US Open: Wall Street gains despite hawkish 'higher for longer' Fed signals

• US Wall Street indices started the session with gains
• Fed members agree - there is still a chance for more rate hikes in the US
• US100 gains 0.7%, still near 15,370 points
• Meta Platforms (META.US) gains after contractual VR headset sales for Chinese Tencent
• Illumina (ILMN.US) at 10-year lows after Q3 results.

Indexes in the US are posting modest gains today, with the US100 gaining 0.7% but the US30 and US500 gaining 0.3 and 0.2%, respectively. The increases on Wall Street are driven by BigTech companies among which stand out today the shares of Meta Platforms, which received an order to supply VR goggles for China's Tencent. Investors perceived the fact positively as the company has had long battles with Chinese regulators and has already exited the Chinese market several times. Meanwhile, data according to the University of Michigan indicates that inflation expectations are rising and becoming more anchored which, surrounded by recent comments from the Fed, including Powell himself, makes a 'higher for longer' scenario - a fundamental hawkish change in Fed policy.

Michigan's annual inflation expectations rose to 4.4% from 4.2% previously, and 5-year inflation expectations will be 3.2% versus 3% expected earlier. At the same time, U.S. consumer sentiment fell to around 60,3 points from 63,8 recorded earlier. The situation in the U.S. economy was also commented on today by RAphael Bostic, who indicated that some of the effects of the rate hikes on the economy are yet to manifest themselves but there is still 'a lot of work to be done' on inflation. Bostic expects lower 1.2/1.5% U.S. GDP growth next year and slowing consumer trends but the Fed is 'in the right position' to watch these processes.

Bulls on the US100 are struggling to break above 15,400 points, local peaks from the first half of October. Volume in the last two sessions indicates an advantage for sellers, who saw the rally as an opportune time to exit their positions and take profits after US benchmarks recorded their most dynamic rally since 2021. The MACD dynamics make a correction scenario more likely, but still a potential continuation of the upward momentum lies on the table as long as the US100 remains above 15,200 points. Source: xStation5

News

• Casino operator Wynn Resorts (WYNN.US) has reached an agreement with unions in Las Vegas on a new contract covering 5,000 employees. The company's shares are losing nearly 10% as markets expect a higher costs due to jump in wages for casino workers
• GM China's joint venture with SAIC Motors will recall 1.13 million Buick, Chevrolet and Cadilalc cars due to safety concerns. General Motors (GM.US) shares lose after Chinese regulator's decision
• Pharmaceutical company Hologic (HOLX.US) reported results that topped Wall Street forecasts due to strong demand in its breast health segment. The company now expects first-quarter earnings per share in the range of $0.92 to $0.97, compared with expectations of $0.94. The company manufactures and supplies diagnostic tests, medical imaging systems and surgical products. The Breast Health Monitoring business posted sales of more than $352 million against $345 million forecasts, and revenue came in $5 million above estimates, at $945.3 million against $940 million estimated by Refinitv analysts. 
• Illumina (ILMN.US) the genetic testing company lowered its annual profit forecast for the second consecutive quarter. The company was hit by lower demand for materials, services and especially gene sequencing tools. Sales at its core unit, which develops instruments for sequencing and genetic analysis, were $941 million, compared with estimates of $963.80 million. Illumina expects annual earnings per share of $0.60 to $0.70, compared with previous estimates of $0.75 to $0.90. Revenue in the third quarter was $1.12 billion, compared with analysts' expectations of $1.13 billion. Illumina expects 2023 revenue to decline 2% to 3% on a year-over-year basis. The stock lost nearly 14%, the company was not helped by higher earnings per share, which indicated $0.33 against $0.12 forecasts

Illumina shares hit 10-year lows today, with the RSI indicator on the W1 interval near 23 points indicating extreme market pessimism. Source: xStation5

Analyst recommendations

• Illumina (ILMN.US) was downgraded by Evercore to $160 from $180 previously, as the company lowered its annual earnings forecast and signaled less robust growth in 2024 
• Netflix (NFLX.US) was raised to $510 from $480 by JP Morgan because analysts reflected in the forecast the ability to accelerate revenue in 2024 from paid advertising and account sharing
• Tapestry (TPR.US) was downgraded to $38 from $44 previously by Bernstein because the company lowered its sales forecast and revenue target for 2024 
• Veeva Systems (VEV.US) was downgraded to $200 from $235 previously by Piper Sandler analysts, who expect the company to face serious macroeconomic challenges 
• Warner Bros Discovery (WBD.US) - the target for the stock was lowered to $15 from $17 by Goldman Sachs - the analysts' decision was prompted by lower estimates for 2024 and continued weakness in the advertising sector