Markets Today: Stocks Rally Despite Amazon’s Plunge

Morning Markets

The S&P 500 is up +0.76%, and the Nasdaq is up +0.5%.  This is despite the -10% plunge in Amazon and today’s rise in the 10-year T-note yield.  

U.S. personal spending came in a bit stronger than expectations, and the U.S. PCE deflator report was no worse than market expectations.

Sep U.S. personal income showed the expected rise of +0.4% m/m, while the Sep personal spending report of +0.6% m/m was a bit stronger than expectations of +0.4%.  The Q3 employment cost index rose +1.2%, in line with market expectations.

Today’s Sep PCE deflator report of +0.3% m/m and +6.2% y/y was close to market expectations.  The Sep core PCE deflator report of +0.5% m/m and +5.1% y/y was also close to market expectations.  The PCE deflator is the Fed’s preferred inflation measure.  The Sep headline PCE deflator report of +6.2% y/y was unchanged from August and remained 0.8 points below June’s 40-year high of +7.0%.  The Sep core deflator of +5.1% y/y was up from Aug’s +4.9% but remained 0.3 points below the 39-year high of +5.4% posted earlier this year in February and March. 

The markets are awaiting the release later this morning of Sep U.S. pending home sales (expected -4.0% m/m after Aug’s -2.0%), and the final-Oct U.S. consumer sentiment index (expected to be revised slightly lower by -0.2 points to 59.6).

The Euro Stoxx 50 index today is down -0.73% on carry-over weakness from yesterday’s sharp sell-off in U.S. tech stocks.  Today’s slew of European economic data was mixed.  A standout report was that Germany’s Q3 GDP report of +0.3% q/q was stronger than expectations for a -0.2% decline.  However, the Oct Eurozone CPI rose to +12.8% y/y from Sep’s +9.4% and was much stronger than expectations of +9.9%, which was hawkish for ECB policy.

Asian markets today closed lower.  China’s Shanghai Composite closed down -2.25%, and Japan’s Nikkei Stock Index closed down -0.88%.

The Bank of Japan (BOJ) today, at the conclusion of its 2-day policy meeting, left its key rates and QE policies unchanged, in line with the market consensus. 

Pre-Market U.S. Stock Movers

Amazon (AMZN) is sharply lower by -13% in pre-market trading after the retailer late Thursday issued disappointing guidance for holiday sales that would be the slowest in the company’s history.  Amazon forecasted the growth of its holiday shopping sales at +2% to +8% as consumers tighten their belts with rising interest rates and as sales drop in the post-pandemic period.  Amazon’s holiday shopping warning had negative implications for the many other stocks that depend on consumer spending for their livelihoods.

Amazon forecasted Q4 revenue of $140-148 billion, below the analyst consensus of $156 billion. Amazon’s revenue for Q3 came in close to expectations at $127.1 billion, while earnings fell to 28 cents per share from 31 cents in the year-earlier period.  Amazon said the strong dollar reduced its revenue in Q3 by about $5 billion, a problem faced by many other U.S. companies that do business overseas. Despite Amazon’s pledge to reduce costs, Amazon’s expenses in Q3 rose +18% to $125 billion.

Apple (AAPL) is up +0.5% in pre-market trading after reporting better-than-expected Q3 results.

Twitter (TWTR) is up +0.30% in pre-market trading as Elon Musk’s $44 billion purchase of Twitter appears to be set to close today, as planned.  Mr. Musk fired Twitter’s top management last night and plans to take over as interim CEO. There are reports he plans to address Twitter’s staff today.

After the deal closes and Twitter becomes a private company, the stock market will no longer have an interest in Twitter, except to the extent that any fallout at Twitter may have some consequences for Tesla.  Also, Wall Street banks are on the hook for a huge loan package pledged to close the exorbitant Musk takeover, which may result in loan losses for the banks down the line as they attempt to sell off the loans.  The main banks involved in the Twitter bank loans are Morgan Stanley, Bank of America, Barclays, and Mitsubishi UFJ Financial Group.

Tesla (TSLA) is down -0.53% in pre-market trading as investors may be worried that Mr. Musk’s plan to take over as interim CEO at Twitter may distract him from the challenges for Tesla to remain the leader of the EV pack.

Exxon (XOM) is up +2% in pre-market trading after reporting blow-out earnings of $4.68 per share, well above the analyst consensus of $3.89.  The company reported record net income of $19.7 billion, taking out the previous quarter’s former record of $17.6 billion.  Exxon is reaping the benefits from high crude oil prices, sparked by production restrictions by the OPEC+ cartel, strong post-pandemic demand, and Russia’s invasion of Ukraine.

Intel (INTC) is up +6% in pre-market trading after saying it is focused on reducing expenses. 

Pinterest (PINS) is up +11% in pre-market trading after the social media company reported better-than-expected Q3 revenue of +8% to $684.55 million, above the consensus of $666.9 million.

U.S.-listed Chinese stocks are lower in overnight trading after the Hang Seng China Enterprises Index plunged -4.08% in Hong Kong today.  Chinese tech stocks fell sharply today as a follow-on to Meta’s -23% plunge on Thursday and on underlying concerns about Chinese tech stocks sparked by Chinese President Xi’s power play earlier this week to install his lieutenants in key leadership positions and maintain his Zero-Covid strategy.  In overnight trading, JD.com (JD) is down -5.44%, NetEase (NTES) is down -3.93%, Alibaba Group Holding (BABA) is down -3.75%, and Baidu (BIDU) is down -3.16%,

Today’s U.S. Earnings Reports (10/28/2022)

Exxon Mobil (XOM), Chevron (CVX), AbbVie (ABBV), Industrial Commercial Bank of China (IDCBY), PetroChina ADR (PTR), Equinor ADR (EQNR), Sanofi ADR (SNY), Volkswagen 1/10 ADR (VWAGY), Airbus Group NV (EADSY), Sony ADR (SONY), Volkswagen Pref 1/10 ADR (VWAPY), Glencore ADR (GLNCY), Glencore (GLCNF), Charter Communications (CHTR), Colgate-Palmolive (CL), Aon (AON), Natwest Group (NWG), Safran SA (SAFRY), ENI ADR (E), Hitachi ADR (HTHIY), Denso ADR (DNZOY), United Overseas Bank ADR (UOVEY), Imperial Oil (IMO), China Life Insurance ADR (LFC), China Citic Bank ADR (CHCJY), BBVA ADR (BBVA), WW Grainger (GWW), Fomento Economico Mexicano (FMX), Coterra Energy (CTRA), Swiss Re (SSREY), Mitsubishi Electric ADR (MIELY), Anhui Conch Cement Co (AHCHY), Church&Dwight (CHD), Fortis Inc (FTS), Surgutneftegaz ADR (SGTZY), Surgutneftegaz OAO (SGTPY), W P Carey Inc (WPC), China Eastern Airlines (CEA), Avantor (AVTR), Booz Allen Hamilton (BAH), OMV AG PK (OMVKY), Danske Bank A/S ADR (DNKEY), Royal Caribbean Cruises (RCL), Banco De Chile (BCH), Dr. Reddy’s Labs ADR (RDY), Impala Platinum Holdings Ltd PK (IMPUY), Santander Chile ADR (BSAC), IAG ADR (ICAGY), Newell Brands (NWL), Shell Midstream Partners LP (SHLX), Gentex (GNTX), Allkem (OROCF), Toto (TOTDY), Makita (MKTAY), Seiko Epson ADR (SEKEY), Balchem (BCPC), Industrias Penoles (IPOAF), Air France KLM SA (AFLYY), PNM Resources (PNM), Rithm Capital (RITM), Fuchs Petrolub ADR (FUPBY), Electrolux B ADR (ELUXY), TFS Financial (TFSL), First Hawaiian (FHB), Proximus ADR (BGAOY), Arbor (ABR), Enel Chile ADR (ENIC), Piper Sandler (PIPR), Newmark Group (NMRK), Itau CorpBanca ADR (ITCB), Usinas Siderurgicas de Minas Gerais (USNZY), Barnes (B), Alps Electric (APELY), Provident (PFS), Granite Construction (GVA), ImmunoGen (IMGN), Dime Community (DCOM), Virtus (VRTS), Greenbrier (GBX), Southside (SBSI), Controladora Vuela ADR (VLRS), WisdomTree (WETF), Gorman-Rupp (GRC), Peapack-Gladstone (PGC).

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