Wall Street shuts down for a day and all hell breaks loose. The market talk before the Thanksgiving holiday on Thursday, 25 November, was of faster tapering of economic stimulus packages and sustained inflation, but Friday’s worldwide stock market sell-off after a new, potentially lethal Covid variant was uncovered in southern Africa, has completely re-written the tune investors had been singing.
Threats of fresh lockdowns, mobility restrictions and lower economic growth will now be occupying the minds of investors and central bankers, including the Fed’s Jay Powell, newly re-elected by President Biden at the start of the week.
|US markets this week|
|S&P 500||Nasdaq Composite|
|4,601.36 (-2.01%)||15,560.91 (-3.09%)|
|Dow Jones||Russell 2000|
|34,818.78 (-2.20%)||2248.41 (-4.04%)|
|Source: Google Finance, prices at 3.30pm UK time|
Signs of stress in financial markets on real economic worries will be the excuse to stop monetary tightening, which could offer support to equities by lowering yields.
Major US stock markets had been modestly up in the days prior to Thanksgiving but predictably steep declines emerged with the reopening, leaving a lot of red about on Black Friday. After stiff selling in some of the big tech/lockdown winners, like Zoom, Peloton and Netflix, they bounced at the opening bell, up 10%, 4% and 2% respectively.
Stock of the week: Vonage
Cloud-based communications software company Vonage saw its shares jump 26% this week after announcing that it will be bought out by Ericsson in a deal valuing the company at $6.2 billion.
The Vonage platform serves over 120,000 clients and over one million registered developers worldwide. Ericsson said it expects the deal to boost its earnings per share, excluding non-cash amortisation impacts, and free cash flow from 2024 going forward.
The deal is expected to close in the first half of next year if, that is, Vonage shareholders and regulators give their approval.