The Australian stock market recorded its third consecutive day of declines on Wednesday, driven by a drop in materials, energy stocks and technology stocks.

This comes as the market anticipates crucial interest rate decisions from the Bank of England, Bank of Japan, and the US Federal Reserve in the next 48 hours. The S&P/ASX 200 ended 44.2 points or 0.6 per cent lower at 7165.5, with the All Ordinaries showing a comparable decrease.

Meanwhile, in the US the Fed left rates unchanged at 5.25-5.50 per cent. However, projections showed one more rate hike to come in 2023, with fewer rate cuts ahead in 2024, playing into the higher-for-longer narrative. Jerome Powell, chief of the Federal Reserve, mentioned, “We believe we’re nearing our target,” and suggested that a gradual stabilisation is feasible.

US equities finished lower in Wednesday trading, with big tech firms a notable laggard. The Australian market is set to open lower today with the SPI200 down 20 points or 0.28 per cent to 7151.

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Tech companies often face legal battles, but now we’re witnessing one of the largest antitrust cases in years. Google is currently defending its search business in Washington against the Justice Department.

The DOJ claims Google engaged in unlawful deals to push out competitors, which negatively impacted consumers and advertisers. For instance, Google pays Apple billions to be the default search on Safari. However, Google argues that they encourage competition by catering to providers and allowing consumers the choice to use other products. It will be weeks before the witness testimony wraps up but, should the judge find against Google, it will be transformative for the industry.

On its New York Stock Exchange debut, martech firm Klaviyo’s shares increased by 9.2 per cent, marking the first significant IPO for a U.S. venture-backed software firm since late 2021.

The stock opened at US$36.75 but dipped to close at US$32.76. Klaviyo, valued at over US$9 billion after pricing its shares at US$30 each, managed to raise US$345 million by selling 11.5 million shares. This valuation slightly decreased from its US$9.5 billion worth in a 2021 private financing round.

On the closing bell on Wednesday NASDAQ-listed Instacart’s shares fell approximately 11 per cent on its second trading day, ending just above their IPO price of US$30. While the stock initially surged 40 per cent to open at US$42, it declined to close at US$33.70, eventually settling at US$30.10 by Wednesday. Instacart’s IPO revived a dormant market, which had slowed since late 2021 due to inflation and rising interest rates.

However, the decline in its stock price indicates investor caution towards tech companies targeting traditional sectors amidst economic challenges. Instacart joins the ranks of gig economy companies like Airbnb, DoorDash, Uber and Lyft on the public market, with only Airbnb proving favourable for investors.

Pinterest surged, recording its best performance since July with a 3% increase. This boost was attributed to its CEO’s optimistic three- to five-year forecast and praise for Pinterest’s advertising tools. The company recently partnered with Amazon for advertising. Early tests indicate ads from this partnership are more relevant, as highlighted by Pinterest’s strategy chief, Martha Welsh.

Expert Views

Naba Banerjee, responsible for Airbnb’s global party ban, has dedicated over three years to tackling party “collusion” among users, identifying “chronic party properties,” and chiefly, developing an AI system to prevent parties. According to CNBC, the AI models look at hundreds of factors, including the reservation’s closeness to the user’s birthday, the user’s age, length of stay, the listing’s proximity to where the user is based, weekend vs. weekday, and whether the listing is in a popular location. CNBC reports “There was a global 55 per cent drop in parties reported on Airbnb between August 2020 and August 2022, according to the company, and since the worldwide launch of Banerjee’s system in May, more than 320,000 guests have been blocked or redirected from booking attempts”.

US media companies are grappling with challenges as actors and screenwriters demand better streaming residuals, wage increases, and AI safeguards, causing industry-wide disruptions. Amid this uncertainty, firms with extensive content and global reach seem better equipped for volatility. Netflix remains a leading force in streaming, witnessing a 34 per cent share increase in 2023 and anticipated further growth. Rosenblatt analyst, Barton Crockett, emphasized the growing strain on traditional pay TV, suggesting an increasingly challenging landscape. Since pioneering the streaming model, Netflix has stood out as a dominant competitor to topple and the main threat new entrants face in the fight to capture consumer attention. It’s also experienced a stellar 2023 as investors rotate back into the beaten-down technology sector. Shares have jumped 34 per cent year to date, with the average price target suggesting it has another 17.7 per cent gain in store. “

Microsoft is narrowing its market value difference with Apple, the world’s largest technology stock, primarily because of its anticipated growth and diminished concerns regarding China. Recently, Microsoft’s stock performance has surpassed Apple’s, which is facing rising tensions with China. Microsoft’s prowess in cloud computing and AI is drawing significant investor interest. “Microsoft has more of what the market wants right now and given where we stand on the pair’s growth prospects, we wouldn’t be surprised to see it overtake Apple,” said David Klink, senior equity analyst at Huntington Private Bank. “We have more faith in Microsoft’s margins, while the cloud and AI are growth areas that can stand the test of time over a decade. We don’t know if the iPhone can do the same,” he said. “It’s hard to make a bear case for Apple, given its services business, but the bull case clearly favours Microsoft.”

Current market trends and major events in 2023 seem to resemble past times. With high inflation, increased oil prices, worker strikes, and political tensions, it feels like the 1970s. Russia’s actions in Ukraine have disrupted global unity. The BRIC alliance is shifting the world’s energy supply dynamics. After the Ukraine situation, while the USA used the dollar as leverage, BRIC nations are now using energy and resources in a similar way. Strikes are more frequent due to rising costs and job insecurity.

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