Wall Street Breakfast: What Moved Markets

Stocks clawed back some of this week’s losses in a broad-based rally Friday that ended the week on an upbeat note. Tech-related stocks led the way, with Netflix surging 8.5% after gaining more subscribers than expected in its latest quarter even as the company missed earnings estimates, and Alphabet adding more than 5% after Google announced plans to cut 12,000 employees. U.S. Treasury yields rose Friday, with two- and 10-year bonds extending a rise from four-month lows at mid-week but still posted a third straight weekly decline as investors weighed mixed signals on the economy. The Nasdaq was the top performing index for the week, adding 0.5% in its third positive week in a row, while the S&P 500 edged 0.6% lower and the Dow Jones Average closed the week down 2.7%, both breaking two-week winning streaks.

Demographic crisis

A historic shift is taking place in China that is set to have long-term impacts for both the domestic and global economy. Data released by the National Bureau of Statistics on Tuesday showed that the nation’s total population fell by 850K in 2022 to 1.412B, marking the first decline since 1961. The United Nations also projects that in 2023, China will lose its status as the world’s most populous country to India, whose estimated 1.4B population is still growing. On that note, SA contributor Macrotips Trading points to the iShares MSCI India ETF (INDA) for boosting exposure to large- and mid-cap Indian equities as the nation revs its growth engine. (56 comments)

Another legal battle

Jury selection wrapped up this week in a trial over Elon Musk’s tweets claiming he had “funding secured” to take Tesla (TSLA) private in 2018. A group of nine jurors then began hearing opening arguments in a courtroom showdown that is scheduled to last for around 10 days. Millions – or possibly billions – of dollars in damages are on the line if Musk is found to have knowingly and materially misled shareholders. Despite the additional hot water, Tesla was the biggest gainer in the S&P 500 Index (SP500) on Tuesday with a 7.4% push higher. See why here (and it wasn’t because of testimony that Tesla’s self-driving footage was faked). (62 comments)

Learn to Code

Not anymore? Google (GOOG, GOOGL) is laying off 12,000 employees, or 6% of its workforce, adding to the slew of major U.S. tech companies cutting jobs amid fears of an oncoming recession. The news came after Microsoft (MSFT) confirmed 10,000 layoffs, or 5% of its workforce (and created an “iPhone moment” for AI with new ChatGPT support). Besides downsizing their workforces together, Big Tech is standing united on protecting Section 230 at the Supreme Court amid several cases centering around online speech. (24 comments)

Next episode

Shares of Netflix (NFLX) jumped 7.1% AH on Thursday following a Q4 earnings report where the company easily beat Street and management expectations for subscriber growth – and narrowly cleared the bar on its newfound top focus of revenue. Revenues grew 1.9% year-over-year to $7.85B, and the company added a net 7.66M subscribers globally to hit 230.75M total memberships. That’s 70% higher than the 4.5M net adds expected by the company, while Wall Street was even more cautious, forecasting 4.1M net adds. New leadership is also set to take the reins as Netflix co-founder Reed Hastings steps down as CEO, but stays on as executive chair. (135 comments)

Debt ceiling

The U.S. reached its statutory debt limit of $31.4T this week, prompting a series of extraordinary measures to avoid a default on government debt. “The Treasury could just ignore Congress and issue notes and bonds with coupons well above current yields,” wrote SA contributor James Baker, referencing a novel solution to the debt crisis. “There is a big mess taking place behind the scenes,” noted Mark Grant, saying there might be drastic impacts on the financial condition of the Fed. “Reducing the deficit is not the same as reducing the debt,” added Ronald Surz, cautioning that “U.S. debt continues to climb into the stratosphere.” (190 comments)

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