Two indicators point to a still strong US economy. This leads investors to fear even more rate hikes from the Fed. Tesla drives into the guardrail again and AMC is hit.
The New York stock exchanges seemed Wednesday in Christmas rally mode with their solid gains, but the mood has turned after three consecutive days of gains. The Dow Jones
lost 1.1 percent at the close, the S&P 500 slipped 1.5 percent and the technology exchange Nasdaq
even thundered 2.2 percent lower. Although this last barometer was more than 3 percent in the red earlier in the day.
Interest rate fears overcame year-end optimism now that the US central bank (Fed) has made it clear that the economy and the labor market must cool down in order to quell high inflation for a long time. But the latest numbers seem to indicate that both are still strong.
In the labor market, the number of new applications for unemployment benefits increased slightly last week to 216,000. That is fewer than the 222,000 economists predicted. This is a sign that the US labor market is still very tight.
There is also good news in terms of economic growth. It was 3.2 percent on an annual basis for the third quarter compared to the second quarter. The government previously assumed an expansion of 2.9 percent. Growth was revised upwards as consumption and business investment rose more than expected.
Investors now fear that the Fed sees an additional reason in those figures to raise the continue interest rate hikes. Those higher interest rates reduce the present value of future profits. Especially tech stocks, where the value is mainly based on profits that are yet to come, are falling lower as a result.
Big Tech does not escape the dance. Microsoft
lost 2.6 percent, Apple
fell 2.4 percent, Amazon
had to surrender 3.4 percent, Alphabet
recorded 2.2 percent in the red and Meta
lost 2.2 percent.
Another tech stock that took a beating: Tesla
. The electric car manufacturer drove against the guardrail with almost 9 percent. And that is not the first time. This year, the stock has already fallen 70 percent.
Investors and analysts are concerned about demand for the cars as an economic slowdown looms. But equally important is the problem there is with CEO Elon Musk who is also CEO of the social media company Twitter. That may distract his attention from what is happening at Tesla. In addition, there is concern that Musk’s extreme statements will make the Tesla brand more polarized.
plunged 7.4 percent to $4.91 after proposing to convert preferred stock to common stock along with a proposal to conduct a reverse stock split.
According to CEO Adam Aron, this is necessary to prevent AMC from moving towards a penny stock. According to him, this could happen under the influence of malicious Wall Street bankers. The proposal is to return one share for every ten shares to investors, so that AMC’s optical price climbs.
The preferred shares came out in August, but were quickly snapped up by retail investors who speculated on them. “It is in our shareholders’ interest to simplify the capital structure,” says Aron. In addition, the company also raised $100 million by selling preferred stock to creditor Antara Group at a price of 66 cents, 2.5 cents below Wednesday’s closing price. Today, the price of the preferred stock – under the symbol APE – soared 75 percent to $1.20.