Summary:
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Wall Street indices opened lower on the final trading day of the week
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Nasdaq leads declines after some tech giants release weakish earnings report
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No surprise in UoM data revision
It looks like Thursday’s session was just a one-day relief as equities all around the world returned to the freefall mode today. Tech shares are in the spotlight as some of the biggest companies from this sector reported their earnings over the night or ahead of the market open. As expected the University of Michigan data released earlier today did not show major deviations from the preliminary reading and thus did not spur any bigger movements on the USD market.
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Open account Try demo Download mobile app Download mobile appUoM data revision saw a minor downtick. Source: xStation5
The final University of Michigan data for October saw consumer sentiment index dropping to 98,6 pts instead of 99 pts shown in the preliminary reading. On the other hand, some pleasing revisions were spotted in terms of the inflation expectations gauges. The 1-year inflation expectations increased from 2,7% to 2,9% ( increase to 2,8% in the preliminary reading) while the 5-10-year gauge dropped from 2,5% to 2,4% (drop to 2,3% in the preliminary reading). However, as it is usually the case for UoM revisions the release did not translate into bigger price movements on the USD market or the US equity market.
The US500 bulls failed to defend the 2675 pts handle and the index extends decline today. The next area to watch is the support zone localized around the 2600 pts handle that saw some price action following the early-year rout. Do notice that with today’s drop the US500 is trading below 2018’s opening price. Source: xStation5
When it comes to the performance of the US equity indices today we can see some similarities to yesterday. Namely, the Nasdaq index is once again experiencing a move of much bigger scale than S&P 500 or Dow Jones. However, yesterday all three indices surged and Nasdaq was the outperform while today with broad declines on the US equity market the tech index is underperformer. Reasons behind the drop are unchanged - concerns over monetary tightening and impact of trade conflict on the global growth. Speaking of growth, the US GDP report released earlier today saw growth beating market expectations. At the same time the PCE inflation gauges missed forecasts. Such a combination, in theory, should boost stock market valuations but it did not. All 24 industry group subindices from the S&P 500 index trade lower today with retailers, media companies and tech shares being among the biggest laggards.
Breakdown of the S&P 500 index industry group subindices. Source: Bloomberg
Company News
Alphabet (GOOGL.US) released its third quarter earnings report yesterday after market close. Tech giant managed to beat market expectations when it comes to earnings with net profit coming in at $10.378 billion (expected $9.056 billion) and EPS at $14.75. However, the revenue data showed weaker results than market consensus suggested. Alphabet generated revenue of $27.158 billion, 0.64% below median estimate. It does not look like a big thing but it highlights a worrying feature of the current earnings. Namely, more and more companies shows better earnings results and weaker revenue figures.
When it comes to the Amazon’s (AMZN.US) earnings report the outcome is very similar to Alphabet’s. Net income reached $3.95 billion providing a beat of 38.5% over median estimate. EPS came in at $7.883 (expected $5.622). On the other hand, revenue missed the forecasts by 0.86% and came in at $56.576 billion. A better-than-expected earnings and weaker-than-expected revenue shows that growth is fueled by the tax overhaul to large extent while business does not grow in line with it.
Luckily, when it comes to Intel (INTC.US) we did not see such worrying signs as in the case of Alphabet or Amazon. Intel managed to beat expectations in all relevant measures with net income surging to $6.508 billion (expected $5.436 billion) and EPS jumping to $1.4 (expected $1.152). Unlike in the case of the two aforementioned stocks Intel also smashed revenue expectations. Market consensus point at a revenue of $18.123 billion while the company generate sales of $19.163 billion in the June-September period. Good earnings were boosted by strong growth in the PC and data-center segments.
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