The Personal Consumption Expenditures Price Index remained unchanged at 6.2% on a year-on-year basis in September. However, the Core PCE Price Index rose less than expected to 5.1% from 4.9% in August, versus forecasts of 5.2%. In addition, Personal Spending was up 0.6% in September, compared with 0.4% expected.

So, what does that mean for the Fed and for investors? That's still unclear and market reaction was mixed after the announcement, with all three Wall Street indexes struggling for direction. A slower rise in inflation means that the Fed policy is working and it could start easing the pace of its rate hikes. On the other hand, strong consumer spending means that the US consumer is resilient and could support more rate hikes. Personal Income rose by 0.4%, which means that consumers spent more money than they earned after adjusting for inflation in September. This only adds to investors confusion after the debacle of tech stocks.

Yesterday, Amazon.com was the latest tech giant to post disappointing results, warning about a slowdown in sales growth for the holiday season.

Apple's results were better, but the company said that revenue growth could struggle in the current quarter.

Yesterday, things were all over the place: The Dow Jones gained 0.6%, but the Nasdaq 100 lost 1.9%. Twitter rose, but Meta Platforms lost 25%. You get the picture… To put it simply, let's say there are conflicting forces at work.

The engine of infinite earnings growth for tech companies looks broken. And since they weigh heavily in the capitalization balance, it's causing damage - hence the huge performance differential between the Dow Jones and the Nasdaq.

There are too many adverse unknowns in the equation (inflation, geopolitics, energy...) to reasonably imagine that everything will end well.

While markets have priced a 75-bps rate increase by the Fed at its next meeting, what will the future hold? The ECB, which raised rates by 75 basis points yesterday, did not say anything new. Christine Lagarde explained that "substantial" progress had been made in the fight against inflation (which is a bit daring with inflation at 10% in the euro zone in September, but hey...). Apparently, yesterday's rate hike was not unanimous and commentators point out that the doves of the ECB have more reason to be satisfied than the hawks.

On the macro side, the US yield curve is now clearly inverted: 10-year debt has seen its yield fall below 4% and is paying less than 3-month, 6-month, 2-year and 5-year maturities. This means that the market thinks that the Fed's rate peak will be lower than it feared a few days ago, but also that recession is looming.

 

Economic highlights of the day:

Today, we have PCE inflation, household income and spending, pending home sales and the consumer confidence index from the University of Michigan. All the macro agenda is here. This morning, the Bank of Japan confirmed that it is maintaining an accommodating policy and low interest rates.

The dollar is trading at EUR 1.0056 and GBP 0.8667. The ounce of gold is down to USD 1643. So is oil, with North Sea Brent crude at USD 94.20 a barrel and U.S. light crude WTI at USD 88.13. The yield on 10-year U.S. debt is back down to 3.94%. Bitcoin is trading at USD 20,200 per unit.

 

In corporate news:

* Chevron reported its second-highest quarterly profit in its history, beating analysts' average expectations, buoyed by rising global oil and gas demand and an acceleration of its U.S. production. The stock was up 2.3% in pre-market trading.

* Thanks to soaring oil prices, Exxon Mobil, the other U.S. energy giant, also reported a better-than-expected quarterly profit, which, by reaching a record $19.66 billion, is close to Apple's performance over the period. The stock gained 2.5% in pre-market trading.

* Apple gained 0.4% in early trading after reporting higher-than-expected quarterly sales and said it expects its sales growth for the current quarter to be slower than expected by the market.

* Amazon - The world's largest online retailer fell 13.8 percent in early trading after reporting lower-than-consensus quarterly sales and guidance for the current quarter.

* Intel gained 5.9% in early trading as better-than-expected results from its PC business outweighed a downward revision of annual guidance, which the semiconductor giant cited as a reason for the economic uncertainty.

* Pinterest gained 9.2% in pre-market trading after reporting better-than-consensus sales thanks to a return to growth in the number of users of its platform. Several analysts have raised their price targets.

* Gilead Sciences - The pharmaceutical company published Thursday evening a better-than-expected quarterly profit and revised upwards its annual forecast. The stock gained 5% in after-hours trading.

* T-Mobile US on Thursday raised for the third time its annual growth forecast for its subscriber base. The stock was up 3.3% in after-hours trading.

* American Airlines offered a 19 percent pay raise over two years to its pilots, a draft agreement to be submitted to members of the pilots' union shows.

* Pioneer Natural Resources - The shale oil producer reported better-than-expected quarterly earnings Thursday night and said it plans to distribute $7.5 billion to shareholders through dividends and share buybacks. The stock was up nearly 2% in after-hours trading on Wall Street.

 

Analyst recommendations:

  • Amazon: Piper Sandler adjusts price target on amazon.com to $125 from $175, reiterates overweight rating.
  • Apple: KeyBanc adjusts price target to $177 from $185, reiterates overweight rating.
  • Axalta: PT set to $27, implies a 14% increase from last price.
  • Caterpillar: Deutsche Bank downgrades to hold from buy. PT up 4.2% to $221.
  • Dana: RBC Capital Markets downgrades to sector perform from outperform. PT down 0.2% to $16.
  • Essex Property: Piper Sandler downgrades to neutral from overweight. PT up 13% to $250.
  • Gilead: Truist Securities upgrades to buy from hold. PT rises 30% to $91.
  • Intel: KGI Securities upgrades to neutral from underperform. PT up 6.6% to $28.
  • Marks and Spencer: HSBC downgrades from buy to hold, targeting GBp 105.
  • Mastercard: Wedbush cuts price target to $340 from $380, keeps outperform rating.
  • McDonald's: Wedbush lifts price target to $300 from $265, keeps outperform rating.
  • Meta Platforms: Edward Jones downgrades to hold from buy.
  • National Grid: Jefferies maintains a Hold rating with a price target reduced from GBp 1070 to GBp 820.
  • Smith & Nephew: Morgan Stanley resumes line-weighted tracking, targeting GBp 1229.
  • Stanley Black & Decker: Baird downgrades to neutral from outperform. PT up 5.7% to $80.
  • United Fire: Piper Sandler downgrades to neutral from overweight. PT down 2.4% to $31.
  • VF Corp: DA Davidson cuts price target to $34 from $55 on 'lower fundamentals,' reiterates buy/add rating