This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Nasdaq still trails other major indexes
The S&P 500 and Dow Jones Industrial Average rose on Tuesday, but the Nasdaq Composite retreated, making it the second day it’s underperformed. Asia-Pacific markets mostly fell Wednesday. Japan’s Nikkei 225 lost around 0.1% as the Reuters Tankan survey for January found business sentiment in the country rising.
South Korea’s President Yoon arrested
Yoon Suk Yeol, president of South Korea, was arrested Wednesday by the country’s Corruption Investigation Office for High Ranking Officials. A first for a sitting South Korean leader, the arrest was the CIO’s second attempt after the first was thwarted by the president’s security staff. South Korean stocks had a muted reaction to the news.
Implications of the global bond sell-off
A sell-off in global bond markets is accelerating, triggered by the prospect of fewer interest rate cuts in the U.S. and rising government debt, analysts told CNBC. Higher yields increase borrowing costs for governments and businesses, potentially forcing tax increases and lowering corporate profits. The rise in U.S. yields also pressurizes other currencies and makes it harder for global central banks to cut rates.
Meta cuts jobs while Microsoft freezes hiring
Meta will be cutting about 5% of its lowest-performing employees, CNBC confirmed Tuesday. CEO Mark Zuckerberg informed employees about the decision in a memo posted on the company’s internal forum on Tuesday. Separately, Microsoft plans to pause hiring in part of its consulting business in the U.S., according to an internal memo.
SEC sues Musk over Twitter shares
The SEC filed a lawsuit against Elon Musk on Tuesday, alleging the billionaire committed securities fraud in 2022 by failing to disclose he had amassed an active stake in Twitter, a secrecy that allowed him to buy shares at “artificially low prices.”
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The bottom line
The market’s tech rout hasn’t stopped yet.
The Nasdaq Composite lost 0.23%, underperforming the S&P 500 and Dow Jones Industrial Average — which gained 0.11% and 0.52%, respectively — for the second day in a row. All Magnificent Seven stocks fell, with Meta, Tesla and Nvidia registering the biggest losses.
Adding to the sector’s misery, the fall in tech shares was accompanied by news of layoffs and hiring freezes.
In a bid to reduce expenses, Microsoft will pause hiring in part of its consulting unit, reduce travel expenses and cut marketing spending, according to an internal memo.
Meanwhile, Meta announced in an internal memo Tuesday it will be “exiting approximately 5% of our lowest performers.” (Just as one “exits” fact-checking or “enters” free speech, I suppose.) Zuckerberg also warned employees that 2025 will “be an intense year.”
Zuckerberg’s warning was directed at Meta, of course, but it might also apply to tech companies grappling with heavy investment in artificial intelligence, without necessarily having the revenue to justify such high expenditure.
As we enter fourth-quarter earnings season, however, there are signs of optimism in the business environment for this year.
“We do think earnings will be stronger,” Jay Hatfield, founder of Infrastructure Capital Advisors, said.
“The economy is strong in the fourth quarter. Usually, companies learn if they have a problem by then, and they’re probably going to be pretty optimistic about the future because the Trump administration is pro-business. So we think that most CEOs are pretty optimistic about the forecast for 2025.”
Perhaps the upbeat CEOs are steering other sectors, as the movements of investors, who moved out of tech to utilities, financials and materials on Tuesday, suggest.
Whether this sectoral rotation persists will hinge on the consumer price index, dropping later today.
— CNBC’s Lisa Kailai Han, Hakyung Kim and Brian Evans contributed to this report.
