The largest technology stocks that lifted the broader market last year are having a less rosy start to 2024. The “Magnificent Seven,” which includes AAPL, AMZN, GOOG, MSFT, META TSLA and NVDA, have slipped four consecutive days. This group surged more than 100% last year, driven by a frenzy in artificial intelligence, thus suggesting profit taking is needed.
APPL is down about 5% during the last four days, erasing over $370 billion in market value. TSLA is down about 8%. To place the magnitude of the dollar loss of APPL, the shares lost more value than the capitalization of all but 16 members of the S & P 500. AAPL’s value fell more than the entire capitalization of Procter and Gamble and Home Depot.
AAPL is still worth $2.86 trillion and is the largest public company in the world, a capitalization which is greater than the $2.8 trillion capitalization of the Russell 2000.
Oil continued to advance on Middle East tensions. Production from Libya’s largest oil field was suspended because of unrest. The continual attack on shipping in the Red Sea and a bombing deep inside Iran that took over 100 lives added to oil’s nervousness.
An argument can be made that Middle Eastern tensions are increasing, an increase that is not reflected or discounted in the markets.
Speaking of a lack of a discount, the Federal Deficit is now over $34 trillion, projected to be $36 trillion by the end of the year. Interest payments on the national debt reached $900 billion for this fiscal year and will soon exceed $1 trillion, amounting to over 17% of the budget. Interest expense on the debt has almost tripled from four years ago and are projected to exceed over $1.5 trillion in 18-20 months.
As with geopolitical tensions, the markets have largely ignored the deficit which most suggest is unsustainable. At some juncture, the deficit and interest expense will matter but the pivotal question is as to when.
Commenting about the Minutes from the December FOMC meeting, the Committee said it would be appropriate to maintain a restrictive policy stance “for some time” while acknowledging they are probably at the peak rate and would begin cutting in 2024. There was no indication that easing could begin as soon as March, the month that the market is suggesting the first-rate cut will occur.
There was no change in the Fed’s projections that three interest rate cuts will occur in 2024, an outlook that is also in direct conflict of the market’s view of 6 interest rate reductions.
There was little reaction to the Minutes.
What will happen today?
Last night the foreign markets were mixed. London was up 0.07%, Paris up 0.04% and Frankfurt down 0.06%. China was down 0.43%, Japan down 0.53% and Hang Seng up 0.01%.
Futures are flat. Oil is up another 2% on Libyan supply disruptions and on threats of retaliation from Iran for the result of attacks that killed almost 100 people in that country claiming the attacks were the result of its stance against Israel. The 10-year is off 12/32 to yield 3.97%.
