Morning in New York: Fed minutes at the center of the agenda

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The focus of investors' attention today will be the publication of the minutes of the September FOMC meeting, which are of interest in terms of the nuances of the discussion of its participants, as well as the balance of their views on the future course of monetary policy. After mixed signals from the last meeting (a more dovish rate forecast and a subdued tone of Powell's press conference), it is also important for investors to assess the Fed's concerns about the sustainability of inflation. If it turns out that the monetary authorities' worries about rising prices are stronger than expected, this could lead to a deeper correction in the stock market.

This Wednesday's weekly mortgage applications data released will provide additional guidance on the health of the housing market after a 12.7% drop in the previous week.

Futures on US indices show about zero dynamics. We assess the balance of risks as neutral with moderate volatility. We focus on S&P 500 fluctuations in the range of 6670-6760 points (from -0.7% to +0.6% of the previous session's closing level).

- Nvidia (NVDA) shares are in the spotlight amid reports of Elon Musk's startup xAI investing $20 billion and bringing new partners into the current investment round. The funds, which include a share of debt, will be used to purchase and then lease Nvidia GPUs for the Colossus 2 project, xAI's largest data center in Memphis.

- SoftBank Group (SFTBY) is buying ABB's robotics division for $5.4 billion. The deal is the first major move by the company's new CEO Morten Virod as part of a strategy to focus on the electrification and automation segments.

- Shares of Penguin Solutions (PENG) plunged about 20% on the premarket after the release of its quarterly report, which recorded revenue below consensus. Investors were also disappointed by the weak outlook for the next fiscal year.

- Esperion Therapeutics (ESPR) shares were losing more than 21% in morning trading, driven by the announcement of an additional share issue that poses a risk of dilution to existing shareholders.

- Joby Aviation (JOBY) quotes were falling by about 10% before the start of main trading after the announcement of an additional share offering. In this regard, investors are concerned about capital dilution. They are also concerned about the company's need to raise funding to continue operations.

October 7 trading on American stock exchanges ended with a corrective decline. S&P 500 lost 0.38%, Nasdaq 100 fell by 0.55%, Dow Jones fell by 0.2%, Russell 2000 fell by 1.12%. The key factor of pressure on the market was profit taking after the recent rally, reinforced by concerns about the prolonged shutdown and doubts about the sustainability of growth in the artificial intelligence sector. In this context, there was a capital flight to defensive assets, with consumer staples (XLP: +0.93%) leading the way, while the consumer staples sector (XLY: -1.75%) was the outsider. The Magnificent Seven stocks, with the exception of Amazon (AMZN: +0.4%), ended the day in the negative. Tesla (TSLA: -4.45%) posted the deepest drop amid concerns that the launch of a more affordable version of the Model Y could cut into profits.

The main macroeconomic event of the day was the publication of the consumer expectations survey from the FRB of New York for September, which indicated a deterioration in the sentiment of American households. Median inflation expectations for the year ahead rose to 3.4%, and for five years - to 3%. The survey also recorded increased concern about the employment situation and decreased optimism about personal finances. These data increased fears of stagflation and made it more difficult for the Fed to further ease monetary policy, which put additional pressure on the market.

Comments of the Fed's management representatives did not make its future plans clear. Thus, the head of FRB Minneapolis Neel Kashkari warned of stagflation signals and risks associated with too rapid rate cuts. Amid the general uncertainty, exacerbated by the shutdown, investors continued to move into protective assets, resulting in gold prices exceeding the $4000 per ounce mark for the first time in history. At the same time, the auction of three-year Treasury bonds went well and showed healthy demand from foreign investors.

Consumer lending data for August recorded an increase of $0.36 billion, the lowest in six months, with a consensus of $13.1 billion, in stark contrast to the revised $18.1 billion increase in July. Such a sharp slowdown, primarily due to a decline in credit card debt, was further evidence of a cooling in consumer activity.

- Doubts about the profitability of the artificial intelligence cloud business put pressure on Oracle (ORCL: -2.5%). This was prompted by The Information, which, citing internal data, reported the company's "extremely low" gross margins in the NVIDIA chip rental segment, casting doubt on the market's optimistic expectations.

- Concerns about possible production disruptions put pressure on Ford Motor (F: -6.1%) shares. The negative reaction followed press reports about a fire at the Novelis plant, a key supplier of aluminum to the automaker. It is expected that the incident may affect the production of highly profitable models, such as the F-150 pickup truck, and negatively affect the company's results in the third quarter.

- Forecasts of further declines in profitability led to a drop in Tesla shares (TSLA: -4.5%). The negative reaction followed the presentation of more affordable "standard" versions of Model 3 and Model Y. Investors believe that price cuts will put pressure on margins amid intensifying competition.

- Dell Technologies (DELL: +3.5%) shares showed positive dynamics ahead of the analyst day. The company significantly raised its long-term outlook, announcing plans to increase annual revenue by 7-9% (previously: 3-4%) and grow earnings per share by 15% or more (previously: from 8%).

This article was AI-translated and verified by a human editor