Stocks on Wall Street Turn Lower, Inflation Measure Shows Cooling Trend

Barry Adams
26 Jan, 2024
New York City

Stocks on Wall Street declined in early trading, and investors reviewed another batch of earnings and inflation updates.

Benchmark indexes lacked direction, and semiconductor stocks dropped after Intel estimated sharply lower-than-expected revenue in the current quarter.

Moreover, market sentiment was dented after Visa Inc. said U.S. transaction volume growth is slowing and American Express said provision for credit losses soared 40% to $1.4 billion at the end of the fourth quarter.

On the economic front, a closely watched alternative measure of inflation eased, as expected by market watchers.

 

U.S. Personal Spending Rises, Inflation Measured by PCE Prices Slowed

Personal income increased $60.0 billion, or 0.3%, from the previous month in December, according to estimates released today by the Bureau of Economic Analysis.

Disposable personal income, personal income less personal current taxes, increased $51.8 billion, or 0.3%, and personal consumption expenditures increased $133.9 billion, or 0.7%, from the previous month, respectively.

The Personal Consumption Expenditure Index increased by 0.2% in December from the previous month and was steady at 2.6% on an annual basis.

Prices for goods increased less than 0.1%, and prices for services increased 3.9%.

Food prices increased 1.5% and energy prices decreased 2.2% from the previous month, respectively.

Core PCE, which excludes food and energy, rose to 0.2% from 0.1% on a monthly basis, and the annual core rate fell to 2.9% from 3.2%, the lowest level since March 2021.

The core rate of inflation declined for the eleventh month in a row.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.04% to 4,927.73, and the Nasdaq Composite decreased 0.2% to 15,651.03.

The yield on 2-year Treasury notes increased to 4.36%. 10-year Treasury notes declined to 4.14%, and 30-year Treasury bonds edged down to 4.38%.

WTI crude oil increased $0.53 to $75.66 a barrel, and natural gas prices increased 18 cents to $2.82 a thermal unit.

Gold increased by $1.37 to $2,013.92 an ounce and extended this week's gains after the U.S. dollar drifted slightly lower in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.27.

 

U.S. Stock Movers

Intel Corp. declined 10.5% to $44.36 after the advanced chipmaker reported weaker-than-expected quarterly results and issued a cautious outlook.

Revenue in the December quarter rose 10% to $15.4 billion from $14.0 billion, and the company swung to a net income of $2.7 billion from a loss of $664 million, and diluted earnings per share were 63 cents compared to a loss of 16 cents.

For the full year 2023, revenue increased 14% to $54.2 billion. $63.1 billion, net income plunged to $1.7 billion from $8.0 billion, and diluted earnings per share dropped to 40 cents from $1.94 a year ago.

The company guided first-quarter 2024 revenue to range between $12.2 billion and $13.2 billion, with a diluted loss per share of 25 cents and a gross margin of 40.7%.

KLA Corp. fell 3.9% to $616.96 after the semiconductor equipment company reported better-than-expected quarterly results.

Revenue in the fiscal second quarter ending in December dropped to $2.48 billion from $2.98 billion, net income plunged to $583 million from $979 million, and diluted earnings per share fell to $4.28 from $6.89 a year ago.

Visa Inc. dropped 2.7% to $265.30 after the payment processing platform reported strong quarterly results driven by robust consumer spending; however, the company signaled weakening U.S. spending volume.

Revenue in the fiscal 2024 first quarter increased 9% to $8.6 billion, net income rose 17% to $4.9 billion from $4.2 billion, and diluted earnings per share advanced 20% to $2.39 from $1.99 a year ago.

Among the key business drivers, payment volume rose 8%, processed transactions rose 9%, and cross-border volume, including intra-Europe, advanced 16%.

American Express Company rose 3.2% to $194.10 after the company reported mixed quarterly results.

Total revenue net of interest expense increased 11% to $15.8 billion from $14.1 billion, net income rose 23% to $1.93 billion from $1.57 billion, and diluted earnings per share advanced 27% to $2.62 from $2.02 a year ago.

Business billed in the quarter increased by 6% to $379.8 billion from $357.4 billion a year ago.

Total provision for credit losses increased by 40% to $1.4 billion from $1.0 billion a year ago.

Full-year 2023 revenue increased 14% to $60.5 billion, and net income rose to $8.4 billion, or $11.21 per share, compared with net income of $7.5 billion, or $9.85 per share, a year ago.