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CNBC Pro: Wall Street is excited about Chinese tech — and loves a mega-cap stock

After more than 2 years of regulatory repression and a pandemic-induced crisis, Chinese tech names are back on Wall Street’s radar, with one stock in particular standing out as the top pick for many.

Pro subscribers can find out more here.

— Zavier Ong

Fed will likely discuss when to halt hikes next week, Journal report says

Next week, Federal Reserve officials will almost certainly approve of a further deceleration in interest rate hikes while discussing when to halt hikes altogether, according to a Wall Street Journal report.

The Federal Open Market Committee responsible for setting rates is due to meet from January 31 to February 31. 1, with markets prize in almost 100% chance a quarter-point increase in the central bank’s key rate. More importantly, Fed Governor Christopher Waller said on Friday he sees an increase of 0.25 percentage points as the preferred move for the upcoming meeting.

However, Waller said he doesn’t think the Fed is done tightening yet, and several other central bankers in recent days have backed that idea.

The Journal report, citing public statements from policymakers, said the slowing pace of increases could provide an opportunity to assess the impact the increases are having so far on the economy. A series of rate hikes that began in March 2022 resulted in increases of 4.25 percentage points.

Market prices are currently pointing to quarter-point increases in the next two meetings, a period of inaction, and then down to a half-point reduction by the end of 2023, according to data from the CME group.

However, several officials including Governor Lael Brainard and New York Fed President John Williams have used the phrase “staying the course” to describe the future policy path.

—Jeff Cox

Nasdaq on pace for back-to-back gains as tech stocks rise

The Nasdaq Composite rebounded more than 2.2% in midday trading Monday, buoyed by shares of battered tech stocks.

The move put the tech-heavy index on pace for a straight day of gains exceeding 2%. The the index ended up 2.66% on Friday.

Rising semiconductor stocks helped lift the index. You’re here and Apple, meanwhile, jumped 7.7% and 3.2%, respectively, as China’s reopening raised hopes of a boost for their businesses. western digital and Advanced micro-systems increased by around 8% each, while Qualcomm and Nvidia jumped about 7%.

Information technology was the best performing sector in the S&P 500, gaining 2.7%. This was partly due to gains in the chip sector. Communication services rose 1.9%, boosted by companies like netflix, Metaplatforms, Alphabet and Matching group.

— Samantha Subin

El-Erian says Fed should hike 50 basis points, calls smaller increase a ‘mistake’

Inflation shifted from goods sector to services sector, says Mohamed El-Erian

Much of the inflation spike may be in the past, but a move to a 25 basis point hike at the Federal Reserve’s upcoming policy meeting is a ‘mistake’, chief economic adviser says Allianz, Mohamed El-Erian.

“‘I’m in a very, very small camp that thinks they shouldn’t demote 25 basis points, they should do 50,’ he told CNBC’s “Squawk Box” on Monday. “They should take advantage of this window of growth that we’re in, they should take advantage of the market situation and they should try to tighten financial conditions because I think we still have an inflation problem.”

Inflation, he said, has shifted from the goods sector to the services sector, but could very well surge again if energy prices rise as China reopens.

El-Erian expects inflation to peak around 4%. This, he said, will put the Fed in a difficult position as to whether it should continue to crush the economy to reach 2%, or promise that level in the future and hope that investors can tolerate stability. from 3% to 4% in the shorter term.

“That’s probably the best result,” he said of the latter.

— Samantha Subin

An earnings recession is imminent, says Morgan Stanley

An earnings recession is imminent this year, according to Morgan Stanley equity strategist Michael Wilson.

“Our view has not changed as we expect the trajectory of U.S. earnings to disappoint both consensus expectations and current valuations,” he said in a note to the media on Sunday. clients.

Some positive developments have unfolded in recent weeks – such as China’s ongoing reopening and falling natural gas prices in Europe – and have helped some investors view the market outlook with more optimism.

However, Wilson advises investors to stay bearish on equities, citing price action as the main influence behind this year’s rally.

“This year’s rally has been led by poor quality and heavily shorted stocks,” he said. “He also saw a strong move from cyclical stocks to defensive stocks.”

Wilson based his forecast on disappointing margins, and he thinks the case for that is growing. Many industries are already facing revenue slowdowns, as well as bloated inventories and less productive workforces.

“It’s just a matter of timing and scale,” Wilson said. “We advise investors to stay focused on fundamentals and ignore false signals and misleading reflections in this mirror bear market.”

—Hakyung Kim

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