Thread: Daily Market Analysis from ForexMart

AI Breaks and Breaks: Amazon Spends, Microsoft Gains, Nasdaq Slips

U.S. Indexes Close Lower: 'Chip' Fever and Earnings Expectations
The American stock market ended Wednesday with a decline, as chipmakers slipped and investors paused, awaiting corporate earnings.

Microsoft: Beating the Estimates
After the market closed, Microsoft and Meta Platforms (banned in Russia) reported earnings that exceeded revenue forecasts. These positive results drew attention to upcoming reports from other tech giants, reinforcing confidence in the "heavyweights" of the tech market.

Alphabet: 'Magnificent Seven' Reports Offer a Bright Spot
Among the largest players in the top "Magnificent Seven," Alphabet also showed impressive results. Its 2.8% growth on Tuesday after beating third-quarter revenue and earnings expectations gave the market a small boost, helping to offset the negative impact from the decline in chipmaker stocks.

Chipmakers Under Pressure: AMD and Qorvo Slump
Shares of Advanced Micro Devices (AMD) and Qorvo faced significant pressure. Grim forecasts triggered drops of 10.6% and 27.3% in their stock prices, respectively.

Heavy Losses for Super Micro and Nvidia
Super Micro Computer dropped 32.6% after Ernst & Young stepped down as the company's auditor. Nvidia also ended in the red, with a 1.4% drop.

Tech Sector Hit Hard
The information technology sector saw the biggest drop among S&P 500 sectors, down 1.34%, while the communication services sector showed slight growth due to Alphabet's success.

Market Optimism Fades
According to Michael James, managing director of equity trading at Wedbush Securities, the volatility in Qorvo, Advanced Micro, and Super Micro stocks is raising questions and "dulling the rosy picture" set by Alphabet's impressive report.

Focus Turns to Earnings and Forecasts
"There will be a laser focus on earnings and company guidance reports," added James, highlighting the intense anticipation among investors.

Small Losses but Significant Expectations
Wednesday ended with small declines across major indexes. The Dow Jones Industrial Average fell by 91.51 points (0.22%) to settle at 42,141.54. The S&P 500 also slipped, down by 19.25 points (0.33%) to 5,813.67, while the Nasdaq Composite recorded the largest drop, losing 104.82 points (0.56%) to close at 18,607.93.

U.S. Economy Grows but Below Expectations
According to preliminary data from the U.S. Department of Commerce, GDP grew by 2.8% annually in the third quarter, slightly below the forecasted 3.0% growth rate. This minor gap between actual and expected results raised some concerns in the market, although the overall growth trend remains positive.

Private Sector Exceeds Job Growth Expectations
In other positive news, the private sector saw stronger-than-expected job growth. October added 233,000 new jobs, above forecasts, signaling steady recovery in the labor market and giving investors a reason for optimism, reinforcing expectations of consumer activity and economic strength.

Political Tensions: Harris and Trump Run Neck-and-Neck
With the upcoming presidential election on November 5, the race between Kamala Harris and Donald Trump is a hot topic among market participants. According to the latest polls, the candidates are running neck and neck. Investors are keeping a close eye on the election's potential impact on economic policy and the market.

Disappointing Corporate Reports: Eli Lilly and Starbucks
Eli Lilly disappointed investors, dropping 6.2% after falling short of sales forecasts for its popular weight loss and diabetes medications. Analysts expected better results, leading to a decline in the pharma giant's stock.

Starbucks reported a decline in quarterly sales, with a decrease in global demand impacting the company's profits. Investors closely monitoring the cafe chain received confirmation that global economic challenges have affected even the largest brands.

NYSE Remains Positive Despite Declines
Despite the overall market downturn, the New York Stock Exchange showed a positive balance: for each stock that declined, another rose. A total of 210 new highs and 52 new lows were recorded, indicating a mixed sentiment, with many investors remaining optimistic.

New Highs and Lows: S&P 500 and Nasdaq Show Divergent Movement
The S&P 500 recorded 24 new 52-week highs and five new lows, while the Nasdaq Composite saw 126 new highs and 98 new lows. This divergence in performance illustrates mixed investor sentiment, with investors balancing between growth expectations and concerns for the tech sector.

Amazon Up Next: Markets Brace for Earnings Report
Amazon is expected to release its financial results on Thursday, and the forecasts suggest trends similar to recent reports from other tech giants. Investors worry that aggressive investments in AI and infrastructure could impact the company's high margins, potentially reducing interest in its stock.

Tech Sector Under Pressure: AI Comes at a High Cost
Shares of major tech giants continued to decline in aftermarket trading on Wednesday. A key challenge these companies face is balancing ambitious AI initiatives with the need to demonstrate short-term returns. "Investing in AI is costly. Building capacity is expensive," commented GlobalData analyst Beatriz Valle.

Capacity Competition: Capital Expenditures on the Rise
Tech corporations are in a race to build AI infrastructure, but widespread adoption of the technology will take time. According to Visible Alpha, Microsoft's quarterly capital expenditures now exceed its annual spending level before 2020. Meta has also significantly increased its spending, with quarterly investments now comparable to its annual costs before 2017.

Microsoft: AI Spending Increases and Potential Azure Slowdown
Microsoft reported a 5.3% increase in capital spending to $20 billion in the first fiscal quarter and confirmed further increases in AI investment in the coming quarter. However, the company warned that growth in its Azure cloud business may slow due to limited data center capacity. This statement added to investors' concerns.

These investments will undoubtedly help tech giants strengthen their positions in the AI market in the long term, but for now, the question of profitability and margin growth remains open.

Investments and Their Impact: Microsoft Slows Margins for Future Gains
Head of technology research at D.A. Davidson, Gil Luria, points out, "Investors sometimes overlook that each time Microsoft makes major investments, it dampens the company's margin by a full percentage point, which can drag on for the next six years." According to Luria, the current capital expenditures could slow Microsoft's margin metrics, creating a temporary barrier to profitability.

Chipmakers Struggling to Meet Demand: AI Growth Drives Shortages
Chip manufacturers like Nvidia face challenges in meeting the growing demand for AI components. Advanced Micro Devices, which reported earnings earlier this week, emphasized that AI chip demand is surging faster than production capacity. The company warned that AI chip supply will likely remain limited into next year, leaving some orders unfulfilled.

AI Investments Echo the Early Days of Cloud Technology
These substantial investments by tech giants hark back to the times when companies actively invested in cloud technology, waiting for customers to adopt and adapt to the new technology.

High-Stakes Bet on AI Infrastructure
"We're on the verge of significant opportunities, even if building infrastructure may raise questions for investors in the short term," said Meta (banned in Russia) CEO Mark Zuckerberg, commenting on the company's current spending. He stressed that the company plans to continue making substantial investments in AI infrastructure, preparing for future demand and long-term results.
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Microsoft's Big AI Spend Weakens Wall Street, Nasdaq Dow

U.S. Indices Close in the Red: AI Costs Hit Market Optimism
All three major U.S. stock indices ended Thursday's trading session in negative territory after reports from Microsoft and Meta Platforms (banned in Russia) highlighted rising AI-related expenses that could impact future profits, dampening enthusiasm for the mega-cap companies that had driven this year's rally.

Microsoft: Record Profits Couldn't Prevent Stock Drop
Despite Meta Platforms (banned in Russia) and Microsoft (MSFT.O) surpassing profit expectations, their stocks fell significantly, with Meta dropping by 4.1% and Microsoft by 6%. This decline followed reports indicating rising AI costs, which investors perceived cautiously, seeing the potential for these costs to reduce profit margins.

The "Magnificent Seven" Lose Ground
Among other tech giants in the so-called "Magnificent Seven," both Amazon.com (AMZN.O) and Apple (AAPL.O) released their quarterly results. Amazon exceeded revenue forecasts, driven by strong growth in its cloud division, while Apple pleased investors with higher-than-expected iPhone sales and met expectations in both revenue and profit.

Amazon Up, Apple Down: Market Reacts to Earnings Reports
As a result, Amazon.com shares rose by 4.5% after market close due to solid quarterly results that exceeded Wall Street's estimates. Apple shares, however, slipped by 2% despite its positive report, remaining aligned with investor forecasts. During the regular trading session, Amazon saw a decline of 3.3%, while Apple's shares fell by 1.8%.

Alphabet Also Ends Lower
Alphabet (GOOGL.O), which reported earlier on Tuesday, also faced pressure, with its shares dropping by 1.9%.

Investors Wary: Unlimited AI Budgets Raise Questions
"The 'Magnificent Seven' are clearly hinting that their AI-related budgets remain open-ended, and this isn't a comforting message for investors," said Carol Schleif, Chief Investment Officer at BMO Family Office. "While long-term benefits for the U.S. economy could be substantial, the short-term question remains: where is the immediate profit from these investments?"

Microsoft Points to Rising Capital Expenditures
Microsoft confirmed that increasing capital expenditures are linked to its expansion of AI investments, potentially affecting its profit margin, causing uncertainty among shareholders.

Market Downturn: Major Indices Lose Ground
The market reacted with declines across all major indices. The Dow Jones Industrial Average (.DJI) closed down by 378.08 points, or 0.90%, at 41,763.46. The S&P 500 (.SPX) dropped by 108.22 points, or 1.86%, to 5,705.45, while the Nasdaq Composite (.IXIC) lost 512.78 points, or 2.76%, ending the trading day at 18,095.15.

Monthly Losses: Market Ends Extended Growth Streak
Amid September's fluctuations, the S&P 500 lost 0.99% for the month, Nasdaq fell by 0.52%, and the Dow ended with a 1.34% loss, marking the end of a five-month growth streak for the Dow and S&P.

Inflation Continues to Rise: Consumer Spending Exceeds Expectations
According to the latest Personal Consumption Expenditures (PCE) index, a key inflation indicator closely watched by the Federal Reserve, prices rose by 0.2% in September, aligning with analyst forecasts. However, the annual core inflation rate reached 2.7%, slightly above the 2.6% forecast, while consumer spending also exceeded expectations, adding further uncertainty regarding the central bank's future actions.

Intel Faces Restructuring Costs and Write-Downs
Intel (INTC.O) presented its earnings report post-market close, which showed the impact of restructuring costs and asset write-downs. Despite optimization efforts, the company's financial results fell short of expectations, leading to a restrained reaction from investors.

Market Under Pressure: NYSE Decliners Outnumber Advancers
On the New York Stock Exchange (NYSE), the number of declining stocks outpaced gainers by more than two and a half times, at a ratio of 2.66 to 1. During the trading day, the S&P 500 recorded 24 new 52-week highs and nine new lows, while the Nasdaq Composite registered 59 new highs and 159 new lows, reflecting the general negative market sentiment.

U.S. Consumer Spending Rises, Economy Strengthens
Thursday morning data indicated that U.S. consumer spending in September exceeded expectations, providing a positive signal for the economy, directing it toward a stronger growth trajectory in the year's final quarter. This increase in spending could bolster confidence in economic resilience.

Labor Costs Slow Growth
Another report showed that the Employment Cost Index (ECI), the broadest measure of labor costs, rose by 0.8% in the third quarter. This growth marked the slowest pace since mid-2021, lower than the previous quarter's 0.9% figure, indicating a potential easing in wage inflation.

Dollar Weakens as Yen and Euro Strengthen on Economic News
The dollar came under pressure against the yen after the Bank of Japan took a slightly more hawkish stance than anticipated, while the euro gained ground following data indicating faster-than-expected inflation in the eurozone in October. This factor supported arguments for a cautious approach to potential rate cuts by the European Central Bank, adding additional strength to the euro.

Dollar Index Declines, Yen and Euro Gain Ground
The dollar index, which measures the dollar's value against a basket of six major currencies, fell by 0.2% to 103.88, while the euro edged up by 0.04% against the dollar to $1.0859. Meanwhile, the dollar weakened 0.8% against the Japanese yen, reaching 152.18 yen. These currency fluctuations come amid expectations for the upcoming Fed meeting.

Rate Cut Anticipation: Markets Almost Certain
The market is nearly convinced that the Fed will implement a 25-basis point rate cut during its November 6-7 meeting. However, according to CME Group's FedWatch tool, there is only a 70% chance of an additional cut in December, reflecting investor caution.

Eyes on Employment Report and Presidential Race
Traders and investors are focused on key events in the coming days, with October's U.S. employment report due on Friday and the presidential election set for Tuesday. Polls indicate a close race between Republican Donald Trump and Democrat Vice President Kamala Harris, adding uncertainty on the political front.

Global Indices Fall, Bond Yields Rise
The global MSCI Index (.MIWD00000PUS) closed down by 12.64 points, or 1.50%, at 832.30, and saw a 2.3% decline in October, ending a five-month winning streak. The European STOXX 600 index also ended the day in the red, down 1.2%.

Yields on U.S. Treasury bonds rose following the release of economic data. The 10-year bond yield increased by 1.8 basis points to 4.282%, nearing Tuesday's four-month high of 4.339%.

Cryptocurrency Market Under Pressure: Bitcoin Loses Ground
On the cryptocurrency market, Bitcoin, the world's largest cryptocurrency by market capitalization, fell by 3.2%, reaching $70,458. This level is about 4% below its all-time high from March, signaling short-term fluctuations amid market volatility.

Gold Retraces After Record High, Monthly Gains Remain Strong
Gold retreated slightly after hitting a new all-time high, though it wrapped up a fourth consecutive month of gains, supported by demand for safe-haven assets. Spot gold dropped by 1.6% to $2,740.45 per ounce, after reaching a peak of $2,790.15 earlier in the session. Gold prices saw a 4% increase over the month, underscoring its appeal during times of instability.

Oil Prices Surge Amid Middle East Tensions
Oil prices continued their upward movement in response to reports suggesting that Iran is preparing to launch an attack on Israel from Iraq within days. WTI crude futures surged by $1.81, reaching $70.42 by 3:00 PM ET. Brent crude futures for January delivery also rose by $1.82, hitting $73.98. U.S. crude climbed by 1.33%, settling at $69.52 per barrel, while Brent rose by 0.94%, ending at $73.23 per barrel.

This increase highlights the oil market's sensitivity to geopolitical risks and confirms its reaction to potential escalations in a region that remains a crucial energy supplier.
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