Tech it to the limit, one more time

Making sense of the forces driving global markets

By Jamie McGeever, Reuters Open Interest Markets Columnist 

Another wave of U.S. tech euphoria lifted Wall Street to new highs on Tuesday, this time in the shape of a deal between Microsoft and OpenAI, a day ahead of a clutch of U.S. Big Tech earnings and the Federal Reserve's policy decision. 

In my column today, I look at the U.S. stock markets' record concentration and the iron grip 'Big Tech' has on Wall Street. By global standards, however, the U.S. isn't actually that top-heavy at all. 

I'd love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

Data refreshes every time you open this email. For more U.S. market news, click here. Please send any feedback to morningbid@thomsonreuters.com.

* Tech venture mania

Another strand was added to the tangled U.S. tech and artificial intelligence ecosystem on Tuesday as Microsoft and OpenAI reached a deal to allow the ChatGPT maker to restructure itself into a public benefit corporation, valuing OpenAI at $500 billion. 

Many Big Tech firms have commitments, joint ventures, or tie-ups worth hundreds of billions of dollars with one another. OpenAI and Nvidia are two of the most involved. Skeptics argue not all will play out as flagged and concentration risk is only increasing, but for now, they are enough to keep the AI-fueled market juggernaut going.

* U.S. job losses mount

Amazon and UPS on Tuesday announced combined job losses of at least 62,000, among the biggest round of publicly-confirmed job cuts in a year that has seen a slow, steady drumbeat of firms shedding workers.

How much this gets on Fed officials' radar remains to be seen. But at the very least, and with no economic data being released due to the government shutdown, it is a sign that the labor market is weakening, perhaps even more than they have bargained for. 

* Fed to deliver

The Federal Reserve is widely expected to cut interest rates again on Wednesday by a quarter of a percentage point, and according to rates futures markets, repeat the move in December and at least twice more next year. Let's see what signals Chair Powell gives about that.  

There may also be some big changes around the Fed's balance sheet and the plumbing of the U.S. banking system, with the Fed perhaps announcing it will end QT soon. Indeed, this could open up the possibility of the Fed buying bonds or bills in the near future. 

With Wall Street scaling fresh peaks and five of the "Magnificent Seven" U.S. tech giants reporting earnings this week, investors' focus is once again zeroing in on record-high stock market concentration and the risks associated with it. But this concern may be overblown.

This is not a new debate, but it has raged in the last two years, particularly with the explosion in Nvidia's share price. The chipmaker's market cap has quadrupled since 2023 to $4.5 trillion, lifting the Mag 7's share of the S&P 500 above the 30% mark.

However, surprising as it may be to many market-watchers, concentration on Wall Street is not that extreme by global standards. In fact, the U.S. lags well behind many developed economies when it comes to equity market concentration, and even further behind some key emerging economies.

Find ROI on the Reuters website, and join the debate on LinkedIn and X.

Trading Day is sent every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.

Want to stop receiving this email? Unsubscribe here. To manage which newsletters you're signed up for, click here.

This email includes limited tracking for Reuters to understand whether you've engaged with its contents. For more information on how we process your personal information and your rights, please see our Privacy Statement.

Terms & Conditions