Jittery US Market affects MU stock price ?
Last Week - Round up.
US stock markets had a mixed close on Fri, 20 Sep 2024, following a robust rally on Thursday, spurred by the Fed's decision to cut interest rates by 50 basis points (bps).
US market futures index for Mon, 23 Sep 2024 is not looking rosy:
Dow Jones registers a marginal gain of +0.06%.
S&P 500 registers a marginal gain of +0.19%.
Nasdaq registers a marginal gain of +0.31%.
On Friday, Fed Governor Christopher Waller supported the 50 bp rate cut.
He noted that inflation was declining faster than he had anticipated, thus indicating the pace of future cuts would be data dependent.
He also mentioned he would consider another rate reduction if:
Labour market deteriorates. or
Inflation decreases more than expected.
Only Fed Governor Michelle Bowman, dissented in the latest FOMC decision, expressing concerns that the jumbo rate cut might be seen as a "premature declaration of victory” over inflation.
This Week.
Although last week's Fed rate cut has marginally reduced the immediate importance of incoming data, attention will still be focused on this week’s:
Flash Purchasing Managers' Index (PMI). and
Core personal consumption expenditures (PCE) inflation figures. (see below)
PCE forecast : August 2024.
US core PCE for Aug 2024 (forecast)
So far, both headline and core PCE data have shown stability.
Prices are expected to trend down in August 2024 report.
Core PCE (MoM) is projected to remain status quo at 0.2% (same as July 2024).
Core PCE (YoY) is forecasted to tick marginally higher by +0.10% to 2.7% from July’s 2.6%.
The 2 reports are crucial metrics:
When it comes to assessing US economy’s health.
Its potential to avoid a recession.
And injecting a dose of confidence in investors (equally important).
In fact, they will be more important than US Q2 2024 GDP’s final readings (Thu, 26 Sep 2024), assuming there are no major revisions.
** Good news is short-term prospects for avoiding a recession appear favourable. (see below)
US - Not in Recession.
Above is Atlanta Federal Reserve's latest GDPNow forecast
For Q3 2024, it predicts a 2.9% growth in US’s gross domestic product (GDP).
That should quell the fear of a possible recession slipping into US economy any time soon.
As for US market, historically, the $S&P 500(.SPX)$ has rallied an average of +17% over the 12 months, following an interest rate cut by the Fed, provided a recession did not ensue immediately.
Chips Stocks Free Fall.
Will $Micron Technology(MU)$ pull back this week as it prepares to report its Q4 2024 earnings on Wed, 25 Sep 2024;
This comes on the back of a ‘possible’ jittery US market, waiting for US PCE inflation report to be released on Fri, 27 Sep 2024?
All eyes will be on MU’s earnings, after it was downgraded by $Morgan Stanley(MS)$ on 16 Sep 2024. (see below)
Morgan Stanley has:
Lowered MU's rating to Équal (hold) from Outperform (buy).
Cut its price target to $100 from $140.
Root Cause:
MS is warning about the future of the memory chip sector.
It sees a “cooler-than-expected” conditions for Micron as both NAND and DRAM are losing steam.
Although memory chip demand is still moving up, the rate of change is approaching a peak as supply catches up to demand.
MS foresees the sector's earnings growth reaching the top and then reversing in the coming quarters, with a nearly -30% price-to-book (P/B) ratio contraction.
Memory chips average selling price (ASP) growth is “falling increasingly into question for Q4 2024 and into Q1 2025 - hence the downgrade.”
Will MU’s stock price affects other chip stocks (semiconductor) in the process. eg. $Broadcom(AVGO)$ $Advanced Micro Devices(AMD)$, $Qualcomm(QCOM)$ etc…?
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Do you think US market will be jittery this week until Core PCE report is out ?
Do you think Micron Technology will do better than Wall Street expect, in their upcoming quarterly earnings report?
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