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Quest Means Business
Global Selloff Enters Second Week As Risks Intensify; European Stocks Fall Amid Threat Of War In Ukraine; White House Urging Americans To Leave Ukraine; 13 Chinese Warplanes Enter Taiwan's Air Defense I.D. Zone; U.S. And UAE: Ballistic Missiles Intercepted Over Abu Dhabi; Assange Can Seek Appeal Against Extradition To U.S. Aired 3-4p ET
Aired January 24, 2022 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:22]
ALISON KOSIK, CNN BUSINESS HOST: A doozy Monday on the markets. The Dow was down more than 1,000 points at session lows. Stocks have really been on
a roller coaster. The Dow now down more than about two percent. It looks like investors had targeted their sights on tech and meme stocks to sell.
It's like anxiety is ruling the market. The Fed meets this week and a surprise interest rate hike could be on the table.
Meantime, the U.S. President is set to speak to European leaders this hour as thousands of U.S. troops are put on standby to deploy to Eastern Europe.
And less than two weeks before the Olympics, the U.S. and China spar over flight restrictions.
Live from New York. It's Monday, January 24th. I'm Alison Kosik, I'm in for Richard Quest, and this is QUEST MEANS BUSINESS.
Good evening, tonight, Wall Street is seeing risk from all sides. Stock markets in the U.S. and around the world are deep in the red. They're
extending losses following the worst week since the start of the pandemic.
The Dow lost more than 1,000 points before climbing back. The S&P and the NASDAQ are down more than two percent, now also off their lows of the day
and the causes are many: worsening geopolitical tensions between Ukraine and Russia. We're going to bring you live reports from Moscow and
Washington in just a few minutes on those topics. And then there's also rising inflation. The omicron variant and its impact on corporate earnings,
and a Federal Reserve meeting this week with a possible interest rate hike.
Who better to bring in but Richard Quest, he is with me now, on assignment in Dallas, but now I get to throw some questions to you about the market.
You know, I know you've been watching the markets all day. I'm curious what you think how much do you think what we're seeing, which, by the way, the
Dow down about 500 points off the lows of the session, incredible just to say, how much of this is beyond a taper tantrum. And it is really the
market telegraphing that it is worried that the Fed could be making a policy mistake by raising rates too many times this year.
RICHARD QUEST, CNN BUSINESS ANCHOR: I don't think that's the issue on this occasion. I think everybody has known for a long time that higher rates are
coming. The question is why should the market be so unhappy about an event that they knew was already preordained? Rates were going to go up and
whether it was one notch or two notches or four notches, that was going to happen.
What I think this is about is a shift in perception and sentiments to use the jargon. In other words, companies may not be as profitable. Tech
companies may not have the same revenues, they may be losers on investment strategy to other higher yielding assets. And that's why we're seeing the
NASDAQ, as you can see there, bearing the brunt of these.
Because ultimately, what happens, Alison, is the tide has gone out. And if not exactly naked, we can start to see that the valuations of stocks simply
couldn't be justified. And so you do get the NVIDIAs which are down another six or seven percent down; you get Netflix which is down nearly 50 percent
from its 52-week high, you get Microsoft very sharply down.
If you look at the Dow 30, overall, at the moment, you will see those stocks that have been hit hardest are those where valuations had been
allowed to get out of play. Now, an interesting one there, of course, is Apple, the $3 trillion, whatever it is company. Well, can you justify that
price at this time when rates are going up? Clearly, the market is giving an opinion. The answer is no.
KOSIK: I'm wondering if you see the Fed changing course now that you've seen this selloff, you know, go into its second week at this point. Do you
see the Fed may be changing its stance even on three rate hikes?
QUEST: No. No, I don't. I see -- I mean, can they shift the dates? Can they tinker elsewhere? The real risk from this dislocation in markets is
that it created -- the wealth effect evaporates. People feel poorer, people feel uncertain. They therefore put off economic activity, buying a new car,
buying a new house, buying -- well, a house is slightly different because of rising rates.
But they put off major purchases because they are worried about their own individual economy and that is not just in the U.S., that's in the U.K.
[15:05:10]
It's in the Eurozone. It's across the world.
When the market falls, people feel worried. They're worried about pensions, they're worried about savings, and they put off investment decisions, or
they put off purchases. That's how you get into a downward spiral. But at the moment, I do believe the Fed's main concern, I think they're quite
shocked, frankly, that the inflation got to seven percent and seemingly was not going to change.
KOSIK: Yes, and many saying that the Fed was behind the eight ball, we will see if the Fed can make up for that.
Richard Quest, you'll be back on the anchor chair on Thursday. Good to see you.
Tech shares are getting hit particularly hard in the selloff. Microsoft, IBM, Intel and Apple all report earnings this week. There are fears that
the runaway growth that we've enjoyed over the last two years could end if the Fed tightens up policy.
Kristina Hooper is the chief Global Market Strategist at Invesco, and she joins me now from Greenwich, Connecticut. Great to see you.
KRISTINA HOOPER, CHIEF GLOBAL MARKET STRATEGIST, INVESCO: Great to see you, Alison.
KOSIK: Well, I am hearing today, especially when we saw the Dow fall more than a thousand points, hearing today, this is capitulation day. But
is this a market that you're seeing that is oversold or not sold enough?
HOOPER: I think it's not sold enough. I think if we take a step back and look at where we are. Early January, the release of the minutes from
December's F.O.M.C. meeting was the unofficial start of tightening season for the Fed and that really triggered a significant volatility and started
the slide downward for stocks.
They are going through a rerating process. Richard talked about that. There is an evaluation of stocks, and they're moving lower, given rising rates
and the expectations about the Fed.
But I will give this caveat. We're not exactly sure what the Fed is going to do. At this point, people are letting their imaginations run wild, and
quite often, reality is a lot better than what our imaginations can conjure up.
KOSIK: Yes, some saying this could be just an overreaction. But you know, there is also the thinking that the Fed, you know, already has made a
big mistake by not being more aggressive early on about inflation.
HOOPER: Well, it was very difficult for the Fed to know how to act because it has dual mandates. Some Central Banks don't have dual mandate. And so
the Fed has been juggling, that employment mandate, along with that controlling prices mandate,
But now that it feels as though it has met the mandate on full employment, now, we can focus more on inflation. But I do believe that we're going to
see continued volatility, we're going to continue to see some downward days until we actually get more clarity from the Fed, and in particular, until
we see lift off for rate hikes.
KOSIK: I went back in the Stock Market Almanac actually, and I know that in your notes that we got before we interviewed you, you said to not fear
higher rates. But there is some history here that each of the 10 recessions since 1955, they were preceded by a significant rise in benchmark interest
rates, you know, little nudges of the monetary needle intended to produce a moderation of inflation without pushing the economy off a cliff.
The problem is we see a lag of how policy -- how the impact of it, there is a lag of nine to 12 months of the impact of that policy. It makes it
difficult to know if rates have risen too far until it's too late. Is this the market showing that it's concerned that the Fed may be too aggressive
and may not realize it until it's too late?
HOOPER: Oh, absolutely. The market is fearing an aggressive Fed and it really has led its imagination run wild in terms of what it thinks the Fed
can do this year. But I have to say that we actually can take comfort in knowing that the Fed anticipates employing three tools this year. Right?
Not only is it tapering its balance sheet, but it also expects to raise rates and actually shrink its balance sheet. So having three tools takes
pressure off the primary tool of raising rates. So I do take home from that.
But you're absolutely right. This is a delicate balancing act and the Fed could easily commit a policy error, which is why we have such market
jitters right now.
KOSIK: What are the other speed bumps you see going forward?
HOOPER: Well, clearly omicron is continuing to be a problem. I think it's going to be a short term problem, but it is certainly impacting the
services side of economies like the United States, like Japan, and really any country it runs through, but also it is likely to exacerbate inflation
with the supply chain disruptions.
[15:10:10]
Also exacerbating inflation unfortunately, is the potential for a Russian invasion of Ukraine. That could drive up oil prices and add to inflationary
pressures.
KOSIK: Okay, Kristina Hooper, the Chief Global Market Strategist at Invesco. Great to get your analysis today. Thanks.
HOOPER: Thank you.
KOSIK: U.S. and European leaders holding a call right now to coordinate their response to the Ukraine crisis.
We'll be live in Moscow with the latest on the tense standoff with Russia.
(COMMERCIAL BREAK)
KOSIK: More now on our breaking news story. A huge selloff on the global markets. Stocks in Europe closed sharply lower as investors brace for a
possible Russian invasion of Ukraine. Germany's DAX and the CAC 40 in Paris were each off almost four percent. Russian stocks are also getting
hammered.
The MOEX in Moscow closed down six percent.
Breaking news just in to CNN, as the situation between Russia and Ukraine further deteriorates, the White House is urging American citizens inside
Ukraine to leave now, warning that there are no plans for a military evacuation if the situation there gets worse.
And we're learning that The Pentagon is putting some 8,500 U.S. troops on high alert for a possible deployment to the Baltic States to help NATO
allies.
(BEGIN VIDEO CLIP)
REAR ADMIRAL JOHN KIRBY, (RET.) PENTAGON PRESS SECRETARY: In some cases, units would go from say 10 days prepared to deploy. Now, they are at five
days. That's not the case for every unit that is being notified that they are in a heightened alert.
Some are simply more ready and postured that way than others. The idea though, is that all of these units that he is putting on prepare to deploy
will be ready to go on a shortened timeframe.
Again, no final decision has been made to deploy them.
(END VIDEO CLIP)
KOSIK: Right now, President Biden is on a conference call with European leaders talking about how to handle the growing crisis. Meantime, the
Ukrainian President is telling his country there is no reason to panic.
In a Facebook video address a short time ago Volodymyr Zelensky said Ukrainian authorities are working for the full de-escalation of the
situation at the border with Russia.
CNN international diplomatic editor, Nic Robertson joins me now from Moscow and our Pentagon correspondent Oren Liebermann is in Washington.
Oren, I'm going to begin with you because I know that Department of Defense Spokesman John Kirby just wrapped up a news conference and we got some
information. What did you learn?
[15:15:11]
OREN LIEBERMANN, CNN PENTAGON CORRESPONDENT: Pentagon Press Secretary John Kirby stressed that the U.S. government diplomacy remains the first option,
and then it hasn't made the order or the decision to deploy troops yet to Europe, but it is also well aware of the situation of what's happening on
Russia's borders, or rather Ukraine's borders with a buildup of Russian forces, and that diplomacy certainly hasn't worked yet to ease the tensions
along the border between Russia and Ukraine.
And it's because of that, that the military has put as many as 8,500 U.S. troops on heightened prepared to deploy orders, meaning essentially,
they'll be ready to go on short notice if the decision is made to deploy those forces.
Most of them would be under NATO's control if NATO decides to activate its response force known as the NATO Response Force, a multinational group of
some 40,000 troops that NATO can use to deploy essentially along the Eastern flank of NATO in case of a buildup of Russian troops or continued
buildup or a Russian decision, a decision by President Vladimir Putin to invade Ukraine.
The Pentagon Press Secretary said that the decision was made to deploy or rather to prepare to deploy those troops, not because of some change on the
ground because Defense Secretary Lloyd Austin wanted troops to have as much of a heads up as possible to deploy to Europe if that decision is made.
Pentagon Press Secretary John Kirby said it would likely come from a NATO Response Force activation decision from NATO, or if there is a continuing
deterioration of the security situation there, and the decision is made to deploy those.
Again, most troops will be part of the NATO Response Force, but Defense Secretary Austin wanted some troops available for other contingencies.
It is a message and a statement to Russia that NATO stands united and a willingness to bolster the defense of the Eastern flank of NATO and a
message of deterrence to Putin as he makes his decision on what he wants to do when it comes to Ukraine.
It is worth noting that in light of the deteriorating security situation, as you pointed out, the State Department has told U.S. citizens to get out
of Ukraine as it has drawn down the embassy presence there. Meanwhile, as a further message of unity behind NATO, NATO has taken command of the Truman
Carrier Strike Group already operating in the Med. So you see this unity behind NATO actions, all with one aim, and that is to deter Russia.
KOSIK: Okay, well, you know what, let me go to Nic Robertson on this because the optics are that, you know, the situation is escalating, and
that it is moving further away from any diplomatic resolution where Putin won't back down. What are you hearing?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Well, the Kremlin spokesman today said that a lot of what the Kremlin had heard over the
weekend, such as that President Putin was trying to find a puppet leader, a pro-Russian puppet leader to put in charge of Ukraine if it was invaded and
then occupied.
All of this was dismissed as informational hysteria, false information, lies that are not true. But what we also heard from the Kremlin spokesman
was the assertion that Ukrainian forces were building up in the east of Ukraine, close to the Donbass area. That's that area of Russian pro-Russian
backed separatists in the east of Ukraine. The Ukrainian forces were building up there, and the Russian narrative has been that all this as they
describe it, informational hysteria, by the media is in a way to cover up some context, pretext by NATO, for some kind of action -- some kind of
military actions.
They are not specific, but that's the allegation that they throw out there. So the Kremlin is essentially saying that it is the Ukrainians who are
getting ready to strike and all this information about NATO reinforcing, et cetera that this is all some kind of Western pretext for action.
So what is happening here is a real tensioning of the situation, and I certainly think that Vladimir Putin, and his military analysts and
strategist will be watching this sort of growing tension, if you will, between the Ukrainian leadership, seeing the way that you know, Britain,
the United States, Australia have decided to draw down the presence at their embassies, sending some families home, non-essential staff, et
cetera.
President Zelensky and others in his government are trying to calm the Ukrainian population, essentially implying that this is an overreaction to
remove these embassy staff now, that the Kremlin will be able to see the sort of the cracks and the fissures appearing here and recognize
potentially that the Ukrainian government is genuinely worried about the public mood in Ukraine right now.
So all of this is building to a worrying point of tension right now.
[15:20:11]
KOSIK: Okay, Nic Robertson and Oren Liebermann, thanks so much for all of your great reporting.
Commodity prices are following the downturn of the markets, a major factor, the rising dollar due to the Ukraine tensions along with those fears of Fed
rate hikes. Brent crude is down one -- almost two percent and WTI is down almost two percent as well.
Gold which is seen as a safe haven for investors, that is up by about a half a percent. For months, the E.U. has warned Moscow of severe economic
sanctions if it invades Ukraine. However, such a move could disrupt Europe's own economy given the nature of their trade relationship.
CNN's Anna Stewart explains.
(BEGIN VIDEOTAPE)
ANNA STEWART, CNN REPORTER (voice over): Away from the border with Ukraine, a different battle strategy is being drawn up as Western allies
consider how to respond to a potential Russian incursion with economic weapons.
URSULA VON DER LEYEN, EUROPEAN COMMISSION PRESIDENT: The European Union is by far Russia's biggest trading partner, and by far the largest investor.
And yes, this trading relationship is important to us, but it is far more important to Russia.
STEWART (voice over): In 2020, the E.U. accounted for over a third of Russia's total trade. It's their biggest market for oil and gas and their
biggest foreign investor with investments worth $350 billion in 2019.
Some sanctions are already in place imposed in 2014 for Russia's illegal annexation of Crimea, and more were added as relations with Russia
continued to sour.
TIM ASH, BLUEBAY ASSET MANAGEMENT: Sanctions do have an impact. I mean, a lot of people brush them away as being ineffective. Russia spent a lot of
money since 2014 lobbying against them, which suggests they don't like them. More restrictions on sovereign debt, Russia's ability to borrow
overseas, I mean, there is still a whole host of things they can do.
STEWART (voice over): The Kremlin has repeatedly denied they plan to attack Ukraine, but Western allies remain wary. Europe faces a problem though,
energy. The E.U. relies on Russia for more than 40 percent of its natural gas imports, and 25 percent of oil.
SIR ADAM THOMSON, DIRECTOR, EUROPEAN LEADERSHIP NETWORK: Some allies and I guess the finger often points at Germany are very committed to an approach
of dialogue and diplomacy. And through Germany, a lot of the rest of Western Europe get Russian energy supplies, which if cut off totally, would
leave us with a very cold winter indeed.
STEWART (voice over): Which is why other more extreme options on Europe's table could backfire. Germany could refuse to give the final approval to
Russia's new $9.5 billion Nord Stream 2 gas pipeline.
UNIDENTIFIED FEMALE: We are at the heart of the global financial system --
STEWART (voice over): Or the West could cut Russia off from the global payment system, SWIFT, used by banks.
ASH: Russia has made it clear that it would see a cut off from SWIFT. I mean, I think, the Kremlin Press Secretary said that it would be equivalent
to a declaration of war, and I think in that scenario, Russia could well suspend that energy deliveries to Europe.
STEWART (voice over): Western allies and the E.U. in particular, have powerful economic weapons to hand, but wielding them comes with risk. It'll
be hard for the West to agree on sanctions, but if Russia invades Ukraine, they'll need to stand united.
Anna Stewart, CNN, London.
(END VIDEOTAPE)
KOSIK: Helima Croft is Managing Director and Global Head of Commodity Strategy at RBC Capital Markets. Great to have you on the show.
HELIMA CROFT, MANAGING DIRECTOR AND GLOBAL HEAD OF COMMODITY STRATEGY, RBC CAPITAL MARKETS: Thank you for having me on.
KOSIK: So we are watching oil prices fall which is kind of a head scratcher because we're seeing these heightened tensions between Ukraine
and Russia, the predictions from Goldman Sachs and Morgan Stanley that crude could hit $100.00 per barrel this year. And never mind the fact that
you know Russia is an important member of OPEC+. What is going on today?
CROFT: Well, I mean, I think the dollar and concerns about Fed rate hikes has been dominating, you know all markets today. That said we're
heading into a very important OPEC meeting. I think concerns about Russia and Ukraine remains front and center. And certainly the path to $100.00 oil
is a Russian invasion of Ukraine.
And so I think again, the market is taking a breather, focusing on the Fed. But if those tanks cross the border, make no mistake, we are in for
significantly higher oil prices.
KOSIK: You know, despite oil prices lowered today, they are up about 10 percent this year, seeing gold prices up as well. So with commodity prices
rising, is that an indication that in fact if that happens, what you said that you know if invasion does happen and the U.S., you know sends troops,
is it an indication that the U.S. could be willing to go further than first thought to defend Ukraine?
[15:25:10]
CROFT: I mean, I don't think -- I think the United States is deeply concerned about higher energy prices. And so when they think about their
sanctions that they're looking to impose, I think they're talking about crippling financial sanctions, but are concerned about ensuring that Europe
can still get the gas that it needs.
But there is an expectation, obviously, if Russia was kicked out of SWIFT, if there are sanctions based on their ability to raise debt, the ruble
transactions, that Russia can do what it has done in the past, which is restrict the flow of gas into Europe. That remains a very, very serious
concern of the White House.
They are working with countries like Qatar, like Norway, like Asian consuming countries that may have additional cargoes available for the
milder winter. They are looking to try to get as much additional gas into Europe to mitigate a potential Russian cut off, but knowing that they
cannot fully backstop a Russian supply disruption.
KOSIK: You know, there is the possibility of economic sanctions, of course, and we've seen the U.S. do this before in the past, impose
sanctions when Russia annexed Crimea, sanctions have been imposed for election interference and for cyberattacks.
Why do you think or do you think that sanctions would actually work here when they have not worked in the past?
CROFT: I mean, I think the real question is, what is the result of the West to endure some economic pain in pursuit of their objectives around
trying to change Vladimir Putin's calculation? I do think if you signal that you are trying to carve out energy, you are potentially signaling to
Vladimir Putin that you are highly concerned about rising energy prices, hence, he may respond by cutting off energy flows to try to force the issue
with the West.
I think it's going to be very important to see what happens to Russian financial institutions. Leading sanctions experts say one clear way to
really hurt Putin is to go after the major Russian financial institution, SberBank, BTP, Gazprombank, but a number of Western asset managers hold
Russian financials.
So the question is, do Western countries really want to take on such sanction measures because it can cause some pain for Western populations?
So I think it's going to be very interesting to watch how they balance their willingness to confront Vladimir Putin, while at the same time trying
to shield their own countries from any economic fallout.
KOSIK: And I'm curious what you think about divisions among Western allies like Germany, and how the response is toward Russia? Does that hurt
the effort to deter Putin in getting him to pull back?
CROFT: I mean, all Western nations have tried to strike a unified front and saying there will be crippling sanctions. But we certainly started to
see some cracks emerge over the weekend. Certainly the U.S. and U.K. have taken a stronger public line on Russia. You had the German Naval Chief
expressing some sympathy for Vladimir Putin, lost his job for doing so.
Well, you even as Chancellor Scholz out over the weekend talking about the need to be prudent when it comes to sanctions. So there does seem at least
publicly to be a less willingness on the part of the German to impose the most crippling economic sanctions.
But what we have been told is that the German government has indicated that for example, the Nord Stream 2 pipeline that will be put on ice, if those
Russian troops crossed the border into Ukraine,
KOSIK: Okay, Helima Croft with RBC Capital Markets, fantastic getting your perspective today.
CROFT: Thank you so much.
KOSIK: Boris Johnson is facing a fresh set of allegations that he broke the COVID lockdown rules, details of a Downing Street birthday celebration
for the Prime Minister coming up.
(COMMERCIAL BREAK)
[15:31:55]
KOSIK: Hello. I'm Alison Kosik. There's more QUEST MEANS BUSINESS in a moment when we'll have the latest numbers from Wall Street as the S&P 500
heads for the worst month since March of 2020.
And Boris Johnson is facing new allegations he broke COVID lockdown rules. This time for a birthday party. Before that, this is CNN and on this
network the facts always come first.
Earlier on Monday, China's sent 13 More warplanes into Taiwan's air defense identification zone according to Taiwan's Ministry of National Defense. It
comes a day after dozens of Chinese war planes flew into the space in the largest such incursion by Beijing this year.
Tensions are escalating in the Persian Gulf region. The U.S. and the United Arab Emirates intercepted two ballistic missiles heading toward Abu Dhabi.
That's according to authorities.
The Iranian-backed Houthi rebels in Yemen are claiming responsibility. It's the second attack in a week targeting the Emirati capitol.
WikiLeaks founder Julian Assange has won the right to try and appeal to the U.K.'s Supreme Court against extradition to the U.S. Assange faces
espionage charges in the U.S. for his role in publishing thousands of classified military and diplomatic cables. In December, the British High
Court said that Assange could be extradited based on assurances from the U.S. about how he would be treated.
Well, another day another set of allegations that the U.K. Government violated its own COVID rules. This time the event in question was Prime
Minister Boris Johnson's birthday in June 2020. His spokesman has admitted a group of staff gathered briefly inside to mark the event, which occurred
during the first U.K. lockdown. CNN affiliate ITV News reported that as many as 30 people were there.
At the time the U.K. only allowed outdoor gatherings of up to six. Bianca Nobilo joins me now live with more. You know, this is -- it brings back
memories of many of us having our birthdays on Zoom.
BIANCA NOBILO, CNN CORRESPONDENT: Well, quite and hypocrisy is at the center of all of this controversy and why the prime minister is in so much
trouble. Alison, I've been trying to keep track when I was in the makeup room and I've got about 10 parties now that Boris Johnson allegedly either
attended or obviously oversaw or was aware of in Downing Street. So what we're talking about today is his birthday the 19th of June 2020.
Which I might add was not yet two months after he was in hospital with COVID, which his team and others referred to as a brush with death. So it's
not like the important, the danger of COVID would have been lost on him at this point. But nonetheless, the 19th of June 2020 supposedly two events
took place. The first at 2:00 p.m. reportedly according to ITN in the Cabinet Office. So, indoors as with up to 30 people.
Downing Street said that the Prime Minister attended for no more than 10 minutes. And they dispute some of the facts of that event. And the other
part of that being a gathering in the evening, which the Prime Minister said was with just his close family, and that was outside. But it's
possible that could also have been breaking the rules as well, because you weren't allowed to mix with people outside of your bubble.
Now, as you know, Alison, the Prime Minister is in huge amounts of trouble with his own party and potentially facing a vote of no confidence,
imminently as a result of this investigation, which is ongoing into whether or not he broke his own rules. We can expect the results from that any day
this week, potentially next week. Sources I've been speaking to have indicated that the person in charge of that report, Sue Gray is now
speaking to the police and that they have perhaps acquired some more damning evidence.
But really, we're at the point where nobody is surprised by these revelations. I think the fact that the Prime Minister is surviving is a
function of somehow people getting used to these stories and also wanting to wait for the outcome of that investigation, and crucially, the absence
of an obvious successor to him. But the public anger over this issue is so great now, obviously, when I speak to my friends or when I speak to people
on the street or cab drivers in London, they'll speak to me about these things.
And it's just palpable, although I would say at this point, people are just getting to the -- to the -- to the state where they used to it and if there
are more allegations of parties in the coming days, nobody would be surprised.
KOSIK: Well, I would say even though they're getting used to it doesn't mean they have to or have to or want to tolerate it. Bianca Nobilo, thanks
so much.
U.S. officials are striking back at China in the latest round of a growing airline spat. Just days ahead of the Winter Olympics in Beijing, the U.S.
transportation department is suspending 44 China-bound flights from Chinese carriers between late January and early March. It says the move in response
to China's cancellation of the same number of U.S. flights. CNN Aviation Correspondent Pete Muntean is following the story. And he joins me now from
Washington. Pete, what started this back and forth with the cancellations?
PETE MUNTEAN, CNN AVIATION CORRESPONDENT: It does really sound like a bit of a playground fight here, Alison. You know, this all goes back to these
rules imposed by China and the Chinese Civil Aviation Authority in the first place according to airlines and U.S. government officials, they're
called circuit breaker rules. And it's all about U.S. flag flights flying into China, if a passenger onboard that flight later test positive for
COVID.
Five of them means that that flight, that same flight will be canceled for up to two weeks. This also applies if one of those passengers test positive
up to seven days after that a flight arrives in the United States. Now airlines really call these rules so onerous, Delta, American and United
have all been impacted by these Chinese rules. It's really left them scrambling to try and figure out how to rebook passengers on different
flights.
So now the U.S. government is firing back, it goes all the way back to these pandemic era rules in agreement posed by the U.S. and the Chinese
government. And in that, these new restrictions say that the U.S. government is canceling Chinese bound flights to the United States. 44
flights, as you mentioned, four different carriers starting now and between March, you know, this really leaves a lot of people in limbo who are trying
to get to the Winter Olympic Games in Beijing.
They start next Friday. And now it seems that folks who have a Olympic credentials will really only be able to get their unchartered and special
flights, Alison. It's really tricky now.
KOSIK: I can't believe at the Beijing Olympics are of -- you said next Friday.
MUNTEAN: Yes.
KOSIK: And it's still difficult for so many to get there. All right, Pete Muntean, thanks so much.
An update on breaking news of an apparent military coup in Burkina Faso when we return.
(COMMERCIAL BREAK)
[15:41:37]
KOSIK: We're following a developing story out of Burkina Faso where members of the country's military say they have taken control of the West African
nation. In an announcement on state TV, they declare that the military is now in charge. The whereabouts of the president aren't known. Though some
of the soldiers taking part in the coup told CNN, he's being held in a safe place.
A car that's part of the presidential fleet was found with numerous bullet holes and blood inside the vehicle. Let's bring in CNN Stephanie Busari for
more on this breaking story. Stephanie, what's the latest?
STEPHANIE BUSARI, CNN DIGITAL SUPERVISING EDITOR, AFRICA: So, as you say the military has announced that they are taking over. Part of the
announcements they made earlier was that the government is now dissolved. They've closed the London air borders and imposed a curfew from 9:00 p.m.
to 5:00 a.m. They say this action is necessary. And President Roch Kabore must go because he has simply failed in his responsibility as leader to
protect the citizens from jihadist violence.
And they say they and their colleagues are the ones bearing the brunt of these attacks. About 50 soldiers were killed just recently in the country
in some of the latest attacks. So the President's whereabouts are unknown, as you say, but it hasn't come out of the blue, this military takeover.
He's faced some criticism and protests. And in fact, after the military announcements, citizens took to the streets honking and cheering the
military decision to dissolve the government.
And, you know, this country is in crisis and remains to be seen what will happen in the next few weeks and months. ECOWAS to West African regional
bloc has condemned in no uncertain terms. This action calling it a grave act, Alison.
KOSIK: All right. Stephanie Busari live for us. Thanks so much. After a break, we'll take one final look at the markets as they stage a bit of a
recovery here.
(COMMERCIAL BREAK)
[15:46:31]
KOSIK: Welcome back. I'm Alison Kosik. And we're into the final minutes of trading on Wall Street. Markets look like they've come roaring back. The
Dow had lost as much as 1100 points. That was prompted by concerns over geopolitical tensions, inflation, Omicron and a potential Fed rate hike.
The past hour has seen the Dow claw back most of those losses. As you see the Dow down now only 107 points.
The three main indices have been broadly in line today with similar losses across the board throughout the day, before they staged a late resurgence.
Matt Egan is in New York suffering through some of this whiplash with me. What is going on here? It's like today was a joke, or is this sort of a
precursor of the volatility of what's to come?
MATT EGAN, CNN REPORTER: Alison, I think the ladder, we're going to see a lot more volatile days like this one. And you know things are bad on Wall
Street, when the Dow being down 50 points feels like a massive win that's because of the massive losses earlier, you know, the Dow was down 1100
points. This could be the seventh day in a row where the market is down. We haven't seen a losing streak like that since February of 2020.
The NASDAQ turn positive a moment ago for the first time all day. The NASDAQ is in the middle. And there it is, it's positive very slightly right
now. And that's suffering its worst months of 2008, worst January ever. And what's funny is that earlier today when the Dow was at as low as point and
I was frantically calling some market strategist, you know, some of them sounded kind of upbeat which are those little curious.
But they said, you know, the selling felt like it had gotten to a point where it was extreme, where there was a washout that was going to shake out
what they called some of the weaker hands and allow for bargain hunters to come in and scoop up some beaten down names. And that seems like what has
actually happened here is that stocks got to the point where people thought that they started to look attractive again. You know, sometimes Alison, the
best cure for low prices is low prices.
KOSIK: But we're seeing a little topsy turvy here. You know, we're seeing the tensions in Russia and Ukraine amp up, but we're also seeing oil prices
fall. I know you've been writing extensively about oil prices moving higher.
EGAN: Right. So the Russia-Ukraine tensions, that is very bullish for energy prices because Russia is the number two oil producer on the planet.
Number two natural gas producer. And the risk of a full scale invasion by Russia into Ukraine, really threatened some of the energy supply, including
potential sanctions, or maybe Russia weaponizing its exports of oil and natural gas. And yet what was interesting is that today, we actually saw
oil prices fall pretty sharply.
And that appears to be because it was sort of contagion. It was spillover from the stock market where at a certain point, people were so nervous,
they were just selling everything, even though one of the reasons why the market was down earlier is because of the Russia-Ukraine tensions and those
tensions are bullish for energy prices. It kind of didn't matter which I think speaks to how negative sentiment had gotten.
Alison, I do think, though, that the market is going to be in store for some more turbulence. I mean, we have the Federal Reserve meeting on
Wednesday. What Jerome Powell says about the plan to fight inflation is really going to be crucial here for the stock market given all these
concerns about Fed rate hikes. And then we have what happens next on the inflation front.
[15:50:03]
I mean, if we see the next consumer price report showing another acceleration in consumer prices that's only going to add to the concern and
anxiety on Wall Street. I don't think we're going to have many dull moments for the next few weeks or months, Alison.
KOSIK: You know, I saw some analysts playing the guessing game of how many rate hikes the Fed may make, and I'm seeing now there could be five, is
this what is spooking the market today?
EGAN: Yes. I mean, I do think that there's this concern that the Federal Reserve is going from extremely supportive to the stock market, right?
Buying $120 billion of bonds every single month. There you can see the Dow turning positive.
KOSIK: Incredible.
EGAN: Yes. It really is incredible. I mean, it was down 1100 points earlier. Now up slightly on the day. The NASDAQ is up about a quarter of a
percentage point, at one point it was down more than four percent on the day. So this is a really, really remarkable swing. But on the Fed there is
concerned that the Fed is going to maybe be moving too quickly to go from really, really dovish to really hawkish as it tries to fight inflation.
Everyone wants to know how many times are they going to raise interest rates, they've been penciling in three rate hikes. The consensus on Wall
Street among investors had been four. But then we're hearing from Jamie Dimon, I think he said -- recently, he said maybe it could be six or seven
times. We don't really know so much is going to be dictated by what the next inflation reports look like.
And also how the real economy is holding up. What happens on the COVID front and yes, all these geopolitical concerns, Alison, there's just so
many different factors for the Fed to try to sort out here.
KOSIK: Yes. So the Fed meeting this week, we will see if we get any clearer message from Jay Powell. Matt Egan. Thanks so much for your great analysis.
EGAN: Thank you, Alison.
KOSIK: Dan Ives is managing director of Equity Research with Wedbush Securities. And he joins me from Westfield, New Jersey. Well, what do you
think, the NASDAQ turned positive today after a really rough day. What are your thoughts about what's going on in the market, especially with tech?
DANIEL IVES, MANAGING DIRECTOR, EQUITY RESEARCH AT WEDBUSH SECURITIES: Yes, I think today was a capitulation day. It really important -- I think you
saw a lot of the risk off, you know, really sort of hit in APEX earlier in the day. And I think this is ultimately bullish for what I believe is going
to be the start of a week of earnings and tax, especially Apple, Microsoft. Yes. So, it's going to reverse a negative trend that we're seeing.
So ultimately bullish but I think they would join this capitulation D that the institutional investors look for is maybe sign that we're starting to
bottom.
KOSIK: Doesn't capitulation usually hold though, and we're not seeing that, that doesn't concern you with the tech sector?
IVES: Look, I mean, it's going to be volatile, of course, over the coming days, weeks. But if you look here, we think it's oversold in terms of --
especially in tech stock. You know, many of these names are down 30, 40 percent to start the year. You're already factoring in four to five rate
hikes, you got the Russia-Ukraine situation. It's a tightening, and, of course, valuation centric. And I think you got to look at the fundamental
story of going to a fourth industrial revolution growth.
I mean, just to give you some numbers room for 25 percent growth for overall software, going into this year, typically, that's about 13 to 14
percent. Growth continues to be elevated go in 2022.
KOSIK: You know, there's just a lot of skepticism with, you know, interest rate hikes around the corner that tech stocks can actually move higher in a
rising rate environment, that skepticism has been playing out, not just today but over the past week or so.
IVES: Yes. And it becomes a self-fulfilling prophecy because ultimately, risk assets get thrown out. You start to see some rotation to value. And
now what you're seeing now in this painting environment, I think is dislocated from fundamentals. I mean, covering tech stock, 21 years in the
street, I've seen many of these times where inflation hawks and you worry about fed raising rates. It all comes down to look at the growth.
It's unprecedented the growth that we're seeing in cloud names like Microsoft, you could CyberSecure, that's another pocket. And then I look in
names like Apple as well as some electric vehicle names like (INAUDIBLE) I think this is a pivotal week that fundamentals now start to turn the tech
sector higher.
KOSIK: Yes. I mean, we're seeing the mega techs. The mega cap stocks do really well. But then there are a lot of names in the tech sector that need
to be corrected, that aren't making a profit. So as -- so we're seeing this rebalancing, I'm curious if you see E.V.s in the same light.
IVES: Look, I think you're starting to see some of that we'll call it the weekends or no, especially some of these unprofitable names really get
thrown to the wayside, but you can (INAUDIBLE) the whole sector with that. You look not just names like Tasso but I think ways to play E.V. or are
names like Ford and G.M. In terms of rereading names, and there's a lot of other players out there in terms names like life cycle which is a recycling
E.V. name and a bunch of others that are going to play into this $5 trillion spending.
[15:55:08]
I think this creates the opportunity for investors. You have some of the froth come off from the mark which is ultimately healthy. But I don't -- I
do not believe this is the start of, you know, what I believe is going to be a (INAUDIBLE) your negative turn for this bull market. In fact, I just
view it as a correction on a longer term trajectory despite the Fed tightening.
KOSIK: So you mentioned the big -- some of the big industry players like Microsoft, Apple, Tesla are reporting earnings from the holiday quarter.
These texts could either make things worse and rattle the markets more or they can kind of sue the markets. Where do you think things are going to
land?
IVES: Yes. I mean, also I think it's the biggest week for tech earnings, you know, potentially in the decade because of some of the white knuckles
that you're seeing. And I believe it's going to be bullish, specifically in Microsoft tomorrow night on Cloud. You look at Apple. Coming on Thursday,
terms of 5G and some of the chip shortage issues and of course Tasso coming Wednesday and what we're seeing this massive E.V. demand. I think this is
really going to start to turn the tide.
KOSIK: All right. Dan Ives, Managing Director of Equity Research with Wedbush Securities. Great to have you on the show.
IVES: Thank you.
KOSIK: And there are just moments left to trade on Wall Street. We'll have the final numbers and the closing bell right after this. The Dow is
positive.
(COMMERCIAL BREAK)
KOSIK: There are just moments left to trade on a very volatile Wall Street. U.S. markets are following their worst week since the start of the pandemic
with a truly wild session. A 1200 points swing for the Dow today. It was off more than 1000 points earlier Monday. It's now recovered roaring back.
And as you can see, it's positive. The S&P 500 and the NASDAQ were We're down even further.
The S&P was off more than two percent and on track to end the day in a correction. It's now positive on the day. The NASDAQ entered a correction
last week. It's now turned positive as well. And that's QUEST MEANS BUSINESS.
END
