At the start of one of the busiest weeks of the year for results in corporate America, our head of markets runs through the big issues affecting stock prices. There's also an update on UK shares.
Markets finished the week strongly, with the beaten down Nasdaq index continuing to show signs of new year promise.
After a torrid 2022 in which the rising interest rate environment sucked much of the life from growth stocks, there has been some bargain hunting from investors who wonder whether there has been an overshoot of depressed valuations.
The backdrop has clearly had an effect on some of the larger tech names which have announced job layoffs in the face of possible recessionary worries. Google parent Alphabet Inc Class A (NASDAQ:GOOGL) is the latest to cut jobs, following on the heels of the likes of Microsoft Corp (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN).
Even so, the Nasdaq has added 6.4% in the year to date, most recently underpinned by numbers from Netflix Inc (NASDAQ:NFLX), which added more subscribers than expected in the latest quarter, while the Alphabet news also met with a warm reception.
The market faces a barrage of earnings to consider this week, with an estimated quarter of the S&P500 reporting. The likes of General Electric Co (NYSE:GE), Johnson & Johnson (NYSE:JNJ), Tesla Inc (NASDAQ:TSLA), Boeing Co (NYSE:BA), Visa Inc Class A (NYSE:V) and Microsoft are all capable of nudging the dial not only in terms of the latest quarterly earnings, but also the outlook based on current trading conditions.
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There are also some important economic releases due later in the week, most notably fourth quarter GDP and the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditure price index.
Comments from a Fed member on Friday added to some of the day’s gains. While the comments did not veer from the Fed’s mantra of bringing inflation under control at all costs, there was some suggestion that rates could be getting nearer to being “sufficiently restrictive” to finish off the job. Nonetheless, the two economic camps of either recession or a soft landing will continue to anticipate outcomes as the year progresses.
In the meantime, and set against some low expectations for the rest of the quarterly reporting season where earnings are generally expected to weaken, the other main indices have also made some progress in the year to date, with the Dow Jones having added 0.7% and the S&P500 3.5%.
With several markets in Asia closed for the Lunar New Year, investors were left directionless for the time being. Even so, early reports that travel demand may have beaten expectations on China for the celebrations could augur well as a sign of recovery in both economic activity and consumption.
In the absence of an Asian catalyst, UK markets followed the lead of the US finish to the week, notching early gains to leave the FTSE100 ahead by 4.5% so far this year.
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Meanwhile, the FTSE250 continued its own positive start to the year, still driven by some UK economic data which has been less dire than had been feared, and has climbed by 5% in the year to date.
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