Global markets are still volatile as investors consider the economic prospects. The week is packed with economic policies, inflation as well as global PMIs. However, Bitcoin beats the odds and fights back from bankruptcy as the price edges towards 23k.
Market Week Ahead: Inflation Data, Monetary Policies, Global PMIs in Focus As Bitcoin Rally Edges Towards 23k; Tech Companies Lead Earnings Reporting Even As Layoffs Pile
Across the industry, tech companies are laying off thousands of employees ahead of earnings reports. Among the companies reporting this week are Tesla, Microsoft, IBM, Intel, and TI. Can the optimism of Netflix spread to the rest of the IT industry?
Last week’s market sentiment was uneven across the board. The Nasdaq 100 rose 1.27%, while the tech-heavy Dow Jones fell 2.38%.
Over in Europe, the DAX 40 and FTSE 100 also experienced declines of -0.35% and -0.94%, respectively. Market conditions in the Asia-Pacific area were better. The Nikkei 225 and Hang Seng Index each saw gains of 1.66% and 1.41%.
Early trading saw the pan-European Stoxx 600 rise 0.15%, with tech companies rising 1.1% and chemicals declining 0.7%.
After economic data last week revealed a decline in wholesale prices and retail sales, the prospect that the Federal Reserve is preparing to curtail the pace of its inflation-fighting rate hikes has been taken into consideration by international markets.
Fed Governor Christopher Waller stated on Friday that he supports only a quarter-point increase on February 1 when the central bank releases its upcoming interest rate policy update.
In addition, Waller claimed that interest rates are already too high and are harming the economy.
IMF managing director Kristalina Georgieva stated Friday at the World Economic Forum that while things are not as awful as initially anticipated, “less bad doesn’t quite yet mean good.”
While equities rose in Asia overnight, Sunday evening saw minimal movement in U.S. stock futures. However, most markets in the area are closed for the Lunar New Year holiday, with Shanghai’s exchanges closed for the whole week.
Fed vs ECB: EUR/USD Seeks Breakout
The resistance level of 1.09 was inching closer to the euro as last week came to a conclusion. The European Central Bank (ECB) is presently leading the way against the Federal Reserve in what has become a contest amongst central bank speakers to maintain their credibility and stick with a highly hawkish narrative.
By concentrating on the dismal economic statistics coming out of the United States, markets are almost ignoring the Fed’s comments on raising the terminal rate to the 5% level by 2023.
Having said that, considering how many Fed officials are united in their commitment to lowering inflation down to its target level, it could be stupid to do so.
Alphabet and Microsoft & Other Tech Companies Layoffs
As the corporations that drove the 10-year bull market to adjust to a new reality, job layoffs in the tech industry are piling up. Google announced intentions to fire 12,000 employees on Friday, and Microsoft indicated it would let go 10,000 staff members on Wednesday.
Also, Amazon started a new round of layoffs, resulting in the greatest personnel decrease in the e-28-year retailer’s history and more than 18,000 job losses.
The layoffs occur amid sluggish economic growth, increased interest rates to combat inflation, and concerns about a potential recession in 2019.
Alphabet’s main firm, Google, announced Friday that it would be letting 12,000 employees go.
Google’s CEO, Sundar Pichai, announced in an email to the workforce that the company will start making layoffs in the United States immediately. He says the procedure in other nations “will take longer due to local laws and procedures.”
As the software company prepares for slower sales growth, Microsoft is laying off 10,000 employees through March 31. Additionally, the business is incurring a $1.2 billion charge.
In a statement to staffers that was published on the business website on Wednesday, CEO Satya Nadella declared, “I’m optimistic that Microsoft will emerge from this stronger and more competitive.” He said that some workers would learn this week whether they will keep their jobs or not.
Recently, Microsoft-supported ChatGPT was released, and given its popularity, investors may be wondering what it implies for Alphabet, Google’s parent company.
According to analysts, the platform may pose a threat to Google’s core search business.
An artificial intelligence chatbot named ChatGPT was developed by San Francisco-based OpenAI and has the ability to provide answers and compose essays. In the cloud computing market, both tech behemoths compete.
Bitcoin Nears $23K, Shrugs Off Bankruptcy
Continuing its 2022 bull run, Bitcoin (BTC-USD) just surpassed $23,000 for the first time since August 2022 before dropping to about $22,705 on Monday.
Bitcoin recently broke over a price level last seen when the FTX cryptocurrency exchange failed in November 2022, sending the market into a series of liquidations.
At the time of writing, Bitcoin was worth $22,938, up from a low of $16,000 at the start of the year. This increase over the previous week was over 8.9%.
Max Keiser, one of the original proponents of bitcoin, said: “Bitcoin shakes off the FTX issue like water off a duck’s back.
He added that people concentrate on pricing when they have to concentrate on hash rate, adoption rates that have reached new highs, and how bitcoin is altering Central America and Africa while also making headway around the world.
Ethereum (ETH-USD), the second-largest cryptocurrency by market capitalization, increased by more than 5% this past week to reach $1,633.
The cryptocurrency market ignored Genesis, a crypto-lender, declaring bankruptcy on Friday; as a result, the market capitalization of the entire industry has increased to $1.08 trillion.
Analysts theorized that traders had anticipated the investment platform’s bankruptcy since signals had been telegraphed for several weeks.
Genesis is a member of the Digital Currency Group (DCG), a grouping of more than 200 companies with a cryptocurrency focus. Genesis’ insolvency is connected to FTX’s bankruptcy, which occurred last November amid fraud suspicions.
The week Ahead: US Q4 GDP and Inflation Data, BoC Rate, Global PMIs
Several US economic announcements that were scheduled to be released around the end of the following week were anticipated to attract investors’ attention.
A preliminary reading of GDP prices for the fourth quarter was released on Thursday.
The price deflators followed this for December’s personal consumption expenditures and the final readings for January’s inflation expectations gauges from the University of Michigan.
These reports would be the last ones about US inflation before the Federal Reserve’s next policy meeting on January 31–February.
The Canadian Dollar expects the Bank of Canada’s statement about interest rates. Trading participants believe that the 25 basis point rate increase on Wednesday will be the final one in this tightening cycle based on market pricing.
Similar to the BoJ, this makes markets more susceptible to setbacks and allows the Loonie to gain ground.
The inflation rates for New Zealand and Australia, expressed as NZD/USD and AUD/USD, respectively, are two additional noteworthy event risks for the coming week.
What else to expect for this week?
Tuesday saw the preliminary figures for S&P Global’s manufacturing and services Purchasing Managers’ Indices for the euro region released.
The survey results were predicted to indicate that in January, the latter somewhat reentered the expansionary area. Investors would also be closely monitoring a consumer confidence poll in Germany scheduled to be released the same day.
On Wednesday, the carefully watched IFO Institute business confidence poll was released, covering the January month. Further progress was also anticipated.
Tuesday’s factory and services PMIs from S&P Global will also be watched closely here at home.
On Thursday, Japan’s wholesale services pricing data for December was expected, and on Friday, Tokyo’s core consumer price data for January.
Because of the Lunar New Year holidays, Chinese markets were expected to be closed all week.
With Microsoft and Tesla releasing their numbers, the earnings season is still in full swing, especially for tech companies. It’s reasonable to wonder if all of the bad news has been factored into the market as the conflict between good and negative news cycles continues.
Investors who are waiting for a chance to enter this bear market from the sidelines are incredibly anxious to discover whether stock prices have reached their bottom.
Shares of Netflix, Inc. (NFLX) increased by about 8.5% on Friday before settling at its highest level since April 19, 2022, when they plummeted following the company’s announcement of its first decline in net paid subscriber additions in ten years.
Although the streaming giant’s robust paid subscriber growth delighted Wall Street, overall earnings forecasts for S&P 500 firms have softened in recent days.
Microsoft (MSFT) will report earnings after the close, Tuesday, Jan. 24.
Microsoft forecast by Wall Street is that it will generate $52.99 billion in revenue and earn $2.30 per share. This contrasts with the prior-year quarter’s $2.48 per share earnings on $51.73 billion in revenue.
Microsoft recently announced layoffs, which is the latest indication that a recession may be on the horizon, even if the market is still generally favorable to the firm.
Microsoft announced on Wednesday that it would lay off 10,000 workers globally and incur a $1.2 billion charge for the job losses in the second quarter of its fiscal year, which would reduce its earnings per share by 12 cents.
Tesla (TSLA) will report Q4 earnings after the close, Wednesday, Jan. 25.
Analysts predict that Tesla will generate $24.22 billion in revenue and earn $1.14 per share. When compared to the prior quarter, which had revenue of $17.72 billion and earnings of 85 cents per share.
Is now the right time to purchase Tesla stock? That has been the most often asked question since the company’s shares last month fell to near-$101 52-week lows.
Tesla has not been the first high-growth tech stock to decrease during the current bear market, but given that it declined by 70% in 2022, compared to other high-growth tech stocks, its decline appears to be more significant.
Intel (INTC) will also brief investors on Q4 performance when it releases its reports after the close Thursday, Jan. 26. Analysts predict that Intel will generate $14.48 billion in revenue and earn 20 cents per share.
This contrasts with the prior-year quarter’s $1.09 per share earnings on $19.53 billion in revenue.
One of the biggest letdowns in the semiconductor industry has been Intel stock, which has dropped by roughly 50% over the last twelve months.
The stock price of Intel has decreased by 40% and 25%, respectively, in the past nine and six months.
As a result of ongoing chip supply bottlenecks, the possibility of a recession, and waning demand for consumer and data center goods.
However, given that Intel’s forward P/E is only 15, which is within the range of its historical average, this may be a good time to add shares of the company for the long run.
Summary of Expected Earnings Reports this week from major market players
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