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Today in the Market (1/5/2022)

Good Evening! U.S. equities declined as economic data revealed sustained labor market tightness, which is expected to keep the Federal Reserve on pace to raise interest rates. Investors also look forward to tomorrow’s critical monthly employment data.

The S&P 500 dropped 1.16%, while the Dow Jones fell 1.02%. The Nasdaq Composite declined the most by 1.47%.

AFTERSHOCK OF FTX

Shares of Silvergate Capital Corp. (SI), a crypto-focused California bank, lost nearly half of their value after the Wall Street Journal reported it spent the equivalent of a decade’s profit and laid off 40% of its employees as investors scrambled to redeem $8.1 billion in the aftermath of the collapse of crypto exchange FTX.

Let’s get into the numbers… Silvergate sold equities and derivatives at a loss of $718 million during the fourth quarter, while clients withdrew around $8.1 billion in digital deposits. This figure much exceeds the bank’s earnings since 2013, as reported by the Journal. On top of that, the bank has abandoned its intentions to develop a digital currency and written off $196 million associated with its purchase of Diem Association’s technology and assets from Meta.

Did you know… The Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency all said earlier this week that it is crucial to avoid uncontrollable risks from entering the financial system.

BING OR GOOGLE?

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Microsoft is developing a new version of its Bing search engine that will use ChatGPT from OpenAI. Microsoft is attempting to entice people away from the search engine leader, Google, by providing more relevant search results. And Google is concerned about the AI danger. Despite ChatGPT’s shortcomings, Google’s executives warned that its publication constituted a “code red” that could upend their business.

Why is that? ChatGPT’s reply style is especially problematic for Google, which mainly depends on paid search results, which are difficult to include in direct, conversational responses. (Google Digital advertisements contributed more than 80% of the company’s income in 2021.)

What else? Microsoft has already spent $1 billion on OpenAI and expects that being a major player in search would help to offset its other issues, such as its sluggish development in cloud computing. According to a report from The Information, Bing’s ChatGPT integration may deploy as early as late March.

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