News Recap • Week 44 2024

Markets

Let’s kick things off with a look at the numbers before diving into the news and events behind the movements.

Equities

• S&P 500 fell 1.37% for its second straight week of declines after the recent all-time high.
• Nasdaq Composite retreated 1.5% for the week after hitting a new intraday record on Wednesday. The index fell 2.76% on Thursday alone.
• STOXX 600 dropped 1.52% despite a 1.09% gain on Friday.
• FTSE 100 declined 0.87% but closed in the middle of the range after a volatile week.
• DAX fell 1.07% but remains near its ATH.
• Nikkei 225 gained 0.37% for the week despite a 2.63% drop on Friday.
• Hang Seng declined 0.41% as the recent stimulus volatility continues to subside.
• CSI 300 fell 1.68% and continues to consolidate and look for direction.
• Nifty 50 advanced 0.51% after four straight weeks of declines.

Currencies & Commodities

• The DXY closed unchanged at 104.317 after a somewhat volatile week.
• USD.DKK lost 0.38%, giving back a bit of the recent month’s rally.
• USD.GBP rose another 0.31% to extend its winning streak to five weeks.
• USD.JPY gained another 0.45% as it closes in on the ATH set in early July before the yen carry trade unwinding.
• Gold ticked down 0.39% after hitting a new record high of almost $2,800 on Wednesday.
• Crypto is down 1% as of Saturday afternoon CET, down 7.5% from the highs on Tuesday. Bitcoin almost reached its ATH when it peaked at $73,625 but has since retreated to $68,400. ETH is down 2% for the week while SOL has shown some rare underperformance with a +7% drop. BTC dominance is above 60% for the first time since March 2021. Crypto’s poor performance toward the end of the week seems to be correlated to Donald Trump’s decline in the polls.

Other

• The VIX rose 7.6% to 21.88, its highest weekly close since early September and a higher level than we saw through the entire first half of 2024.
• The 10-year US treasury rallied another 3.39%, now yielding 4.386% and up almost 22% from the bottom in September.

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US and eurozone inflation on target

The US Fed’s preferred inflation gauge, the Personal Consumption Expenditure (PCE), came in at 2.1% as expected in September. The Fed hasn’t achieved the official 2% target since February 2021 but the latest data is arguably close enough to warrant some celebration.

Core PCE did come in significantly hotter though, hitting 2.7% in October after a 0.3% monthly increase.

Services prices increased 0.3% while goods decreased by 0.1%. Housing prices slowed their pace with a rise of 0.3%.

Even more notable was the Q3 PCE number released on Friday. The headline number came in at just 1.5% annualized with core at 2.2%. Even for the Fed, I imagine this must feel like hitting the 2% target, especially compared to where we came from.

Meanwhile, eurozone inflation came in at 2% in October, higher than last month’s 1.7% and slightly hotter than the 1.9% expected.

Just as in the US, core inflation remains higher and stickier with a 2.7% reading. Analysts expected 2.6%. Services inflation held steady at 3.9%.

The uptick in eurozone inflation decreases the odds of a 50 bps rate cut at the next meeting in December. Markets are currently expecting a modest 25 bps cut.

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US GDP growth strong but below expectations

GDP grew by 2.8% annualized in the third quarter adjusted for inflation and seasonality, far less than the 3.1% expected by economists. It was also less than the 3% growth we saw in Q2.

Markets seemed pretty indifferent about the miss though. It’s also important to note that while the number did miss expectations, a 2.8% growth rate is still extremely strong. Especially considering that many analysts had expected the economy to be in a deep recession by now, induced by the Fed’s aggressive rate hikes.

Much of the strong growth can be attributed to resilient consumer spending which rose 3.7% for the quarter and accounts for two thirds of all economic activity. That, and the high government spending that has pushed the budget deficit to more than $1.8 trillion in fiscal 2024. In fact, federal government spending expanded 9.7%, in particular due to a 14.8% increase in defense outlays.

An 11.2% increase in imports offset an 8.9% gain in exports and held back the total GDP growth number.

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Mega cap tech earnings galore

We hit peak earnings season this week with Apple, Microsoft, Alphabet, Amazon, and Meta all on deck. Here are the highlights with a lot more earnings further down.

Alphabet kicked things off this week with a solid beat, delivering $2.12 in earnings per share vs $1.85 expected and $88.27 billion in revenue vs $86.30 expected. Revenue grew 15% year over year, more than the same quarter last year. Cloud revenue came in at $11.35 billion, up 35% from the $8.41 billion a year ago. Alphabet’s search business was up 12.3% from a year ago, now generating $49.4 billion. Ad revenue jumped from $59.65 to $65.85 billion. All in all a super strong quarter by Alphabet. The stock rose 7% at the open on Wednesday but closed the day just 2.8% higher.

Meta also delivered a big Q3 earnings beat of $6.03 per share vs expectations for $5.25. Revenue was a slight beat as well, coming in at $40.59 billion vs $40.29 billion expected. Sales jumped 19% year-over-year while net income grew 35% to $15.7 billion. However, the number of daily active users fell just shy at 3.29 billion vs 3.31 billion expected. The company also raised capital expenditures guidance from $37 to $40 billion to now $38 to $40 billion and said the number will grow significantly in 2025.

Microsoft reported revenue growth of 16% in its fiscal 2025 Q1, coming in at $65.59 billion vs $64.51 billion expected. EPS was a beat as well with $3.30 vs $3.10. Revenue from Azure and other cloud services was up 33%, also surpassing expectations. The company guided to revenue between $68.1 and $69.1 billion in the current quarter, slightly lower than the $69.83 forecast. Shares fell 6% after the report and are now only up by 10% for the year, trailing far behind its Magnificent 7 peers.

Apple’s revenue came in at $94.93 billion vs $94.58 billion expected with $1.64 in EPS vs $1.60 expected. iPhone revenue grew 6% and came in slightly above consensus while Mac, iPad, and Services revenue all missed. iPad revenue grew the most at 8%. Gross margin came in at an impressive 46.2% vs 46% expected. Apple’s overall net sales grew by 6% for the quarter, its fastest rate since Q4 of 2022. Shares fell 1.3% after the report.

Amazon showed one of the most impressive earnings reports with a whopping earnings beat of $1.43 per share vs $1.14 expected on $158.9 billion in revenue vs $157.2 billion expected. Both AWS and ad revenue grew 19% from a year ago with the former accelerating from a 12% growth rate back then. Shares rose 6.2% on Friday after the report to within 2% of its record high set in July.

All in all, US mega cap tech companies continue to prove what earned them the ‘Magnificent 7’ nicknames and why they’ve been the preferred stocks to own for many investors in the past two years.

They’re all showing strong growth and an impressive ability to improve margins and increase profits. The main reason why Meta, Microsoft, and Apple fell this week was the extremely high expectations going into the reports. Some investors may also be slightly concerned about the massive amounts of money the companies are investing in AI. Will it pay off? Time will tell. For now, I maintain my investments in Alphabet, Amazon, and the Nasdaq at large.

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In other news

• US consumer confidence rose more than 11% to 138 in October, its biggest monthly acceleration since March 2021. The expectations index of future conditions rose 8% to 89.1, well above the 80-level that indicates a recession.
• On Friday, the nonfarm payrolls data showed one of the biggest misses in recent memory. Analysts had expected 100,000 new jobs but only 12,000 were created. The market seemed to shrug it off though, as the two massive hurricanes and a big Boeing strike significantly distorted the picture. The unemployment rate remained at 4.1% as expected. Job creation for August and September was revised lower by a total of 112,000 jobs to 78,000 and 223,000 respectively.
• Private job creation on the other hand beat expectations of 113,000 with a total of 233,000 new jobs.
• Japan’s unemployment rate for September fell to 2.4% from 2.5% the month before. The forecast was for another 2.5% reading.
• China’s factory activity expanded in October, with the official purchasing manager’s index coming in at 50.1. The index hasn’t been above 50 since April, the threshold for expansion.
• Eurozone GDP grew by 0.4% in Q3, the highest pace in two years and ahead of expectations for 0.2%. Spain’s economy grew by 0.8% while Germany avoided a technical recession with a surprise 0.2% growth rate.
• Inflation in Germany jumped to 2.4%, well ahead of analysts’ expectations for 2.1%. Core inflation rose to 2.9%. The numbers are up from 1.8% and 2.7% respectively in September.
• OpenAI launched a search feature in direct competition with Alphabet’s Google.
• In Japan, the Liberal Democratic Party lost its parliament majority for the first time since 2009. The party’s Prime Minister, Shigeru Ishiba, said he intends to stay on in his role.
• Ernst & Young resigned as Super Micro’s financial auditor, saying that it’s “unwilling to be associated with management’s financial statements”. In case you were wondering, this is not a good sign. The stock plummeted 33% on the news and another 21% in the two following trading days. It has now completely round-tripped the 330% it gained in Q1 this year.
• Berkshire Hathaway’s cash pile topped $325 billion for the first time in Q3. That’s up from $277 billion in Q2. Berkshire continued to sell down its equity holdings, including in Apple and Bank of America. It held $70 billion worth of Apple stock at the end of September, down by 25% since the prior quarter and 67% in total from the end of Q3 last year.
• UK’s Conservative Party named right-wing Kemi Badenoch as its new leader, seemingly shifting the party further to the right.
• Nvidia joined the Dow Jones Industrial Average alongside Sherwin Williams. The two companies will replace Intel and Dow Inc.
• Gold demand topped $100 billion for the first time after rising 5% in the third quarter.
• After reaching 67% last week, the likelihood of Donald Trump winning the election according to prediction markets has come back to Earth. Polymarket is currently showing 54-46 in Trump’s favor.

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(More) earnings

• Ford slightly beat Q3 expectations but guided to the low end of its previously announced 2024 earnings forecast. Shares dropped 8.4% after the report.
• McDonald’s delivered a slight beat on both revenue and earnings. The stock initially rose on Tuesday but ended the day down by 0.5%. McD executives also said that the recent E. coli outbreak is “behind us” as the company put the Quarter Pounder back on the menu.
• PayPal presented a slight earnings beat but fell short on revenue. The company guided “low single-digit growth” in Q4 while analysts expected 5.4%. Shares fell 4% on Tuesday after having been down 8% earlier in the day.
• Pfizer beat earnings estimates and hiked its full-year guidance. After a volatile day, the stock ended Tuesday down by 1.4%.
• HSBC reported profit growth of 10% year-over-year with revenue growth of 5%. Both were above forecast at $8.5 billion and $17 billion respectively.
• UBS crushed Q3 earnings with operating profits before taxes of $1.93 billion. That’s up from a $184 million loss in the same quarter last year. Shares still fell on the news though.
• Chipotle delivered disappointing same-store sales growth and missed on revenue. Growth was expected to come in at 6.3% but landed at 6% while revenue came in at $2.79 billion vs $2.82 billion expected. The stock dropped almost 8% on Wednesday after the report but rebounded strongly on Friday.
• Eli Lilly has been one of the hottest stocks this year but fell short of expectations with their Q3 report. Earnings per share came in at $1.18 vs $1.47 expected with revenue at $11.44 vs $12.11 billion expected. The company also lowered guidance for full-year adjusted earnings to between $13.02 and $13.52 per share, down from $16.10 to $16.60. Shares dropped as much as 14% at the lows on Wednesday before rebounding to finish the day with a 6.3% loss. The stock is still up by more than 40% for the year.
• Starbucks missed on both revenue and earnings with sales declining for the third straight quarter, causing new CEO Brian Niccol to promise a fundamental change in strategy. The results had already been pre-announced a week earlier though.
• Visa delivered a solid earnings beat with $2.71 EPS, an increase of 16% year over year. Net revenue grew 12% and slightly beat consensus. Shares rose almost 3%.
• Snap EPS came in at 8 cents vs 5 cents expected on $1.37 billion in revenue. The company also reported 443 million daily active users. Shares jumped 16% on the report.
• Reddit topped estimates and rallied 42% on the back of it. Earnings per share landed at $0.16 vs $0.07 expected on revenue of $348.4 million vs $312.8 expected.
• AMD reported inline earnings and a slight revenue beat but failed to impress with its forecast. Shares dropped more than 10% after the report on Wednesday and continued their slide through Thursday and Friday.
• Garmin raised its full-year profit and revenue forecast, the latter expected to come in at $6.12 billion compared with an earlier forecast of $5.95 billion. Shares rocketed more than 23% after the report on Wednesday and broke out to a new all-time high.
• Volkswagen reported a 42% drop in profits on a 0.5% decline in year-on-year revenue. Shares rose 1% on the back of the report but were already down 20% for the year.
• Uber reported a massive earnings beat with $1.20 per share vs $0.41 expected. Revenue was higher than forecast as well.
• Intel delivered a surprise beat on both revenue and earnings. The latter came in at 17 cents per share vs an expected loss of 2 cents. The stock jumped almost 8% on Friday but is still down more than 50% this year and 66% since the peaks in 2020 and 2021.
• Etsy beat on revenue but missed on earnings. Net income, profit margin, and earnings are all down significantly from a year ago. The stock rose more than 7% after the report but is down 35% year to date and 83% from its peak in 2021.
• Peloton delivered a revenue beat of $586 million vs $575 million expected but missed on earnings. Earnings were still up to basically break-even from a loss of $159 million during the same quarter last year. The company also announced Peter Stern as new CEO. Shares jumped almost 28% after the news on Thursday but gave back 15% on Friday.
• eBay Q3 earnings came in line with expectations and guided to Q4 earnings slightly lower than the consensus estimate. Shares dropped more than 8% after the report.
• Coinbase delivered a big miss with EPS of 28 cents vs 41 cents expected on $1.21 billion in revenue vs $1.26 billion expected. However, retail trading revenue grew 98% to $483.3 million for the quarter while institutional revenue jumped 292% to $55.3 million from a year ago. Shares fell more than 15% and are essentially unchanged for the year. This comes after a 460% gain in 2023 though.
• Robinhood missed by around 3% on both revenue and earnings. The stock plummeted almost 17% after the report on Thursday but is still up by a whopping 94% for the year. For further perspective, this week’s decline only takes the stock back to where it was three weeks ago.
• BYD reported disappointing revenue but a slight beat on net income. Revenue still topped Tesla’s for the quarter though, with $28.2 vs $25.2 billion. This was the first time ever.
• Comcast topped estimates with $1.12 earnings per share and $32.07 billion in revenue.