23rd April – 29th April 2022 | Another week in the markets
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|Nifty 50||Gold||Silver||Brent crude||USD-INR||EUR-INR|
This week the world stocks have remained on course for their worst month since the pandemic broke out in March 2020 and the current virus outbreak worsening in China isn’t helping.
- Tech giants including Amazon and Meta posted mixed first-quarter earnings
- US sees a decline in its first-quarter GDP by 1.4%
- Elon Musk secures a deal to buy Twitter at a valuation of about $44 billion
- President Biden to make a decision on student loan forgiveness soon
- The virus outbreak in China threatens to stress global supply chains further
Taking stock | Ups and downs | Quarterly drop | Town square sale | Student loan forgiveness | Supply chains shanghaied | Invest wisely
The Dow Jones, S&P 500, and Nasdaq all closed the last trading day of April with sharp losses. The Dow Jones and S&P 500 booked the worst losses since 1970 while Nasdaq registered its biggest monthly dip since 2008. Between the release of fresh inflation data, disappointing earnings posted by Amazon.com Inc., and Apple warning about rising costs, the US stocks dropped.
Ups and downs
On Thursday, Amazon.com Inc., posted its 2022 Q1 earnings which revealed a net loss of $3.8 billion. This is the first quarter in four years that Amazon has posted a net loss. As a result, in after-hours trading, Amazon’s stock dropped by about 10%. The results for the quarter were mixed with a revenue increase of 7% and certain revenue streams such as Amazon’s Web Services beating estimates. However, high costs and slow growth resulted in a net loss and an EPS of -$7.56 which fell far below analysts’ estimate of $8.55.
On the other hand, Meta, Facebook’s parent company, which also posted its quarterly earnings on Thursday beat profit estimates and saw a 17.6% surge in its stock price. Meta’s EPS of $2.72 was higher than the $2.56 estimated by analysts. Meta’s revenue of $27.91 billion, however, was lower than estimates. The daily active users increased marginally from 1.93 billion to 1.96 billion but this comes after the company posted a disappointing fourth-quarter report which showed the first-ever drop in active daily users.
US’s 2022 first-quarter Gross Domestic Product (GDP) declined by an annual rate of 1.4% and proved to be the weakest quarter since early 2020 when the pandemic broke out. This is also a sharp reversal from the 6.9% annual growth rate of the fourth quarter of 2021. One of the primary reasons for this is a growing trade deficit and pandemic related supply-chain challenges. The first quarter of the year saw a decline in exports while the imports surged. Another factor that pushed down growth is the slow inventory buildup by businesses as compared to last quarter. The stock market did not react to this for the most part as a drop in the quarter GDP does not always lead to a recession. Moreover, the US economy has continued to remain resilient with consumer spending being the primary driver.
Town square sale
From becoming Twitter’s largest shareholder to offering to buy the entire social media platform to finally securing a deal on Monday, Elon Musk has finally got what he wanted. The deal values the firm at roughly $44 billion with $54.20 a share. Some are still on the fence about this deal going through and believe it could fall for various reasons over the next few months before it is finalized. EU regulations, Musk’s 2018 settlement with the Securities and Exchange Board (SEC) about what he can tweet, Twitter’s shareholders weighing in, etc., are some of the factors that could impact it.
Student loan forgiveness
President Biden has said that the decision on student loan forgiveness will be announced in the next couple of weeks. While the amount and terms of this are yet uncertain, one thing is clear that it would be less than $50,000. People are speculating that the bulk of the debt reduction benefits would go to borrowers from the lower-to-middle income groups. Even a $10,000 reduction would entirely eliminate student debt for about 1 in 5 borrowers.
Supply chains shanghaied
China’s President Xi Jinping has enforced a zero-COVID policy in an effort to contain the country’s worst outbreak yet. Shanghai, which is the world’s biggest container port has now been shut for a month and cases are rising in Beijing. Companies in the US are fearing that the already stressed global supply chains due to the Ukraine crisis will further be strained and worsen inflation.
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