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Market Snapshot
US equities ended yesterday in red, failing to continue last week’s positive momentum. The moves came amid a quiet day on the economic and earnings fronts, but both are set to heat up as the week progresses.
This week, all eyes will be on the Fed meeting on 1st and 2nd Nov. After three 75 basis point rate hikes this year, the likelihood is extremely high for another 75 bps this week. However, certain data points like bond yield curve inversion suggest that the Fed might go slow on hiking the rates aggressively.
Market Summary
- Temu, an e-commerce app, has surpassed its competitors to become the most downloaded app in the US. Temu is the Chinese e-commerce giant Pinduoduo’s international version. Pinduoduo pioneered the idea of “social e-commerce” and is considered as one of the most successful innovations in China’s consumer tech sector. With more than 730 million monthly active users, Pinuoduo overtook Alibaba in 2020. With Temu, it seems that Pinduoduo wants to replicate its success in the US e-commerce market and compete against the likes of Amazon, Walmart and Shein.
- Meta has lost 70% of its market value this year and is no longer among the top 20 most valuable firms in the US. According to the company’s recent quarterly report, ad revenue has declined by 4% year-over-year, and Metaverse investments have not paid off. Investors are concerned that rather than focusing on a core, profitable business, Meta is investing heavily in an uncharted zone of the Metaverse and is unable to cut down on costs.
- The US bond yield curve inverted again! Typically, yields of long-term bonds are higher than short-term ones as the risk is higher. But last week, the yield on a 3-month treasury bond stood at 4.032%, while the 10-year Treasury yield was slightly less than 4.007%. The last time this happened was in 2020 during the pandemic. This is likely to happen when investors are not optimistic about the short-term and want higher returns to compensate for the risk. This suggests that investors expect economic growth to slow soon and that the Fed will need to lower interest rates below where they are now to aid an ailing economy.
- 40% of Europe’s liquefied natural gas (LNG) imports now come from the US, but it won’t be enough to offset the deficit from Russia. While Europe has been able to plug the gap with US supplies, those shipments won’t be able to keep up as the shortfall expands next year. While for the US, ??????Europe’s purchases are helping to keep gas exports near maximum levels, but strong global demand is causing historically high gas prices in the US, adding to household energy bills and fueling inflation.
- Ford drops the development of self-driving vehicles. Instead, Ford will work in-house on developing a simpler driver-assist technology that has proven easier to develop and bring to market. The company still intends to offer fully self-driving vehicles at some point but believes they are far from being profitable yet.
