The U.S. stock market finished the week on a high note, with the S&P 500 index rebounding after three consecutive weeks of losses. Despite the Federal Reserve's interest rate hikes, fresh data revealed a resilient economy that fueled gains in the stock market. The Dow Jones Industrial Average also booked consecutive daily gains of 1%, a feat it hasn't accomplished since November and ended its four-week losing streak.
Investors weighed how aggressively the Federal Reserve may need to hike interest rates to control inflation, which boosted the market's gains. However, some market analysts, such as James Solloway, chief market strategist and senior portfolio manager at SEI Investments Co., remain cautious about the stock market. Solloway said, "There's a fair amount of uncertainty out there right now," adding that "the improvement that we've seen in the past two days merely offsets what has been some severe weakness in the last couple of weeks."
Stocks pulled back in February, affecting the market's strong start in 2023. Investors reassessed their expectations for how high the Fed will drive interest rates to control inflation, leading to concerns about the Fed's monetary policy. This has resulted in rising bond yields this week.
Nevertheless, the market's outlook remains positive, with consumers still spending money and unemployment remaining stubbornly low. Keith Apton, a managing director at UBS Wealth Management, expects that the S&P 500 will fall to 3,800, presenting a better entry point in the market later this year. He also advises clients to brace for a mild recession in the third quarter of this year.
Apton's sector preference includes defensive areas of the market, such as healthcare and utilities, as well as international equities, including developed and emerging markets. Additionally, potential economic stimulus from the Chinese government's legislative session this weekend could boost the market.
The S&P 500 gained 1.9% for the week, while the Dow Jones Industrial Average rose 1.7%, and the technology-heavy Nasdaq Composite advanced 2.6%. Despite this, equities generally remain in a broad trading range, according to SEI's Solloway, who added, "We are at the upper end of that range right now."
Among the companies in focus, C3.ai Inc. saw its shares surge over 33% after delivering well-received results and upbeat forecasts. On the other hand, Zscaler Inc. shares sank 11.1% after the cloud cybersecurity company forecasted a decline in billings and announced layoffs. Meanwhile, Marvell Technology Inc. blamed inventory corrections for an outlook below the consensus view, causing its shares to fall 4.7%.
And now, let's dive into the latest news and updates about the commodities markets.
Oil prices opened lower on Monday following China's announcement of a lower-than-expected target for economic growth of around 5%, with investors waiting for U.S. Federal Reserve Chair Jerome Powell's testimony later in the week. Brent crude futures were trading down 58 cents, or 0.7%, at $85.25 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were also down 0.7%, at $79.12 a barrel.
According to Vandana Hari, founder of oil market analysis provider Vanda Insights, crude remains in a tug-of-war between optimism over the Chinese reopening and nervousness over a hawkish Fed that could hurt the U.S. economy. China's growth outlook was lower than last year's 5.5% GDP growth target, with GDP growing just 3% last year. However, analysts at UBS Investment Bank upgraded their forecasts for China's GDP growth to 5.4% for 2023 and 5.2% for 2024, from 4.9% to 4.8%, respectively.
Oil prices settled more than $1 higher on Friday after a report that the United Arab Emirates was considering leaving OPEC was found to be inaccurate. However, the rebound was bigger than the original slump, leading to crude prices being in overbought territory and resulting in prices correcting downwards on Monday.
In addition, oil prices are likely to be impacted by rate hikes worldwide as global central banks tighten policy over fears of increasing inflation. The U.S. Federal Reserve's Chair Jerome Powell will testify to Congress on Tuesday and Wednesday, where he will likely be questioned on whether larger rate hikes are needed in the world's largest oil-consuming country. Moreover, the United States' future rate hikes will depend on the February payroll report and the February inflation report due next week.
In contrast, gold prices ticked lower on Monday as central banks indicated further interest rate hikes to control high inflation, diminishing the metal's appeal. Spot gold was down 0.1% at $1,853.99 per ounce as of 0540 GMT. Higher interest rates discourage investors from investing in non-yielding assets such as gold. Edward Meir, a metals analyst at Marex, expects a trading range of $1,775-$1,900, as he believes that the March Federal Open Market Committee meeting will be more hawkish than investors are hoping for.
As we move forward into the coming week, it's time to turn our attention to the most significant events on the horizon.
Upcoming Market-Moving Events:
This week is jam-packed with important events, from the release of the U.S. jobs report for February to Congressional testimony from Federal Reserve Chairman Jerome Powell to central bank meetings in Japan, Canada, and Australia. The week also brings data from the U.K. on how its struggling economy held up at the start of the year. Here's a breakdown of what's in store.
The February employment report, set to be released on Friday, will be the last before the Fed's meeting on March 21-22. Investors will be keeping a close eye on the report, especially after January's robust jobs growth prompted a reevaluation of expectations for future interest rates. The economy is expected to have added 200,000 jobs last month, down from January's impressive growth of 517,000, while the unemployment rate is expected to remain at a more than five-decade low of 3.4%. Another strong report could fuel fears of more hawkish Fed action, as strong demand in the labor market can lead to higher inflation and pressure the Fed to push rates higher.
Jerome Powell testimony
Powell will appear before Congress to present the central bank's semi-annual monetary policy report on Tuesday and Wednesday. Given recent data pointing to persistent inflation, his comments will be closely watched for any hints on whether a larger rate hike is being considered this month. The Fed slowed the pace of rate hikes to 25 basis points at its last meeting in February, following a 50-basis point increase in December.
Stock market volatility
Wall Street experienced a volatile week, with the S&P 500 snapping a three-week losing streak and the Dow Jones Industrial Average posting its first weekly advance since late January. However, the market remains cautious, as investors worry that the Fed will push interest rates higher than previously expected and keep them elevated for longer to combat inflation. More market volatility could be in store before the Fed's March meeting.
Central bank decisions
This week, central banks in Japan, Australia, and Canada are set to hold monetary policy meetings. No changes are expected from the Bank of Japan's last meeting, which is chaired by Haruhiko Kuroda before he steps down and passes the reins to Kazuo Ueda. The Reserve Bank of Australia is expected to keep rates on hold after recent data showed weak economic growth in the fourth quarter and indications that inflation may have peaked. The Bank of Canada is also expected to hold rates steady at its first meeting since announcing a conditional pause in January to allow the economy time to adjust to higher borrowing costs.
The U.K. is set to release GDP data on Friday, showing how the economy performed in January. Economists are expecting the gross domestic product to have expanded by just 0.1% in January from the prior month. Although the country's economy is showing slightly more momentum than expected, and pay growth is faster than predicted by the central bank. The U.K. is still the only G7 economy smaller than before the pandemic, and the International Monetary Fund expects it to be the only G7 economy to shrink this year.
The Bank of England may need to keep raising rates to support the economy, as consumers appear to be holding up despite double-digit inflation.
Hot stocks that everyone's searching for:
Let's look at three stocks making waves in the market and garnering significant attention on StockInvest.us. Detailed analysis of these stocks can be found on the platform by searching for the respective ticker symbols.
Troika Media Group's (Nasdaq: TRKA) stock price experienced a decline of 4.35% on Friday, falling to $0.51. However, despite the recent drop, Troika stock could be considered a diamond in the rough. The company was formed via a reverse merger of a shell company and Converge Direct, a media and marketing firm that generated $23 million in adjusted EBITDA in 2021.
The newly combined firm, with former Converge COO Sadiq Toama as CEO, is expected to produce $22.80 million in operating profits. Mid-tier valuation multiples in the digital customer acquisition industry typically range between 4 to 6 times EV/EBIT in private markets and 5 to 10 times EV/EBIT in public ones. However, since acquiring Converge Direct, Troika's shares have plummeted from $1 in March 2022 to 10 cents, resulting in an enterprise value of only $60 million and a rock-bottom 2 point 6 times EV/EBIT multiple. As a result, Troika could be one of the most underpriced penny stocks of the year.
On Friday, Tesla's (Nasdaq: TSLA) stock price gained 3.61%, reaching $197 after the company reduced the prices of its Model S and Model X vehicles in the United States to boost sales during the final month of the first quarter. The basic version of Model S now costs $89990, down from $94990, while the high-performance Plaid version starts at $109990, down from $114990.
Meanwhile, the basic version of Model X is now priced at $99990, down from $109990, and the Plaid version at $109990, down from $119990. In January, Tesla cut prices for its Model 3 and Model Y vehicles, which led to concerns about sagging demand and lower margins.
However, Piper Sandler analysts believed that the move could increase sales and market share. During Tesla's annual investor day last week, executives emphasized the company's commitment to reducing manufacturing costs and prices for consumers, stating that people's desire to own a Tesla is high, with the primary limiting factor being their ability to pay for it.
Finally, Amazon's (Nasdaq: AMZN) stock price gained 3.01% on Friday, reaching $94. However, the company announced a pause in constructing its second headquarters near Washington, D.C., due to the retrenchment of the tech sector. The company said it would temporarily delay breaking ground on the second phase of its Arlington, Va., development, which involves the construction of three 22-story office buildings. It promised to spend 2.5 billion dollars through 2030, creating over 25000 jobs in the region. Amazon had originally planned to begin construction in the first quarter of 2023.
And to wrap things up:
In a recent conversation with CNBC at the Mobile World Congress in Barcelona, Cher Wang, the CEO and co-founder of HTC, expressed her views on Apple's foray into the world of mixed-reality headsets. Wang said that Apple is likely to launch its own mixed reality product, also known as XR, very soon, possibly this year itself. However, she does not appear to be concerned about the potential competition. The company will likely prioritize a mixed-reality headset over augmented-reality glasses, according to Wang.
Wang's comments come after a Bloomberg report that suggested Apple is gearing up to release a mixed-reality headset in the spring. Though it should be noted that Apple has reportedly put on hold its plans to launch AR glasses by 2025. Apple is known for holding off on getting into a particular product trend or feature until long after other firms. For instance, the iPhone didn't get a camera with two lenses until 2017, years after HTC introduced a dual camera with its HTC One M8 handset in 2014.
While Neil Shah, the research vice president of Counterpoint Research, has expressed his view that XR is the newest form of how we can interact differently with the world and can change the paradigm of personal computing. Leo Gebbie, principal analyst for connected devices at CCS Insight, said that when Apple does eventually make its way into a new product category, it tends to "redefine the way that everyone thinks about an opportunity."
It should be noted that Apple wouldn't be the only company to enter the XR market. Meta launched its $1,500 Quest Pro device in October 2021, which lets users interact with virtual objects that appear in a full-color view of the world around them. Furthermore, a Samsung executive has confirmed that the South Korean electronics giant is "working out" its mixed reality strategy, while Microsoft has its own mixed reality headset called HoloLens.
Additionally, Chinese smartphone maker Xiaomi unveiled a prototype set of augmented reality glasses earlier this week.
The competition in the XR market will mean more competition for HTC. According to data from Counterpoint Research, HTC shipped over 100,000 XR devices in the second quarter of 2022, up by 158% from 40,000 shipments in the same period a year prior. However, its market share remains relatively small.
Wang thinks that moving from Apple, Meta, Samsung, and others in the space will boost the adoption of mixed reality devices, which she sees as a boon to HTC's business. "It's really proven that our direction is correct," she said. "Competition is always good."
Once a major player in the smartphone market, HTC has staked its future on merging virtual and physical worlds. In January, the company launched its Vive XR Elite device, a lightweight headset focused on gaming, fitness, and productivity, at a $1,099 price point. The bet long term is that these devices will be how we interact with a mass-scale virtual world known as the "metaverse".
HTC has its own so-called metaverse, named HTC Viverse, and the company talked up its ambitions in this area at the show this week. Shen Ye, HTC's global head of product, said, "The metaverse is kind of growing in a state where so many social media companies and walled garden companies are trying to build it out themselves. Our goal is to make sure it's as open and interconnected as possible."
Though the hype surrounding the metaverse has died down lately, the initial enthusiasm surrounding Meta's involvement has been wearing off. According to IDC data, worldwide shipments of VR headsets, as well as augmented reality device sales, sank over 12% last year. Companies have instead steered towards artificial intelligence, the new in-vogue tech topic that has been catapulted.
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