Rate cut bets build after CPI data

General market commentary

Wall Street closed Wednesday on a subdued note as October's inflation data met expectations without any surprises, keeping major indices near flat, though the Nasdaq retreated slightly. Short-term Treasury yields dipped as odds of a December rate cut climbed, while longer-term yields, such as the 10-year Treasury, rose on concerns over inflation linked to economic growth and potential fiscal policy shifts.

Consumer discretionary shares led gains, boosted by companies such as Amazon and Home Depot, and driven by optimism for strong holiday spending and resilient earnings. Shares in this sector, further buoyed by Tesla’s recent surge, have outperformed others over the past week, supported by rising real average wages that are likely to fuel consumer demand.

Latest market update

US equity futures were steady as investors awaited insights from Federal Reserve Chair Jerome Powell amid growing expectations for a December interest rate cut following recent inflation data.

Asian equities fell on Thursday, extending recent losses amid concerns over persistent U.S. inflation and uncertainty regarding future interest rate cuts. Investors are also awaiting additional stimulus measures from China as local markets reacted to disappointing fiscal policies.

US equities closed near the flatline on Wednesday, with the Dow gaining 0.1%, the S&P 500 unchanged, and the Nasdaq down 0.26%. Super Micro Computer fell by 6.4% due to earnings report delays, while Rivian surged by 13.6% following Volkswagen's investment announcement.

European markets closed lower on Wednesday, with the STOXX 50 down 0.3% to a three-month low. Notable movements included Volkswagen falling 1.7%, Bayer down 1.6%, and RWE rising 7.1% on a share buyback announcement.

The yield on the 10-year U.S. Treasury note rose to over 4.45% on Wednesday, the highest since July, as investors reacted to the latest consumer price index data and increased expectations for a Federal Reserve rate cut in December.

The U.S. dollar index held above 106.5 on Thursday, supported by strong inflation data, while the euro weakened to around 1.055 amid concerns over political uncertainty in Germany.

Oil prices rose dipped this morning, influenced by mixed U.S. inventory data and underwhelming fiscal measures from China. Markets are awaiting further insights on demand from China and the International Energy Agency, as concerns over cooling fuel demand grow.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Cisco Systems reported fiscal Q4 results that exceeded expectations, with an adjusted EPS of $0.91 on revenue of $13.8 billion. The shares were flat in after-hours trading following the upbeat guidance for the upcoming quarter and full-year earnings.

Occidental Petroleum reported Q3 adjusted earnings of $977 million, or $1.00 per share, exceeding expectations despite a decline in oil and gas profits. The company increased production by 15.7% to 1.4 million barrels per day, aided by its CrownRock acquisition.

Rocket Lab USA shares jumped over 28% after reporting Q3 revenue of $104.8 million, a 55% year-on-year increase, and announcing its first customer for the Neutron rocket. Despite a widened net loss of $51.9 million, the company projected Q4 revenue between $125 million and $135 million.

Allianz reported a 14% increase in operating profit for Q3 2024, reaching €3.9 billion, driven by strong performance in its Property & Casualty segment. The company's shares rose 0.6% following the announcement, with total business volume up 17.3% to €42.8 billion and core net income rising to €2.5 billion.

Super Micro Computer shares fell over 6% yesterday after it announced a delay in filing its quarterly 10-Q report due to unresolved issues from an internal review and the resignation of its auditor, Ernst & Young. The ongoing scrutiny over its financial practices has raised concerns among investors.

Mastercard has set new mid-term guidance for 2025-2027, aiming for a net revenue CAGR in the low double digits and a high teens CAGR in value-added services. The company also targets an operating margin of at least 55% and mid-teens growth in earnings per share.

Amazon has launched a new low-cost e-commerce service called Amazon Haul, offering products priced at $20 or less, with most items under $10. This initiative aims to compete with Chinese retailers like Shein and Temu, as consumers seek affordable options amid rising prices.

Rivian's shares jumped over 13% on Wednesday following a $5.8 billion investment from Volkswagen to support their joint venture. The partnership aims to enhance Rivian's technology and help launch its more affordable R2 SUV.

Upcoming data and events

Today’s key US data releases include the Producer Price Index, jobless claims, and crude oil inventories, alongside earnings reports from Walt Disney and Applied Materials, with Fed officials set to speak on future monetary policy. In Europe, ASML will present new financial guidance at its Investor Day.

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