Stocks in the United States opened higher on 24th October as investors awaited a slate of earnings from some of the biggest technology firms.
Investors are also awaiting the newest batch of earnings, with tech firms including Apple, Google-parent Alphabet, Facebook parent Meta and Microsoft reporting this week, and energy giant Exxon Mobil. Below mentioned are where the US indexes stood at the 9:30 a.m. opening bell on 24th October:
- S&P 500: 3,768.76, up 0.43%
- Dow Jones Industrial Average: 31,346.74, up 0.85% (264.18 points)
- Nasdaq Composite: 10,882.71, up 0.21%
According to the Mortgage Bankers Association, a looming recession could push mortgage rates down to 5.4% by the end of 2023. UBS says that the potential caution from the central bank will add to the stock software rally. Refiners in China are raising purchases of Russian crude, with imports up 20% year-over-year.
According to Fundstrat’s head of research Tom Lee, the Federal Reserve is starting to realize that inflation is a smaller “black hole of pain” than that was previously thought, and a pivot or halt on rate hikes might lead stocks to rally more than 16% by the end of 2022.
Lee pointed in a note to recent comments by Fed officials, which dialed back some of the hawkishness that has roiled markets in 2022 and sent the S&P 500 falling 25% since January. Though inflation remains high, the Fed’s Loretta Mester, James Bullard, and Neel Kashkari have commented that the Fed could pause on rate hikes in December. That led the way stocks to rally last week despite mixed corporate earnings reports.
After a rough year in the public markets, it is considered that today’s brilliant trading as good news. Any positive price movement is treated as a win.
The Nasdaq Stock Market is an American stock exchange situated in New York City. It is ranked second on the stock exchanges list by market capitalization of shares traded, behind the New York Stock Exchange.
The tech-heavy Nasdaq composite index increased by 3.4%, while other major US indices jumped smaller amounts in a hall-of-fame start to the trading week.
However, sector-specific news is even more important to the tech industry. Below are a few observations.
- Software/ Cloud Companies: As measured by the Bessemer Cloud Index, shares of these companies are up by 5.8%.
- Fintech: As measured by the ARK Fintech Innovation ETF, shares of these companies increased by 7.4%.
When the value of a particular commodity or security falls sharply, it usually follows up its declines by bouncing back a little. If the underlying forces that caused the negative security remain in place, such rebounds frequently prove short-lived and not indicative of the actual bottom of any specific trading range.
It is usually called, a “dead cat bounce,” or more particularly, the sort of modest rebound that a cat’s corpse might manage if it hit concrete after falling from a high window.
How does the dead-cat concept impact today’s rally in the value of tech companies and software and fintech concerns, specifically? It’s hard to call today’s stock market results anything other than a fatal feline ricochet, as the value of both sets of companies in question have fallen so low that multiple days are needed, like today in a row, to claw back even a fraction of their lost ground.
Get ready to celebrate the strong trading of the day. Please don’t take it as more than one day’s market enthusiasm. Users might raise an eyebrow if one gets another day in a row of similar gains. A third might be so bold as to say that a trend is forming.
That likely will not happen. The main forces that brought the value of tech stocks down in recent quarters are still in force and are set to become all the more strict in the coming months as central banks are generally anticipated to continue increasing interest rates. Furthermore, the geopolitical tensions that are spilling over into the technology landscape are not set to resolve anytime soon, if ever.
Let us put this into numbers. At its peak, the Bessemer cloud index’s ETF traded as high as 65.51 points during the closing months of 2021. Today, the same basket of companies is worth 25.66 points after its gains.
Sure, a 1.41-point recovery today is Big News in percentage terms, but when one considers how far things remain depressed from highs, such gains are little more than a ray of sunshine when there’s still ample snow and ice on the ground.
Getting caught up in near-term market movements and reading too much into them is very easy. So long as technology valuation multiples remain depressed, and today’s share price movement will not provide more than a nudge when it comes to unwinding recent losses, nothing changes in venture land.
It will still be more difficult to increase, defending prior valuations will be incredibly difficult, and 2021-scale losses will remain out of fashion. The notes on the issues facing the IPO market and unicorns remain in force.
It would be more fun to be positive about the day’s trading. But there is a little reason to lie to ourselves. Don’t cheer the dead cat; it’s not about to take flight.
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