Microsoft before mega takeover
Interest rate concerns deter US investors
01/18/2022, 10:49 p.m
Concerns about rate hikes are fueling bad sentiment on Wall Street. Technology stocks in particular are coming under pressure due to rising bond yields. Meanwhile, Microsoft faces the largest takeover in its history.
After the bank holiday long weekend, rising bond yields weighed heavily on US stock markets. Investors are increasingly expecting interest rate hikes by the US Federal Reserve due to persistently high inflation. Yields on 10-year US bonds rose to their highest level in two years – and at the same time weighed on stocks, particularly technology stocks on the Nasdaq.
The leading US index Dow Jones Industrial fell 1.51 percent to 35,368.47 points. The market breadth S&P 500 slipped by 1.84 percent to 4577.11 points. The tech-heavy one Nasdaq 100 lost even more with 2.57 percent to 15 210.76 points. There is now a threat of a relapse to the lowest level in three months. Rising interest rates are a particular burden for high-growth companies, primarily in the technology sectors. The prices of chip manufacturers and their suppliers came under pressure.
The annual report from also affected the mood Goldman Sachs, the stock price plummeted 7 percent. Significantly higher costs than in the previous year had brought the US bank a drop in profits in the fourth quarter. Goldman missed expectations with the result. On Friday both had JP Morgan as well as Citigroup reported a decline in earnings for the fourth quarter, although they beat analysts’ expectations. They, too, struggled with lower trading revenues, while the investment banking divisions reported higher revenues.
MorganStanley and Bank of America will present their business figures on Wednesday. The shares of JP Morgan, Citigroup, MorganStanley and Bank of America lost up to 4.8 percent – despite sharply increased market interest rates. With a discount of 3 percent, the banking sector was one of the weakest sub-indices S&P 500.
Euro falls to weekly low
Microsoft is facing the largest takeover in the company’s history and wants the computer games manufacturer for 68.7 billion dollars Activision Blizzard take over. In the negative overall market environment, Microsoft shares fell by 2.4 percent. In contrast, Activision Blizzard’s shares shot up 25.9 percent. Exxon Mobil climbed 1.7 percent as oil prices rallied.
The telecom supplier ericsson filed a number of patent infringement suits Apple because the US company is said to have used the technology of the Swedes in products like the iPhone without a license. Apple shares fell 1.9 percent.
The rise in yields drove investors into the dollar dollar index increased by 0.6 percent. In return, the discounted Euro to its lowest level in a week. The greenback is likely to remain supported by expectations of US interest rate hikes ahead of next week’s Fed meeting, ING expected. In addition, the dollar could benefit from its safe-haven status on a backdrop of further sharp falls in equity markets, say FX analysts.
Oil prices climbed to their highest level in more than seven years. Traders pointed to geopolitical tensions in the Middle East. Houthi rebels had flown a heavy drone attack on a key oil facility in Abu Dhabi. The United Arab Emirates are the third largest oil producer within the OPEC oil cartel. In retaliation, the Saudi-led military coalition launched airstrikes on the Yemeni capital, Sanaa.
Analysts at Goldman Sachs expect the price of the variety to rise Brent to $100 by Q3 2022. It should then even go up to $105 by the first quarter of 2023. Meanwhile, higher market interest rates and the firm dollar pushed down the price of gold.