Facebook's sharp discount. Wall Street sold the facts

Despite the achievement of a trade ceasefire between the PRC and the US, the New York stock exchanges experienced declines. In particular, significantly overvalued technology companies were overvalued. The biggest decline affected the shares of Meta – the owner of Facebook.

Shares of Meta Platofrms fell by over 11% on Thursday after the former Facebook published its financial report for the third quarter a day earlier. The results themselves weren't bad. Both “adjusted” earnings per share and revenues exceeded Wall Street analysts' expectations. But at the same time, Mark Zuckerberg's company announced an increase in capital expenditure – mainly for building a technological base for AI algorithms.

A day earlier, Alphabet, the owner of Google, also announced an increase in AI capex. Microsoft also increased expenses related to investments in AI. In this case, investors also turned up their noses and overvalued the shares of the Redmond giant by almost 3%. Amazon's quotations also dropped significantly (by 3.2%), and it will announce its results after Thursday's session.

Earlier, Jeff Bezos' company announced the layoff of 14,000 office workers. These are the first signs of laying off employees to save money needed to expand data centers needed to run AI algorithms. Moreover, jobs in large technology companies may become the first victims of the expansion of generative artificial intelligence, which will perform the same work much faster and cheaper (though not necessarily better).

Nvidia's stock also dropped by over 2%, as the day before it became the first company in history to be valued at over $5 trillion. Tesla's capitalization dropped by over 4%, Oracle's stock dropped by 6.7% and Broadcom's by 2.5%. Alphabet's shares gained significantly (by 2.5%), but next to Apple (+0.6%) it was the only such a large green spot in the technology sector.

As a result, the Nasdaq Composite dropped from the historical peak set the day before, falling by 1.57%. The S&P500 fell by almost 1%, retreating to 6,822.34 points. However, the Dow Jones lost only 0.23% and ended the day at 47,522.12 points.

You could say this was Wall Street's way of selling facts after buying rumors for the previous weeks. Reports about a kind of trade truce between the authorities of the People's Republic of China and the United States during President Trump's visit to Beijing on Thursday have been confirmed.

Secondly, the market does not have much to discount in terms of further interest rate cuts by the Federal Reserve. Although on Wednesday it received a second 25-point cut in a row, Chairman Powell refrained from confirming the rate cut expected by the market in December.

Due to the federal government shutdown in the US that has been ongoing for 30 days, we do not have most official macroeconomic statistics and we do not fully know what is happening in the world's largest economy (we only have private reports and CPI inflation data). And on this front, anecdotal reports are not looking good, as even manufacturers of basic consumer goods are complaining about weak demand for their products.

K.K

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