To The Moon

On Mon, 28 Oct 2024 I have talked about how this week is going to be a pressure cooker week with all the economic reports and major tech giants’ quarterly earnings happening simultaneously. Click here ! to read, repost and like ok - thanks.

On the eve of US’s September personal consumption expenditure (PCE) inflation report due, below is a recap of what have transpired and how likely will US market ends on Thursday 4pm.

US Market, Past 3 Days.

To say that US market has been jittery is an understatement. Like it or not, it all boils down to today’s PCE inflation and tomorrow’s Non-Farm payroll reports to fully dictate market’s direction.

3 days’ performance:

• DJIA - after 3 days of neither here nor there, the Dow is up negligibly +0.064%.

• S&P 500 - similar to the Dow, it is up marginally by +0.096%, slightly better than the Dow.

• Nasdaq - fared the “best” of the 3 indexes, however it’s also so so of +0.48%.

US Economic Reports, so far !

(1) US Consumer Confidence - October 2024. (see above)

• US consumer confidence increased to a nine-month high in October amid improved perceptions of the labor market.

• On Tue, 29 Oct 2024, the Conference Board reported consumer confidence index rose to 108.7.

• Incidentally, September’s data was revised upwards to 99.2 from previous reading of 98.7.

• Economists polled by Reuters had forecasted the index climbing to 99.5.

• This is the strongest monthly Consumer confidence recorded since March 2021.

• As noted by CB, Chief economist, Dana Peterson - it still has not break free of the narrow range that has prevailed over the past two years.

(2) Jobs Opening and Labour Turnover surveys (JOLTs) - September 2024. (see above)

• US job openings drop to more than 3-1/2 year low in September 2024.

• Last month’s jobs opening was also revised down to 7.86 million from initial readings of 8.04 million.

• Job openings, a measure of labor demand, dropped by -418,000 to 7.443 million for September 2024.

• The Labour Dept Bureau of Labour statistics confirmed that this is the lowest level since January 2021.

• Economists polled by Reuters had forecast 7.98 million job openings.

• Hires increased 123,000 to 5.558 million.

• Layoffs rose 165,000 to 1.833 million.

• Hurricanes and strikes are the likely causes that temporarily obscure the labour market view, with job gains expected to have slowed significantly in October 2024.

(3) US Private Payroll - October 2024. (see above)

• Despite fears of temporary disruptions from hurricanes and strikes, US private payroll growth surged for October 2024.

• Private payrolls increased by +233,000 jobs last month.

• September’s data was also revised upwards to 159,000 from initial readings of 143,000.

• Economists polled had forecast private employment increasing by 110,000 positions.

(4) US Gross Domestic Product (GDP) - Q3 2024 Preliminary data (see above)

• US’s GDP for Q3 2024 increased at a 2.8% annualized rate.

• It is below the 3.1% estimate and Q2 2024 reading of 3.0%.

• Wednesday’s reading is the first of three US Commerce department will issue.

• Consumer spending and federal government outlays were two of the biggest contributors to GDP growth. (see above)

• Very important, the report confirms that US expansion has continued despite elevated interest rates and long-standing worries that the burst of fiscal and monetary stimulus that carried US economy through the Covid crisis would not be enough to sustain growth.

• Optimistically, US’s GDP has (now) grown for 10 consecutive quarters.

US Corporates’ Earnings, so far !

(1) $Alphabet(GOOG)$.

Alphabet reported stronger-than-expected earnings results.

Google’s report card:

• Earnings per share: $2.12 vs. $1.85 expected by LSEG

• Revenue: $88.27 billion vs. $86.30 billion expected by LSEG

Other numbers Wall Street are interested, according to StreetAccount :

• YouTube advertising revenue: $8.92 billion vs. $8.89 billion expected.

• Google Cloud revenue: $11.35 billion vs. $10.88 billion expected.

• Traffic acquisition costs (TAC): $13.72 billion vs. $13.53 billion expected.

The “star” performer for the quarter and future is product - Google Cloud.

Amidst intense competition from Amazon Web Services (#1) and Microsoft’s Azure (#2), Google’s businesses have increased by +35% YoY from $8.41 billion to $11.35 billion.

The company attributed its strong cloud results to its artificial intelligence (AI) offerings, that included subscriptions for enterprise customers and AI is the “future” of all tech companies.

(2) $Advanced Micro Devices(AMD)$.

AMD reported Q3 results with earnings in line with forecasts and revenue that slightly beat expectations.

AMD’s report card:

• Earnings per share: $0.92 adjusted vs $0.92 expected.

• Revenue: $6.82 billion vs. $6.71 billion expected.

• Net income: $771 million vs $299 million (Q3 2023); a +258% YoY gain.

As the 2nd-largest vendor of data center graphics processing units (GPUs), that are used to train and deploy large generative AI models, its future is “bright” as long as it keeps re-inventing and improving its GPU line of products.

However, its outlook for Q4 2024 failed to impress Wall Street.

Forecast revenue was shy of estimates and raised its artificial intelligence chip sales forecast to $5 billion for 2024 - not enough to impress investors.

(3) $Microsoft(MSFT)$

Microsoft reported an earnings and revenue beat for the fiscal first quarter.

Microsoft’s report card versus analysts’ expectations based on a survey by LSEG: 

• Earnings per share: $3.30 vs $3.10 expected, that is a +10% YoY gain.

• Revenue: $65.59 billion vs $64.51 billion expected, that is a +16% YoY gain.

• Net income: $24.7 billion vs $22.29 billion, that is a +11% YoY gain.

• Operating income: $30.6 billion vs $26.84 billion, that is a +14% YoY gain.

Like AMD, Microsoft’s revenue outlook for Q4 2024 failed to impress Wall Street.

• CEO Satya Nadella reported that Q4 revenue will be in the range of $68.1 billion to $69.1 billion.

• That implies +10.6% growth at the middle of the range.

• Analysts surveyed by LSEG were looking for $69.83 billion in revenue.

Like Google, Microsoft’s full intelligent cloud segment (includes Azure, Windows Server and enterprise services), generated $24.09 billion in revenue.

That’s up +20% and slightly more than the $24.04 billion StreetAccount consensus.

In terms of growth comparison (percentage), Google’s cloud growth of 35% is more impressive.

(4) $Meta Platforms, Inc.(META)$.

Meta Platform reported weaker-than-expected earnings for Q3 2024.

Meta’s report card versus analysts’ expectations based on a survey by LSEG:

• Earnings per share: $6.03 vs $5.25 expected.

• Revenue: $40.59 billion vs $40.29 billion expected.

• Net income: $15.7 billion vs $11.6 billion, that’s a +35% YoY growth.

• Daily active people (DAP): 3.29 billion, that’s a +5% YoY growth. It fell short of analysts’ 3.31 billion expectations.

Although Meta’s earnings were nothing short of spectacular, CEO’s warnings of capital expenditure caused market to panic.

• He has raised FY 2024 capital expenditures guidance to between $38 billion & $40 billion.

• This is an upwards revision from $37 billion to $40 billion previously.

• In addition, CEO also said capital expenditures is expected to continue to grow significantly in 2025 due to an acceleration in infrastructure expenses.

• This is in recognition of (1) higher growth in depreciation and (2) operating expenses of Meta’s expanded infrastructure fleet.

• Mr Zuckerberg’s justified the increase in expenditure due to unplanned increased usage of Meta AI.

• The 400 million users reported in September has increased to 500 million.

The results sent mixed signals to investors about whether digital ad sales from Meta's core social media business would continue to cover the cost of its massive AI buildout.

Emarketer, Principal analyst - Jasmine Enberg has remarked:

• Meta needs to prove that it can continue to cover its AI costs as they rise next year.

• Any weakness in its core ad business could make investors nervous as they continue to wait for a return on Meta’s bigger AI bets.

Lest we forget, Meta had a similar past. Its shares sank in April 2022, after it also disclosed a higher-than-expected expense forecast, knocking $200 billion off its stock-market value. and ended a run of strong quarters.

To climbed back from a share-price meltdown in 2022, Meta has resorted to (a) slimming its workforce, (b) leaning into investor excitement about AI and (3) earlier this year issuing its first-ever dividend.

Highly Anticipated Reports.

The two economic reports that will be out today (PCE inflation report) and tomorrow (Non Farm payroll) will be hawked over by analysts and retail investors.

Together with other mega cap companies (eg. $Amazon.com(AMZN)$, Apple Inc) that will be reporting its earnings on Thu, 31 Oct 2024 will set the path for US market for the coming weeks.

(1) US Personal Consumption Expenditure - September 2024.

US inflation increased slightly in September 2024.

It moved closer to the Fed’s target, according to US Commerce Department.

Headline inflation: both in line with Dow Jones estimates.

• PCE (MoM) : 0.2% vs 0.2% expected vs 0.1% (QoQ).

• PCE (YoY) : 2.1% vs 2.1% expected vs 2.3 (QoQ).

Core inflation:

• Core PCE (MoM) : 0.3% vs 0.3% expected vs 0.2% (QoQ).

• Core PCE (YoY) : 2.7% vs 2.6% expected vs 2.7% (QoQ).

This set of data reinforces market’s betting heavily that the Fed will cut its Fed funds rate for the 2nd time when it convenes next week.

(2) US Non Farm Payroll Forecast.

Reuters survey of economists showed that US Nonfarm payrolls for October 2024, will probably increased by 115,000 jobs after its meteoric rise of 254,000 for September 2024.

That would be the smallest count in six months.

Unemployment rate is forecast to remain unchanged at 4.1%.

My viewpoint : (mine only)

I think US market will react negatively towards:

• Corporate earnings from Microsoft and Meta Platform.

• US’s PCE inflation reports for September 2024.

It will take a miracle for Amazon and Apple Inc corporate earnings out on Thu, 31 Oct 2024 (after market close) to pull a fast-one on US market for Fri, 01 Nov 2024, the start of a new trading month.

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