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Morning Offering: Chipped | Reuters

A look at the day ahead in the US and global markets from Mike Dolan.

A wave of “soft landing” hopes for the U.S. economy on Thursday was dashed overnight after a dire sector reading from chip giant Intel decimated its stock price after the bell.

Intel (INTC.O) fell a whopping 10% after the company said it expects to lose money in the current quarter, surprising investors with a bleak outlook for both the PC market and its key data division. center.

“We’ve stumbled … we’ve lost altitude, we’ve lost momentum,” said CEO Pat Gelsinger as the company reported a glut of chips in the PC sector, declining consumer electronics demand and a drop in business investment. cautious in recession.

“We are literally expecting some of the biggest inventory corrections we have ever seen in the industry,” he later told Reuters.

While the chip world and Intel may have particular post-pandemic problems, the issue of rising inventories was a worrying feature of Thursday’s otherwise surprisingly upbeat US GDP report for the final quarter of last year.

While fourth-quarter annualized economic growth came in at a brisk 2.9%, the Commerce Department showed that half of that came from a sharp increase in inventories held by businesses, some of which is likely unwanted and which is now could be reduced as production is reduced.

That could cast a cloud on the New Year’s outlook, but should also boost hopes for discounting and disinflation, with Friday’s release of the Federal Reserve’s preferred measure of inflation – the Personal Consumption Expenditure Index (PCE ) – now in the spotlight ahead of next week’s Fed Policy Meeting.

Annual “core” PCE inflation is expected to slow to 4.4% last month, the lowest in more than a year, from 4.7% in November.

With the Fed’s decision now firmly in sight and widely expected to wrap up another scaling of its interest rate hikes to just 25 basis points, continued tension in the US labor market is one area that will keep the central bank on alert.

A separate report from the Labor Department showed initial claims for state unemployment benefits fell last week to their lowest level since April 2022.

The flip side of such low and prevalent unemployment readings is a wave of corporate announcements about planned job cuts, something that was initially concentrated in the digital and tech universe but is now spreading to other sectors.

Toymaker Hasbro (HAS.O) said Thursday it would cut about 15% of its global workforce this year, shedding about 1,000 full-time positions globally and joining a growing list of companies losing jobs. work, including big industry names like Dow and 3M. Hasbro shares fell 5% in afterhours trading.

American Express and Colgate-Palmolive are among the companies reporting on Friday.

After gaining 1% more for Wall Street’s major indexes on Thursday at a new-year high, stock futures fell back into the red ahead of Friday’s open. US Treasury and dollar yields were slightly higher.

Abroad, the Japanese yen strengthened on news that annual core consumer prices in Tokyo, a leading indicator of national trends, rose 4.3% in January, the fastest in nearly 42 years.

As the data keeps the Bank of Japan under pressure to phase out ongoing monetary stimulus and limit government borrowing rates, Prime Minister Fumio Kishida has insisted a return to deflation cannot be ruled out as domestic demand remains weak.

Meanwhile, UK Finance Minister Jeremy Hunt vowed to address the country’s weak productivity with post-Brexit financial reforms to boost growth, but signaled he would stick to tax hikes as a way to deal with high inflation. . “The best tax cut right now is an inflation cut,” he said.

Shares of Indiana’s Adani Enterprises (ADEL.NS) plunged 20% on Friday after a scathing report from a U.S. short seller triggered a rout in the conglomerate’s listed companies, raising questions about how investors will respond to the secondary offering $2.45 billion company’s record.

Seven listed companies in the Adani conglomerate – controlled by one of the richest men in the world, Gautam Adani – have lost a total of $48 billion in market capitalization since Wednesday.

US bonds of Adani firms also fell after Hindenburg Research signaled concerns in a Jan. 24 report about debt levels and the use of tax havens.

Key developments that could provide direction to US markets later Friday:

* US December Personal Consumption Spending (PCE) Price Index and Personal Income/Expenditure, Dallas Fed December Trimmed Average PCE Price Index, Dallas Fed December Pending Home Sales , Kansas City Fed January Services Index, University of Michigan January Consumer Sentiment, and Inflation Expectations

* US Corporate Earnings: American Express, Chevron, HCA Healthcare, Colgate-Palmolive, Roper Technologies, Charter Communications

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By Mike Dolan, edited by XXXX [email protected]. Twitter: @reuterMikeD; Edited by Jan Harvey

Our standards: the Thomson Reuters Trust Principles.

The views expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias under the Trust Principles.

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