Home Depot, and McDonald’s have been roaring higher in recent months and helped the index achieve a fresh all-time high on Oct. 11.
Despite the Dow’s track record, not every component has a high yield or has been a trustworthy dividend stock. Boeing‘s slew of challenges pressured the company to suspend its dividend. Tech stocks like Microsoft, Apple, and Salesforce have yields under 1%, and Amazon doesn’t pay dividends.
Johnson & Johnson(NYSE: JNJ), Dow(NYSE: DOW), and Chevron (NYSE: CVX) are three of the highest-yielding stocks in the index. Investing $2,500 into each stock produces an average yield of 4.2% and should generate at least $300 in passive income per year. Here’s why all three dividend stocks are worth buying now.
Image source: Getty Images.
J&J has dealt with significant challenges over the last few years
Johnson & Johnson (J&J) is a Dividend King with 62 consecutive years of dividend increases. The company has long been known as a stodgy passive-income powerhouse. But the last few years have been challenging, as reflected in its languishing stock price.
J&J was a leader in COVID-19 vaccine developments, which was initially a boon for the company. But rapidly declining demand for the vaccine has been a drag on the company to the point where J&J now reports many of its results as “excluding the impact of the COVID-19 vaccine.”
Another challenge has been adjusting to the spinoff of J&J’s consumer health business, which occurred in August 2023. Former J&J brands, such as Band-Aid and Tylenol, are now under the new entity Kenvue. The spinoff should help J&J be a faster-growing company by focusing on just two segments — Innovative Medicine and MedTech. However, it does remove some of the safe and stodgy parts of the business that made J&J a rock-solid dividend stock, no matter the economic cycle.
Finally, J&J has been dealing with lawsuits that allege its talc-based products led to cancer development. J&J restructured and made a subsidiary called Red River Talc LLC, which filed for Chapter 11 bankruptcy on Sept. 20 to handle current and future claims.
After a messy few years, J&J is finally ready to turn the corner. The business has been putting up solid results and growing at a rate that should support good, if not excellent, dividend raises going forward. J&J generates a ton of free cash flow that easily covers its dividend expense. And with a yield of 3.1%, J&J stands out compared to the S&P 500 dividend yield of just 1.2%.
Dow is a coiled spring for economic growth
Not to be confused with the “Dow” in the Dow Jones Industrial Average, Dow makes chemicals used in plastics, seals, foams, gels, adhesives, resins, coatings, and more. The commodity chemical company has three key segments — Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings.
Dow’s business model is capital intensive and vulnerable to ebbs and flows in global demand and supply. Dow has been hit hard by volume declines and lower margins. In the following chart, you can see that revenue and margins surged in 2021 and early 2022 but have fallen considerably since then. Similarly, the stock price has gone practically nowhere since the spinoff.
Dow has blamed macroeconomic factors as a key reason for its weak results. However, low interest rates could greatly benefit many of the company’s end markets. For example, lower mortgage interest rates could boost housing demand, which would help Dow’s polyurethanes and construction chemicals business. Lower interest rates could also boost demand for durable goods.
Overall, Dow is well positioned to see a sizable uptick in earnings next year. Analyst consensus estimates call for just $2.26 in earnings per share (EPS) in 2024 but $3.55 in 2025 EPS. Although Dow looks expensive based on trailing earnings, it would have a far more reasonable valuation if it delivers on expectations.
Despite the volatility of Dow’s performance, it has proven to be a reliable income stock spinning off from DowDuPont in 2019. Dow yields 5.2%, making it the second-highest yielding stock in the Dow Jones, behind only Verizon Communications. Dow hasn’t raised its payout since the spinoff, but it has incorporated stock repurchases as part of its capital return program. The company’s goal is to return 65% of earnings to shareholders through buybacks and dividends so it has enough dry powder to fund long-term investments in new production plans, low-carbon efforts, and more.
Overall, Dow is a good value stock for income investors to consider now.
A quality energy stock with a high yield
Like Dow, Chevron can be a highly cyclical business whose results are heavily impacted by commodity prices. But Chevron has a strong balance sheet, a diversified upstream business that doesn’t depend on one production region, a massive refining business, and a track record for raising its dividend no matter what oil prices are doing.
In fact, Chevron has paid and raised its dividend for 37 consecutive years. Chevron yields 4.3%, which is the third-highest yield in the Dow Jones. The company’s track record for dividend raises, paired with its high yield, makes it arguably the single best passive income play out of the 30 Dow components.
Investors worried about declining oil prices can take solace in knowing that Chevron has a large margin for error in supporting its dividend. Chevron’s capital expenditures and buybacks are near five-year highs. If oil prices tank, Chevron can simply pause buybacks and pull back on capital expenditures. Chevron didn’t cut its dividend when oil prices crashed in 2020, so it stands to reason that it would take a prolonged downturn for the company even to consider reducing its payout.
Chevron stands out as a balanced buy for investors looking for a safer way to invest in oil and gas and power their passive income stream.
Should you invest $1,000 in Johnson & Johnson right now?
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Stocks in the U.S. plunged for a third consecutive trading day, with the Dow Jones Industrial Average tumbling more than 1,000 points amid growing fears of an economic downturn sparked by a slowdown in hiring and consumer spending.
The S&P 500 slid 160 points, or 3%, to 5,186 on Monday, the index’s biggest one-day drop in nearly two years, according to FactSet. The tech-heavy Nasdaq Composite sank 3.4% as investors fled some of the Big Tech players that until recently had powered the U.S. market higher — Apple shed 4.8%, while Meta and Nvidia, fell 2.5% and 6.4%, respectively.
The Dow Jones Industrial Average tumbled 1,034 points, shedding 2.6% of its value. Earlier in the day, it had lost as more than 1,200 points, but the markets regained some of their early losses as Wall Street digested Monday data from the Institute for Supply Management (ISM) Services index, which showed that service employment picked up in July.
“The details of the ISM report were encouraging, with business activity, new orders and employment all rebounding markedly in July,” Oxford Economics said in a Monday research note. The report “aligns with our view of an economy in transition rather than one on the brink of collapse.”
Even with Monday’s rout, U.S. stocks still remain in positive territory this year. The S&P 500 has gained 9.4% in 2024, even after including its recent slide, while the Dow remains up by 2.6%.
What’s driving down stocks
Stocks lost ground on Thursday after weak reports on manufacturing and construction, which stoked fears the U.S. economy may finally be buckling under the pressure of high interest rates.
Then on Friday, government data showed that hiring last month was far weaker than expected, adding to Wall Street’s fears that a “soft landing,” in which the U.S. economy could avoid a recession despite the highest interest rates in 23 years, could instead become a hard landing.
“The main factor that has staying power is the economy’s slowdown,” wrote Wells Fargo head of global investment strategy Paul Christopher in a report. “Investors have been watching household financial stress build for the past two years, but during that time, job growth remained above its December 2009-December 2019 average of 180,000 new jobs per month.”
But Friday’s jobs report showed that employers added only 114,000 new jobs last month, far fewer than the 175,000 jobs expected by economists, he noted.
Tech stocks have been hit particularly hard in recent weeks as investors pull back from artificial intelligence companies amid questions about when the emerging sector will deliver profits.
“It has been a tough few weeks for the AI group as earnings were reported,” analysts with Melius Research wrote. ‘Microsoft, Meta, Google and Amazon were all asked about payoffs from AI investments. While pretty clear that they all need to keep spending, the market remains skeptical of the pace.”
The market rout extended to Asian and European markets, with Japan’s benchmark stock index plunging 12.4% on Monday. The Nikkei had dropped 5.8% on Friday, making this its worst two-day decline ever.
Stocks in Korea and Taiwan also fell sharply, with all three Asian markets damaged as investors pull back from companies focused on artificial intelligence out of concern the sector has been overhyped.
When will the Fed cut rates?
With the disappointing economic data, Wall Street is worried the Federal Reserve may have kept its benchmark interest rate too high for too long, heightening the risk of a recession. The central bank kept the federal funds rate unchanged when it met on July 31 to discuss economic conditions and whether and when it should begin cutting rates.
A rate cut would make it less expensive for U.S. households and companies to borrow money, but it could take time for the effects to boost the economy. On Monday, some investors called for the Fed to start cutting rates sooner rather than later to stave off an economic downturn.
“The Federal Reserve needs to start easing monetary policy more aggressively than had been anticipated, in order to head off a looming recession in the world’s largest economy,” said Nigel Green, CEO of deVere Group, an independent financial advisory and asset management firm, in an email. “The Fed was behind the curve at the beginning of the cycle, it cannot afford to be behind the curve this time too.”
Economists still don’t expect a recession
Although worries over weakness in the U.S. economy and volatile markets have rippled around the world, domestic economic activity remains solid, with many analysts saying that a recession remains unlikely. Stephen Brown, deputy chief North America economist with Capital Economics, still expects a soft landing, while acknowledging that the risk of a sharper downturn is rising.
The economy has accelerated this year, with the nation’s gross domestic product jumping to 2.8% in the second quarter, blowing past forecasts. A recession is typically marked by two consecutive quarters of negative GDP. And although July’s jobs report was disappointing, analysts point out that it reflects just one month of data, while also noting that the depressed hiring figures in July could have also been impacted by Hurricane Beryl.
“It can be a mistake to read too much into a single data release,” noted Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management, told investors in a research note. “The number of people who reported being unable to work [in July] due to the weather was 436,000; this compares to an average of 33,000 for July since 2000.”
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
The stock market took a big slide Monday following a lackluster jobs report and growing fears of a recession in the next year. Jo Ling Kent breaks down what it all means.
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The Dow closed above 40,000 points for the first time on Friday in a quiet day on Wall Street, with investors taking cheer in strong corporate profits and signs that inflation is cooling.
The Dow Jones Industrial Average, which was launched in 1896, tracks the stocks of 30 major “blue-chip” companies generally regarded as low-risk investments. The index’s listed companies include Apple, Intel and Microsoft among tech players, while the financial industry is represented by companies such as American Express, Goldman Sachs and JPMorgan Chase. Health care companies in the Dow include Amgen, Johnson & Johnson, Merck and UnitedHealth Group.
The Dow crossed the 30,000 point mark in November of 2020. Yet while the 128-year-old index is still widely followed, institutional investors generally focus on broader stock market barometers, such as the S&P 500 and tech-heavy Nasdaq.
The Dow added 134 points, up 0.3%, to close at a record high of 40,004. The S&P 500 index edged up 0.1% and the Nasdaq ended essentially flat. All three financial markets climbed to new heights this week after the Consumer Price Index rose at an annual rate of 3.4% in April, in line with analyst forecasts.
The Dow has risen nearly 20% over the last 12 months, while the S&P 500 has surged 27.5%.
Soft landing ahead?
Although inflation continues to run considerably hotter than the Federal Reserve’s 2% target, the latest CPI data suggests that prices around the U.S. are moderating after rising much faster than expected earlier this year. That is rekindling hopes the Federal Reserve could soon act to cut its benchmark interest rate, which would give a further lift to financial markets as well as lower borrowing costs for consumers and businesses.
With the U.S. economy seemingly on track for a soft landing, many traders expect the U.S. central bank to trim the federal funds rate — now at its highest level in more than two decades — twice this year. Yet analysts said the Fed will wait for more evidence that inflation is retreating before easing policy.
“Of course, the Fed will not wait for inflation to retreat to 2% to start cutting rates,” Bob Schwartz, senior economist with Oxford Economics, said in a note to investors. “By then it would probably be too late to prevent the economy from descending into a recession. But it is taking longer than usual for the Fed’s rate hikes in 2022 and 2023 to bring inflation under control, and it will take several months of benign inflation reports to instill confidence that the trend towards 2% is firmly in place.”
While major markets have continued levitating, so-called meme stocks are fizzling after soaring earlier in the week. Shares of GameStop, a money-losing video game retailer that has been embraced by retail investors, fell nearly 20% on Friday after the company said it expects to report a loss of $27 million to $37 million for the three months through May 4. It also said it could sell up to 45 million shares of stock in order to raise cash.
The stock had topped $64 on Tuesday after Keith Gill, a popular online trader known on social media as “Roaring Kitty,” resurfaced on X (formerly Twitter) after a three-year hiatus.
Traders work on the floor of the New York Stock Exchange (NYSE) on June 01, 2023 in New York City.Spencer Platt/Getty
US stocks fell on Friday following reports of a potential Iranian attack against Israel.
Fears of an escalation of tensions in the Middle East sent oil prices higher and interest rates lower.
Investors also digested the first batch of first-quarter earnings, and they weren’t impressed.
US stocks sold off on Friday, with the Dow Jones Industrial Average dropping by nearly 500 points amid fears of a possible Iranian attack against Israel.
US intelligence reports indicated thata potential attack against Israel by Iran or its proxies was imminent within the next few days. The reports, which was confirmed by a US official, specified that a potential drone strike against Israel could target “possibly on Israeli soil” rather than Israeli interests outside of the country.
Such an attack would come shortly after Israel launched a missile strike that killed seven Iranian military personnel in Syria.
Investors also digested the first batch of first-quarter earnings results, and they weren’t impressed. Mega-banks JPMorgan, Wells Fargo, and Citigroup all reported better than expected results, but saw significant sell-offs in their stocks, with JPMorgan falling more than 6%.
Here’s where US indexes stood at the 4:00 p.m. closing bell on Friday:
Here’s what else happened today:
In commodities, bonds, and crypto:
West Texas Intermediate crude oil jumped by 0.49% to $85.44 a barrel. Brent crude, the international benchmark, climbed 0.48% to $90.17 a barrel.
NEW YORK (AP) — Amazon.com is being added to the Dow Jones Industrial Average, joining Apple, Walt Disney, Walmart and other companies that make up the 30-stock average.
The e-commerce giant will replace drugstore operator Walgreens Boots Alliance in the Dow before the open of trading on Monday, S&P Dow Jones Indices said Tuesday.
The shift was prompted by Walmart’s decision to do a 3-to-1 stock split, which will reduce its stock’s weighting in the index.
The Dow is a price-weighted index, so stocks that fetch higher prices are given more weight.
Meanwhile, ride-sharing service Uber Technologies will be added to the Dow Jones Transportation Average, replacing JetBlue Airways.
The Dow soared more than 500 points on Wednesday, closing over 37,000 for the first time. The surge came after the Federal Reserve said it is keeping interest rates unchanged for the third time in a row. Gregory Daco, chief economist at Ernst and Young, joins CBS News to unpack the Fed’s decision.
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The Dow Jones Industrial Average surged to close at more than 37,000 points for the first time as investors applauded a statement from the Federal Reserve on Wednesday that it could cut its benchmark interest rate next year.
The blue-chip index jumped 512 points, or 1.4%, to end the day at 37,090, topping its prior peak of 36,799 in early 2023. The broader S&P 500 rose 1.4% and is within 1.9% of its own record. The tech-heavy Nasdaq composite added 1.4%.
Fed officials also left their short-term rate unchanged for a third straight meeting amid signs that their aggressive push to subdue inflation is working. With the price spikes that slammed Americans during the pandemic now receding in earnest, Fed Chair Jerome Powell said in a news conference that the federal funds rate is projected to fall to 4.6% by the end of next year, from its current range of 5.25% to 5.5%.
“The Fed decision was more dovish than anticipated on a variety of fronts, including the acknowledgement that growth and inflation have both cooled, the strong signals that rate hikes are finished, and Powell’s admission during the press conference that ‘rates are at or near their peak,'” analyst Adam Crisafulli of Vital Knowledge said in a report.
Lower interest rates curb borrowing costs for consumers and businesses, boosting spending and broader economic growth. Interest rate cuts also tend to buoy riskier assets, including stocks. Markets have steadily pushed higher since October as Wall Street bet that the Fed, which hiked rates 11 times during the latest tightening cycle to their highest level in 22 years — will pivot to cuts in 2024.
While noting that the Fed is not ready to declare victory over inflation, Powell also said Fed officials don’t want to wait too long before cutting the federal funds rate.
“We’re aware of the risk that we would hang on too long” before cutting rates, he said. “We know that’s a risk, and we’re very focused on not making that mistake.”
Headline inflation around the U.S. edged down November as gas prices fell. The Consumer Price Index edged 0.1% higher last month, leaving it 3.1% higher than a year ago, the Labor Department reported on Tuesday. The so-called core CPI, which excludes volatile food and energy costs, climbed 0.3% after a 0.2% increase in October and is up 4% from a year ago. The Fed targets annual inflation of 2%.
Following the release of the Fed’s rate projections, traders on Wall Street upped their bets for cuts in 2024. Most of those bets now expect the federal funds rate to end next year at a range of 3.75% to 4%, according to data from CME Group.
“We see modest upside for U.S. stocks from current levels,” David Lefkowitz, CIO head of equities at UBS, told investors in a research note. “Both sentiment and positioning have improved, posing greater downside risks if there are any negative economic or earnings surprises.”
Stocks ended November with a bang, with the Dow Jones Industrial Average jumping 520 points on Thursday and financial markets posting their biggest monthly gain in more than a year.
The Dow rose 1.5% to close at 35,951, with investors cheered by a new government report showing that inflation is continuing to ease. The Personal Consumption Expenditures index — the Federal Reserve’s preferred inflation gauge — fell to 3.5% in October excluding volatile food and energy prices, down from 3.7% the previous month and nearly 5% as recently as May, new labor data show.
“Progress, in short, has been startlingly rapid compared to policymakers’ expectations,” analysts with Pantheon Macroeconomics said in a report.
The sharp fall in inflation since another closely watched barometer — the Consumer Price Index — peaked at 9.1% in June of 2022 has raised investor hopes that the Fed will shelve its efforts to cool economic growth by pushing up borrowing costs. Some Wall Street analysts now forecast that the central bank could move to trim its benchmark interest rate by the middle of 2024.
Wall Street analysts are also increasingly confident that the U.S. will dodge a recession despite the Fed’s aggressive campaign to quash inflation. Although job growth has slowed — pushing the nation’s unemployment rate to 3.9%, the highest level since January of 2022 — most economists now think the labor market will avoid the kind of steep downturn that historically has followed rapid increases in interest rates.
All three leading stock indexes posted solid gains in November. The Dow rose 8.8%, while the broader S&P 500 added 8.9% — its biggest monthly increase since July of 2022. Driven by strong corporate profits, the tech-heavy Nasdaq jumped nearly 11% in November.
“The rally has been dramatic in its move,” said Quincy Krosby, chief global strategist for LPL Financial.
“What you want to see is that next leg up as we close the year,” she said. “November is a strong month for the market, but so is December.”
The front page of TheWall Street Journal on Friday commemorated a grim milestone: the 100th day of Evan Gershkovich’s wrongful detention. The Journal reporter was detained in Russia in March while on a reporting trip and has been accused of espionage by Russian authorities—charges that he and the US government have forcefully rejected. “His unjust arrest is a brazen violation of press freedom that has far-reaching consequences for journalism and the media, as well as for governments and democracies,” Editor in Chief Emma Tucker wrote in a letter to readers Friday, encouraging them to keep sharing Gershkovich’s work and updates on his situation. “A free press is pivotal to maintaining a free society and we all have a stake in this,” said Tucker. “Journalism is not a crime, and we will not rest until Evan is released.” Journalistsat the Journalandelsewhere also continued to call attention to Gershkovich’s plight on Twitter:
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In a joint statement with Dow Jones CEO and Journal Publisher Almar Latour, Tucker also vowed to “continue to work closely with the highest levels of the U.S. government and expect they will vigorously pursue all efforts to free Evan.” Gershkovich’s family also released a statement on Friday, expressing gratitude for the “overwhelming” support from around the world. “Every day that Evan isn’t home is another day too many,” they wrote.
On Friday, the Journalreported that Dow Jones attorneys asked a United Nations humans-right advocate to urge Russia to release Gershkovich. “Russia’s arrest of him was a blunt and chilling warning to all those in Russia who would dare to exercise their rights in ways disfavored by the Russian government,” the lawyers wrote. “Gershkovich’s detention calls for a clear and robust international response.” The 100-day mark comes days after a Kremlin spokesperson confirmed that Russia is in contact with the US over a potential prisoner swap, likely for Gershkovich. A day earlier, US ambassador to Russia Lynne Tracy visited Gershkovich, at Moscow’s Lefortovo Prison—Gershkovich’s first contact with a US diplomatic official since April, according to the New York Times. In June, a Russian court upheld the extension of Gershkovich’s pretrial detention until at least August 30. If convicted on the baseless espionage charges, Gershkovich—the first US journalist to be detained in Russia on such accusations since the Cold War—could face up to 20 years in a penal colony.
