A recap of the past week in three short headlines.
1. Up and Down
The past week in the stock market was characterized by contrasting movements in different indices. The NASDAQ had a strong showing, with its fifth consecutive weekly gain, lifted by impressive results from selected technology stocks. The S&P 500 saw a more modest increase, but the Dow fell slightly, demonstrating the significant divergence between the NASDAQ and the Dow this year. While the NASDAQ has been on a steady upward trajectory, up nearly 14.8% year to date, the Dow has been lagging behind with only a 2.4% gain.
The monthly labor report was a bright spot, with the economy adding 517,000 jobs in January, the most since last July, and the unemployment rate dropping to its lowest level since 1969 at 3.4%. This report exceeded economists’ expectations and painted a positive picture of the job market. However, the price of U.S. crude oil experienced a major drop, falling nearly 8% for the week to around $73 per barrel, the lowest level in about a month. This was due to an increase in U.S. crude supplies among other factors, and had an impact on the overall market performance. Halfway through the earnings season, the proportion of S&P 500 companies that have beaten analysts’ earnings expectations is slightly lower than usual, and are projected to decline this year.
2. Odd Friday
Last Friday was a tumultuous day for the US stock market as investors faced a surprise surge in job growth and subpar earnings results from Big Tech giants. The strong labor market performance likely reduced the pressure on the Federal Reserve to pause its rate hike campaign, which was a factor that fueled the stock market rally at the start of the year. However, this positive employment data was offset by underwhelming results from Apple, Amazon, and Alphabet, the market’s most heavily weighted companies.
While Apple saw revenue drop 5% and iPhone sales drop 8% year-over-year, Amazon reported better-than-expected sales growth but a disappointing profit due to losses from its stake in Rivian Automotive. Alphabet’s results also missed expectations on revenue and earnings per share due to a decline in advertising. Despite this, shares of Apple gained 2.4%, while Amazon and Alphabet plummeted 8.4% and 2.7%, respectively. The stock market’s surge at the start of the year was due to the belief that the Federal Reserve would end its rate hike cycle sooner than expected, but many strategists remain skeptical and believe that the Fed won’t be able to pause until labor market conditions ease significantly, which is unlikely without higher rates for a longer period than currently expected.
3. Fighting Inflation with Technology
Argentina has been plagued by inflation for decades and has tried various unconventional approaches to tackle it. The government has now turned to technology, using artificial intelligence and machine learning software developed by the state-run software and satellite agency Arsat, to keep a check on the rising prices in real-time. In the past, the government has imposed price freezes for certain goods and negotiated with companies to control the speed of price increases, which often involved visits from ministers or mayors to supermarkets to ensure compliance.
The latest move involves launching two new software tools – one that provides real-time pricing for goods included in the program at supermarkets and another to verify if prices posted online match the deal agreed with authorities. Inflation has continued to remain high and Economy Minister Sergio Massa called inflation the “worst poison” for the economy. He said that everyone, including companies, workers, supermarkets, and producers, should comply with the program for the benefit of all Argentines.
The gap between the NASDAQ and the other two leading US indexes, the S&P 500 and Dow Jones, has widened even more this week. On the final trading day of the week, investors were taken aback as job growth exceeded expectations, but the tech giants stumbled. Inflation is becoming a worldwide concern and nations are exploring innovative methods to mitigate its impact on their economies. Argentina is among these countries and has decided to turn to artificial intelligence for assistance.
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