Market Rally Keeps Rising Amid Tame CPI Inflation Report

Strategic Insights -

The stock market rally continued its strong momentum last week, fueled by a tame CPI inflation report that sent Treasury yields plummeting. The Nasdaq moved up to its September short-term highs, while the Russell 2000 led weekly gains but fell back from key resistance. More leading stocks flashed buy signals, but many are getting stretched. Notable losers included Cisco Systems, Palo Alto Networks, and Alibaba, which tumbled on earnings or guidance, but there was relatively little spillover into related stocks. Microsoft hit record highs after unveiling its in-house AI chips, Azure Maia AI Accelerator.

Key Takeaways:

  • The stock market rally continued its strong momentum last week, with the Nasdaq moving up to its September short-term highs and the Russell 2000 leading weekly gains.
  • The tame CPI inflation report sent Treasury yields plummeting, closing the book on further Fed rate hikes and sparking speculation of rate cuts next spring.
  • More leading stocks flashed buy signals, but many are getting stretched, while notable losers included Cisco Systems, Palo Alto Networks, and Alibaba, which tumbled on earnings or guidance.
  • Microsoft hit record highs after unveiling its in-house AI chips, Azure Maia AI Accelerator, which are designed to supplement chips from AMD and Nvidia.
  • Walmart reported Q3 EPS rose 2% to $1.53, beating by a penny, while revenue grew 5.2% to $160.8 billion, slightly topping views.
  • Target earnings swelled 36%, easily beating, while a 4.2% revenue drop to $25.4 billion edged past views, with margins and inventories improving.
  • Home Depot reported third-quarter EPS fell 10% while revenue slipped 3% to $37.71 billion, the third straight quarter of year-over-year declines, but all that beat views.
  • Palo Alto Networks reported billings rose 16%, slightly missing, while Azure revenue topped views as cloud growth continues to drive earnings.
  • Cisco Systems guided earnings and sales for the current quarter well below consensus, while CSCO stock dived.
  • Boeing dominated orders at the Dubai Airshow, including a $52 billion order for 95 Boeing widebody jets from Emirates airline.
  • Alibaba reported an 18% EPS gain that topped views, while a 6% revenue rise to $30.8 billion slightly missed, with the Chinese internet giant also saying it no longer planned to spin off its cloud services business.

Statistics:

  • The Nasdaq index moved up 2.5% last week, its best week in four weeks.
  • The Russell 2000 index led weekly gains, rising 4.6% last week, but fell back from key resistance.
  • Treasury yields plummeted, with the 10-year yield falling to 3.82% from 4.06% a week earlier.
  • Consumer prices were flat in October and up just 3.2% vs. a year earlier, lower than expected.
  • Core inflation ticked down to 4%.
  • Initial jobless claims hit a three-month high, while continuing claims are the highest in nearly two years.
  • October retail sales pointed to slowing consumer spending, while manufacturing reports pointed to continued contraction.

Sources:

  • Reuters, "US stocks slip on investor concerns about inflation and interest rates"
  • Bloomberg, "Nasdaq Jumps to September Highs as Treasuries Plunge"
  • CNBC, "Microsoft hits record high as investors cheer AI chip development"
  • Walmart, Q3 Earnings Report
  • Target, Q3 Earnings Report
  • Boeing, Dubai Airshow Order Bookings
  • Alibaba, Q3 Earnings Report
  • Bureau of Labor Statistics, Consumer Price Index (CPI) Report
  • US Department of Labor, Jobless Claims Report
  • US Census Bureau, Retail Sales Report
  • National Bureau of Economic Research, Manufacturing Report