The Nasdaq recovered earlier this week due to strong financial results from well-known businesses like Amazon, Intel, and Microsoft. The recent decline in bond prices has subsided despite a slight improvement in the Federal Reserve’s preferred inflation gauge. The prevailing sentiment among consumers regarding inflation expectations remains persistently elevated.
The upcoming Federal Reserve meeting scheduled for next Wednesday is anticipated to result in the maintenance of existing interest rates. However, it is widely expected that a hawkish stance will be adopted, primarily due to the persistent robustness of the United States economy.
The Tech Industry Goes up Because Profits Are Going Up
The technology sector is currently experiencing a period of recovery after a challenging week, as evidenced by the favorable outcomes of Amazon and Intel’s Q3 earnings, which were disclosed next to the conclusion of trading activities yesterday. The third-quarter revenues of Amazon demonstrate the ongoing resilience of the US consumer, which is noteworthy given the unexpectedly positive nature of the results.
The upward momentum witnessed earlier in the day was negated, as the Nasdaq, predominantly composed of technology stocks, experienced a decline exceeding 4% throughout the preceding two sessions. After releasing their respective earnings reports earlier in the week, Alphabet, the parent company of Google, and Meta, the parent company of Facebook, suffered sizable losses that were the primary catalyst for this downturn.
The upcoming week will conclude this quarter’s earnings season with prominent technology companies taking the forefront. Apple, in particular, is scheduled to disclose its financial performance on Thursday.
Ford Makes a Deal With the Unions. Will GM and Stellantis Do the Same?
A tentative agreement has been reached between Ford and the United Auto Workers union, enabling the company to retract its previously issued negative earnings guidance that had cast a shadow over its earnings report. Ford has incurred an approximate financial impact of $1.2 billion during the fourth quarter as a result of the strikes. The onus now rests upon General Motors and Stellantis to emulate this action.
How Much More High Are the Rates, and How Longer Will They Be In Effect?
The Federal Reserve continues to grapple with a significant difficulty: how should an extended period of elevated interest rates be interpreted in an economy impervious to deceleration? The current inflation readings, hovering at approximately 4%, continue to surpass the Federal Reserve’s ultimate inflation target of 2%.
The expenditure patterns of American citizens have persistently maintained a robust momentum, reaching the growth rate in personal income. The current state of consumer inflation expectations remains persistently elevated, surpassing the threshold of 4%.
According to the CME’s Fedwatch tool, there is an 80% probability of interest rates remaining unchanged in December, followed by a 72% probability in January and a 65% probability in March. The determination of whether the current market perspective is excessively optimistic or if there will be a subsequent increase in interest rates shall be ascertained in the forthcoming week.
The Federal Reserve is likely to take a stronger stance, keeping the option to make more interest rate hikes if they think it is necessary. This is because the economy is doing well, and there are signs of inflationary pressures. Consequently, the possibility of a rate hike before the year’s conclusion remains.
The Nasdaq Is Driving the Market Upward
- The Nasdaq experienced a 0.9% increase during morning trade following a week of generally favorable earnings reports from technology companies. Similarly, the S&P 500 observed a 0.2% uptick, while the Russell 2000, which encompasses a broader range of companies, recorded a 0.7% rise.
- The foreign equity markets correlated with the recent decline observed in the US equity markets. Notably, the FTSE 100 experienced a decline of 1.0%, the DAX witnessed a decrease of 0.4%, and the Nikkei 225 observed an increase of 1.4%.
- The VIX, commonly called Wall Street’s fear index, has experienced a decline and currently stands at a level of 20.3.
Bond Rates and the Dollar Stay the Same
- The 2-year and 10-year yields remained unchanged at 5.04% and 4.86% respectively.
- The dollar index exhibited no change, remaining at 106.5.
- About the dollar, the Japanese Yen experienced a 0.5% increase, while the Euro recovered 0.2% following a period of recent weakness. Additionally, the British Pound Sterling observed a modest 0.1% upward movement.
Med-East Unrest Causes Oil Prices to Rise
- The price of crude oil experienced a 0.6% increase, reaching $83.6 per barrel. The recent surge in crude oil prices can be attributed to the escalating tensions in the Middle East. Reports indicate that Israel has conducted additional raids into Gaza, while the United States has carried out air strikes on Iranian military targets in eastern Syria. These actions were taken in response to the recent increase in attacks on US military targets in the region, which have been attributed to Iranian-backed proxies.
- The spot price of gold experienced a decline of 0.3% to reach $1,989 per ounce, whereas the price of silver remained unchanged at $22.9 per ounce.
- The mid-day performance of the agricultural complex exhibited a mixed trend, characterized by the soy complex displaying upward momentum driven by the sustained strength observed in soymeal. Consequently, this exerted a slight positive influence on the corn market, albeit to a lesser extent. Conversely, the wheat complex experienced a decline in value during this period.