US Technology Stocks Face A Dim Future?
Wall Street's main indexes finished flat on Thursday.
Early gains as a result of “milder than feared” CPI inflation data evaporated as investors begin to worry:
About US economy in the longer term and its prospects.
Whether US stocks have further runway?
When US market closed for Thu, 10 Aug: (see above)
DJIA: +0.15% (+52.79 to 35,176.15).
S&P 500: +0.03% (+1.12 to 4,468.83).
Nasdaq: +0.12% (+15.97 to 13,737.99).
Volume on US exchanges was 11.82 Billion shares, compared with the 10.95 Billion average for the full session over the last 20 trading days.
US Market On Thursday.
Market’s Thursday performance was closely linked to US’s July 2023 Consumer Price Index report (see above).
CPI climbed up by 0.2%, notching an annual rise of 3.2%; 0.1% less than analysts’ forecast of 3.3%.
Core CPI (less Food & Energy) registered an annual rate of 4.7%, a shade (0.1%) less than June’s CPI data.
Upon CPI report released, the three benchmark indexes advanced > 1% in the first hour of trading, as traders bet that:
The Fed would stop further monetary tightening in 2023.
The Fed would start cutting interest rates early 2024.
The euphoria did not last unfortunately.
Stock prices began to sag from late morning onwards and bounced between positive & negative territory for the rest of the afternoon.
This is because as traders combed thru and digested the data, they realized that although inflation (CPI data) has slowed, core inflation (core CPI data) remained sticky.
US Weekly Jobless Claims for week ending 05 Aug 2023
The other official data out yesterday was US Weekly Jobless Claims.
For the week ending 05 Aug 2023, jobless claims came in at 248,000.
This is up from last week’s 227,000 or +9.25%.
And unchanged from 248,000 (one year ago).
While the data will be useful for the Fed, weekly jobless claims exert negligible influence over the US market.
US Producer Price Index - July 2023
US Producer Price Index (PPI) for July 2023 was fresh from the oven.
On a YoY basis, headline PPI was up 0.8%.
Prices (excluding food, energy and trader) moved up by 2.7% on an annual basis, unchanged from June.
The Fed references both CPI and PPI closely.
Although CPI gets more attention, PPI is seen as more of a leading indicator as it looks at pipeline costs for various products and services.
There are more updates to the above news that I have shared yesterday.
The Biden administration’s executive order on US investments in Chinese companies leaves plenty of open questions on how it will be implemented.
The executive order provided an outline of what the program’s scope is going to be.
It aimed at restricting US investments into (a) Chinese semiconductor, (b) Quantum computing and (c) Artificial intelligence companies over national security concerns.
US Treasury Secretary, Ms Janet Yellen is mostly responsible for determining the executive order’s details.
This I find ironic because of her recent trip to China,
The “executive order” is not cast in stone yet.
There will be a 45-days public comment period giving US investors significant potential to influence any final regulation.
Against the list of prohibited investments, there is also a list of approved investments. But that is another story.
Below Is What I Think:
Take it at face value that the restrictions are going to protect US national security.
It will also curtail the potentials of businesses outlined in the executive order.
This will definitely impact stocks in the following industry/sector - (a) Semiconductors - $NVIDIA Corp(NVDA)$, $AMD Resources Ltd(ADM.AU)$ , (b) Technology stocks dealing with Artificial Intelligence eg. $Microsoft(MSFT)$ , (c) Quantum computing - eg. $IBM(IBM)$ , $Alphabet(GOOG)$
I don’t believe the impact will be felt now.
However, for the mid to long term, what are the “damages” or “revenue loss” will investors be looking at potentially?
Do you think the Executive Order will have an impact on US stocks?
Do you think the Executive Order will be enacted and enforced “forever”?
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Well just the competition between US and China…
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So the deal is US scumbags sold out to the lowest bidder on technology. The greed is so bad it makes the communist govt look awesome.