Written by Richard Warne.

Last week saw equity markets rebound, with the global index MSCI All Country World Index up +1.1% in Sterling terms, but this masked a high degree of volatility beneath the surface. Earnings’ season has got  under way in the US in earnest, and the past few weeks have been quite a ride for equity markets.  It appears investors are broadly reassessing valuations and positioning against a backdrop of tightening financial conditions.

A case in point, on Friday the Nasdaq 100 Index in the US fell over -4%, the biggest one-day loss since September 2020, yet still managed to end the week in positive territory.  Let’s take a look at some of the US technology stocks that reported last week and the subsequent market reaction.  Facebook, or ‘Meta’ as it is now known, fell over -25% wiping a staggering $230bn+ of market cap in one day.  The Company blamed TikTok competition, and revenue headwinds and supply chain related cost increases for a substantial miss on its earnings numbers.

A similar story was unfolding in Snapchat, where investors were abandoning the stock in anticipation of difficult earnings’ numbers. The stock price fell over -20% by Thursday, and by the close of Friday this had turned into nearly a +30% gain! The Company ended up smashing revenue forecasts and forward guidance.  At the same time, Amazon was caught up in the melee, taking a hit earlier in the week, only to rebound over +13% on Friday.  The week certainly reflected plenty of overexcitement from investors racing to get ahead of the pack on earnings’ expectations.  Wild times!

It’s not hard to see that this heightened volatility could continue, with the Fed’s hawkish stance on tapering and raising rates continuing to send jitters through bond markets and equity markets alike.  Hold tight!

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