The recent U.S. earnings season has seen significant stock volatility. AMD (AMD, Financial) experienced a notable intraday drop of over 10% following its latest earnings report, which fell short of market expectations for the fourth quarter. This led to a broad decline in U.S. semiconductor stocks, with the Philadelphia Semiconductor Index falling over 3% and impacting companies like ASML, Qualcomm, Nvidia, Micron Technology, and TSMC.
Simultaneously, American pharmaceutical giant Eli Lilly faced a significant downturn, with its stock dropping up to 14% during the session. Despite third-quarter revenue of $11.44 billion, marking a 20.5% year-on-year increase, it missed market forecasts. Adjusted earnings per share stood at $1.18, below analyst predictions of $1.51. The company also revised its annual profit guidance downwards, anticipating full-year sales between $454 billion and $460 billion, down from an earlier maximum projection of $466 billion.
In other news, recent data from the U.S. Department of Commerce revealed that the third-quarter GDP growth rate stood at an annualized 2.8%, lower than the anticipated 2.9% and previous 3% growth. This marked a significant slowdown since the third quarter of 2023. Despite this, consumer spending increased by 3.7%, its highest rise in 2023, driven by federal government spending, particularly in defense.
The trade balance negatively influenced GDP growth, with imports rising by 11.2%, counteracting an 8.9% increase in exports. Core personal consumption expenditure (PCE) price index growth decelerated to 2.2%, aligning with the Federal Reserve’s inflation target but exceeding market expectations of 2.1%.
President Biden commented on these figures, highlighting economic achievements during his tenure but warning about the potential financial impacts of proposed tariffs by political adversaries.
On the employment front, data from ADP showed a surge in jobs by 233,000 in October, significantly above the forecast of 114,000, marking the largest increase since July 2023. The service sector, in particular, saw rapid job growth, while goods-producing jobs slowed. This robust employment data raised concerns about the Federal Reserve's future interest rate decisions.
Wall Street analysts see the slowing growth as a potential window for the Federal Reserve to cut rates. However, unexpected employment data has caused uncertainty regarding future rate cuts. Jeffrey Gundlach, CEO of DoubleLine, predicts one rate cut this year, contrary to market expectations of two cuts. He expressed confidence in a sub-3% inflation rate next year and noted concerns about U.S. debt levels and their potential impact on long-term bond volatility.
