Amazon shines with its third-quarter earnings, helping Wall Street finish the week on a high note. The Fed’s preferred indicator is coming later in the afternoon, while oil prices are rising owing to increased Middle East tensions. The Bank of Japan meeting next week also looms important.
1. Amazon excels in the third quarter
Amazon (NASDAQ: AMZN) was the most recent large tech company to post third-quarter earnings, and the e-commerce behemoth outperformed forecasts as growth in its cloud business stabilized and advertising growth increased.
Amazon Web Services, the company’s cloud division, increased revenue by 12% year on year to $23.1 billion, while advertising income increased by 26% to $12.06 billion.
With a deal to invest up to $4 billion in chatbot-maker Anthropic, the company has sought to bolster its cloud presence, taking on major rivals Google (NASDAQ: GOOGL) and Microsoft (NASDAQ: MSFT), and has also reorganized its delivery network, allowing it to fulfill orders faster and more cheaply than before.
Its shares rose more than 5% in premarket trading after the results were revealed after the close on Thursday, despite a warning that customers remained cautious about spending heading into the holiday season.
2. Futures are higher, thanks to a solid Amazon figure.
After good earnings from e-commerce behemoth Amazon, U.S. stock futures nudged up Friday, capping out a challenging week on a positive note.
The Dow futures contract was up 107 points, or 0.3%, at 04:40 ET (08:40 GMT), the S& P 500 futures contract was up 25 points, or 0.6%, and the Nasdaq 100 futures contract was up 138 points, or 1%.
The major indices finished substantially lower Thursday, with the tech-heavy Nasdaq Composite dropping 1.8%, putting it on track for weekly losses of about 3% and its third straight losing week.
The broad-based S& P 500 index finished 1.2% down, down 2% on the week, while the blue-chip Dow Jones Industrial Average fell 0.8%, its sixth negative session in seven, and set for a 1% weekly loss.
However, the tone has shifted Friday with the publication of good Amazon data.
Before the opening bell, oil giants Chevron (NYSE: CVX) and Exxon Mobil (NYSE: XOM), as well as consumer goods business Colgate-Palmolive business (NYSE: CL), will report earnings.
3. The Fed’s preferred inflation gauge is because
The Federal Reserve of the United States is widely anticipated to postpone future interest rate rises at its meeting next week, but Thursday’s surprisingly high third-quarter GDP figure has cast doubt on December’s meeting.
Because the core reading of the personal consumption expenditures index is the Fed’s preferred inflation indicator, Friday’s data on inflation will be very important.
Analysts predict that the September headline reading will grow 3.4% year on year and 0.3% month on month, while the core PCE, which excludes fuel and energy costs, will rise 3.7% year on year and 0.3% month on month.
4. BOJ meeting looms large
Next week, central banks in the United States, the United Kingdom, and Japan will meet to decide policy. While the Fed meeting typically garners the most attention, Bank of Japan policymakers may have the most to talk.
With rising global bond rates and sustained inflation, the Japanese central bank will face increasing pressure to abandon its contentious bond yield control policy.
The BOJ has been preparing the framework for an eventual end to negative interest rates, but this meeting is considered to come too soon, with BOJ governor Kazuo Ueda warning of the consequences of slowing the global economy.
5. Crude increases as a result of US airstrike in Syria
Crude prices climbed Friday on fears that the Israel-Hamas conflict will worsen, potentially affecting supplies in this oil-rich region.
By 04:45 ET, US oil futures were 2% higher at $84.89 per barrel, while Brent futures were 2% higher at $89.70 per barrel.
The petroleum market jumped after the Pentagon acknowledged that the United States had undertaken strikes on two installations in eastern Syria that it alleged were utilized by Iran’s Islamic Revolutionary Guard Corps in response to previous attacks on US forces in Iraq and Syria.
These attacks heightened fears of a larger conflict in the Middle East, potentially affecting petroleum supplies from Saudi Arabia, the world’s top oil exporter, and other major Gulf producers.
However, both benchmarks are still on course to register their first weekly loss in three weeks, as the geopolitical premium created by these worries has ebbed in the absence of an interruption in oil supply.
