MarketLens
Market Overview
The S&P 500 closed on Friday down 1.78% after election momentum faded this week.
Bitcoin continued to reach record highs this week, topping 93,000 at one point. Since the U.S. election on Nov. 5, the cryptocurrency has surged over 32%.
Economic Insights You Need to Know
Inflation rose to 2.6% in October, up 0.2% from September, while core CPI reached 3.3%, also increasing by 0.3%. Both measures were in line with expectations but remained above the Fed’s 2% target. Additionally, the Producer Price Index (PPI) showed wholesale prices climbed by 0.2%. The CME Group’s FedWatch tool indicates a 59% probability of a 25-basis-point rate cut in December. However, Fed Chair Jerome Powell stated, “The economy is not signaling urgency to lower rates".
Since Donald Trump won the U.S. presidential election, companies have been rushing to borrow money by selling bonds because borrowing costs have dropped significantly. Big companies like Caterpillar and Goldman Sachs have already borrowed over $50 billion this week, making it one of the busiest weeks in the bond market.
The reason borrowing has become cheaper is that investors are optimistic about potential tax cuts and economic growth under the Trump administration. This has lowered the extra cost companies usually pay to borrow compared to government bonds, making it the cheapest in decades.
Consumer financial health remains a concern, as the 90+ day credit card delinquency rates are the highest they've been in 10 years. The current levels are even higher than when the unemployment rate hit 15% in 2020. The rising debt levels should be monitored for potential market impacts.
Gold prices have dropped to $2,500 per ounce, its lowest level in two months. Following the U.S. election, the value of the dollar increased. Additionally, gold investors could be harvesting profits and reinvesting into cryptocurrencies and equities.
Stock of the Week: Coinbase
Coinbase Global Inc., (NASDAQ: COIN) the largest cryptocurrency exchange in the U.S., saw its stock climb 12.1% over the past five days. This growth follows a surge in crypto trading activity after the election, highlighting its strong market position and low trading fees.
U.S. Business News
Amazon is set to unveil its AI chip, Trainium2, in December. Back in 2015, Amazon acquired a company called Annapurna Labs, which will be responsible for manufacturing the chips. These chips are reportedly being tested by Anthropic, an Amazon-backed AI firm. The move comes as big-tech companies including Meta, Microsoft, and Amazon have spent billions on purchasing chips from Nvidia. For perspective, Meta intends to spend $40 billion in CapEx in 2024 alone, with a large percentage of that going toward buying chips from Nvidia. Nvidia’s chips are currently the best on the market and tech companies such as Amazon, Meta, and Apple are shifting toward creating their own.
Amazon also announced that it will be creating a discount shopping platform, Amazon Hall, that will compete with Chinese discount competitors like Temu and Shein. Amazon Hall will feature products that run for less than $20 and will be available as a tab on the Amazon website and app. Items from Amazon Hall are expected to take longer to ship (approximately one to two weeks) as the products plan on being imported directly from China.
Disney's Q3 earnings revealed continued profitability for Disney+ ($321 million), fueled by reduced marketing costs and increased ad revenue. However, TV networks (ABC, FX, and Disney Channel), as well as theme parks, faced declines in revenue by 6% and a drop in profit by 38%. The stock rose 9% on Thursday morning.
The Home Depot saw its sales increase 6% in Q3, beating Wall Street expectations. Home Depot stated that U.S. households have a high demand for housing projects and remodeling, but are likely waiting for mortgage rates to drop. With anticipated rate cuts, Home Depot expects its sales to increase even more due to lower borrowing costs. Its sock was up about 2% Tuesday morning in response to its earnings report.
Spotify reported Q3 earnings and saw increases in user growth, total revenue, and gross margin. The company’s net subscribers and monthly active users increased by 6 million and 14 million. Spotify’s total revenue is up 21% YTD and its gross margin hit 31.1% compared to 26.4% in Q3 2023. Its stock price was up about 8% Wednesday morning.
Apple is currently developing a new smart home device that will contain features powered by Apple Intelligence. Mark Gurman of Bloomberg reported that Apple is looking to showcase its new product in March 2025. The smart home device will likely consist of a wall-mounted iPad that can control smart locks, lighting, cameras, and other appliances.
Meta will be going to trial after the FTC claims Meta overpaid to acquire Instagram and WhatsApp to outbid competitors. In 2012, Meta bought Instagram for $1 billion, while it purchased WhatsApp for $19 billion in 2014. The trial seeks to highlight Meta’s monopolistic market power, yet the outcome remains uncertain due to political shifts and potential FTC leadership changes.
Anthropic, an AI research company and creator of the AI chatbot Claude announced it will be partnering with Palantir and Amazon to expand into the U.S. defense and intelligence agencies. Amazon is a prominent investor in Anthropic and Palantir is already an established partner when it comes to providing AI software for military and defense operations. Anthropic’s stock is up over 250% this year. Since 2022, the U.S. Defense Department has more than doubled its AI budget to process complex data more efficiently.
Klarna, a popular Swedish “buy now pay later” company, is filing for a U.S. IPO. The company was founded in 2005 and is currently valued at $15 billion.
Overseas Updates
The UK economy barely grew in the third quarter of the year, increasing by just 0.1%, and even shrank in September, mainly due to weak performance in manufacturing. This is a challenge for the Labour government, which had promised to boost economic growth. The services sector, which makes up 80% of the economy, also struggled, growing by only 0.1% compared to 0.6% in the previous quarter.
China's retail sales improved in October, rising by 4.8% compared to last year, marking the biggest increase in eight months. Industrial production also grew but slightly missed expectations. Regardless, China's property market continues to struggle, with home prices falling for the 16th month in a row. Property investment also dropped by over 10% this year through October.
To address these challenges, the government has introduced measures like cutting lending rates, encouraging stock buybacks, and offering debt refinancing for local governments. However, these efforts haven’t fully revived the real estate sector.
Taiwan Semiconductor Manufacturing Company (TSMC) is getting $11.6 billion from the U.S. government to help build three new chip factories in Arizona. These factories will make advanced computer chips used in artificial intelligence and other technology. This funding is part of the Chips Act, a government plan to grow U.S. chip production, and it’s the largest foreign investment ever in U.S. manufacturing.
Both Democrats and Republicans agree that making more chips in the U.S. is important for the economy and national security. TSMC’s new factories are part of a larger effort to bring chip production back to the U.S., along with funding for other companies like Intel and Samsung.
News in Sports
NFL
Thursday Night Football: The Philadelphia Eagles defeated the Washington Commanders 26-18
Sunday Night Football: The Los Angeles Chargers will host the Cincinnati Bengals
Monday Night Football: The Dallas Cowboys face off against the Houston Texans
NCAA Football
SEC: No. 7 Tennessee vs. No. 12 Georgia
Big-10: No. 1 Oregon vs. Wisconsin
ACC: No. 20 Clemson vs. Pitt
Big-12: No. 16 Kansas vs. Arizona State
NBA
Western Conference Standings
1. Oklahoma City Thunder
2. Golden State Warriors
3. Phoenix Suns
Eastern Conference Standings
1. Cleveland Cavaliers
2. Boston Celtics
3. Orlando Magic
Closing Remarks
Goldman Sachs revealed in a survey that 38% of retirees and 39% of working Baby Boomers have less than $100,000 saved for retirement.
Over the past 12 months, the Russell 2000 index has outperformed the S&P 500.
Wealth Accumulation = Discipline + Consistency
Stay with us for more insights next week.
Disclaimer: This is not financial advice or a recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Ashlyn Haringa