Yesterday the Wall Street Journal published a story about the man leading Amazon. The story sounds like it might be a small blemish on Jeff Bezos record, until one reads a little further into the details. Whilst the pandemic meant a huge boom for online shopping, the most recent inflationary concerns have led to a drop in demand. Demand that had been driving the price of Amazon shares over the last two years.
Listed on Nasdaq, Amazon has been hovering just above $100 for a few weeks now. Perhaps demand is really shaking the tech giants results which used to be nearer $180 during the peak of the pandemic. However, Amazon isn’t just a home delivery company, is it? And with demand for cloud technology ever increasing, perhaps there may be better news to come soon.
Oracle and Spotify buck the Trend
There is better news for software company Oracle. Their shares shot up by 14% on Monday. One of the major reasons for the improvement in Oracle’s share price is a “major increase in demand” for its cloud infrastructure business, according to CEO Safra Catz. However, it’s not all good news. Through the week Oracle’s share price started to drop again.
On Wednesday, another tech firm, this time Spotify, was in the news. Their share price shot up by 7.5%. Which would be great if the share price hadn’t slumped 57% so far this year. Wells Fargo have issued an ‘Equal rating’ and a price target of $124 for Spotify. And, today shares are trading below $100. Spotify CEO Daniel Elk is focusing on improving margins. He is also slowing the number of new hires by 25%. Joining Meta, Uber, Snap and Lyft in slowing hiring.
Layoffs in the news continues
The Crypto Winter is here. Bitcoin is at an 18-month low. Coinbase are firing 1,100 employees. Steve Hanke thinks that “winter has set in early this year”, especially for employees at Coinbase and other crypto firms.
Coinbase has gone from planning to hire 2k people, to pausing that, to rescinding new job offers, and now reducing headcount by 1,100. BlockFi, another leader in the Digital Assets space, is also cutting 20% of its workforce. Crypto.com are also letting go of around 260 employees. Perhaps Hanke is right in his observation? Or did they just grow too quickly? As Coinbase CEO Brian Armstrong seems to think.
To compound matters further. Robinhood, Peloton, Netflix and Tesla have all announced layoffs too.
Netflix is a bigger problem. Last Friday Goldman Sachs downgraded the tech firms’ shares. Thought to be worth $265 a share one day, Goldman Sachs have slashed their price target for Netflix to $186. With the shares on $173, this isn’t very comforting. A year ago, Netflix shares were trading at over $600… A huge drop by a company that was once one of the darlings of Wall Street.
Interest Rates in the U.S. and the UK
Inflation means central banks must raise interest rates. This week the Fed did just that. With analysts increasingly seeing a recession looming in the U.S., the Fed hiked rates from 1.5% to 1.75%.
Wells Fargo now forecasts a “mild recession” starting in mid-2023. Ryan Sweet, Moody’s Analytics head of monetary policy research has a starker message though. In a research note he shared how “the Federal Reserve is going to hike interest rates until policymakers break inflation, but the risk is that they also break the economy.”
Yesterday the Bank of England raised interest rates too. Some have complained that it isn’t enough. Raising rates to 1.25% might not do enough to address the huge spike in inflation seen in the UK these last few weeks. The Bank of England expect the economy to contract in the current quarter, and inflation to peak at “slightly above” 11%.
Investors think that the interest rate in the UK might go as high as 3% by the end of the year. If you have a mortgage, it might be time to be a little concerned.
How did FAANG stocks perform?
Normally there is a little light at the end of the tunnel in our weekly trading trends summary. The light at the end of the tunnel might have gone out though. For now.
Apple are down over 5% this week. Google’s Alphabet down by over 4%. Amazon lost almost 5.5% of their share value. Whilst Facebook’s Meta lost over 8%. Netflix, whom we mentioned earlier, also lost over 5%. Tesla? Things looked promising for a moment, but even Tesla slumped by over 3.5% this week.
The only companies from amongst the select few ‘Large Cap’ stocks in the U.S. to grow were Walmart, CME Group, Oracle and, interestingly, Boeing. Whilst many of the companies listed lost over 10%. Notably, Blackstone, Salesforce, Chevron, American Express and PayPal all lost over 10% of their value this week. And the list didn’t end there.
Could it be a good time to buy? Many observers of bitcoin think so. But when it comes to traditional equities, its not clear if we have come to the end of the bearish market, or whether it might continue over the next few weeks.
Author: Andy Samu
#FAANG #Oracle #Spotify #Fed #BankofEngland #InterestRates #Inflation #LayOffs #Amazon #Netflix
All prices quoted in this story were taken from information available on TradingView’s platform, and were correct at 13.30 GMT.
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