Blog

Jan 12, 2024

It's all about big tech

By Romain Fournier The lack of good news coming from

By Romain Fournier

The lack of good news coming from US debt ceiling negotiations and fears for future economic momentum weighed heavily on Wall Street yesterday. Today, investors are focused on Janet Yellen and the latest draft of the Fed's monetary policy meeting minutes.

Equities took a beating yesterday, much like a rubber band that is stretched and then released a little abruptly. In reality, the explanation is a bit more subtle than that, as the pullbacks are quite targeted. For example, in Europe, the United Kingdom, the Netherlands and, to a lesser extent, Germany have not suffered much. But the Nasdaq and the S&P500 both lost a little more than 1%. In a period of low volatility, this change is noticeable.

The cause of this decline is the same that sparked the bullish sessions that have dominated since the beginning of the year: big tech. Because of course, what works in the ascending phase also works in the other direction. In addition, the negotiations on the US debt ceiling are stalling, which is adding to the grim mood. After having seemed relatively close on Sunday, Republicans and Democrats moved apart on Tuesday. This is all very political, and drama is part of the process.

The macro agenda for the day is quite full. UK inflation figures released earlier today showed that inflation remains sticky. CPI data revealed that core inflation – which excludes volatile components such as food and energy – soared to a 31-year high in April to 6.8%, fueling expectations of further rate hikes by the Bank of England.

Overall consumer price inflation fell to 8.7% in April from March's 10.1%, the Office for National Statistics said. This is higher than the 8.6% expected in the Reuters consensus of economists.

Later today, we have comments on the debt ceiling from Janet Yellen, guest at a conference organized by the Wall Street Journal, and the Fed will publish the minutes of its last monetary policy meeting.

On the corporate front, some tech results are due in the United States, including those of Nvidia, after Intuit or Agilent yesterday. Nvidia has reached the status of trend-setter in the same way as Apple or Microsoft, which makes it a key player in the US market. Let's not forget that with a capitalization of $760 billion, the graphics processor specialist has risen to the 5th position of American capitalizations, far ahead of Berkshire Hathaway, Tesla or Meta. Nvidia's boss has just warned American congressmen that a "chip war" with China could be disastrous for American tech.

US stocks opened lower this morning. The Dow Jones Industrial Average was down 0.3%, S&P 500 fell 0.5%, and the Nasdaq 100 fell 0.6%.

Economic highlights of the day:

British inflation and the German Ifo business confidence index, U.S. oil inventories and the release of the minutes of the last Fed meeting are today's main events. All the agenda is here.

The dollar is worth EUR 0.9269 and GBP 0.8063 The ounce of gold falls back to USD 1977. Oil rebounds, with North Sea Brent crude at USD 78.05 a barrel and U.S. light crude WTI at USD 74.32. The yield on 10-year US debt is strengthening 3.71%. Bitcoin is trading at USD 27,000.

In corporate news:

Analyst recommendations:

By Romain Fournier