Market Munch 🍔| 28 July 2022
The Fed goes hiking again, Meta misses profit targets, and Silicon Valley gets shunned from BNPL.
Good morning Munchers!
Here is your daily dose of the news that matters, from Wall Street to Dalal Street - in 5 minutes and 14 seconds.
Let’s dive in.
What’s hot, what’s not?
Market Commentary
The US Fed raised their benchmark interest rate by 75bps (0.75%). Markets more or less expected this and rallied on the news.
This rise in rates is hampering demand and also taking it’s toll on corporate earnings - so JPow said that “it could be appropriate to slow pace” of future hikes. 😬
Strong earnings are keeping us afloat. Interesting to note that 75% of companies reporting have either met or beat expectations. Maybe we’ll all be okay. 😏
IMPORTANT EARNINGS RELEASES TODAY -
- PFIZER, TILRAY, MASTERCARD, MERCK all before market open.
- APPLE, AMAZON, ROKU, INTEL, US STEEL all after market close.
Story Roundup
1 - The Fed doubles down on inflation fight with 75bps hike. 💸
America’s central bank raised it’s benchmark interest rate by 0.75% to 2.25-2.50%.
It’s another step in their most aggressive monetary tightening cycle since 1981 - and it’s one that’s much-needed to tame decades high inflation.
US headline inflation printed at 9.1% last month - so it’s not a surprise that these hikes will continue into H2 of 2022 and maybe 2023.
The big question, however, is the size and pace of these hikes.
Fingers crossed.🤞
2 - Facebook suffers it’s first quarterly revenue decline. 💀
2022 has given Meta a lot of ‘firsts’. First yearly user loss, first 25% daily drop, and the first time a company has lost more than $200b in a single day.
They can also add to that list - first quarterly revenue decline.
Facebook’s parent company had it’s earnings release early today and missed both revenue and profit targets. Revenue was down 1% on the year and profit was down 36% on the year.
Mark Zuck’s ship is one of many ad-reliant companies that have been battered by a steep drop in ad-spend. Both YouTube and Snap disappointed heavily earlier this week.
Meta stock is down 6% on the news.
3 - The Feds raise an eyebrow at Big Tech’s BNPL plans. 🤨
The director of the US’s consumer finance regulator said that he’d “have to take a very careful look at the implications of Big Tech in BNPL”.
This comes after Apple announced their Apple Pay Later product - which eliminates any iOS user’s need to use a BNPL product.
It makes sense for tech giants - they have a treasure trove of data on their clients that can be used to influence spending.
Looks like Silicon Valley’s gonna dominate our wallets. 🙏
4 - Shopify CEO admits that “I got this wrong”. 😬
The world’s largest e-com company is down 20% in the last 2 days - over a mass employee firing and disappointing earnings.
Yesterday they announced that they'd be laying off about 1,000 employees - a perfect example of a company that grew way too fast, and collapsed even faster.
This headcount reduction marks a significant change in direction - with a disappointing earnings print too.
They missed revenue targets by 26% and profit targets by almost $40m.
Someone on Twitter said it best - “You never needed 10k employees to let teens sell hats”.
5 - More subs, less problems - Spotify earnings🎧
The world’s largest music streaming platform is moving ahead, full steam.
Spotify stock has been absolutely hammered this year, as investors thought it would move in lockstep with Netflix. (They’re both subscription models)
Instead, they ended the 2nd quarter with 188mn subscribers - beating estimates despite the fact that they lost quite a few subs in Russia.
Ad revenue is up 31% on the year and 28% from the previous quarter.
CEO Daniel Ek tried distancing themselves from Netflix saying that they have “vastly different business models” - and this quarter proves it.
(Btw, 95% of Spotify’s listens were me looping Kanye and Sidhu Moosewala.)
Aaaand that’s a wrap.
Thanks a ton for reading. Hope you enjoyed it. Any feedback is open - positive or negative. Hit my line at aryaansh.rathore@gmail.com or https://www.linkedin.com/in/aryaansh/.
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