This year has started on Wall Street as expected, with volatility due to the bipolar mood of investors, who one day jump for any sign and, the next day, fall into depression.
There is a key factor that will begin to reveal the market trend in the first quarter of the year: financial reports for the fourth quarter of 2022.
In general terms, it seems that they will be negative, with lower profits and income, already reflecting the effects of the economic slowdown that would have started since November and that, despite the Christmas dates, was not interrupted.
The warnings of lower revenues and profits also lower than those of other quarters companies like Honeywell, in the industrial sector, have sprung up everywhere in the last few hours; IBM in technology; 3M, in the industrial services sector, and JP Morgan in the banking industry, have warned about their numbers, pointing out that they will not be positive, that they already hope to reflect the impact of the Fed’s interest rate hike.
On Wednesday the 18th, Honeywell lost 3.75 percent, IBM 3.33%, 3M 3.06% and JP Morgan 3.01%, as a sign of the session in which Wall Street fell, erasing nearly all of last week’s gainsin a single session pessimism invaded investors.
Also on January 18 all sectors fell back, led by essential goods companies with less than 2.65 percentpublic services minus 2.41 percent and industrial minus 1.84 percent.
There are other figures that contribute to the volatility in the market: it was known that sales of the retail sector in the United States during the 2022 Christmas season, which covers November and December, totaled 936.3 billion dollars, the figure represented 5.3 percent more than those of the previous year; however, it was lower than expected.
Indeed, according to the National Retail Federation (NRF) the previous figure was below forecasts, the most pessimistic expected sales in the retail sector for a total of 942.6 billion dollars, while the The most optimistic expectation considered that up to 960.4 billion dollars could be sold.
In fact, the percentage growth was not the best either, since in 2020 Christmas sales grew at a rate of 9.3 percent, while in 2021 they did so at 13.5 percent.
“These figures show that consumers slowed down more than we expected, in the face of a troubled environmentdominated by inflation,” the NRF said in a statement to the market.
The new economy is “shrinking”
The pandemic generated a kind of “new economy”; as we know, in industrialized nations the release of billions of dollars to workers and companies boosted demand for technology products and service platforms.
Given the magnitude of such demand, many companies in these sectors undertook the task of hiring the necessary personnel and moreeverything lasted until mid-2021 when the economic reopening began to mark a new reality.
From then on, the “new economy”, despite its youth, had to begin to reduce its expectations of income, profits and, consequently, growth.
A year and a half later, the situation seems to have become untenable, that explains the wave of layoffs in the technology industryas this is being written hundreds of employees are being evicted from their jobs in Europe by Amazon, while Microsoft has joined with 10,000 layoffs, two true giants in the sector and when they shake, the industry shakes completely .
The problem does not end there, it is much deeper, the cuts in this sector and, above all, in giants like Amazon and Microsoft, have two major implications:
one) The first is obviously within the industry; their multiplier effect is very broad because they are “heads of the sector”, they are in bad shape, but other smaller companies can even go bankrupt.
2) The second implication reaches economics, not only because of its poor results and its efforts to reduce costs and stop the decline in its revenues and profits; the signals that they send to the economy, in general, is pessimistic.
All previous: the expectation of bad results in the financial reports of the corporations, the wave of layoffs in the technological giants, the bipolar mood of the stock markets on Wall Streetand everything that comes to mind, can be summed up in a sentence that contains a key word that we have used a lot in this space because, surely, throughout the year it will be the undisputed protagonist: Fear of a RECESSION.
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