- Indexes indicate a higher opening for the cash session on Wall Street
- The US PCE data came out as expected
- Investors are beginning to speculate about the end of interest rate hikes
The opening on Wall Street brings an improvement in sentiment, with gains for the SP500 and Nasdaq 100. On the last day of the week, market conditions slightly improve in favor of stocks. Although the dollar consolidates at its peaks, the quite sharp increases of the last weeks have been halted. Yields on U.S. bonds are also slowly starting to lose and are moving away from the psychological barrier of 5.0% after the recent attempt to exceed it.
Today's increases are driven by solid results from Amazon and Intel. Both companies gain over 5.0% at the opening. It's worth remembering that this week's declines in technology companies were driven by weaker results from Alphabet (Google), which lost over 11% in two trading sessions since publishing its quarterly report.
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The PCE data package for the US for September has just been published at 14:30
- PCE Inflation y/y: 3.4% Expectations: 3.4% Previously: 3.5%
- PCE Inflation m/m: 0.4% Expectations: 0.3% Previously: 0.4%
- Core PCE Inflation y/y: 3.7% Expectations: 3.7% Previously: 3.9%
- Core PCE Inflation m/m: 0.3% Expectations: 0.3% Previously: 0.1%
Today's PCE data turned out to be in line with the consensus. Judging by the market's negligible reaction, such data was already priced in. However, more important are the emerging speculations about the end of the Fed's rate hike cycle. The decision to maintain rates at the next meeting on November 1 is already more or less a foregone conclusion. However, investors are giving less chance of a hike at the meeting on December 13. Just to recall that probably only one more hike is on the table. So, one way or another, the end of the rate hike cycle is already close. However, the open question remains how long the Fed will decide to keep rates at such a high level.
Technical Analysis of the SP500 Situation
The US500 has been under strong selling pressure in recent days. The index lost over 5% in 8 days and did not stop at key support levels. The current declines stopped at the level of 4170 points near the area that effectively halted bulls from further growth at the beginning of this year, from February to June. If the current strong trend is stopped here, we can expect a rebound even around 4300 points. Otherwise, the declines may continue, and the next levels worth noting will be 4100 and 4000 points. Source: xStation 5
Amazon (AMZN.US) reported strong third-quarter earnings, surpassing analysts' expectations with earnings per share of 94 cents and revenue of $143.1 billion, against the expected 58 cents and $141.4 billion, respectively. The company's Amazon Web Services and Advertising segments also performed well, though AWS slightly missed the expected revenue. Amazon forecasts fourth-quarter sales between $160 billion and $167 billion, aiming for a growth of 9.6% from the previous year. The company has been in a cost-cutting mode, laying off 27,000 employees and shutting down unprofitable projects, which has resulted in a tripling of net income to $9.9 billion and an operating margin of 7.8%, the highest since early 2021. Despite a challenging 2022, Amazon's core e-commerce business and digital advertising continue to grow, with ad revenue increasing by 26%. However, AWS's growth has slowed, possibly losing market share to competitors like Microsoft Azure and Google Cloud.
In the third quarter of 2023, Intel Corp. (INTC.US) reported a revenue of $14.2 billion, marking an 8% YoY decline. The earnings per share (EPS) stood at $0.07, with a non-GAAP EPS of $0.41. Despite the decline, the revenue surpassed the upper end of the company's guidance, benefiting from robust operational leverage and disciplined expenses. Intel's CEO, Pat Gelsinger, highlighted significant progress in product and process roadmaps, new foundry agreements, and AI expansion. The company also announced organizational changes to enhance its market approach and reduce costs. Intel remains committed to its manufacturing goals, with significant advancements in transistor technology and the opening of new fabrication facilities. The company's focus on AI was evident at Intel Innovation 2023, where they showcased their strategy to make AI universally accessible.
Chevron Corp. (CVX.US) slip over 5.0% on Friday after the oil producer reported adjusted earnings per share for the third quarter that missed the average analyst estimate. Management cited lower upstream realization and lower margins
Exxon Mobil Corp. (XOM.US) drop over 1.0% after its adjusted earnings per share for the third quarter missed analysts’ estimate. The oil giant boosted dividends more than expected and posted a bigger-than-expected cash flow increase
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