Weekly Market Update

Author : The BlackSummit Team
Date : January 7, 2023

Global Market News

Global Equities Rise

Global equities rose on the week after encouraging jobs data from the Department of Labor. The S&P 500 and Dow Jones rose 1.81% and 1.49% respectively, while the Nasdaq rose 1.57%. The yield on the US 10-year Treasury declined several basis points to end the week at 3.6%. The price of a barrel of West Texas Intermediate crude oil fell on the week to $74.75. Volatility, as measured by the CBOE Volatility Index, rose slightly to 21.50.

Unemployment Continues to Fall as Wage Pressure Decreases

December employment data showed that wage growth slowed last month, while a manufacturing report showed a contraction in the services industry. Investors see this as a sign that the Fed may continue to ease its monetary policy. On the other hand, the Labor Department showed that the US added 223,000 jobs to payrolls in Dec as unemployment fell to 3.5%, better than expected. Nevertheless, the tight labor market continues to be a driver of inflation as companies raise wages to attract workers.

International Developments

US, France, Germany to Supply Armored Vehicles to Ukraine

As the war in Ukraine grinds on into its 10th month, the United States, France, and Germany have each pledged to supply Ukraine with armored fighting vehicles. Specifically, the US will supply Bradley Fighting Vehicles, France will supply AMX-10 RCs, and Germany will supply Marders to fill Ukraine’s request for 700 new armored vehicles. Meanwhile, in response to Patriarch Kirill of Moscow’s call for an Orthodox Christmas ceasefire, Russian President Vladimir has ordered the implementation of a 36-hour ceasefire; a call which Ukrainian President Volodymyr Zelensky has rejected.

Covid Fears Resurge as New Variant Spreads

Covid-19 continues to make an impact globally as a new and highly contagious subvariant of Omicron, known as XBB 1.5, has emerged, raising concerns of a wave of new hospitalizations. XBB 1.5 has been described as the most transmissible Omicron variant to date; however, it is not yet clear how severe infections will be. This comes at a time when China, having rescinded its zero-Covid policy, continues to see a surge in new cases, which has prompted the CDC to update rules on testing requirements for incoming travelers.

US Social & Political Developments

Kevin McCarthy Elected House Speaker After 15 Ballots

Representative Kevin McCarthy (R-CA) was elected Speaker of the Rebublican-controlled House of Representatives early Saturday morning following 14 unsuccessful ballots. McCarthy’s appointment had been opposed by a few hardline Republicans; the Republicans’ slim majority in the chamber permitted a few holdouts to stall the Representative’s appointment. The holdouts were swayed by several significant concessions from McCarthy, notably spending cuts and restrictions on his leadership.

Biden Tightens Migration Policies Ahead of Border Visit

Ahead of his planned trip to the southern border on Thursday, President Biden released a new policy regarding immigration that will accept 30,000 migrants per month from Cuba, Haiti, Nicaragua, and Venezuela, while cracking down on those who fail to use the plan’s legal pathways from those countries. The administration also plans to implement a new regulation, which is a version of a Trump-era rule called the “transit ban,” which will prohibit migrants from applying for asylum in the US without having first sought and failed to acquire asylum in a transit country first. Additionally, the administration will deem any migrants that do not go through authorized ports of entry as ineligible.

Corporate/Sector News

FTC Proposes Rule Banning Noncompete Agreements

The FTC is considering a rule to ban noncompete agreements, which block workers from working for a competitor for a period of time after their employment. These agreements affect 20-45% of US workers, and economists believe that these clauses help explain in part why pay levels for middle-income workers has stagnated. Noncompetes are often seen as a way for firms to keep wages suppressed. The FTC said the potential rule would take effect 180 days after it is officially published, but it may face legal challenges.

Meta Platforms Fined $400M

Meta was fined over $400m for violating EU privacy laws by requiring users to opt in to personalized ads. Meta disagreed with the rulings and plans on appealing the ruling and the fines. The regulator’s decision gives the company 3 months to stop requiring users to opt in to these ads. This would restrict Meta from using data that it collects on its apps, which the company contends would remove a tool that makes up a core part of the company’s advertising business.

Microsoft To Incorporate AI Chat Bot into Bing Search Engine

Microsoft is working on integrating the conversational artificial intelligence behind ChatGPT into its Bing search engine, which could make Microsoft’s product more competitive with Google. Alphabet, Google’s parent company, declared “code red” in response, seeing the AI integration as a major disruptor to the way consumers use search engines. Google is also reportedly working on its own AI to enhance its search products. The Bing integration comes as OpenAI, the company behind ChatGPT, is considering a $300M tender offer which values the company at $29B, placing it among the most valuable startups in the US.