AIMSTAR FINANCIAL INSIGHTS – February 1, 2024

Your Weekly Guide to Financial Insights and Market Trends

PUBLISHED THU, Feb 01, 2024, 2:46 PM EST

UPDATED THU, Feb 01, 2024, 3:00 PM EST

Market Overview

Fed Holds Rates, Bond Yields Fluctuate

The Federal Reserve maintained its main interest rate unchanged on Wednesday, indicating that a rate cut is unlikely until there’s more certainty about inflation moving towards the 2% target. Fed Chair Jerome Powell emphasized the need for more data to ensure a consistent decrease in inflation rates.

After the Fed’s announcement, the bond market saw fluctuating Treasury yields, which had previously decreased due to weaker-than-expected economic reports. A specific report highlighted slower growth in wages and benefits for U.S. workers in the last quarter of 2023 than predicted, which might help alleviate concerns about wage-driven inflation.

The 10-year Treasury yield stood at 3.95% early Thursday, slightly up from 3.92% the previous day and below the 4.04% rate observed late Tuesday. In October, the yield surpassed 5%, marking the highest level since 2007. 

Stock Market Today

U.S. stock futures and oil prices witnessed an increase today. On Wednesday, a significant decline occurred in the stock market, primarily driven by a downturn in Big Tech stocks due to the failure to meet high market expectations. The S&P 500 experienced its worst day since September. The decline in Big Tech companies also led to a loss in the Nasdaq composite. The Dow Jones Industrial Average is less affected by tech stocks.

Alphabet’s 7.5% Drop

Among the tech giants, Alphabet witnessed a significant drop of 7.5%, even though its reported profits and revenue exceeded analyst predictions.  The company pointed to the success of its Azure ai cloud service, which provides access to large and small language models integrated with infrastructure, data and tools. However, concerns were raised about the company’s advertising revenue trends. So far, 2024 is painting a good picture- economic data has been supportive, inflation is moving lower, interest rates are moderating, and Fed messaging has been easier.

Microsoft’s 2.7% Decline

Microsoft also experienced a decline of 2.7%, despite its financial results outperforming expectations, with one analyst praising its quarterly report as exceptionally outstanding.

Amazon Abandons iRobot Acquisition

Amazon withdrew its proposed acquisition of iRobot, following objections from the European Union. iRobot makes the Roomba autonomous vacuum cleaner; the EU claimed the deal would have allowed Amazon to hoover up competition in the market. After Amazon’s announcement, iRobot said it would shed a third of its staff after sales fell by 25% last year.

Tesla Shares Drop Musk Legal Battle

Tesla’s shares fell by 2.2%, following a legal decision against CEO Elon Musk regarding his compensation package. A judge in Delaware struck down the $55.8bn pay package awarded by Tesla to Elon Musk in 2018, finding that as the “superstar CEO”, he had “dominated the process” that led to the deal.

Never incorporate your company in the state of Delaware,” Mr. Musk retorted on X. He is going to ask Tesla’s shareholders “immediately” to transfer the company’s incorporation base to Texas.

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