58 Mins Ago
Tech companies still recovering from a low-rate era, says Bank of America
The tech sector is still feeling the ripple effects of when real rates were below 1%, according to Bank of America’s technology, media and telecommunications team. The firm said the unwinding effects of the “zero interest rate policy” era are still ongoing and will continue into 2024.
“Earnings were not a near-term priority at many companies, as valuations in Growth Tech were dictated by EV/Sales, total revenue growth, and revenue growth accretion, rather than earnings accretion,” the TMT team wrote in a Sunday note.
“As a result, companies were incentivized to pursue low/no margin revenues. … Empty calories were all the rage. This created many distortions,” it added.
This created both over-confident management teams and investors, it added, underscoring that software, internet and e-commerce and streaming companies were the most impacted by this trend.
— Hakyung Kim
An Hour Ago
Morgan Stanley sees ‘slowing growth, easing policy’ in 2024
The U.S. will see GDP growth slow down next year, according to Morgan Stanley. The firm also predicts the Federal Reserve will hold rates steady at 5.375% until June 2024, when it predicts rate cuts will begin.
“High rates for longer cause a persistent drag, more than offsetting the fiscal impulse and bringing growth sustainably below potential from 3Q24. We maintain our view that the Fed will achieve a soft landing, but weakening growth will keep recession fears alive. We forecast that GDP slows from an estimated 2.5% 4Q/4Q (2.4%Y) in 2023 to 1.6% (1.9%) in 2024,” chief U.S. economist Ellen Zentner wrote in a Sunday note.
Labor demand will also slow in 2024, but will not be “falling off a cliff,” she added.
— Hakyung Kim
An Hour Ago
Stock futures open slightly lower
U.S. stock futures ticked down Sunday night.
Futures tied to the Dow Jones Industrial Average fell by 43 points, or 0.15%. Meanwhile, S&P 500 and Nasdaq 100 futures declined by 0.16% and 0.12%, respectively.
— Hakyung Kim
