US Close: Inflation everywhere, Apple’s poor profits, Amazon fights rising costs, FX
Risk appetite had no chance after two giant disappointments in tech earnings, soaring employment costs and rising global bond yields amid inflation fears. Inflation hit a 13-year high in the eurozone, the Fed’s preferred inflation indicator continues to hold its 30-year high of 3.6%, employment costs in the United States hit the highest pace in 19 years and energy prices remain high. Despite all the growing inflation fears, the growth outlook for next year remains strong and investors will continue to bank on the exceptionalism of US growth.
US stocks trimmed losses after investors viewed Apple and Amazon’s poor performance and supply chain constraints as a short-term problem and nothing to derail their dominance as a company most profitable smartphone and largest e-commerce company in the world.
Apple / Amazon
Profit season was buzzing, and then Apple and Amazon had to play ‘Grinch’. Despite a 47% year-over-year jump in iPhone sales, Apple missed quarterly sales for the first time since 2018 as supply issues cost them $ 6 billion. Everything is getting more and more expensive for Amazon as they face billions of dollars in additional costs this quarter. This will be difficult for Amazon as the pressure on labor and wages is expected to continue and the rise in transportation costs will last beyond the holiday season.
Wall Street knows that if Amazon and Apple are grappling with supply chain issues this holiday season, small businesses don’t stand a chance. Despite an initial drop of around 5%, investors know this is just a small incident for these tech giants.
The bond market clearly shows that inflationary pressures are intensifying, which worries some investors and triggers a flight to the dollar. Yesterday, the euro recorded its best day in five months as ECB rate hike expectations moved from December 2022 to October 2022. Today’s European economic data clearly showed that inflation is on the rise. clearly above the ECB’s target and nothing in the earnings season suggests it is going to abate anytime soon. With euro zone inflation reaching 4.1%, a new 13-year high, growth prospects will have to be revised downwards.
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