Arm Holdings CEO Rene Haas rings the Nasdaq opening bell at the Nasdaq MarketSite on September 14, 2023 in New York City.
Michael M. Santiago | Getty Images
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The Dow Jones Industrial Average fell on Tuesday after recent reports on home sales and consumer confidence raised concerns about the state of the U.S. economy. The Dow lost 388.00 points, or 1.14%, to 33,618.88 on its worst day since March. The 30-stock index closed below its 200-day moving average for the first time since May. The S&P 500 fell 1.47% to 4,273.53, closing below 4,300 for the first time since June 9. Meanwhile, the Nasdaq Composite lost 1.57% to close at 13,063.61.
Higher, not just longer
JPMorgan Chase Chief Executive Jamie Dimon warned that interest rates could rise significantly further as policymakers face the prospect of elevated inflation and slow growth. “I’m not sure the world is prepared for 7%,” he told The Times of India in an interview. Minneapolis Federal Reserve President Neel Kashkari sees a 40 percent chance of “significantly higher” interest rates. The comments come less than a week after Fed officials indicated in their quarterly economic update that they could approve another quarter-percentage point hike by year’s end before beginning some rate cuts in 2024.
Still, the biggest risk isn’t higher interest rates — Dimon said it’s geopolitical. “More important to me is the Ukraine war, the oil, gas and food migration – it affects all global relationships – very importantly, the one between America and China,” he said in another interview with CNBC-TV18. Therefore, he claims that India’s optimism is “fully justified” and not just because investors are looking for China alternatives.
IPO of Alibaba unit
Alibaba plans to list its Hong Kong logistics unit Cainiao, the Chinese e-commerce giant said in a regulatory filing on Tuesday. It is the first company to announce IPO plans after one of the most radical shakeups in Alibaba’s history. The company divided its structure into six business units and hopes that most of them will be able to raise external funds and go public.
[PRO] How to play Amazon
The Federal Trade Commission accuses Amazon of illegally maintaining “monopoly power” to artificially inflate prices, degrade quality for shoppers and stifle competition. CNBC Pro examines the possible positions that can be taken after shares of the e-commerce giant plunged 4% on Tuesday on the development.
Given the uncertain economic outlook, will technology stocks continue to be the gift that keeps on giving?
Financial markets have been sent into a tailspin as U.S. Treasury yields have soared since Federal Reserve Chairman Jerome Powell said the Fed could approve another quarter-percentage point hike by the end of the year before will begin with some interest rate cuts in 2024.
The forecast appears to be bleaker, with JPMorgan Chase Chairman Jamie Dimon and Minneapolis Federal Reserve President Neel Kashkari adding to the pessimistic undertones on Tuesday. Despite the Fed’s official guidance, it suggests that more rate hikes may be lurking.
Technology-related names, particularly those in the artificial intelligence space, have been among the most notable outperformers this year – so how do investors refine their thinking on the sector?
“We’re starting to think that the model of a successful tech company in 2023 … the optimal size is probably not that big,” Herman Narula, CEO of SoftBank-backed virtual reality startup Improbable, told CNBC. “You probably want to think about much smaller companies overall.”
Improbable said it reduced losses by 85% in 2022, a year in which the company shifted its focus to delivering new “metaverse” experiences. Narula said Improbable has been able to deliver more products with fewer employees thanks to advances in generative artificial intelligence.
Will productivity gains manifest in upcoming technology-related names?
Alibaba logistics company Cainiao’s planned Hong Kong IPO could attract a lot of interest simply because of its association with the Chinese tech giant and international growth. Alibaba has previously said it hopes to take its cloud business public, although nothing has been publicly announced yet.
Technology, with its inherent pioneering promise, is often seen as the best hope against the uncertainty about the future. That may seem to be the case at this moment, but it doesn’t hurt to take a closer look.