Powell Stance & Mideast Tensions Sink Tech, Gold Up, Yields at 5%

Key Takeaway

• Nasdaq 100 tech stocks see fourth week of losses amid inflation fears and Middle East tensions, with Israel's response to Iran exacerbating concerns.
• Fed Chair Powell rules out rate cuts, driving two-year Treasury yields to a high of 5%; gold records fifth week of gains.
• Tesla announces over 14,000 layoffs, more than 10% of its workforce, as part of cost reduction efforts.

Market Downturn Persists

The U.S. stock market is facing a significant downturn, with the Nasdaq 100 recording a drop of over 5% this week, its most considerable decline since late October 2022. Similarly, the S&P 500 is on a six-day losing streak, the longest since September 2022. This negative trend is driven by a combination of factors, including concerns over interest rates, corporate earnings, and escalating geopolitical tensions. The recent developments in the Middle East, particularly Israel's limited retaliation against Iran, have added to the market's volatility and uncertainty.

Interest Rates and Commodity Prices

Amid the market downturn, yields on shorter-dated U.S. Treasury bonds have remained stable at around 5%, maintaining levels seen since mid-November 2023. This stability is in the context of Federal Reserve Chair Jerome Powell's firm opposition to rate cuts, emphasizing the central bank's lack of confidence in making progress on inflation. On the commodities front, gold prices have surged to $2,400 per ounce, marking their longest streak of gains since August 2020, driven by the heightened tensions in the Middle East. Oil prices, after an initial spike following the Israeli strike, have stabilized.

Sector and Stock Movements

The downturn has impacted various sectors and stocks differently. The technology sector, particularly semiconductor stocks, has been notably affected, contributing to the broader market strain. However, there have been positive movements within the financial and media sectors. Paramount Global experienced a significant increase of 13% on rumors of a potential acquisition by Apollo Global Management and Sony Group Corp. Financial institutions like American Express and Fifth Third Bancorp reported gains following their earnings announcements. Conversely, companies like Super Micro Computer and Netflix faced declines, with Netflix's decision to cease providing quarterly subscriber growth disclosures notably impacting investor sentiment.

Management Quotes

• Jerome Powell, Fed Chair:

  "Firmly shut the door on rate cuts, citing lack of confidence in progress on inflation."

• Gita Gopinath, International Monetary Fund Deputy Chief:

  "Voiced concerns over the U.S. national debt, stressing the need to reduce the federal deficit, which equals 7% of GDP."

• Elon Musk, CEO of Tesla Inc.:

  "This painful decision is necessary to reduce costs and eliminate redundancy in job functions."