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The stock market has been experiencing a tumultuous week, with the S&P 500 falling below the 6,000 mark and tech stocks leading the decline. This unexpected downturn comes as investors await earnings reports from major companies like Nvidia, which could potentially trigger significant market movements.
On Monday, Starbucks announced that it would eliminate 1,100 corporate jobs in an effort to increase efficiency. While this move was not a surprise, it did little to boost investor confidence, instead contributing to the overall negative sentiment.
Meanwhile, Domino’s Pizza reported lower-than-expected US sales growth in its fourth quarter results, highlighting the challenges faced by companies trying to appeal to budget-conscious American consumers.
In more positive news, Berkshire Hathaway’s operating earnings surged 71% in the fourth quarter, thanks to higher interest rates and improvements in its insurance business. This unexpected boost from one of the world’s largest conglomerates has led some Wall Street strategists to remain optimistic about the medium-term outlook for US equities.
According to Morgan Stanley strategist Michael Wilson, who had previously maintained a bearish stance on US stocks until mid-2024, the S&P 500 is now “the highest quality index” with the “best earnings growth prospects.” Similarly, JPMorgan Chase strategist Mislav Matejka suggests that US earnings growth would need to significantly underperform the rest of the world in order to justify an outright bearish view on American markets.
As we move into the coming week, investors will be closely watching a range of key economic reports that could have a significant impact on market direction. Friday brings the January report for the Personal Consumption Expenditure (PCE) index, which serves as the Federal Reserve’s preferred measure for inflation. Other important data releases this week include updates on US GDP, housing market conditions, and consumer confidence.
These reports will be scrutinized closely for any clues about the health of the US economy and potential Federal Reserve policy moves. The cryptocurrency market also experienced weakness on Monday, with Bitcoin falling 1.6% to approximately $94,226 and Ether dropping more sharply by 5.7% to around $2,648.
In the bond market, the yield on 10-year Treasury notes fell by two basis points to 4.41%. Currency markets remained relatively calm, with the Bloomberg Dollar Spot Index showing little change. Oil prices showed modest strength, as West Texas Intermediate crude rose 0.5% to $70.76 per barrel, while gold prices remained unchanged.
As investors await these key economic reports and earnings from major companies like Nvidia, it’s likely that market volatility will increase significantly in the coming days.
