Nasdaq notches five-week streak: Longest since November 2021

Tech stocks on display at the Nasdaq.

Peter Kramer | CNBC

The Nasdaq just wrapped up its fifth straight week of gains, jumping 3.3% over the last five days. It’s the longest weekly winning streak for the tech-laden index since a stretch that ended in November 2021. Coming off its worst year since 2008, the Nasdaq is up 15% to start 2023.

The last time tech stocks enjoyed a rally this long, investors were gearing up for electric carmaker Rivian’s blockbuster IPO, the U.S. economy was closing out its strongest year for growth since 1984, and the Nasdaq was trading at a record.

This time around, there’s far less champagne popping. Cost cuts have replaced growth on Wall Street’s checklist, and tech executives are being celebrated for efficiency over innovation. The IPO market is dead. Layoffs are abundant.

Earnings reports were the story of the week, with results landing from many of the world’s most valuable tech companies. But the numbers, for the most part, weren’t good.

Apple missed estimates for the first time since 2016, Facebook parent Meta recorded a third straight quarter of declining revenue, Google‘s core advertising business shrank, and Amazon closed out its weakest year for growth in its 25-year history as a public company.

While investors had mixed reactions to the individual reports, all four stocks closed the week with solid gains, as did Microsoft, which reported earnings the prior week and issued lackluster guidance in projecting revenue growth this quarter of only about 3%.

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Zuckerberg acknowledged that the times are changing. From the year of its IPO in 2012 through 2021, the company grew between 22% and 58% a year. But in 2022 revenue fell 1%, and analysts expect growth of only 5% in 2023, according to Refinitiv.

On the earnings call, Zuckerberg said he doesn’t expect declines to continue, “but I also don’t think it’s going to go back to the way it was before.” Meta announced in November the elimination of 11,000 jobs, or 13% of its workforce.

Link said the reason Meta’s stock got such a big bounce after earnings was because “expectations were so low and the valuation was so compelling.” The stock lost almost two-thirds of its value last year, far more than its mega-cap peers.

Navigating ‘a very difficult environment’

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Amazon CEO Andy Jassy, who succeeded Jeff Bezos in mid-2021, took the unusual step of joining the earnings call with analysts Thursday after his company issued a weaker-than-expected forecast for the first quarter. In January, Amazon began layoffs, which are expected to result in the loss of more than 18,000 jobs.

“Given this last quarter was the end of my first full year in this role and given some of the unusual parts in the economy and our business, I thought this might be a good one to join,” Jassy said on the call.

Managing expenses has become a big theme for Amazon, which expanded rapidly during the pandemic and subsequently admitted that it hired too many people during that period.

“We’re working really hard to streamline our costs,” Jassy said.

Alphabet is also in downsizing mode. The company announced last month that it’s slashing 12,000 jobs. Its revenue miss for the fourth quarter included disappointing sales at YouTube from a pullback in ad spending and weakness in the cloud division as businesses tighten their belts.

Ruth Porat, Alphabet’s finance chief, told CNBC’s Deirdre Bosa that the company is meaningfully slowing the pace of hiring in an effort to deliver long-term profitable growth.

Alphabet shares ended the week up 5.4% even after giving up some of their gains during Friday’s sell-off. The stock is now up 19% for the year.

Ruth Porat, Alphabet CFO, at the WEF in Davos, Switzerland on May 23rd, 2022. 

Adam Galica | CNBC

Should the Nasdaq continue its upward trend and notch a sixth week of gains, it would match the longest rally since a stretch that ended in January 2020, just before the Covid pandemic hit the U.S.

Investors will now turn to earnings reports from smaller companies. Some of the names they’ll hear from next week include Pinterest, Robinhood, Affirm and Cloudflare.

Another area in tech that flourished this week was the semiconductor space. Similar to the consumer tech companies, there wasn’t much by way of growth to excite Wall Street.

AMD on Tuesday beat on sales and profit but guided analysts to a 10% year-over-year decline in revenue for the current quarter. Intel, AMD’s primary competitor, reported a disastrous quarter last week and projected a 40% decline in sales in the March quarter.

Still, AMD jumped 14% for the week and Intel rose almost 8%. Texas Instruments and Nvidia also notched nice gains.

The semiconductor industry is dealing with a glut of extra parts at PC and server makers and falling prices for components such as memory and central processors. But after a miserable year in 2022, the stocks are rebounding on signs that an easing of Federal Reserve rate increases and lightening inflation numbers will give the companies a boost later this year.

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6 things to know in a ‘juggernaut’ of a job market

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1. Unemployment is at historic lows

The unemployment rate fell to 3.4% in January — the lowest since May 1969. Put another way: The last time the jobless rate was this low, Neil Armstrong hadn’t yet walked on the moon, Bunker said.

In fact, you’d have to go back to October 1953 to find a lower unemployment rate — 3.1%.

The unemployment rate is a single-best labor market indicator for the average American — it offers a holistic look at its strength or weakness and a reliable gauge for potential recession, said Daniel Zhao, lead economist at Glassdoor, a career site.

“The job market is still strong, and workers have opportunities to go out and find a job that’s a better fit for them,” Zhao said.

U.S. employers added 517,000 new jobs in January, handily beating expectations. They added 4.8 million total jobs in 2022, more than twice the roughly 2.3 million average from 2015 to 2019, said Julia Pollak, chief economist at ZipRecruiter.

2. Layoffs are low despite Big Tech

The layoff rate has stayed below its pre-pandemic nadir for 22 straight months, according to Job Openings and Labor Turnover Survey data. Workers filed 183,000 new claims for unemployment insurance last week — well below the roughly 245,000 average from 2015 to 2019, according to Labor Department data.

“That is just knock-your-socks-off low,” Zandi said of unemployment claims.

Businesses are reluctant to lay off workers and the labor market is strong enough to rapidly absorb people who do lose their jobs, Zandi said.

Tech jobs also account for a small share of the U.S. workforce: about 4% of total employment in 2020, according to a Deloitte report published in 2021.

Watch CNBC's full discussion on the January jobs report

3. The ‘great resignation’ chugs along

Workers are still quitting their jobs in historically elevated numbers.

Most workers who quit do so for new jobs; they don’t leave the workforce altogether. Voluntary departures are therefore a proxy for worker confidence — they’re optimistic about their chances of finding a better job elsewhere, economists said.

4. Hiring has moderated

5. Wage growth is high but cooling

6. The labor market is ‘out of balance’

Southwest faces Senate hearing over holiday meltdown

John and Lori Ingoldsby, who drove to Denver after the first leg of their flight on Southwest Airlines was canceled, wait for a flight to finish their trip at Denver International Airport on December 28, 2022 in Denver, Colorado.

Michael Ciaglo | Getty Images

Southwest Airlines‘ chief operating officer, Andrew Watterson, will face questions from a Senate panel next Thursday about the carrier’s holiday meltdown that stranded hundreds of thousands of travelers.

Southwest said the hearing date overlapped with “a previous commitment” for CEO Bob Jordan.

Jordan, who has been CEO for a year, has vowed to win back travelers’ trust after the debacle, which led to an $800 million pretax hit last quarter and pushed it into a loss.

Watterson plans to “use the opportunity to explain how we’ve taken actions to make things right for our Customers since Southwest’s late December disruption, as well as what we’re doing to mitigate the risk of it happening again,” the airline said in a statement.

The incident has drawn increased scrutiny from Washington and capped a year of on-and-off disruptions in air travel, due to bad weather, staffing and technology issues.

Southwest canceled more than 16,700 flights between Dec. 21 and Dec. 31 as crew scheduling software was unable to keep up with numerous flight changes in the wake severe winter weather.

The Senate Commerce Committee hearing will also include testimony from Casey Murray, president of the Southwest pilots’ labor union; Sharon Pinkerton, senior vice president of legislative and regulatory policy at Airlines for America, an industry group that represents the country’s largest airlines; Paul Hudson, president of consumer rights group Flyers’ Rights; and Clifford Winston, a senior fellow at the Brookings Institution.

Sen. Maria Cantwell, D-Wash., the committee chair, had previously said she planned to hold a hearing on flight disruptions after Southwest’s holiday travel chaos.

China’s suspected spy balloon prompts Blinken to postpone Beijing trip as Congress seeks answers

U.S. Secretary of State Antony Blinken attends a meeting with China’s Foreign Minister Wang Yi in Nusa Dua on the Indonesian resort island of Bali, July 9, 2022.

Stefani Reynolds | AP

WASHINGTON – U.S. Secretary of State Antony Blinken has indefinitely postponed an already tense trip to China next week after officials said they spotted a “sizable” Chinese reconnaissance balloon looming over parts of Montana that posed a threat to national security.

Blinken was slated to depart for Beijing on Friday night for a trip that State Department officials said was intended to reestablish lines of communication and cooperation. In the past year, Chinese President Xi Jinping has forged closer alliances with Russian President Vladimir Putin and ratcheted up military aggression against Taiwan.

Blinken was scheduled to meet with his Chinese counterpart, Minister of Foreign Affairs Qin Gang, and hoped to see Xi, as well. A State Department official told reporters Friday that “the conditions are not right at this moment” for Blinken’s trip.

China’s Foreign Ministry said Friday that the balloon was a civilian weather airship intended for scientific research that was blown off course. It described the incident as a result of a “force majeure” for which it was not responsible.

This claim was summarily dismissed by U.S. officials. A senior Pentagon official told reporters Thursday night that the object was clearly a surveillance balloon that was flying over sensitive sites to collect intelligence.

“We have noted the PRC statement of regret, but the presence of this balloon in our airspace is a clear violation of our sovereignty as well as international law and is unacceptable that this has occurred,” the official said.

The balloon is moving east at an altitude above 60,000 feet so it is not a threat to civil aircraft, Pentagon officials said.

On Friday afternoon, Kansas Sen. Roger Marshall, a Republican, reported that the balloon was flying over his home state.

Defense officials said the Pentagon considered shooting down the balloon earlier this week, but decided against it after briefing President Joe Biden. The decision was made in consultation with senior leaders, including Joint Chiefs of Staff Chairman Gen. Mark Milley and Defense Secretary Lloyd Austin.

Biden concluded that the U.S. would not shoot down the balloon because debris from it could cause damage on the ground, Pentagon official said. Moreover, any information the balloon collects would have “limited additive value” compared with China’s spy satellites.

“At this stage we are monitoring it and reviewing options,” Pentagon spokesman U.S. Air Force Brig. Gen. Pat Ryder told reporters, adding officials expect the balloon will linger in U.S. airspace for a few days.

Beijing’s apparent provocation so close to Blinken’s visit set off alarms on Capitol Hill.

“It’s not coincidental that this is happening right before Blinken was supposed to visit Beijing,” said Florida Sen. Marco Rubio, the top Republican on the Senate Intelligence Committee.

“They do these sorts of things to humiliate the other side, project strength and send a message. I don’t think this was coincidental. I think it was certainly tied to that,” Rubio said Friday on radio talk show “The Mike Gallagher Show.”

Sen. Jon Tester, D-Mont., who represents the state where the balloon was flying overhead Thursday, said in a statement that he was in contact with Defense Department and intelligence officials over the matter. One of the nation’s three nuclear missile silo fields at Malmstrom Air Force Base is located in the state. But as of Friday morning, Tester said he was still “waiting for real answers on how this happened and what steps the administration took to protect our country, and I will hold everyone accountable until I get them.”

While Blinken has postponed his travel, the U.S. and China have not suspended communication over the incident.

“From the moment this incident occurred, we have been in regular and frequent contact with our Chinese counterparts and I do anticipate that will continue,” said the State Department official, who asked not to be identified to discuss a sensitive intelligence matter.

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The incident came at a moment of high tension between the United States and China. Beijing’s territorial expansion in the South China Sea and its aggressive effort to control Taiwan have long concerned U.S. officials, but recently their worries have grown more urgent.

On Thursday, Austin was in the Philippine capital of Manilla, where the two countries announced the Philippines would grant the United States expanded access to its military bases. The island nation is strategically located in the southeast corner of the South China Sea, approximately 750 miles from Taiwan.

Austin said expanding access for U.S. troops “was especially important as the People’s Republic of China continues to advance its illegitimate claims in the West Philippine Sea,” using the phrase designated by the Philippines to refer to parts of the South China Sea.

House Speaker Kevin McCarthy, R-Calif., has requested a briefing for the so-called Gang of Eight, the Republican and Democratic leaders of both the House and Senate, and the leaders from both parties of the Senate and House Intelligence committees. 

How Supreme Court hearings affect student loan payment pause

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It’s been nearly three years since most people with federal student loans have had to make a payment on their education debt.

The U.S. Department of Education has repeatedly cited specific dates for when the bills would resume, only to extend the pandemic-era break yet again.

Most recently, amid legal challenges to the Biden administration’s student loan forgiveness plan, the government told borrowers they’d get more time still. But the timing wasn’t as straightforward as with previous extensions.

Here’s what borrowers need to know.

Student debt bills may not resume for months

In August 2022, President Joe Biden promised to cancel up to $20,000 for tens of millions of Americans, but Republicans and conservatives quickly filed a number of lawsuits against his plan, forcing the administration to close its application portal in early November.

As a result of those challenges, the Education Department announced another extension of the repayment pause in late November.

It said federal student loan bills will be due again 60 days after the litigation over its student loan forgiveness plan resolves and it’s able to start wiping out the debt. But the Department added that if the Biden administration is still defending its policy in the courts by the end of June, or if it’s unable to move forward with forgiving student debt by then, the payments will pick up at the end of August.

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The Supreme Court will begin to hear oral argument’s over Biden’s plan at the end of February.

When payments could resume depends in part on when the justices reach their decision, said higher education expert Mark Kantrowitz.

“If the court issues a ruling a few weeks after the Feb. 28 hearing, repayment could restart in May or June,” Kantrowitz said. “If they wait until the end of the term, when they go on recess, in June or July, then there would be an August or September restart.”

Another payment pause extension is possible

For now, collection activity still on pause

Make the most of extra cash during the ongoing break

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Tesla, General Motors get boost from EV SUV tax credit change

A Tesla Model Y on display inside a Tesla store at the Westfield Culver City shopping mall in Culver City, California, U.S., on Thursday, April 14, 2022.

Bing Guan | Bloomberg | Getty Images

DETROIT – The U.S. Treasury said Friday it is changing its definition of an “SUV” to make more electric vehicles from Tesla, General Motors and other automakers eligible for up to $7,500 in federal tax credits at higher prices.

The decision follows Tesla CEO Elon Musk publicly criticizing the former standards on Twitter as well as automakers such as GM and Ford Motor lobbying to change the guidelines ahead of final rules being announced next month.

The change raises the retail price cap to $80,000 from $55,000 for vehicles such as the Tesla Model Y, Cadillac Lyriq, Ford Mustang Mach-E and Volkswagen’s ID.4. Previously some or all models of these vehicles did not qualify because they didn’t weigh enough to be considered an SUV by the Treasury’s standards.

The credits are part of the Biden administration’s $437 billion Inflation Reduction Act, which was approved in August. Under the bill, SUVs can be priced at up to $80,000 to qualify for EV tax credits, while cars, sedans and wagons have to be priced at or under $55,000.

The Treasury did not immediately respond to a request for additional comment regarding the changes.

It’s unclear how the decision will impact up to 20% pricing cuts announced by Tesla last month that made the Model Y eligible for the credits. Tesla did not immediately respond for comment.

Wall Street applauded Tesla’s price cuts but also was concerned that they would start an EV pricing war and pressure margins of other automakers, despite rising commodity costs for the vehicles. Tesla has enjoyed significantly higher profit margin on its EVs compared to traditional automakers.

Ford said Monday it would cut pricing of its Mustang Mach-E by up to $5,900 to better compete with Tesla’s Model Y. That’s despite the company’s overall EV business not currently being profitable, including some Mach-E models selling at a loss for the company.

Ford, in an emailed statement, said officials “sincerely appreciate their consideration and hard work” by the Treasury.

GM also thanked the Treasury and hailed the changes: “The alignment on classification will provide the needed clarity to consumers and dealers, as well as regulators and manufacturers.”

The Alliance for Automotive Innovation, a lobbying group for most automakers operating in the U.S., also commended the decision.

–CNBC’s Chelsey Cox contributed to this article.

Amazon stock hit hardest after tech earnings bonanza

Andrew Ross Sorkin speaks with Amazon CEO Andy Jassy during the New York Times DealBook Summit in the Appel Room at the Jazz At Lincoln Center on November 30, 2022 in New York City.

Michael M. Santiago | Getty Images

Shares of Amazon fell as much as 5% on Friday, a day after the e-retailer posted soft growth in its retail and cloud computing businesses, and gave downbeat guidance.

Its stock was hit harder than peers Apple and Alphabet, which also reported on Thursday evening. Shares of Apple were trading up about 4% on Friday morning while Alphabet was down about 1%. Both of those companies missed on the top and bottom.

Amazon’s fourth-quarter revenue increased 9% to $149.2 billion, topping analysts’ expected $145.8 billion. But the revenue beat was overshadowed by another quarter of slowing growth in Amazon’s core retail business and in Amazon Web Services, which have been dented by the challenging economic environment.

Amazon said it expects revenue of between $121 billion and $126 billion in the current quarter. Analysts had been expecting $125 billion.

“Consumers sound cautious and the Cloud deceleration cadence appears to be landing in the ‘mid-teens’ for [the first quarter,]” analysts at Piper Sandler, which have an overweight rating on Amazon shares, wrote in a note Friday.

“Above all, management comments suggest AMZN is still navigating a difficult stretch,” the analysts added.

Despite the near-term rockiness, several analysts said they remain encouraged by CEO Andy Jassy’s efforts to get costs under control. They also believe Amazon will prove it can withstand the economic turbulence and can continue to grow in the long term.

Jassy has been working to get Amazon’s costs under control after a period of unbridled expansion. Last month, the company said it would lay off more than 18,000 corporate employees. It enacted a hiring freeze among its corporate ranks, cut some projects, and paused some physical stores and warehouse expansion.

“While the next few quarters will likely remain volatile as an output of macroeconomic volatility, the long-term narratives from Amazon and a compelling multi-year risk/reward should appeal to investors,” Goldman Sachs’ Eric Sheridan wrote in a Friday note.

Analyst sentiment was a bit different for Apple, which telegraphed that things are getting better. That may explain why its stock is in the green. “Taking a step back, it’s rare to see Apple miss and guide down in a quarter, but we believe the long-term positives from tonight’s report outweigh the short-term negatives,” Morgan Stanley’s Erik Woodring wrote.

Similarly, despite Alphabet’s misses, analysts are bullish on its prospects for artificial intelligence and highlighted its strong core business. “We see Alphabet as a more defensive stock in the group in 2023 with more relative earnings stability given utility of search, expense flexibility, healthy margins that will minimize cash flow concerns, and opportunity to support the stock with buybacks,” Bank of America’s Justin Post said.

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Arete Research's Richard Kramer on the outlook for Apple, Amazon, and Alphabet

Apple’s long-term positives outweigh earnings miss: Morgan Stanley

Apple CEO Tim Cook holds a new iPhone 14 Pro during an Apple special event on September 07, 2022 in Cupertino, California.

Justin Sullivan | Getty Images

Shorter-term macro issues don’t detract from the long-term value at Apple, Morgan Stanley analysts wrote in a Friday morning note that reiterated an overweight rating and a $175 price target.

“Taking a step back, it’s rare to see Apple miss and guide down in a quarter, but we believe the long-term positives from tonight’s report outweigh the short-term negatives,” Morgan Stanley’s Erik Woodring wrote. Apple’s Thursday night earnings report cited a strong dollar, continued production issues in China, and the broader macroeconomic environment as three reasons for Apple’s first year-over-year sales decline since 2019.

“On the third factor, I would say was just the challenging macroeconomic environment, and you’re hearing that from, I would think, everybody,” CEO Tim Cook told CNBC’s Steve Kovach.

But Morgan Stanley assesses those headwinds as transitory, noting both accelerated growth in iPhone installed base and a continued upward margin trajectory as longer-term upside which will ensure “the Apple flywheel keeps spinning.”

Morgan Stanley reiterated its Top Pick rating for Apple. The company has managed to navigate a broader tech downturn with considerable success and is one of the few tech companies that has staved off layoffs and maintained a level of operational expense (opex) discipline.

It’s that same discipline that helps Morgan Stanley analysts maintain a bullish outlook on Apple, which guided to a Mar. 2023 gross margin ranging from 43.5 to 44.5%, according to the note.

“We believe Apple’s ability to post the highest gross margin in a decade despite seeing revenue decline Y/Y is impressive, and moving forward, we expect gross margins to improve as mix, FX, commodities, and logistics all work in Apple’s favor through the rest of 2023 and into FY24,” Morgan Stanley’s note said.

Apple’s user spend levels are also keeping Morgan Stanley bullish, proof that “the underlying drivers of Apple’s model remain robust.”

Investors have apparently embraced Morgan Stanley’s appraisal of Apple’s durability as a long-term investment. Apple shares were up around 1% at the open Friday, despite the sales miss, recouping losses from a 4% drop Thursday night. The company also reported misses on the top and bottom lines, beating analyst expectations only in iPad and services revenue.

CNBC’s Michael Bloom contributed to this report.

Apple misses on top and bottom lines

Payrolls increased by 517,000, unemployment rate at 53-year low

Nonfarm payrolls increased by 517,000 in January; strongest gain since July 2022

The employment picture started off 2023 on a stunningly strong note, with nonfarm payrolls posting their strongest gain since July 2022.

Nonfarm payrolls increased by 517,000 for January, above the Dow Jones estimate of 187,000. The unemployment rate fell to 3.4% vs. the estimate for 3.6%. That is the lowest jobless level since May 1969.

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Markets slumped following the report, with futures tied to the Dow Jones Industrial Average down about 200 points.

Growth across a multitude of sectors helped propel the massive beat against the estimate.

Leisure and hospitality added 128,000 jobs to lead all sectors. Other significant gainers were professional and business services (82,000), government (74,000) and health care (58,000).

Wages also posted solid gains for the month. Average hourly earnings increased 0.3%, in line with the estimate, and 4.4% from a year ago, 0.1 percentage point higher than expectations.

The surge in job creation comes despite the Federal Reserve’s effort to slow the economy and bring down inflation from its highest level since the early 1980s. The Fed has raised its benchmark interest rate eight times since March 2022.

In its latest assessment of the jobs picture, the Fed on Wednesday dropped previous language saying gains have been “robust” and noted only that the “unemployment rate has remained low.”

However, Chairman Jerome Powell, in his post-meeting news conference, noted the labor market “remains extremely tight” and is still “out of balance.” As of December, there were about 11 million job openings, or just shy of two for every available worker.

Though Fed officials have expressed their intention to keep rates elevated for as long as it takes to bring down inflation, markets are betting the central bank starts cutting before the end of 2023.

This is breaking news. Please check back here for updates.

World’s biggest pension fund posts loss in longest losing streak in two decades

Masataka Miyazono, president of the Government Pension Investment Fund (GPIF), speaks during a news conference in Tokyo, Japan, on Friday, July 1, 2022.

Bloomberg | Bloomberg | Getty Images

Japan’s Government Pension Investment Fund — the world’s largest — reported a fourth consecutive quarterly loss on Friday, taking it to its longest losing streak in 20 years.

The world’s largest pension fund saw a 0.97% loss on its investments in the last three months of 2022, equating to 1.85 trillion yen ($14.3 billion).

The string of quarterly losses marks the pension fund’s longest stint in the red since it reported four quarters of falls for the fiscal year 2003.

The GPIF said Friday that its biggest loss was via its foreign bond holdings, which fell 5.3%, while domestic bonds investments were down 1.7%. It managed to gain 3.2% on its domestic stocks portfolio, although its investments in foreign stocks fell slightly.

It takes GPIF’s losses for the first three quarters of the fiscal year to 3.71%, or 7.32 trillion yen. It reported a 5.42% profit equating to 10 trillion yen in the 2021 fiscal year. Its total assets now total 189.9 trillion yen.

GPIF’s loss over the first three months of 2022 was its first negative quarter for two years, as it struggled with the start of U.S. interest rate rises, equity market volatility and some Russia-linked assets.

In the most recent quarter, a sharp drop in the value of the U.S. dollar against the yen weighed on the value of the fund’s foreign assets.

U.S. dollar against the Japanese yen