Major US indices had a record-breaking session on Thursday, but disappointment on Apple and Amazon results will likely weigh on the market sentiment before the weekly closing bell.
Nasdaq which led gains and traded at a fresh record will certainly feel the pinch of the softer-than-expected results from Apple and Amazon. And there is little to improve the mood, as Joe Biden is still struggling to pass his mega spending bill, the Covid delta-plus cases are surging and the US growth fell short of expectations in the latest read.
The US economy grew 2% in the Q3 versus 2.7% expected by analysts and 6.7% printed a quarter earlier. And there is nothing the Federal Reserve (Fed) could do to boost that number, as it is stuck with persistent and significantly above-the-target inflation. The market is aggressively pricing in a tighter monetary policy in the quarters ahead. And that tightening will likely start as soon as next week, with the announcement of the QE taper.
But don’t get demoralized just yet! Bloomberg writes that the GDP report is not as bad as it first looks, as there is no sign of stagflation, as the demand component is up by 6.6%, in line with the pre-pandemic demand, wages in private sector are up by 9.2%, covering for inflation and the services consumption continues to rebound. But people just get less for their money. And that’s called inflation!
The last thing on this week’s corporate calendar is the earnings from the oil giants Exxon and Chevron. Both companies are expected to report strong quarterly earnings thanks to the rally in oil prices. But strong expectations don’t mean a strong beat! Shell for example missed on revenue estimates yesterday and the share price dived 3.50% in London.
US crude rebounded past the $83 yesterday, as the price plunge has been seen as an opportunity to buy the dip in the actual environment of energy crisis, rising global demand and still a tight supply.
A word on the European Central Bank (ECB) meeting: As expected, Lagarde insistently insisted at yesterday’s press conference that the inflation in eurozone is transitory and will revert towards the ECB’s 2% target. How long the Germans are willing to wait for inflation to ease is yet to be seen. Overall, the message from Lagarde was dovish yesterday, but the price action on euro was hawkish. The EURUSD flirted with the 1.17 mark and has potential to price in more hawkishness no matter what Lagarde says.
Finally, Bitcoin plunged to $56K, and could see some more downside pressure during the weekend.
