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Stocks are mixed as Intel’s outlook cools the tech world

The Elite Times TeamBy No Comments5 Mins Read

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Intel’s pessimistic outlook sent stocks lower on Friday as investors analyzed key inflation indicators that could influence the timing of interest rate cuts.

The S&P 500 (^GSPC) rose above the flatline after Thursday’s win saw the benchmark close at a new record high. The Dow Jones Industrial Average (^DJI) rose 0.2%, or about 80 points, while the tech-heavy Nasdaq Composite Index (^IXIC) fell 0.1%.

Tech stocks led the decline after Intel (INTC)’s first-quarter outlook fell far short of Wall Street expectations, slightly eroding the AI-fueled hopes that had propelled the stock to all-time highs. . Intel’s stock price fell more than 11% in the early going, and peers AMD (AMD) and Nvidia (NVDA) also fell slightly.

However, the release of the PCE index in December painted a rosy picture of inflation for investors. Core inflation measure PCE, commonly known as the Fed’s preferred indicator, fell below 3% annually, its slowest growth rate since March 2021.

The numbers, combined with a better-than-expected preliminary report on fourth-quarter U.S. GDP, could further strengthen the view that the U.S. economy is headed for a “soft landing.”

Central bankers are scheduled to meet next week for their first policy meeting of the year. Policy interest rates are widely expected to remain stable. But a recent set of positive economic data means it is likely to start cutting rates later this year, perhaps as early as March.

read more: Impact of the Fed’s interest rate hike suspension on bank accounts, CDs, loans, and credit cards

At the same time, investors will be watching Friday’s set of results for further insight into the health of U.S. companies and the economy. Colgate-Palmolive (CL) has been a highlight, as has American Express (AXP), especially after payment card rival Visa (V) posted lackluster earnings growth forecasts.

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  • Easing inflation strengthens the “if, but when” story of Fed rate cuts

    The Fed’s ongoing public debate over when to begin its monetary easing cycle comes as the central bank’s preferred inflation measure fell below 3% for the first time since March 2021, before the aggressive rate hike campaign began. The situation intensified further on Friday.

    The personal consumption expenditure (PCE) index in December increased by 2.6% year-on-year, consistent with last month’s print results. “Core” PCE, which excludes the volatile food and energy sectors, rose 2.9%, down from 3.2% a month earlier and below the 3.0% expected by economists polled by Bloomberg.

    Quincy Crosby, chief global strategist at LPL Financial, said there remains hope that the Fed will discuss “not when” to start cutting rates at its next policy meeting.

    Markets had largely expected the first rate cut to take place in March. However, many Fed officials are putting the brakes on this theory. They stepped up their data-driven strategy and postponed any major decision to start cutting interest rates in favor of waiting for further confirmation that inflation was fully contained.

    Inflation pressures continue to normalize, with “core” numbers inching closer to the Fed’s 2% target, but the Fed will continue to monitor the impact of increased consumer spending coupled with promises of fiscal stimulus on the rise in inflation. “We’re going to do it,” Crosby said. .

    As of Friday morning, traders were predicting a 47% chance the Fed would cut interest rates at its March meeting. This increases the probability of a rate cut in May to nearly 90%.

  • Spirit shares fall as JetBlue warns merger deal may be terminated on Sunday

    Shares of Spirit Airlines (SAVE) fell as much as 17% on Friday morning after JetBlue Airways (JBLU) told the low-cost airline that its merger deal could be terminated on January 28th.

    JetBlue Airways shares rose more than 2% after the airline received a warning that said certain conditions required in the agreement may not be met. The Long Island City, New York-based company said it will continue to evaluate its options under the agreement.

    The development makes Spirit Airlines’ $3.8 billion sale to JetBlue (JBLU) less likely to go through after a court ruling last week blocked the merger citing antitrust concerns.

    Both companies subsequently filed an appeal of the federal judge’s ruling.

    On Friday morning, Spirit pushed back against JetBlue’s warning, saying there was “no basis” to terminate the merger agreement. The company said it will continue to abide by the agreement and “expects JetBlue to do the same.”

  • Stocks were mixed in morning trading.

    Intel (INTC)’s pessimistic outlook sparked Friday morning as investors take stock of the latest optimistic inflation numbers and how they will affect the timing of the Fed’s first interest rate cut of the cycle. The stock prices were mixed.

    The S&P 500 (^GSPC) rose 0.1% after Thursday’s win saw the benchmark close at another all-time high. The Dow Jones Industrial Average (^DJI) was little changed, while the tech-heavy Nasdaq Composite Index (^IXIC) was down 0.2%.

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