Markets turn cautious as focus shifts to key US data
What is it?
Investors are looking for a sign of relief from the recent downturn in some stocks. Before the economic data came out the markets settled down from earlier in the week.
“Snap shares closed down 43% on Tuesday, marking its worst day ever and dragging down other social media and digital ad company stocks.”*
While some stability seems to be appearing in the bond market, the data on inflation could be pivotal as the markets struggle to find some clear direction.
Why does it matter?
How markets are fluctuating tells us a lot about the market mood. Investors may be uncertain prior to the data coming out but they do not seem to be fearful. If investors were fearful of bad news coming out then our opinion is that they would be selling off more assets prior to the data coming out. With that said we are not seeing a great deal of confidence in the markets either. Very few assets are performing well enough to be deemed overbought which would be a sign of confidence in that asset recently.
We will be paying attention not only to the data, but how markets react to it. One key consideration is that whether the data is positive or negative, it could have the opposite effect on markets. That could be true if the Fed tries to balance out bad data with lower interest rates than anticipated or good data with higher interest rates than expected.
Tech is hitting the brakes on hiring
What is it?
As high costs begin to sink their teeth into profits some technology companies are beginning to operate using less staff than before.
“The tech sector, which boomed during the pandemic, is showing signs of contraction. Facebook parent company Meta is pausing hiring and scaling down some recruitment plans.”**
“Amazon’s CFO told analysts on the company’s earnings call that its warehouses have become ‘overstaffed,’ following a large hiring spree during widespread lockdowns that drove consumers more and more to online shopping.”**
Why does it matter?
Employment data could begin to change which could influence Fed decision making. The workforce as a whole could begin to see the same trend following the large technology names. We will continue to keep an eye on employment and how these larger companies navigate the changing workforce environment.
In a longer term view we will see if this creates opportunity for companies that are automating out the need for as many employees. If for example labor costs are expected to continue rising then using an automated alternative could reduce long term costs.
Other articles we found interesting this week:
Crypto collapse ‘wake-up call’ and ‘opportunity to reset,’ top bank regulator says
Global shares rally on relief after Fed minutes
Markets turn cautious as focus shifts to key US data
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Sources:
*Jessica Bursztynsky. “Snap closes down 43%, its worst day ever, dragging other stocks with it”. 5/24/2022. CNBC. https://www.cnbc.com/2022/05/24/snaps-down-32percent-and-its-dragging-other-stocks-down-with-it.html
**Lauren Feiner. “Tech is hitting the brakes on hiring even as other industries keep adding jobs”. 5/11/2022. CNBC. https://www.cnbc.com/2022/05/11/tech-layoffs-hiring-slowdown-stand-out-in-red-hot-job-market.html
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