Today in the Market (1/26/2024)

Good Morning! On Friday, stocks experienced volatility before settling in a combination of positive and negative territory as investors analyzed a significant inflation report in anticipation of the next Federal Reserve meeting over the trajectory of interest rates.

The Nasdaq and S&P 500 both ended the day down by 0.36% & 0.07%, respectively, while the Dow Jones increased by 0.16%.

OVERBLOWN OR DESERVED?

Intel Corp. (INTC) had a significant decline, the largest in over three years, after the release of a grim prediction. Chief Executive Officer Pat Gelsinger said on Friday that the response to this news was overblown.

But was it? The prospect raised concerns that Gelsinger’s highly anticipated comeback attempt had veered off course. While the chipmaker’s personal computer division is seeing a rebound, there is a decline in demand for data center processors in the highly profitable area. Intel is now facing challenges in the form of a decline in programmable chips and components for autonomous cars. Additionally, its newly established semiconductor company catering to other firms has not yet gained significant traction.

What does Gelsinger think? During a conference call with investors, Gelsinger conceded that the first quarter’s performance fell short of expectations. However, he expressed optimism that the subsequent quarters of 2024 would see gradual improvement. According to him, Intel’s efforts to regain a leading manufacturing position are progressing as planned. Furthermore, he said that the chipmaker is currently not seeing any decline in sales to rival companies in the PC and data center markets.

THE LAYOFFS CONTINUE

In 2024, the media and entertainment business will face more layoffs due to increasing expenses and the burden of debt on their financial statements. Furthermore, in response to the need for increased profitability, they introduced advertising-supported levels, combined their services into packages, and hiked the monthly fees for subscription plans. Here are some examples:

  • Even Alphabet (GOOG, GOOGL) has not been protected from workforce reductions. The business downsized its creator management and operations departments last week, resulting in the termination of 100 YouTube workers.
  • According to Bloomberg, Universal Music Group (UMG), a leading record company in the business, intends to terminate hundreds of staff members in the next quarter.
  • According to TechCrunch, Disney’s animation division (DIS) expects to lay off up to 20% of its workforce, or about 260 people out of a total of 1,300.

But why? Valuation levels continue to be low. Streaming profitability remains significantly weak, as almost all media businesses, besides Netflix, continue to incur losses in this sector. The outcome is more reductions in the workforce.

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