Investors realize they were too optimistic

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

November breather
U.S. stocks ended Thursday mixed, with the Dow Jones Industrial Average, the only major index to fall, snapping a four-day winning streak. Asia-Pacific markets traded lower Friday. The Hang Seng Index fell more than 2%, weighed down by a 10% plunge in Alibaba’s Hong Kong-listed shares. Investors weren’t happy that the Chinese e-commerce giant is shelving plans to list its cloud division.

The everything store
Amazon will allow auto dealers to sell cars on its site starting next year, kicking off with a partnership with South Korean automaker Hyundai. As part of the deal, Amazon’s Alexa voice assistant will come with Hyundai’s cars starting 2025. Shares of used car dealers backtracked following the announcement. (No word yet on whether the cars will be eligible for Amazon’s same-day delivery, though.)

Falling behind in China’s EV race
Hyundai’s getting a boost in the U.S. market, but it’s falling behind in China — along with other global car brands. China’s transition to electric vehicles has been so fast that big automakers are struggling to catch up, according to CNBC’s analysis. Volkswagen’s on track for its worst year of sales in China since 2012, while Nissan and Hyundai are facing their worst year in decades.

Hitting the X
IBM has suspended its advertising on X, previously known as Twitter. It came after a report found ads from the company placed next to antisemitic content. IBM’s move follows X owner Elon Musk drawing attention to an antisemitic X post, and later accusing “Jewish communities,” the Anti-Defamation League and minorities of “anti-white” messaging. He did not provide examples or evidence for his claims.

[PRO] Reservations on Alphabet
Google parent Alphabet’s one of the Magnificent Seven stocks that have soared this year. But Morgan Stanley equity analyst Brian Nowak told CNBC he has some reservations on the stock — especially when compared with Meta and Amazon. The bank also cut its target price on Alphabet by around 3%, though it continues to be overweight on the stock.

More evidence that inflationary pressures are easing: Weekly jobless claims rose more than expected last week; import prices dropped 0.8% for the month, against the expected 0.3%; U.S. oil prices fell 5%. Walmart CEO Doug McMillon even thinks prices of some grocery items might “deflate in the coming weeks and months.”

Despite that, stocks had a lackadaisical day, making slight moves in both directions without conviction. The S&P 500 inched up by 0.12% and the Nasdaq Composite ticked higher by 0.07%. But the Dow Jones Industrial Average slipped 0.13% to end four consecutive sessions of gains.

Investors may be getting the note they were a tad too optimistic about the possibility of rapid rate cuts by the Federal Reserve, and that inflation will fall below 2% without the economy going into recession.

BTIG analyst Jonathan Krinsky thinks a recession might be incoming. Signs of a hard landing include “ slowing macro data, company-specific commentary, and persistent weakness of the average stock,” he wrote. Krinsky also warned that stock rallies tend to happen before a recession shows up.

Meanwhile, Cleveland Federal Reserve President Loretta Mester told CNBC she isn’t fully convinced by this week’s economic data. “We’re going to have to see much more evidence that inflation is on that timely path back to 2%.”

To that end, Mester doesn’t see rate cuts on the horizon. On the contrary, she remains open to rate hikes. “My feeling is that it’s really not about cutting rates. It’s really about how long do we stay in a restrictive stance and perhaps have to go higher given what happens in the economy,” she said.

In sum, neither of those scenarios is pretty. That’s not to say a soft landing is completely out of the picture. In a speech in San Francisco, Fed Governor Lisa Cook said “a soft landing is possible.” But, like everything else in markets, “it is not assured.” Perhaps investors shouldn’t be so sure about impending rate cuts too.