The S&P 500 squeezed out a small gain Friday but still suffered its worst weekly loss in nearly two months as market action was dominated by concerns about the Federal Reserve. A series of central bank officials declared their willingness to push interest rates higher to tamp down inflation pressures, raising fears that policymakers will stay hawkish longer than previously expected. Perhaps more worrying for investors, corporate earnings seem to be coming in a bit on the light side, as the number of companies beating Wall Street estimates is lagging the historical average. Meanwhile, yields on the benchmark 10-year U.S. Treasury note rose to their highest in more than a month following an auction Thursday of 30-year bonds that saw weak demand. For the week, the Dow slipped 0.2% for its second straight weekly drop, the S&P 500 fell 1.1% to snap two consecutive weeks of gains, and the Nasdaq Composite dropped 2.4%. Check out Seeking Alpha’s Catalyst Watch for a preview of next week’s key market events.
Another day, another AI update
Microsoft (MSFT) topped $2T in market value this week after saying it would integrate artificial intelligence into its Bing search engine and Edge browser. “I think this technology is going to reshape pretty much every software category,” CEO Satya Nadella declared. “I have not seen something like this since I would say 2007-2008 when the cloud was just first coming out.” The new version of Bing is now available for desktop in limited preview, with a wider rollout and mobile version expected to come soon. Analyst Dan Ives, who has an Outperform rating and a price target of $280 on MSFT, said the integration of ChatGPT into Microsoft’s products would set off an “AI arms race,” while Google (GOOG, GOOGL) felt some pressure from the developments (its Bard mistake and underwhelming AI event didn’t help the situation). (86 comments)
The economy was a big theme in President Biden’s State of the Union address on Tuesday night. He took the podium as inflation shows signs of slowing, as well as a blowout jobs report that put the unemployment rate at its lowest level since 1969. GDP growth has also beat expectations, but remains under pressure amid concerns about a recession, while the current debt ceiling battle also threatens to derail any economic progress and the broader financial markets. Looking to reduce the deficit, Biden called for a billionaire tax, a corporate minimum tax and a levy on stock buybacks. See more takeaways here. (467 comments)
The return of Bob Iger to Walt Disney’s (DIS) CEO job in November promised a reversal of the company’s recent fortunes – and some potentially big changes to the company’s structure. That will include cutting 7,000 workers and $5.5B in costs, as well as a reorganization into three separate units, following a quarterly beat that pushed the stock higher in after-hours trading. Shares even rose as much as 9% AH on Wednesday after he mentioned an effort to reinstate Disney’s dividend that was suspended during the pandemic (it may also help address the demands of activist investor Nelson Peltz). (201 comments)
Regulatory rumblings also hit the crypto sector once again. Notable exchange Kraken reached a deal with SEC that will shutter its crypto staking platform, which allows investors to earn a yield by temporarily depositing their tokens with an intermediary or crypto network to facilitate blockchain transactions. A $30M settlement was additionally reached over Kraken’s failure to register the program, causing further jitters elsewhere. Shares of rival crypto exchange Coinbase (NASDAQ:COIN) slumped 14% on Thursday, with CEO Brian Armstrong saying the SEC may want to get rid of crypto staking for retail customers entirely. Coinbase reported $62M in revenue from “blockchain rewards,” which include staking, in the third quarter of 2022, accounting for roughly 10% of its total revenue for the period. (32 comments)
WTI crude futures (CL1:COM) advanced 2.5% on Friday to regain the $80/bbl level after Russia said it will cut oil output by 500,000 barrels a day next month. Brent futures (CO1:COM) climbed 2.4% to $86.50/bbl. Moscow said the output decrease, which is around 5% of its production, was in response to sanctions such as price caps on crude and oil products that are an “intervention in market relations and an extension of destructive energy policies of the collective West.” It’ll also deepen the 2M bpd curbs announced late last year by OPEC+, and comes as Russia is said to prepare for a fresh offensive in Ukraine ahead of the one-year anniversary of the war that started on Feb. 24, 2022. (24 comments)
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