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Market Movers Weekly April 27/24: Rollercoaster Ride for Tech Stocks and Rate Cut Hopes

Big Tech earning nvidia stock tesla

Last week, the stock market was a bit of a rollercoaster, especially for tech stocks. The S&P 500 fell by about 1.5%, its sixth straight loss, marking its worst week since October 2022 with a total drop of over 3%. The Nasdaq, heavy on tech, saw a 1.3% dip. In contrast, the Dow actually did alright, gaining about 1.2%.

Poor earnings from big tech companies added to the gloom, with a major streaming service down 9% after missing forecasts. This dampened hopes pinned on quarterly reports boosting a comeback. Even a geopolitical flare-up, prompting a shift to safer investments like gold, only gave a brief lift to the market.

Looking ahead, more tech earnings are on the way, and with recent disappointments, all eyes will be on these updates alongside key economic indicators like the Q1 GDP and the PCE price index. High interest rates seem here to stay, adding to the cautious sentiment. So, buckle up for more ups and downs, particularly in tech.

Tech Stocks Hit Hard, Nvidia Drops 10% Amid Rate Cut Hopes and Geopolitical Tensions

Nvidia Stock Drop

Tech stocks took a major hit today, dragging down market indexes. The S&P 500 dropped 0.9%, continuing a six-day losing streak, its longest since October 2022, and shedding over 3% for the week. The Nasdaq Composite fell harder by 2.1%, totaling a 5% loss for the week. Meanwhile, the Dow managed a modest gain of 0.6%.

Big Tech suffered from poor earnings, with Netflix leading the downturn by falling 9%, affecting hopes for a sector recovery. Nvidia notably plunged 10%, and other major tech names also experienced declines.

Geopolitical tensions added to market jitters, influencing a brief flight to safe havens like gold, though the market remains on edge. Amidst this, Federal Reserve officials are signaling no imminent interest rate cuts, reacting to higher-than-expected inflation figures.

Stocks Extend Losing Streak as S&P 500 Logs Sixth Day of Declines Amid Rate Concerns

S&P 500 Dips Down

Stocks continued their slide with the S&P 500 falling 0.9%, marking its sixth consecutive day of losses, its longest downturn since October 2022, losing over 3% for the week. The Nasdaq also declined by 2.1%, totaling a 5% weekly drop. However, the Dow bucked the trend slightly, gaining 0.6%. Market sentiment was dampened by persistent high interest rates and escalating geopolitical tensions.

What's Coming Up This Week: A Sneak Peek

Microsoft, Meta, Alphabet earnings report

Next week, the focus remains on whether the Fed will cut rates this year, as Wall Street watches tech giants like Meta, Microsoft, and Alphabet report earnings following Netflix's disappointing results. With high interest rates potentially persisting, these reports could be pivotal. Economic indicators such as Q1 GDP and the PCE price index due Thursday and Friday, respectively, will also be key. Yahoo Finance's Brent Sanchez will provide a graphical breakdown of these events.

Looks Like Higher Rates Might Stick Around Longer Than Expected

High interest rates not going down any time soon

Persistent high inflation has prompted a shift in expectations for U.S. interest rates, suggesting that rates may stay higher for longer than previously anticipated. Despite earlier predictions of rate cuts as soon as June, current market projections now see no cuts before September. This adjustment follows recent inflation data that exceeded forecasts. According to Apollo Global Management's chief economist, the unusual length of time since the last rate hike indicates a possible departure from typical Federal Reserve cycles, potentially maintaining higher rates well into the future.

All The Important News

Gold Prices Could Surge Due to Geopolitical Tensions

Amid escalating Middle Eastern tensions and ongoing sanctions on Russian gold, JPMorgan predicts further growth in gold prices, forecasting an average of $2,500 per ounce for the fourth quarter of 2024. The spot gold price has already seen a significant increase this year, spurred by geopolitical unrest and investor concerns, reaching a record high of $2,448.80 per ounce. Analyst Gregory C. Shearer notes a strong holding sentiment among investors, suggesting a continued bullish trend for gold due to persistent geopolitical risks and inflation concerns.

Stock Market Reacts to Interest Rate Shifts: How Valuations are Adjusting

As earnings season continues, the main concern isn't just a potential drop in earnings but the shifting valuations investors place on these earnings. Despite stable earnings estimates for the S&P 500, set at $243 this year, rising interest rates have led to lower price-to-earnings (P/E) ratios. This decline reflects investors' reduced willingness to pay for future earnings due to increased capital costs making future earnings less attractive, as higher rates generally push down P/E ratios, irrespective of earnings stability.

PMorgan Picks Duolingo as Standout Choice in Online Education

JPMorgan has selected Duolingo as its top pick in the online education sector, maintaining an overweight rating with a 12-month price target of $270, indicating a 39% potential rise. Despite a 9% drop this year following last year's 219% surge, the firm sees the current price as a good entry point, anticipating a possible increase in Duolingo's 2024 outlook due to effective marketing and strong execution, which have driven significant user growth and engagement. Additionally, Duolingo's recent addition to the S&P MidCap 400 could attract further investments from index funds.

Taking a Fresh Look at the Classic 60/40 Portfolio in Today's Interest Rate Scene

BlackRock's Rick Rieder recommends revising the traditional 60/40 investment strategy, proposing a 60/30/10 split due to high interest rates. This new strategy maintains 60% in stocks but shifts to 30% in higher-yield, shorter-duration assets, and 10% in alternatives like private credit. Rieder suggests that traditional bonds are less effective as hedges in the current rate environment, and advocates for investments in AAA-rated CLOs and European investment-grade credits to better manage risk and optimize returns.

Needham Gives Netflix a Boost Thanks to AI Potential

Needham analyst Laura Martin upgraded Netflix from hold to buy, highlighting its strong technological foundation and potential in AI to drive revenue and improve margins. This upgrade follows better-than-expected Q1 earnings. Despite this, Netflix's decision to stop reporting quarterly subscriber metrics caused a drop in pre-market shares. Martin raised the price target to $700, expecting a 15% increase, backed by AI integration, advertising, strategic pricing, and consistent content investment, which could enhance free cash flow and ROI.



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