DealBook Briefing: Why the Stock Markets are Tumbling

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The stock markets had an awful Wednesday

Stocks suffered their steepest drop in eight months yesterday. The S.&P. 500 fell 3.3 percent — its fifth consecutive daily decline — while markets in Asia and Europe also shuddered. The losses were led by tech companies: Apple shares, for instance, fell over 4.5 percent on Wednesday.

President Trump called the situation “a correction that we’ve been waiting for for a long time,” and used it as a chance to again criticize the Fed’s interest rate increases. “I really disagree with what the Fed is doing,” he said, adding that it “is making a mistake” and “has gone crazy.” Christine Lagarde, the head of the International Monetary Fund, supported the Fed, calling its policies “legitimate and necessary.”

But Matt Phillips of the NYT points out that many factors are at play in the sudden market fall:

Concerns about nascent inflation, rising interest rates and the potential for the Federal Reserve to tighten monetary policy came together into a wave of selling Wednesday. In addition, President Trump’s policies toward Beijing have become a drag on technology companies, which rely heavily on China as a manufacturing base.

What’s next? Mohamed El-Erian of Bloomberg Opinion says that in the longer term, the markets will take on “a more solid footing” — but warns that the short term is “likely to be quite volatile.” Today could be another roller coaster.

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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.

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Trump clamps down on Chinese investments in U.S.

The White House will tighten rules for foreign investment in America — but its clear target is China.

The Trump administration said yesterday that it would expand the scope of Cfius, the government panel that reviews foreign investments in U.S. businesses. It will now be able to review more transactions, including joint ventures and minority investments, if the American company produces sensitive technology. The stated goal: to protect American technology from falling into Beijing’s hands.

U.S. lawmakers were largely supportive. But the arrest of a Chinese intelligence official who sought to steal trade secrets from G.E.’s aviation business underlined the political will to crack down on Chinese deals. Nicole Lamb-Hale, a Cfius expert at the consultancy Kroll, said, “If we don’t do something very quickly, we’re going to be in a position where from a national security standpoint we’re at risk.”

The new policy will do little to ease tensions between America and China in their trade war.

More on foreign deals: Senator Rand Paul of Kentucky wants a national security review of Broadcom’s planned takeover of CA Technologies. Broadcom said that a memo purportedly from the Defense Department calling for such an inquiry is forged.

Hurricane Michael’s economic hit

The storm slammed into the Florida Panhandle last night, causing destruction with winds that topped 155 miles per hour. But the full extent of the damage won’t be known for months.

“Hurricane Michael is the worst storm that the Florida Panhandle has ever seen,” Gov. Rick Scott of Florida said. Axios notes that meteorologists were shocked by how quickly it grew in power, and that some studies suggest that the increased frequency of powerful hurricanes is a result of climate change.

Michael’s fallout will be felt for months. AccuWeather estimated that it could cause about $30 billion worth of damage, and several economic indicators, including weekly jobless claims, will be skewed by the storm.

Coming up

Central bankers and G-20 finance ministers head to Bali. They will attend the I.M.F.’s and World Bank’s annual meetings there to discuss challenges facing the world economy. Trade tensions will be high on the agenda. (The delegates were welcomed by an earthquake.)

The Labor Department will publish the latest consumer price index data. Analysts expect the indicator of household expenditure to have grown by around 0.2 percent in September, a similar rise to the one in August.

Amazon improves its pay, again

Last week, the e-commerce company said it would raise its minimum wage for hourly U.S. workers to $15 an hour, blunting criticism from lawmakers about how it treats its workers. But the move appeared to backfire, as some longtime workers pointed out that a cut of monthly bonuses and stock grants might leave them worse off. Then Senator Bernie Sanders of Vermont, who had criticized Amazon in the past as paying low wages, asked Amazon to make certain that all of its workers felt a boost.

So Amazon will change its pay policy again. Now it will adjust compensation on a site-by-site, person-by-person basis “to ensure everyone experiences the benefit of this change.”

• Workers who already received $15 per hour will get a $1.25 rise (not the $1 offered last week).

• There will be cash bonuses for workers who stay at the company a long time ($1,500 at the five-year mark, and then $3,000 at every five-year anniversary thereafter).

The move will help Amazon’s standing as it lobbies lawmakers to raise the federal minimum wage, which has been $7.25 an hour for almost a decade.

The White House’s conflicted Saudi strategy

Pressure is building on the Trump administration to act over Saudi Arabia’s involvement in the disappearance of Jamal Khashoggi, the political dissident and journalist. But the White House is conflicted, partly because Jared Kushner has made a big bet on the kingdom’s de facto ruler, Crown Prince Mohammed bin Salman. (U.S. intelligence reportedly suggests Prince Mohammed ordered Mr. Khashoggi’s abduction.)

More from the NYT:

Mr. Kushner championed Prince Mohammed, 33, when the prince was jockeying to be his father’s heir; had dinner with him in Washington and Riyadh, the Saudi capital; promoted a $110 billion weapons sale to his military; and once even hoped that the future king would put a Saudi stamp of approval on his Israeli-Palestinian peace plan.

The White House has stepped up pressure on the Saudis, but President Trump appears reluctant to press too hard. Asked whether he would consider cutting arms sales to the kingdom, he said, “I think that would be hurting us.”

More Saudi news: Three individuals, including former Energy Secretary Ernest Moniz and Jony Ive of Apple, have withdrawn as advisers to the kingdom’s $500 billion megacity project.

Need help understanding the news? Listen to The Argument

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Each week, three Times columnists with very different perspectives — Ross Douthat, Michelle Goldberg and David Leonhardt — will make sense of the news, without pretending that they agree about it. The first episode takes on the future of the Supreme Court and the future of #MeToo. You can subscribe on iTunes or wherever you get your podcasts.

Revolving door

The social network Nextdoor named Sarah Friar, Square’s C.F.O., as its next C.E.O.

James Murdoch is reportedly the front-runner to become Tesla’s chairman.

Citigroup will decide soon whether to make its C.E.O., Mike Corbat, chairman of its board as well.

Potential candidates for Facebook’s top communications and policy role reportedly include Jake Siewert of Goldman Sachs and George Osborne, the former British chancellor of the Exchequer.

Booz Allen Hamilton has named Michèle Flournoy and Ellen Jewett to its board. Another director, Philip Odeen, will retire in March.

The speed read

Deals

• The Justice Department approved CVS’s $69 billion takeover of Aetna. (NYT)

• Sears’s C.E.O., Eddie Lampert, won’t lend the company money to pay off $134 million in debt due Monday. A Sears bankruptcy filing could be good for some landlords.

• Apple agreed to acquire the British chip maker Dialog Semiconductor as part of a $600 million deal. That will give Apple 300 engineers to help expand its growing processor ambitions. (WSJ)

• DealBook exclusive: AllBirds, the sneaker start-up, has raised $50 million from T. Rowe Price, Fidelity and Tiger Global Management. The company plans to open a retail store in London next week and expand into Asia next year.

• The Dolan family, which is considering carving out the New York Knicks and Rangers from Madison Square Garden, may be better at spinoffs than sports. (Breakingviews)

Politics and policy

• Howard Schultz’s presidential ambitions may be a liability for Starbucks. (Breakingviews)

• Michael Bloomberg switched his political affiliation to Democrat, suggesting that he’ll run for president as one in 2020. (NYT)

• New legislation removes a “gag clause” that prevented pharmacists from telling consumers about the best prescription drug prices. (NYT)

• President Trump is no longer ratings gold for Fox News. (Politico)

• Britain’s true point man for Brexit talks is a relatively unknown civil servant. (FT)

Trade

• The U.S.-China trade war is rerouting the world’s oil flows. (Bloomberg)

• It’s also been good for American garlic farmers. (Axios)

Tech

• The Google Plus data exposure has renewed lawmakers’ calls to rein in Big Tech. (WSJ)

• How the Pentagon’s shift to cloud computing became a mess for the tech industry. (Wired)

• Leaked Google research appears to show the company’s struggles in moderating harmful content while preserving free speech. (Breitbart)

• WarnerMedia plans to unveil its Netflix rival by the end of 2019. (NYT)

• Where Amazon, Google, Apple and Facebook stand in the battle to control your home. (Stratechery)

Best of the rest

• Chamath Palihapitiya of the venture capital firm Social Capital said the start-up economy is a kind of a Ponzi scheme. (CNBC)

• In defense of flying business class for work. (WSJ)

• A legal fight over law firm fees could improve the transparency of securities class actions. (NYT)

• Newsweek’s former parent company, IBT Media, has been charged with defrauding lenders. (WSJ)

• Three traders accused of fixing foreign exchange markets were just joking around in the chat rooms they used to share information, their lawyers argue. (FT)

• China may sacrifice its exchange rate to save its economy. (FT)

• Anyone for a weed beer? (Bloomberg)

Thanks for reading! We’ll see you tomorrow.

You can find live updates throughout the day at nytimes.com/dealbook .

We’d love your feedback. Please email thoughts and suggestions to [email protected] .

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