The End of the Metaverse

It was another volatile week for the markets, with Facebook (now Meta) losing 26% of its value on Thursday. The move wiped out $250 billion worth of value in the most significant single-day loss for any U.S. company ever. This was due to disappointing Q4 results published last week, but primarily, the number of daily active users (DAU’s) fell for the first time in the companies 18 year history.

Interesting sidenote: The $250 billion that Facebook lost in one day, is the equivalent value of New Zealand’s entire stock market.

Google’s parent company Alphabet jumped 9% on Tuesday after it published earnings showing that revenue in 2021 was up 33% over the previous year, in stark contrast to Facebook.

The other company making headlines last week was Amazon, with shares rallying 14% in after-hours trading and ending the week up 5%. It was a bit of a sly move though, as they reported earnings per share (EPS) of $27,75 for Q4, and this included unrealized gains from their investment in electric car manufacturer Rivian.

Rivian made headlines last year when it IPO’d at $78, giving it a valuation of $100 Billion, which made it more valuable than General Motors or Ford. The crazy thing was that the company had delivered less than 1,000 vehicles by the end of 2021. That didn’t stop Amazon from including the $10 billion in unrealized gains in their EPS figures for Q4 though.

Rivians’ share price has since fallen by 40% to $58, essentially wiping out half of those profits, but this didn’t seem to matter to Amazon’s share price last week.

Overall, markets had a reasonably good week with 112 of the S&P 500 companies reporting on Q4 earnings, and it certainly highlighted the importance of diversification. No one could have predicted what happened to Facebook, but if you held an S&P 500 index fund, you would have finished the week with a satisfactory 1.60% profit.

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• After starting 2022 with three straight weekly declines, the major U.S. stock indexes posted their second positive week in a row, eclipsing the previous week’s modest gains. Markets were driven by jobs numbers, earnings reports, and the increasingly likely near-term prospect of rising interest rates.?
• The 467,000 jobs that the U.S. economy generated in January exceeded economists’ expectations by a wide margin, and upward revisions to job totals in late 2021 provided a further indication of the labor market’s strength.
• Friday’s strong jobs report weighed on prices of government bonds, sending the yield of the 10-year U.S. Treasury to 1.92%, the highest level since December 2019, prior to the start of the pandemic. Yields also climbed in other countries amid growing expectations of monetary policy tightening.?
• Oil surged on Thursday and Friday and the price of U.S. crude climbed above $92 per barrel, the highest level in nearly eight years. The price was up 23% for the year, building on 2021′s gain of more than 50%.
• The NASDAQ’s volatility was again on full display. On Monday, the technology stock-oriented index surged 3.4%. It posted modest gains on Tuesday and Wednesday, only to tumble 3.7% on Thursday before finishing the week with a 1.6% gain on Friday.
• The S&P 500 fell 5.3% in the first month of 2022, while the NASDAQ had an even tougher time, dropping around 9.0%. Across the S&P 500, energy was the top-performing sector, with a 19.0% gain; consumer discretionary was the weakest, as it tumbled 9.7%.