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Market Update - 22/5/2023 - Debt Ceiling Negotiation, Zoom, Nvidia, and more.
The U.S. stock market was mixed in the week of May 15-19, 2023. As of last Friday, The S&P 500 fell 0.1%, the Dow lost 109 points or 0.3%, and the Nasdaq composite slipped 0.2%. While for the week, all markets rose despite the Friday loss; the S&P 500 is up 67.90 points, or 1.6%, The Dow is up 126.01 points, or 0.4% and Nasdaq is up 373.15 points, or 3%.
A strong performance by large-cap technology stocks helped the Nasdaq Composite finish at 12,688.84, up 1.5% or 188.27 points. Tech-driven indexes closed at their highest level since Aug 25, 2022.
The debt ceiling talks were put on hold.
Biden and McCarthy will meet Monday to discuss the debt ceiling. Before boarding Air Force One to return to Washington DC from Hiroshima, where he met with world leaders during a G-7 summit, Biden called the GOP’s current debt-ceiling stance “quite frankly unacceptable.”
“The White House is moving backward in negotiations,” McCarthy tweeted Saturday evening just about 90 minutes before the White House released a statement saying the latest GOP offer “was a big step back.”
The strategist at Bank of America, Savita Subramanian, raised her year-end target for the S&P 500 from 4,000 to 4,300, saying that the focus of companies on efficiency will boost earnings in the future and that stocks are not overvalued at the moment.
“Current valuations are not low, but rarely are low during profits recessions. On cyclically adjusted earnings, valuations argue for price returns of 5% per year for the S&P 500 over the next decade,” Subramanian said in a note to clients.
**The Treasury Department has warned that the federal government might not be able to meet all its debt repayment obligations by June 1, a deadline U.S. Treasury Secretary Janet Yellen reaffirmed on Sunday.
Zoom Earnings Expected to Shrink as Return to Office, Competition Heat Up.
When it comes to the return-to-work trend, Zoom has struggled to capitalize on it the same way it did with the work-from-home trend. During the height of the pandemic, Zoom was one of the fastest-growing workplace software companies, and its revenue quadrupled in three consecutive quarters from 2020 to 2021. Zoom may face harsher reality with competition from Microsoft and Google in the future, as both of them are integrating AI into their workplace applications.
Nvidia, and AI GPU demand.
This is the highest level that Nvidia shares have reached since December 2021. As of the current price of $312.64, the company shares are at a 118.40% increase YTD at a price of $312.64. Going into the earnings season, the company stock had risen $27.61 over the previous week. With the current increasing demand for AI GPUs, that could potentially lead to a positive outcome for Nvidia in the future.
The markets continue to look for direction as all signs continue to point to a recession.
Based on recent data, the Fed is likely to raise rates by another 25 basis points in June by 40%. As far as the leading economic indicators are concerned, the index shows that the economy is currently weakening and continues to be one of the most telling indicators. Investors may have to start considering what to do if this is the market reality for a long time.
Economic Data Update May 22 - May 29, 2023.
Economic data in the upcoming week will be relatively light, with Federal Reserve meeting minutes (FOMC) released on Wednesday could provide insight into how central bankers are evaluating the possibility of raising rates further, second reading of first-quarter GDP on Thursday and a reading of personal consumption expenditure (PCE) inflation on Friday.
This Week's Earning Schedule
- May 22 – Zoom (ZM), RyanAir (RYAAY)
- May 23 – Agilent Technologies Inc. (A), Lowe’s Companies Inc (LOW), Intuit Inc. (INTU)
- May 24 – Snowflake Inc (SNOW), NVIDIA Corp. (NVDA)
- May 25 –Dollar Tree Inc (DLTR) NetEase Inc (NTES), Best Buy Co Inc (BBY), Costco Wholesale Corp. (COST), Marvell Technology Inc (MRVL)
- May 26 – Best Buy Co Inc (BAH)
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