Action by the Federal Reserve
On Wednesday, after hints of another increase on the horizon from the Federal Reserve, the stock market saw a decline. While markets had already priced in rates before Wednesday’s expected Fed decision, investors were less certain about future increases. The S&P 500 dropped by 0.94%, while the Dow Jones Industrial Average experienced a more modest decrease of 0.22%. The Nasdaq Composite fell by 1.53%, with Microsoft down by over 2% and Nvidia and Google-parent Alphabet both dropping by nearly 3%. All three major indices closed lower for the session. Stay tuned for live market updates.
Federal Reserve Forecasts
The Federal Reserve signaled that there could be another rate hike in 2023. It has kept rates between 5.25% and 5.5%, which, following the conclusion of a two-day meeting on Wednesday, is the highest in nearly 22 years. Fed Chair Jerome Powell mentioned that the central bank still sees “further progress” needed on inflation. The dot plot released by the Fed, which indicates what members are expecting for the future, suggests that the central bank could raise rates as high as 5.6% by the end of 2023, slightly lower than its earlier projection in June.
Apple had plans to benefit from users who were shifting towards trading apps like Robinhood in 2020. It was working on a special investment feature in collaboration with Goldman Sachs that would allow users to buy and sell stocks and had plans to launch it in 2022. However, they abandoned this effort when the markets took a downturn and interest rates rose. Insiders say Apple was concerned about potential backlash if people using Apple products lost money in the stock market and decided to halt the project.
The Return of Initial Public Offerings (IPOs)
IPOs are making a comeback. Arm, Instacart, and Klaviyo all went public within a span of about a week. Klaviyo debuted on the New York Stock Exchange on Wednesday, with a 9% increase in its initial public offering. However, it’s hard to say how long this IPO frenzy will last. Instacart saw its shares drop by almost 11% on its second day of trading, releasing a slide shortly after its stock debut on Tuesday and pricing it slightly above its initial public offering price. It has since rebounded to trade near its first-day price. The company’s trading began with nearly a 25% gain on its first day of trading last week but has since come back to trade near $51 per share, where it priced its IPO.
Could the End of the Writers’ Strike Be Approaching?
According to those familiar with the matter, writers and producers represented by the Writers Guild of America (WGA) are nearing an agreement to end the strike. Reports suggest that WGA and the Alliance of Motion Picture and Television Producers (AMPTP) are hopeful about finalizing a deal after face-to-face meetings. It appears that both parties, representing over 11,000 screenwriters of films and TV shows, are close to resolving the strike that brought Hollywood production to a halt on May 2nd.
Wall Street Recovers Following a Robust Rally Triggered by the Federal Reserve
American stock futures fell on Thursday, one day after a robust rally driven by a strong Federal Reserve. Wall Street saw a continuous upward trend as the relief rally from the Federal Reserve’s dovish stance extended into the third session. The Dow Jones Industrial Average gained 932 points or 2.8%, as Fed Chairman Jerome Powell pushed back against the idea of a 75-basis-point rate hike in the future. The S&P 500 saw nearly a 3% increase, while the Nasdaq Composite added around 3.2%. On Wednesday, market participants pushed expectations for a 50-basis-point rate hike by the Fed on its broadest scale
Upcoming Labor Market Data Releases in the Next 48
HoursWednesday’s market surge suggested that investors, at least for now, were more confident that the Fed could rein in market turmoil without causing an economic recession. The next two days will bring important data to the second pillar of the Fed’s dual mandate – price stability and maximum employment.
The government reported on Thursday that first-time claims for unemployment benefits unexpectedly rose above 200,000 for the first time in April, with Friday’s government employment report showing whether Powell’s claim that “the labor market is strong and extremely tight” holds.
Labor capacity utilization fell by 7.5% in the first three months, more than expected and the largest drop since 1947, according to the latest reading from the government. Unit labor costs in the first three months rose more than an expected 11.6% in nonfarm businesses.
Elon Musk Gains Investment Support, Larry Ellison Included, Through Twitter Poll Fundraising
On Thursday, according to a filing, Elon Musk closed a $7.14 billion funding round from a group of investors, including Oracle co-founder Larry Ellison and Sequoia Capital, to take private Twitter instead of contributing to his $44 billion deal to buy the social media giant. The filing revealed that Saudi investor Prince Alwaleed bin Talal, who initially opposed the deal, also agreed to participate in this arrangement instead of cashing out his $1.89 billion stake. Musk, who is CEO of both Tesla and SpaceX, will continue negotiations with Twitter’s existing shareholders, including co-founder and former CEO Jack Dorsey, to include stakes in the deal, the filing showed.
Etsy’s Stock Declines Due to Bleak Outlook, Caught in an E-Commerce Downturn
On Thursday, Etsy shares plummeted by over 12%, while eBay shares dropped by 7% in pre-market trading when both online marketplace players issued guidance below expectations. Factors weighing on Etsy and eBay’s outlook included concerns over inflation and COVID-era shopping habits returning. Etsy’s earnings fell in line with expectations and revenue missed. eBay missed both earnings and revenue.
After two years of robust growth for e-commerce companies, investors are preparing for a slump in valuations, especially as the economy reopens and shoppers return to stores. Even Amazon, which expanded at a breakneck pace during the pandemic, is not immune to the e-commerce rut.
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