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Amazon, U.S. GDP, ECB rate decision - what's moving markets

Published 26/10/2023, 07:52 pm
© Reuters

Investing.com --Amazon takes the lead as the quarterly earnings season continues, with the tech sector remaining in focus. The European Central Bank is expected to halt its rate-hiking cycle, while investors will also focus on the latest quarterly U.S. growth numbers ahead of next week's Federal Reserve meeting. 

1. Meta Platforms falls on revenue guidance; Amazon next up

It was the turn of Meta Platforms (NASDAQ:META) to take the spotlight after the close of trading on Wednesday, as the Facebook and Instagram owner beat expectations for third-quarter profit and revenue, helped by an austerity drive and a recovery in digital advertising ahead of the holiday season.

Meta's operating margin in the third quarter doubled to 40%, while revenue grew at its quickest pace in two years.

Additionally, CEO Mark Zuckerberg stated that Meta is now moving into artificial technology, following the lead of rivals Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT), adding AI would constitute Meta's biggest investment area in 2024. 

However, Meta’s stock fell over 3% premarket as investors fretted over the company’s guidance for the fourth quarter revenue, with the $38.3 billion estimate coming in 1.6% below expectations.

Earnings from the important tech sector continue Thursday, with e-commerce and cloud computing giant Amazon (NASDAQ:AMZN) expected to report earnings per share of 58 cents on revenue of $141.5 billion, after the close.

Investors will look for signs that Amazon's aggressive expansion of same-day delivery services helped increase its third-quarter profit margin by spurring shoppers to place more frequent and bigger orders.

2. Futures fall as the earnings season continues

U.S. stock futures dropped Thursday, continuing the previous session’s selloff with earnings from a series of tech giants driving sentiment.

At 04:40 ET (08:40 GMT), the Dow futures contract dropped 115 points or 0.3%, S&P 500 futures fell by 26 points or 0.6%, and Nasdaq 100 futures slipped by 140 points or 1%.

The major indices closed sharply lower Wednesday, as Alphabet's (NASDAQ:GOOG) miss on revenue expectations from its cloud operations hit the tech sector, in particular, very hard.

The tech-heavy Nasdaq Composite fell 2.4%, recording its worst day since February, while the broad-based S&P 500 dropped 1.4% and the blue chip Dow Jones Industrial Average fell 0.3%. 

The earnings deluge continues Thursday, with results due from e-commerce giant Amazon the highlight [see above].

Numbers are also due from the likes of pharmaceutical giant Merck (NYSE:MRK), carrier Southwest Airlines (NYSE:LUV), auto giant Ford (NYSE:F) and Mexican fast food chain Chipotle (NYSE:CMG).

There are a number of economic indicators due Thursday, headlined by the first reading of third quarter gross domestic product [see below]. 

September durable goods orders, goods trade deficit, wholesale and retail inventory numbers and weekly initial jobless claims will be published at the same time as the GDP report.

3. ECB to pause lengthy hiking streak

The European Central Bank meets later Thursday, and is widely expected to pause its rate-hiking cycle after raising interest rates at its past 10 meetings.

The central bank hiked its key interest rates by 25 basis points, taking the deposit rate to 4.00% and the refinancing rate to 4.50%, but signaled its 14-month-long hiking streak was likely to be its last.

A weakening eurozone economy suggests the need for further tightening is limited, with Germany, Europe's largest economy, likely entering a recession this quarter.

However, inflation, while slowing, remains above the ECB’s medium-term target. Additionally, the conflict in the Middle East is pushing energy prices higher, creating another headwind.

"The biggest challenge will be to keep a balancing act -- not sound aggressively hawkish but keep the door open to rate hikes," said ING's global head of macro Carsten Brzeski. 

4. U.S. GDP seen rising strongly

The Federal Reserve policymakers get together next week, and they will have fresh data to consider, including the first reading of third quarter gross domestic product, due out later in the session.

GDP is expected to have increased at a 4.3% annualized rate in the last quarter, which would be the fastest since the fourth quarter of 2021, and far sharper than the 2.1% pace seen in the April-June quarter.

This expected lift in growth will likely come from a boost in consumer spending, which accounts for more than two-thirds of U.S. economic activity, which has been supported by a strong labor market.

However, the Fed is likely to keep interest rates unchanged at its Oct. 31-Nov. 1 policy meeting, even with a strong GDP number, as financial conditions have already tightened with U.S. Treasury yields surging.

5. Crude slips lower as U.S. inventories rise

Crude prices edged lower Thursday, giving up some of the previous session’s gains as U.S. oil stocks rose while traders continued to focus on developments in the Israel-Hamas war. 

By 04:40 ET, the U.S. crude futures traded 0.7% lower at $84.72 a barrel, while the Brent contract dropped 0.6% to $89.56 a barrel.

The benchmark contracts settled nearly 2% higher on Wednesday, but have since fallen back after the Wall Street Journal reported that Israel has agreed to delay an expected invasion of Gaza for now.

U.S. crude inventories climbed by 1.4 million barrels last week, according to data from the Energy Information Administration, released Wednesday, pointing to weakening demand at the world’s largest consumer.

However, trading remains volatile, as traders struggle to gauge whether the war would escalate and disrupt crude supplies in the oil-rich Middle East region.


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