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In today’s edition
- Discussing spot bitcoin ETFs
- Netflix’s strategic shift
- Samsung’s earnings slump
- Microsoft’s AI-led surge
Market Snapshot
In the recent trading week, US stock markets showed a mix of performances but ultimately recorded gains. This trend was influenced by the latest inflation data and the commencement of the quarterly earnings season for major banks.
The S&P 500 index achieved a notable 1.8% increase over the week. The Dow Jones Industrial Average (DJI) also ended the week on a positive note, albeit with a more modest rise of 0.3%. The Nasdaq Composite outperformed, registering a significant weekly growth of 3.1%.
A key driver behind these market movements was the unexpected decline in the December Producer Price Index (PPI), which decreased by 0.1%, contrary to expectations of an increase. Additionally, the core PPI, which excludes volatile food and energy prices, remained unchanged, defying forecasts for a rise. This data came on the heels of a Consumer Price Index (CPI) report that was slightly stronger than anticipated, leading to tempered expectations for imminent rate cuts from the Federal Reserve.
Adding to the market dynamics was the start of the quarterly earnings season, with major banks including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo reporting their financial outcomes. Notably, their earnings were significantly affected by special assessments levied by the Federal Deposit Insurance Corporation (FDIC). These assessments were related to the FDIC’s efforts to manage the fallout from recent closures of US banks.
Market closing data for the week from January 8 to 12th, 2024
A solid debut by Spot Bitcoin ETFs
The debut of the first 10 US exchange-traded funds (ETFs) offering direct exposure to Bitcoin resulted in a significant surge in trading volumes, exceeding $4 billion across major stock exchanges.
This milestone followed approvals from the Securities and Exchange Commission (SEC) and included Grayscale Investments’ converted $28 billion Bitcoin trust, which alone accounted for half of the trading. Despite high volumes, the influx did not represent new money at that scale, with some activity likely involving rotational selling from Grayscale’s trust, known for its higher fees.
The launch, which saw Bitcoin’s price fluctuate and settle slightly down from its previous level, marks a shift in the SEC’s stance following a legal tussle with Grayscale. The new ETFs, beginning with about $113 million in seed capital, indicate a growing interest in cryptocurrency exposure through more traditional investment vehicles.
For Indian investors, investing in spot bitcoin ETFs offers distinct tax advantages compared to directly holding Bitcoin.
Under Indian tax laws, while direct crypto investments attract a flat 30% capital gains tax with no provision for loss offset or carryforward, investments in spot bitcoin ETFs through the Liberalised Remittance Scheme (LRS) follow different tax rules.
- Short-term capital gains on these ETFs are taxed according to the investor’s tax slab, and long-term gains (held for over 36 months) are taxed at 20% with indexation benefits.
- Additionally, while a 1% TDS applies to transfers on domestic crypto exchanges, it doesn’t affect US-based spot bitcoin ETFs.
For more information, read our recent blog post, or start browsing the selection of sanctioned spot bitcoin ETFs available on our platform.
News Summaries
Netflix in 2023 released approximately 130 fewer original programs than the year before, marking a 16% reduction and resulting in the lightest release schedule in five years. After a decade of heavy investment in content, peaking at $4.8 billion in a single quarter in late 2021, Netflix has adopted a more conservative spending approach, allocating $3.2 billion in its latest quarter. This change reflects a strategic pivot to ‘quality over quantity,’ contrasting sharply with its 2020 goal of releasing a new movie weekly. This adjustment comes amidst intensifying competition from Disney, Paramount, HBO, and others in the streaming landscape, driving Netflix to focus on crafting fewer, higher-quality titles rather than maintaining its previous rapid output rate.
Despite a global surge in AI chip demand, Samsung, a major player in the chipmaking sector, faces its weakest earnings in 15 years with a 35% drop in fourth-quarter operating profit. This decline, marking the sixth consecutive quarter of falling profits, is attributed to both global and company-specific factors. Globally, reduced consumer spending on electronics due to economic slowdown and high inflation has impacted chip demand. Company-wise, Samsung has fallen behind in chip contract manufacturing and AI chip-related technology, with its market share in the foundry business dropping to 13%, while rival TSMC dominates at 59%. Additionally, Samsung struggled to keep pace with SK Hynix in the high bandwidth memory market, crucial for AI chips, further impacting its earnings despite a rise in average memory chip prices.
Microsoft briefly surpassed Apple as the world’s largest company by market value, reaching $2.87 trillion compared to Apple’s $2.89 trillion, driven by investor enthusiasm in artificial intelligence (AI). Microsoft’s ascent was attributed to its significant investment in AI, particularly as the main supporter of OpenAI and ChatGPT. In contrast, Apple’s focus on hardware and recent concerns over iPhone sales, especially in China, led to a decline in its stock value. Although Apple regained its leading position by the week’s end, Microsoft’s surge highlights the growing importance of AI technology in determining market leadership, contrasting with Apple’s upcoming release of the Vision Pro headset, aimed at advancing spatial computing. This development underscores a pivotal moment in the long-standing rivalry between Microsoft and Apple, with AI and cloud computing becoming key factors in their market valuation and the broader tech industry’s dynamics.
