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Stocks Tumble Amid Inflation, Recession Fears; Biden Invokes Defense Production Act to Ease Formula Shortage; Biden Hosts Leaders of Finland, Sweden at White House Today. Aired 5-5:30a ET
Aired May 19, 2022 - 05:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LAURA JARRETT, CNN ANCHOR: Good morning, everyone. Welcome to our viewers in the United States and all around the world. It is Thursday.
Do we still say Friday eve? Is that still okay?
CHRISTINE ROMANS, CNN ANCHOR: Friday even is okay.
JARRETT: I'm going to say it. It's May 19. I'm Laura Jarrett.
ROMANS: And I'm Christine Romans.
And we begin this Friday with our market -- eyes on the markets all around the world here, following the roughest day on Wall Street in nearly two years. What happened? Worries over inflation, predictions of a recession in the U.S. sent stocks spiraling. The Dow and S&P down about 4 percent, Nasdaq down almost 5 percent.
The selloff started after Target reported, get this, a stunning 52 percent drop in first quarter profits. That was just a day after shares in the nation's largest retailer Walmart had their worst day in 35 years.
So, what's going on here? Well, Target, Walmart, right, both they have their fingers on the pulse of the American consumer and they say inflation was the problem. They say their customers are sticking to the basics, avoiding non-essentials when they come in, leaving with fewer items in their shopping carts.
Those purchasing decisions being driven by sticker shock, of course. Basics are getting much more expensive. Gas is the big one at 44 percent over the last year. Cars, food and shelter also way up.
Americans are also making more money, right? Wages rising in this tight labor market, but that is also feeding into worries about inflation because of wages. And because of rising prices, people don't feel secure so they are cutting back and that is shaking market confidence.
Take a look at Wall Street futures right now, stock index futures all leaning lower again. Markets in Asia are closed mixed overnight. Let's see what the reaction was there. It looks like except for China all down here.
Let's bring in CNN's Kristie Lu Stout live in Hong Kong.
Looks to me when I look at that screen, like the worries on Wall Street bled into the training in Asia. What happened?
KRISTIE LU STOUT, CNN CORRESPONDENT: Yeah. For the large part, markets here across Asia tumbled after that tough Wednesday on Wall Street. Look investors here like in the United States are spooked. They're spooked by rising inflation, by weak earnings and supply chain disruptions caused by China's punishing zero COVID policy. And if you look at the data, with the exception of the shanghai composite, markets ended in the red.
For context, China has been trying to really the spirits of its tech sector after that bruising tech crackdown. You had the vice premiere of China, Liu He, say that the government would properly manage the relationship between the government and the markets, but it is interesting to note that the markets here in Hong Kong, they didn't buy it. They closed lower again, about 2.5 percent lower.
The market is still concerned about growth prospects for the tech sector in China especially after Tencent, this is the maker of that colossal WeChat app in China, this is the world's biggest video game company, reported zero revenue growth in the first quarter -- Christine.
ROMANS: All right. Kristie Lu Stout, thank you so much. Those Asian markets are closed now. But Europe has opened. And let's go to Anna Stewart in London.
European markets are down across the board this morning. What's happening?
ANNA STEWART, CNN REPORTER: I'm looking at these losses, they're actually getting steeper. The FTSE 100 leading it down minus 2.2 percent and they keep falling. This is the second day of losses on European equities. Listen, no surprise here, investors in Europe are also now expecting perhaps more aggressive policy from the U.S. Federal Reserve, that will impact markets here.
But also, the economic picture this side of the Atlantic is frankly the same or worse. Here in the UK, we had inflation data out yesterday for April, it hit 9 percent, it was at 7 percent in March. Three quarters of that, Christine, is energy prices. And this is hitting consumers really hard. And, of course, it's hitting the poorest the hardest.
The Central Bank here in the UK is under huge pressure, is it behind the curve? Can the UK government do more? It's just the same picture.
So, we're going to have a day of losses I think looking at those European markets.
ROMANS: Yeah. Watching futures here to see if it turns around. You hear people talking about when will there be capitulation, but there is just so much uncertainty, so many cross currents in global markets. You can see why investors are unnerved.
The Dow, by the way, this year, since its high down 5,300 points, that is something.
All right. Thank you so much. Nice to see you.
JARRETT: The other top story this morning, President Biden taking on the nation's shortage of baby formula head-on, now officially invoking the Defense Production Act to speed up production.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES: I've directed the Department of Defense and Department of Health and Human Services to send aircraft, planes, overseas to pick up infant formula that meets U.S. health and safety standards so we can get it on the store shelves faster.
(END VIDEO CLIP)
JARRETT: The White House calls it Operation Fly Formula. It's basically going to allow flights -- faster flights of imports and also direct suppliers of ingredients to prioritize deliveries to the companies that make it.
ROMANS: All right. Meanwhile, late Wednesday, the U.S. House of Representatives passed two bills of $28 million in emergency funding to address the formula shortage.
Let's bring in CNN's Daniella Diaz at the Capitol following these developments for us.
Daniella, a pair of bills was introduced by Democrats. How likely is to pass in the Senate?
DANIELLA DIAZ, CNN CONGRESSIONAL REPORTER: Well, Senate Majority Leader Chuck Schumer is trying to put this bill on the floor as soon as possible. Christine, this is a major priority for Democratic leadership. And it is actually a bipartisan issue as well.
You know, Republicans in the House introduced some of their own legislation that is incredibly similar to what House Democrats introduced. Of course they were not working together on these bills that passed through the House late last night. But as I said, Schumer is hoping to put the bill on the floor and have it pass in a process using unanimous consent. That means that every single Democratic and Republican senator could voice their support for this legislation. It passes quickly.
But, of course, that also means a senator could block the legislation, slowing down the whole process. But he is going to do that anyway because as you mentioned, this is a major priority for the administration and they want to start helping Americans quickly to try to alleviate some of the pressures that they are feeling, that they can't find that baby formula -- Christine.
ROMANS: All right. Daniella, thank you so much.
JARRETT: Up next, Secretary of State Antony Blinken speaking out about the war in Ukraine on late night TV, the hard decision he had to make.
ROMANS: Plus, President Biden about to host two world leaders. Will they soon become official NATO allies.
JARRETT: And the U.S. gearing up to put the squeeze on Vladimir Putin once again.
JARRETT: The leaders of Finland and Sweden visit the White House today, key showing of support for the two countries seeking to join NATO.
Turkey's president Wednesday doubled down on his resistance to their NATO bids, but President Biden seemed optimistic that those objections could be resolved.
(BEGIN VIDEO CLIP)
BIDEN: Both leaders of Finland and Sweden are coming to see me on Thursday. I think we're going to be okay.
REPORTER: You can convince Turkey to accept their bid?
BIDEN: I think -- I'm not going to Turkey, but I think that we're going to be okay.
(END VIDEO CLIP)
JARRETT: Let's bring in CNN's Nina Dos Santos. She's live in Stockholm, Sweden, for us.
Nina, good morning.
Can you just explain what is Turkey's beef here with the NATO membership and how will it affect their application to be a part of this alliance.
NINA DOS SANTOS, CNN EUROPE EDITOR: Well, considering all NATO members, all 30 of them have to sign off by unanimous consensus and Turkey holding out here is a problem, perhaps unexpected one both for United States and Sweden and Finland. This is why we've seen the U.S. jump into this unofficial mediation role at lightning speed here to assuage Turkey's concerns and also recognize that Turkey is a huge important member of NATO. It's got the second biggest army for instance in this hugely powerful military alliance. What is Turkey's beef? Well, it's perceived sympathies they say that
these two countries, in particular Sweden, appears to have, according to Recep Tayyip Erdogan, the Turkish president, for Kurdish separatist groups. Turkey also has an issue with Sweden having pushed for and implemented an arms embargo on some of it military hardware back in 2019 after a military operation that Turkey conducted against Kurdish groups in northeastern Syria.
But also, the backdrop is that Turkey wants more of a dialogue with the United States. And Turkey feels that it has been frozen out of the F-35 fighter jet program in 2019 when President Erdogan decided to buy a Russian-made anti-missile defense system. And so, these are the types of things that are probably going to be in the backdrop of these negotiations.
The big question is whether Turkey would veto their membership. Many defense analysts say that they know that this is a win/win for NATO, these are big defense players themselves these two countries -- Laura.
JARRETT: All right. Nina, thank you. Excellent reporting.
ROMANS: All right. The U.S. flag raised once again over the American embassy in Kyiv, Ukraine. The State Department shut the embassy down three months ago following Russia's invasion of Ukraine.
Melissa Bell is in Kyiv for us this morning.
Melissa, the secretary of state talked about that on late night TV here in the U.S.
MELISSA BELL, CNN INTERNATIONAL CORRESPONDENT: That's right, it is a symbolic moment here in Kyiv. The raising of that American flag once again over its embassy. You will remember it was in the days running up to the invasion back on the 24th of February that all the embassy staff had been moved, not terribly far across the border in Poland, but it just seemed too dangerous for the embassy to remain open here.
Here is what the secretary of state had to say last night.
(BEGIN VIDEO CLIP)
ANTONY BLINKEN, U.S. SECRETARY OF STATE: When the attack was coming, we had to make a really hard decision to suspend our operations and get folks out of harm's way. Let me tell you, they didn't want to go, but we moved them to Poland. They took the flag that was flying over the embassy that day with them. And that is the same flag that is now flying over the embassy again in Kyiv.
(END VIDEO CLIP)
BELL: Now, what the secretary of state has also been saying over the course of the last 24 hours or so, Christine, is that it is not just a symbol of the flag but a representation of the continued support of the United States for Ukraine in its fight against Russia. And, of course, it comes in the very week that the U.S. Senate has made progress on that bill to help with that $40 billion package for Ukraine.
We expect that that should come to a final vote by the end of the week. But it is also I think a measure of how successful that support has been in helping Ukraine see off that invasion. Who would have imagined only three months ago that three months later we'd be standing in the middle of Kyiv perfectly peaceful and seeing Russian forces pushed really to the edges of the country and to around what their strongholds have been to begin with?
ROMANS: I mean, it's symbolic indeed, but there's awful lot of work for those American diplomats to do, right? I mean, you got a food crisis that is coming, you've got all these dislocated people. So, there's a lot of hard work to do.
We know that you're following it for us. Melissa, thank you.
JARRETT: Hard to believe it's been three months.
ROMANS: I know.
JARRETT: Well, President Biden goes somewhere he's never been as president later today.
ROMANS: And the gun law that could have prevented the racist attack in Buffalo, it's already on the books. So what happened?
JARRETT: Welcome back.
New York Governor Kathy Hochul signing an executive order requiring state police to now flag individuals deemed a threat to themselves or others. Until now, that was optional.
(BEGIN VIDEO CLIP)
GOV. KATHY HOCHUL (D), NEW YORK: We'll provide law enforcement the guidance they need, the criteria to follow, and we believe that together, these steps are necessary to confront the stem of rising hatred, white supremacism in our state.
(END VIDEO CLIP)
JARRETT; Let's bring in Jennifer Mascia, news writer for "The Trace", an independent, nonpartisan, nonprofit newsroom working to shine light on America's gun violence crisis.
Jennifer, so nice to have you bright and early on EARLY START.
New York already had a red flag law, so help us out here. Why exactly wasn't it triggered? How did the Buffalo shooting suspect essentially fall through the cracks when he had threaten to essentially carry out a murder suicide plot last year?
JENNIFER MASCIA, NEWS WRITER, THE TRACE: So red flag laws require someone to raise an alarm in order for them to be effective. If that is missing, then the law really is kind of a gap, it is just not effective. The red flag law was passed in 2019 and it allows police, school officials and family members or household members to file a petition to ask a judge to temporarily disarm somebody and that brings them in for a hearing and then a determination is made and they can lose their gun rights for a year.
According to one of the postings online, the shooting suspect when he made that threat last June, he knew exactly what to say to avoid triggering the red flag law. He was smart enough to say, you know what, I just wanted to get out of class. And that was the way that he wasn't committed. He was taken for a psychiatric evaluation, but he was not on the ordered committed. That would have cost him his gun rights.
But also, if the red flag law had been triggered, police might have come into his home and seen that he had guns that apparently his parents didn't even know he had if that online screed is to be believed.
ROMANS: Yeah, some of that -- some of that truly troubling step that he was writing online was almost bragging about how he was able to manipulate his parents and his brothers and to hide this. So, the onus is on parents, schools, right, school officials, friends and police to really raise this red flag and get it to a judge.
MASCIA: Yes, yes, it is. And one of the things that had hindered the law is that it hasn't really filtered down to the public. You know, this is a civil process, you can start the process the online and then bring the paperwork to a county court.
A lot of people don't know that they are empowered to do this and that is one of the reasons that Governor Hochul, it was more like an awareness tool, you know, when she said the state police -- you know, the state police confirmed to me yesterday, they already had issued red flag petitions. It was something that they did customarily.
This was kind of like an awareness tool. And the more that that awareness filters down to the public, the more family members can use this as a tool.
JARRETT: You know, we also saw some recent data from the ATF this week that shows just an alarming spike in the gun manufacturing, an alarming spike in the so-called ghost guns. You know, the homemade kits you can use. Look at that, even just over the last two years, the numbers are pretty telling.
So what sort of regulations do you think that the president is going to realistically be able to impose on this industry? So many administrations have tried do things through executive orders and it is always limited. So what is really possible here? MASCIA: Very little is possible with a divided Senate. He has, you
know, really assumed community violence intervention. He has proposed billions in funding for that. He has publicly supported, you know, on the ground solutions to reduce gun violence.
His hands pretty much are tied at this point. I can't see anything getting through the Senate and that's a big, big hurdle. So it is really kind of left to the states.
ROMANS: So we have to look to the states and these red flag laws. Are there examples? I mean, in your piece, you talk about examples where officials say red flag laws have worked specifically for suicide prevention.
MASCIA: Yeah, Connecticut has had its red flag law on the books for more than 20 years and studies have been done, and it did show an association with reduced suicide risks, also, you know, suicide in the elderly as well.
And there were a few dozen cases that researchers identified in California where they reported that it stopped mass shootings, that the application of the red flag law did stop mass shootings.
And it is a temporary tool, there is no arrest attached. It is a civil process and once it's completed, people had no problem buying guns in the future, it really just is a way to quell the immediate crisis. And people do come out of it.
JARRETT: Yeah, it sounds like interesting public awareness campaign.
ROMANS: That is what the governor of New York was trying to do yesterday.
Jennifer Mascia of "The Trace", thank you.
JARRETT: Please come back.
MASCIA: Thanks for having me.
JARRETT: All right. Ukrainian troops hitting a Russian tank just miles from Russia's border. We have the latest from inside Ukraine, next.