The stock market was lower on Tuesday morning, with investors still looking for clarity about whether the U.S. will make effective overtures to resolve its trade disputes with China and other key trading partners. Monetary policy also remained a focus, with the Federal Open Market Committee scheduled to meet next week to discuss whether or not the Federal Reserve should cut its benchmark interest rates further. As of 12:15 p.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 43 points to 26,793. The S&P 500 (SNPINDEX:^GSPC) had fallen 13 points to 2,965, and the Nasdaq Composite (NASDAQINDEX:^IXIC) had dropped 43 points to 8,045.
The credit markets have gotten more attention as interest rates have fallen, but news from Ford Motor (NYSE:F) reminded investors that credit quality remains an important factor as concerns about a potential recession rise. Meanwhile, Target (NYSE:TGT) confirmed that the employment market still looks strong, announcing plans for holiday hiring that signal improved levels of confidence.
Ford's bond rating comes under fire
Shares of Ford Motor were down almost 3% at midday Tuesday after the automaker got bad news from a prominent credit rating agency. Moody's downgraded the bond rating on Ford's senior unsecured debt a single notch from Baa3 to Ba1. That was enough to take Ford's debt out of the investment-grade category and put it into the high-yield debt arena, which many investors refer to as junk bond status.
Moody's referred to "the considerable operating and market challenges facing Ford" in justifying the downgrade, as well as "weak earnings and cash generation likely as the company pursues a lengthy and costly restructuring plan." Ford got credit for addressing its operating inefficiencies and cutting costs, but the credit rating agency still believes a full recovery will take time.
Meanwhile, Moody's is nervous that Ford's troubles arose at a time during which the global auto industry has been extremely healthy. Now, markets appear to be softening. If that continues, it could become tougher for the company to manage a turnaround.
Ford is unlikely to see its bond rating upgraded back to investment-grade status in the near future; Moody's says that before that can happen, it would need to see profit margins, full regulatory compliance, and consumer adoption of innovative products like electric vehicles. Ford can achieve those goals over the long term, but for now, its lower bond rating will likely boost borrowing costs and put more pressure on profits.
Help wanted at Target
Shares of Target were little changed Tuesday after the retailer announced its hiring plans for the upcoming holiday season. The company said it will add more than 130,000 seasonal team members nationwide, and the details revealed some of Target's priorities.
Among the hires, about 125,000 positions will be for jobs at Target's stores. Yet the company said that the primary role for many of them will be to help the company fulfill digital orders through its store network. Indeed, twice as many of its in-store seasonal hires will be focused on fulfilling digital orders as last year. Another 8,000 new workers will be hired to work in the company's distribution and fulfillment centers.
Target also highlighted what it sees as favorable employment terms. The retailer will pay at least $13 per hour, in line with its longer-term policy to reach a $15 per hour company-wide minimum wage by the end of 2020. Workers will also get discounts on merchandise, flexible schedules, and holiday pay on Thanksgiving and Christmas.
Like many retailers, Target has had to deal with cost pressures related to tariffs, as well as rising labor expenses in the current low-unemployment environment. Yet for those looking at the state of the U.S. economy, Target's increase in seasonal hiring signals a more optimistic tone for the department store as the critical holiday period approaches.