Amazon and Intel Results Power Tech Stocks Rebound, Inflation Report Shows Little Progress

Barry Adams
27 Oct, 2023
New York City

Market indexes in Friday's trading lacked direction after investors reviewed another batch of earnings and a report on inflation.

Tech stocks rebounded after Amazon and Intel reported better-than-expected earnings and offered a positive outlook.

Broder market indexes also edged higher, reacting to a flood of earnings released later Thursday and Friday morning.

Market sentiment was dented after the latest alternative inflation measure showed little progress on the inflation front, supporting the Fed's narrative for another rate hike and higher rates through 2024.

The core Personal Consumption Expenditure Price Index, which excludes food and energy prices, increased in September to a four-month high of 0.3% in the month but eased slightly to 3.7% from the year ago, the U.S. Bureau of Economic Analysis reported Friday.

The overall PCE price index edged up 0.4% in the month, matching the rate in the previous month and increasing 3.4% from a year ago.

The watered-down measure of inflation, preferred by the Federal Reserve, is still significantly higher than the Fed's target rate of 2%, despite multiple interest rate hikes over the last eighteen months.

Supply chain-driven inflation in goods prices has eased after the end of pandemic-era disruptions, but demand-driven inflation shows no sign of easing as the Federal Reserve continues to fund the elevated federal government deficit.

 

U.S. indexes and Yields

The S&P 500 index increased 0.2% to 4,145.06, and the Nasdaq Composite advanced 0.8% to 12,714.50.

The yield on 2-year Treasury notes decreased to 5.03%, 10-year Treasury notes inched lower to 4.85%, and 30-year Treasury bonds edged down to 5.02%.

Natural gas prices soared more than 8% after the latest weekly report from the U.S. Energy Information Administration showed that U.S. utilities added 74 billion cubic feet of gas into storage in the week ending on October 20, lower than expected.

Moreover, weather reports suggest that the weather on the mainland U.S. is expected to be colder than previously estimated in the next two weeks, increasing demand for gas-fired heating.

But the expectations of record production kept the price surge in check.

The average U.S. natural production averaged 103.9 billion cubic feet in October, and the production is expected to surpass the record of 103.1 billion cubic feet in July.

Crude oil increased $0.95 to $84.16 a barrel, and natural gas prices jumped 8 cents to $3.56 a thermal unit.

The dollar index edged higher to 106.41, the level last seen in November 2022, due to elevated tensions in the Middle East and the ongoing war in Ukraine.

 

U.S. Stock Movers

Amazon.com, Inc. soared 8.2% to $129.35 after the e-commerce giant reported stronger-than-expected quarterly results.

Revenue in the third quarter rose 13% to $143.1 billion, net income more than tripled to $9.9 billion from $2.9 billion, and diluted earnings per share surged to 94 cents from 28 cents.

The rebound in sales was partly driven by a 7% jump in Amazon's core online retail business in the quarter, following the 4% rise in the second quarter.

Amazon's cost-cutting program is showing early results; operating margin increased to 7.8%, the highest since early 2021.

Intel Corporation jumped 9.4% to $35.57 after the advanced semiconductor maker reported better-than-expected quarterly results, and the company also forecasted strong results in the current quarter.

Revenue in the third quarter declined 8% to $1.533 billion, marking the eighth quarterly decline in a row.

Net income in the period dropped to $297 million from $1.02 billion, and diluted earnings per share fell to 7 cents from 25 cents a year ago.

The board of directors declared a quarterly dividend of $0.125 per share payable on December 1 to shareholders of record as of November 7.

For the fourth quarter, Intel forecast revenue between $14.6 billion and $15.6 billion and diluted earnings per share of 23 cents, based on a gross margin of 43.3%.

Chipotle Mexican Grill, Inc. jumped 7.4% to $1,940.56 after the fast food chain operator reported better-than-expected same-store sales, driven by a price increase and higher customer traffic.

Total revenue in the third quarter increased 11.3% to $2.5 billion from $2.2 billion, net income increased to $313.2 million from $257.1 million, and diluted earnings per share advanced to $11.32 from $9.20 a year ago.

Comparable restaurant sales increased by 5%, and operating margin advanced to 16.0% from 15.1% a year ago.

Food, beverage, and packaging costs in the third quarter were 29.7% of total revenue, a decrease of about 10 basis points compared to the third quarter of 2022.

The benefit from last year's menu price increases was mostly offset by inflation across several food costs, primarily beef and queso.