Marketmind: Amazon and goldilocks ride to the rescue
Send a link to a friend
[October 27, 2023] A
look at the day ahead in U.S. and global markets from Mike Dolan
At least one of the so-called "Magnificent 7" of top U.S. megacaps was
able to ride to the rescue.
After a torrid week for markets, news of the "not too hot or cold"
combination of booming U.S. growth and ebbing inflation in the September
quarter was followed by impressive results from Amazon after the bell on
Thursday - both reports underlining the strength of the U.S. consumer.
Unlike the reaction to similarly decent results from some of its Big
Tech peers this week, shares in the online retail giant Amazon climbed
5% after hours. The company said its cloud growth had stabilized and
fourth-quarter guidance met forecasts.
And both Nasdaq and S&P500 futures were set to bounce into the weekend
later after the cash markets closed at their lowest since May.
The relief is welcome. As an October to forget comes to a close on
Monday, the S&P500 is set to clock its third straight month of losses
for the first time since the pandemic hit - only the second such monthly
losing streak in seven years.
The biggest driver of that retreat has been spiraling long-term
borrowing costs.
Confirmation that U.S. GDP growth more than doubled between through the
third quarter to hit two-year highs of 4.9% shows partly why the
Treasury market has been running scared for weeks - fearful the sheer
strength of the expansion would prevent the Federal Reserve cutting
rates for up to a year at least.
With nominal U.S. growth running at close to 8%, depending on which
inflation gauge you use, the heat is impressive. Nominal U.S. growth was
more than twice that of China's during the quarter.
But with near 5% 10-year Treasury yields at least partly priced for
that, the bond markets on Thursday took their cue from ebbing core PCE
inflation readings in the details of the GDP report - showing a slowdown
to a lower than expected 2.4% last month. And even the racy headline GDP
growth rate was below many assumptions of a 5%-plus print.
The upshot was a 15 basis point peak-to-trough daily retreat of the
10-year yield - which has stabilized about 4.85% overnight ahead of the
September monthly PCE reading later on Friday and next week's Fed policy
meeting.
That bond relief has perhaps flattered the overnight stocks bounce -
although on aggregate the earnings season is pretty decent too. More
than 80% of companies have beaten so far and S&P500 companies are on
course for annual profit growth of 2.6% for Q3 and penciling in some 12%
earnings expansion for 2024.
Big Oil replaces Big Tech at the top of Friday's corporate diary, with
recently acquisitive Exxon Mobil and Chevron due to report. America's
most valuable company, Apple, is out next week.
[to top of second column] |
Traders work on the floor as screens display the logo for Chevron
Corp. and Hess Corp. at the New York Stock Exchange (NYSE) in New
York City, U.S., October 23, 2023. REUTERS/Brendan McDermid/File
Photo
Elsewhere, global stocks captured by MSCI's all-country index also
bounced from their lowest level since March.
Battered Chinese stocks crept higher for a fourth session after data
showed profits at industrial firms there extended gains in
September, while policy measures aimed a stabilizing the ailing
economy helped investor sentiment.
Geopolitical concerns eased a touch after China's top diplomat Wang
Yi said on Thursday the United States and China need "in-depth" and
"comprehensive" dialogue to reduce misunderstandings and stabilize
bilateral relations.
But war in the Middle East will likely keep markets wary of weekend
developments in the region through Friday - with tensions moving to
U.S. engagement in Syria overnight.
Crude oil prices were marginally higher and the dollar backed off
the week's highs, slipping back below the 150 yen it breached on
Thursday, even though no Bank of Japan intervention emerged as many
has feared.
In Europe, the European Central Bank held the line on interest rates
on Thursday but left its balance sheet runoff plans unchanged - a
crumb of comfort for those expecting a faster unwind of its bond
holdings.
European share indexes were muted on Friday, with France's blue-chip
index lagging peers after a dour forecast from drugmaker Sanofi sent
its shares down 15%.
Britain's NatWest shed more than 10% on a profit outlook downgrade
and news the Financial Conduct Authority is probing the lender's
handling of the accounts of the former Brexit party leader.
Key developments that should provide more direction to U.S. markets
later on Friday:
* U.S. Sept personal income/consumption and PCE inflation gauge,
Dallas Sept Fed PCE estimate, final Oct. University of Michigan
consumer survey reading
* U.S. corporate earnings: Exxon Mobil, Chevron, Abbvie,
Colgate-Palmolive, TRowe Price, Aon, Xcel Energy, Stanley Black &
Decker, CBRE, LyondellBasell, Charter Communications, Phillips 66
* European Central Bank President Christine Lagarde attend European
Union Summit in Brussels
(By Mike Dolan, editing by Jane Merriman mike.dolan@thomsonreuters.com.
Twitter: @reutersMikeD)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |