Interest rate worries are back
Tech giants spoil sentiment on Wall Street
2/3/2023, 11:14 p.m
Disappointing quarterly reports from tech heavyweights are sobering on Wall Street. The surprisingly robust latest data from the labor market is also not well received by investors: scarcely has the latest Fed decision been announced than fear of the next steps grows.
Interest rate worries on Wall Street investors have boiled over again after a surprisingly strong increase in US jobs. Disappointing balance sheets from large tech companies also clouded the mood on Friday. The Dow Jones Index the standard values closed 0.4 percent lower at 33,926 points. The tech-heavy one Nasdaq fell 1.6 percent to 12,006 points. The broad one S&P 500 lost one percent to 4136 points.
At the beginning of the year, 517,000 non-agricultural jobs were created on the US labor market, far more than expected. Economists polled by Reuters had expected just 185,000 new jobs. “Whenever we see these big numbers, fear of the Fed comes back with a vengeance as investors worry that the Fed will push things even further than it has, bringing the risk that there won’t be a gentle one landing of the economy, but rather a bounce,” said investment strategist Brian Jacobsen of Allspring Global Investments. After the Fed hiked interest rates by 25 basis points on Wednesday, money markets now expect the US Federal Reserve to hike rates twice more and then pause.
Uncertainty about the further development of fuel demand from China, the world’s largest oil importer, weighed on oil prices. The North Sea variety Brent fell by around three percent.
Equities in interest-sensitive financial stocks bucked the negative market trend. The big US banks JPMorgan, Wells Fargo, Goldman Sachs, MorganStanley and Bank of America increased by up to 1.5 percent. Banks typically thrive with rising interest rates, which bolster their net interest income (NII). In addition, the bond yields which also affect the profitability of financial institutions. The yield on ten-year US Treasuries climbed to 3.517 percent.
A slump in profits at Google’s parent company Alphabet, a poor outlook from Amazon and Apple’s missed profit target for the first time since 2016 hit investors. “Whether it’s through fewer device purchases or lower spending on cloud and advertising, the trend is very clear for everyone,” said market analyst Craig Erlam of trading house Oanda. “Many of the big tech companies have responded by tightening their wallets and announcing mass layoffs, but more is needed to win over Wall Street.” The shares of the Google parent, the online retailer and the iPhone provider initially fell significantly. Apple in the end, however, made it 2.4 percent into the plus. alphabet 2.7 percent lost feathers, Amazon 8.4 percent.
Shares in the US coffeehouse chain fell more than four percent Starbucks. Sales in China were four times worse than expected for the first quarter. Ford papers collapsed by almost eight percent after missing profit targets.