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Weekly markets TL;DR: Google’s AI fail, job numbers worry Fed, and relative calm ahead of CPI next week

By:
on Feb 9, 2023
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  • Blowout jobs report leads Fed to caution market that rates may rise higher, but investors not overly concerned
  • $100B wiped off Google stock after AI announcement disappoints in response to Microsoft's ChatGPT moves
  • Eyes turn to next week's inflation report, with the current week one of relative serenity market-wide

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1. Economy

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  • US Federal Reserve chair Jerome Powell affirmed that more rate cuts would be coming if inflation and jobs data don’t begin to soften
  • Jobs data came in extremely hot last Friday, with the resilience of the market so strong that the Fed is concerned the effort to curtail inflation will be hampered
  • Not a lot of economic data to come, with a slew of data coming out last week and the Fed hiking by 0.25%
  • Fed Governor Christopher Waller affirmed Wednesday that rates could go higher than the market is currently anticipating as the Fed continues to talk tough

2. Stock Market

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  • Stock market continues to try second guess the Fed, moving up and down this week off various comments on rates
  • S&P 500 at time of writing is down slightly on the week, with investors ultimately betting that the Fed’s strong line is not much more than a bluff
  • Google’s AI reveal disappointed investors, with Alphabet stock falling 8% and wiping $100 billion of market cap
  • Google backers had hoped for more to compete with Microsoft, who are powering its Bing homepage with AI trendsetter ChatGPT
  • Disney announced earnings after the bell Wednesday, with 7,000 jobs to be cut amid a $5.5B cost-cutting plan. Shares are up 5% pre-market at time of writing

3. Crypto

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  • Crypto has again been quiet this week, Bitcoin trading in the high $22K range
  • The sector continues to trade off macro conditions, ultimately following the stock market through last week’s slew of data and Fed comments to remain relatively unchanged
  • Coinbase CEO Brian Armstrong tweeted about rumours the US will ban staking for retail customers in the US
  • Softbank-backed Digital Currency Group, parent company of Grayscale, which runs the world’s largest Bitcoin fund, have begun trading off assets at discounted prices as it looks to raise funds to pay back creditors of its bankrupt lending arm, Genesis

4. Other assets

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  • Oil moved up on the news that US inventories fell for the first time in six weeks, crude futures trading at nearly $79 a barrel for the first time since February began
  • Real estate is bouncing back a little in the US, with mortgage rates dipping below 6% last week before rising to around 6.2%. Coupled with mortgage applications rising 3%, the news is positive for homeowners. 
  • Forex markets have not shown great movement despite the slew of data over the last week. The dollar hit a one-month high on Tuesday as the market continued to flock to the greenback following Friday’s blockbuster jobs report, but has slipped back to trade relatively flat on the week
  • Gold continues to trade near all-time highs without making significant moves in either direction, with the metal off to its best start to a year in over a decade, trading at $1885. 

5. What to look out for

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  • The market continues to second guess the Federal Reserve, with last week’s blowout jobs report causing the market to hesitate
  • January’s CPI report will be released next Thursday and should inject volatility and give more of a picture as to where the market is headed
  • Right now market is assuming that inflation has peaked, and assuming job numbers don’t continue to surprise to the upside going forward, the tightening cycle is inching towards a conclusion sooner rather than later

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