Amazon beats, focus on US big Oil and jobs data

Equity selloff in Europe and US extended on Thursday. Technology stocks suffered the biggest losses after Microsoft and Meta – which represent nearly 10% of the S&P500 index – were hit by a 6% and a 4% decline respectively. The S&P500 closed 1.86% down – a touch above its 50-DMA -  and Nasdaq 100 dived almost 2.50%. As such, the major US indices closed the month having scaled back all of their gains. And yesterday’s selloff was amplified by a higher-than-expected spending and core PCE number from the US. The Federal Reserve’s (Fed) favourite gauge of inflation showed yesterday that core inflation remained steady at 2.7% instead of a decline to 2.6%. The headline PCE index – that includes more volatile items like food and energy – eased to 2.1% - a spitting distance from the Fed’s 2% policy goal. But the fact that the core PCE rose the most on a monthly basis since April – along with strong spending and robust growth data released earlier this week – trimmed the Fed cut bets. The US 2-year yield rose to the highest levels since early August while the 10-year yield re-tested the 4.30% level to the upside.

The US futures are slightly in the positive this morning, as Amazon and Intel rallied in the afterhours trading after releasing better-than-expected Q3 results. Amazon posted a nearly 20% increase in both advertising and cloud computing revenue compared to the same time last year and the CEO sounded optimistic regarding the upcoming holidays season. (You bet he did, have you seen the US spending figures?). The stock price jumped 6% in the afterhours trading. While Intel jumped up to 15% after the results as the company surprised with a 17 cents earnings per share, while the expectation was a 2 cents loss. Last but not least, Apple also announced a better-than-expected revenue and a jump in iPhone sales – before the arrival of the AI tools on them. The earnings were hit by an EU fine of $10bn dollars – which is a one-off charge. But what really hurt investors’ feelings is the fact that they missed the Chinese sales estimates – its 3rd biggest market. The shares lost 1.86% in the afterhours trading.

Today, US’ Big Oil companies will go to the earnings confessional and will certainly post weak numbers due to weak oil and gas prices as did their European peers throughout this week. But, given that the expectations are quite low, beating them is easier. Shell announced yesterday a smaller than expected drop in its profit and said that it will buy another $3.5bn of shares in the next three months. Its shares rebounded more than 2% yesterday, also supported by an almost 2% rally in crude oil prices on suspicion that the Middle East tensions could be coming back.

Oil rebounds on renewed tensions

The latest news on the wire suggests that Iran is preparing a response to Israel’s latest attack. As such, US crude cleared the $70pb offers yesterday and could consolidate and extend gains above that level into the weekend. This being said, the geopolitical tensions have proved to be a temporary boost to oil bulls. The global economic outlook and supply / demand dynamics remain comfortably bearish for oil. As such, price rallies are seen as good opportunities for the bears to strengthen their short positions. The latter not only triggers important selloffs as soon as tensions ease, but also limits the oil’s upside potential. Minor resistance is seen at the 50-DMA, near $71.50 level, and the key resistance to the broader bearish trend sits at the $72.85 mark, which is the major 38.2% Fibonacci retracement on July to September selloff.

The Dollar will say the last word

Gilts and sterling gave a delayed reaction to Wednesday’s budget while the US dollar index eased and tested the 200-DMA to the downside despite the stronger-than-expected core PCE figures, the weakening dovish Fed expectations and the rising yields.

The yen strengthened after relatively hawkish comments from the Bank of Japan (BoJ) yesterday – which maintained its policy unchanged but warned that it could continue to increase the interest rates if the economic data aligns with their forecasts.

The EURUSD rallied past the 200-DMA and minor 23.6% resistance with the sight of a stronger than expected CPI update – that showed that the euro area’s CPI rebounded to the 2% in October and core CPI didn’t ease as anticipated. That, combined with encouraging growth data released earlier this week, gave the euro bulls the energy to test the 200-DMA offers. 7

However, US jobs data and the dollar will ultimately determine whether EURUSD closes the week above or below this level. The US economy is expected to have added around 100K new nonfarm jobs in October with a steady wages growth of around 4% on a yearly basis and a steady unemployment rate near 4.1%. The NFP expectations are weakened by the Boeing strike and the hurricanes, but Wednesday’s ADP report defied the weak expectations and printed a strong 233K private job additions. The game isn’t over yet for Fed doves, today’s report is the last major release before next week’s election and the FOMC decision – expected to bring a 25bp cut.