“Amazon’s soaring online sales during the pandemic highlight the crucial role of e-commerce in the modern economy, as PCE data reflects a shift in consumer behavior, prompting the Bank of Japan to reassess monetary policies for a digital-driven future.”
Amazon Shines in Third Quarter:
Amazon (NASDAQ: AMZN) reported its third-quarter earnings, surpassing expectations and contributing to a positive close for Wall Street. The company’s cloud business, Amazon Web Services, saw a revenue growth of 12% to $23.1 billion, while advertising revenue increased by 26% to $12.06 billion. CEO Andy Jassy stated that the company’s AWS growth continued to stabilize, advertising revenue grew robustly, and overall operating income and free cash flow rose significantly. Despite warning about consumer caution in the holiday quarter, Amazon’s stock jumped more than 5% premarket.
Futures Higher, Helped by Strong Amazon Numbers:
Following the release of strong numbers from Amazon, U.S. stock futures edged higher, ending a challenging week on a positive note. The market saw a sharp decline earlier in the week, but Amazon’s performance boosted sentiment. The major indices, such as the S&P 500 and Dow Jones Industrial Average, experienced losses throughout the week but turned positive after Amazon’s earnings report. More earnings are expected from Chevron, Exxon Mobil, and Colgate-Palmolive Company.
Fed’s Favorite Inflation Gauge Due:
The U.S. Federal Reserve is expected to pause on further interest rate hikes at its meeting next week. However, Thursday’s unexpectedly strong reading on third-quarter GDP has created some uncertainty for the December meeting. Friday’s report on inflation, specifically the Personal Consumption Expenditures (PCE) index, will carry extra significance as it is the Fed’s preferred inflation gauge. Analysts anticipate a rise of 3.4% for the year and 0.3% for the month in the headline reading, while the core PCE is expected to rise 3.7% for the year and 0.3% for the month. Any indications of growing inflation could impact future Fed decisions.
BOJ Meeting Looms Large:
Next week, central bank policy-setting meetings are scheduled in the U.S., the U.K., and Japan. While the Federal Reserve meeting garners the most attention, the Bank of Japan (BOJ) officials may have the most to discuss. The BOJ faces pressure to shift away from its controversial bond yield control due to rising global bond yields and persistent inflation. Although the BOJ has been preparing for an eventual end to negative interest rates, it is unlikely to make such a move at this meeting. The widening gap between U.S. and Japanese interest rates and the persistently weak yen are factors to consider.
Crude Rises on U.S. Strikes on Syria:
Crude oil prices increased due to concerns over the Israel-Hamas conflict, potentially impacting oil supply in the region. The Pentagon confirmed U.S. strikes on two facilities in eastern Syria in response to recent attacks on U.S. troops in Iraq and Syria. These strikes raised concerns about a wider war in the Middle East and its impact on crude shipments from Saudi Arabia and other Gulf producers. However, both crude benchmarks are on track to post their first weekly drop in three weeks, as there has been no disruption of oil supply thus far.