US annual inflation slows to 3%

22nd July 2023 – 28th July 2023 | Another week in the markets

S&P 500	Nasdaq	VIX	DJIA	Russell 1000	NYSE
4,582.23	14,316.66	13.33	35,459.29	2,512.92	16,363.26
1.01%	2.02%	-1.99%	0.66%	0.97%	0.46%
Nifty 50	Gold	Silver	Brent crude	USD-INR	EUR-INR
19,646.05	$1,958.80	$24.48	$84.29	82.30	90.69
-0.50%	-0.26%	-1.23%	4.20%	0.36%	-0.61%

Source: MarketWatch 

Hello Saturday,

This week, Twitter rebrands to X, Meta posts strong quarterly results, and US annual inflation slows to 3%.

• The year-over-year Personal Consumption Expenditure (PCE) Price Index based inflation rate dropped to 3% in June; soft landing may be possible for the US economy 
• Twitter undertakes radical rebranding by changing its iconic blue bird logo to ‘X’, as Elon Musk looks to add a range of diverse features to the app, including payments
• Meta’s second-quarter results beat Wall Street estimates as it posts double-digit revenue growth for the first time since 2021 thanks to AI enthusiasm, a pipeline of exciting new products, and massive cost-cutting 
• Google DeepMind researchers use AI to design specialised AI semiconductors quicker and more efficiently, with less reliance on humans
• Netflix reworks agreement with Microsoft as ad partner for its lower-priced, ad-supported plan; offers better deals with lower prices to some advertisers

Taking stock | Just another hike | Twitterminated | Metamorphosis | ChipGPT | No chill Netflix | Invest wisely

Taking stock

Stocks closed higher Friday, ending a volatile week. Better-than-expected earnings reports by tech giants and the latest inflation data indicating that the US could avoid a recession helped all major indices notch weekly gains. The S&P 500 rose 1.01%, the Dow advanced 0.66%, and Nasdaq jumped 2.02%. 

Just another hike

This week the Federal Reserve raised interest rates by 0.25%, as expected. This was the 11th hike in the last 17 months in an attempt to bring down inflation to the 2% target. However, The US economy has been quite resilient, with a strong labour market, high consumer confidence, and a record-low unemployment rate. Moreover, June’s inflation data released on Friday shows that the annual inflation rose at the slowest pace in more than two years. 

The Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred price gauge, rose 3%, in the 12 months through June. This is the smallest annual gain since March 2021. Core PCE, which excludes food and energy commodities, also eased to 4.1%.

Source: Reuters 

Twitterminated

Does a tweet by any other name smell as sweet?

Twitter went through a radical rebranding this week, as Elon Musk replaced the social media platform’s iconic blue bird logo with ‘X’. While this move wipes out millions in brand value, as per analysts and brand agencies, it really is not much of a surprise. It’s simply Musk’s latest move in his pet project to make an “everything app”. 

Musk bought Twitter last year in a $44 billion deal with a vision to create a platform like China’s WeChat where users can do everything, from communicating to shopping. Earlier this year, Musk merged Twitter with his newly incorporated entity called X Corp, post which Twitter ceased to exist on paper. But Musk’s vision for an everything app can be traced all the way back to 1999 when he created X.com — it was originally meant to be an all-in-one financial platform, which then became PayPal. In 2017, he bought back the domain from PayPal, and now X.com directs users to Twitter.com. 

With all the new features coming up in the next few months, including comprehensive communications and payments, the name Twitter doesn’t align anymore, reasoned Musk. Having received money transmitter licenses in four US states in June, he has already begun working on a payments business for the app.

Metamorphosis

Meta reported double-digit revenue growth for the first time since the end of 2021, with an 11% revenue increase from last year. The revenue reported for this quarter was $2.06 billion, beating the expected number of $2.04 billion. The impressive results in Q2 are partly because of the stringent cost-cutting measures and layoffs in Meta’s ‘year of efficiency’, and partly because of the AI enthusiasm that has boosted the tech sector in recent months. 

Meta also issued optimistic guidance for the current period, given the rebound in digital ads, new AI products in the pipeline, Instagram Threads, and the launch of Quest 3, the virtual reality headset, later this year. 

From a low of $90 a share in November, Meta stock has more than tripled to over $300. After the quarterly results, shares were up 6% in after-hours trading on Wednesday.

ChipGPT 

Does using a robot to make more robots sound futuristic? While that may still be a little way down the road, AI building AI is perhaps already here. Researchers at Alphabet’s Google DeepMind have found a way to use AI to design specialised AI semiconductors.

Computer chips are made up of millions of logic circuits, and the use of AI turbocharges the speed of designing and engineering these chips with a lesser reliance on human hardware engineers. This is a game-changer — thousands of logic circuit designs generated by AI in one week compared to one design produced by a human in a few weeks, according to DeepMind staff. 

There is an on-going race among tech giants like Nvidia and AMD to build chips that are better, faster, and more efficient as the demand for generative AI increases. Amazon and Google, are also working on designing their very own home-grown AI chips.

No chill Netflix 

Last year, streaming giant Netflix launched an ad-supported plan at $6.99 in the US and 11 other markets. It chose Microsoft as its ad partner with a revenue guarantee. However, Microsoft has failed to sell the requisite ad inventory, and now Netflix is reworking the agreement. 

Given the sluggish growth of its ad plan, Netflix is looking at reducing the revenue guarantee with Microsoft. However, that’s not all –– it is also looking to partner with other advertisers at lower prices. According to the Wall Street Journal, some advertisers have agreed to pay Netflix around $39 to $45 for every 1,000 viewers, which is down from the $45 to $55 Netflix has charged brands previously. 

While Netflix beat earnings estimates in its Q2 results last week, it failed to meet revenue expectations — revenue of $8.19 billion was reported, as opposed to the $8.30 billion estimated by analysts. This week, Netflix has also been facing scathing backlash for listing a job opening for an AI product manager with a salary of up to $900,000 –– while a writers’ and actors’ strike against the use of AI remains unresolved.

Invest wisely

We may be in the middle of an epoch-making revolution in tech, with AI having crossed its tipping point. Unsurprisingly, the torchbearers of the change are some of the world’s most innovative corporations based in the US. If you want to benefit from these, your investment portfolio must include tech stocks like Nvidia and Meta. 

How can you access the US market in an easy and low-cost way, though? Enter, Appreciate! Through Appreciate, investing in the US stock market is as seamless and convenient as it can get. Download the app today!

Warm regards,
Another week
in the markets