Company reports promise gloomy prospects for U. S. economy
2023.01.27 09:14
Company reports promise gloomy prospects for U. S. economy
By Tiffany Smith
Budrigannews.com – After a dire industry readout from chipmaking giant Intel (NASDAQ:), a surge of’soft landing’ hopes for the U.S. economy was wiped out overnight. shattered its stock price following the bell.
After announcing that it expects to lose money in the current quarter, Intel surprised investors by dropping a whopping 10%, revealing a gloomy outlook for the PC market as well as its most important data center division.
“We stumbled… we lost share, we lost momentum,” said Chief Executive Officer Pat Gelsinger as the company pointed to an oversupply of chips in the PC industry, a decline in demand for consumer electronics, and a decrease in business investment from people worried about the recession.
He later told:
“We expect some of the largest inventory corrections literally that we’ve ever seen in the industry.”
The question of growing inventories was one worrying aspect of Thursday’s otherwise surprisingly upbeat U.S. GDP report for the final quarter of last year, despite the fact that the chip industry and Intel may have peculiar post-pandemic issues.
The Commerce Department revealed that while annualized Q4 economic growth was brisk at 2.9%, half of that was due to a sharp increase in businesses’ inventory, some of which is likely unwanted and may now be low as production is reduced.
With Friday’s release of the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index, now a key focus ahead of the Fed policy meeting next week, that may cloud the outlook for the new year but should also encourage hopes of discounting and disinflation.
It is anticipated that annual “core” PCE inflation slowed last month to 4.4%, the lowest level in more than a year, from 4.7% in November.
Persistent tightness in the U.S. labor market is one area that will keep the central bank on alert with the Fed decision now clearly in view and widely expected to conclude another downsizing of its interest rate hikes to just 25 basis points.
Initial claims for state unemployment benefits fell last week to their lowest level since April 2022, according to a separate Labor Department report.
A wave of company announcements regarding planned staff cuts is the flip side of such low current jobless readings. Initially, these announcements focused on the digital and technology industries, but they are now spreading to other industries.
Hasbro, a toymaker (NASDAQ:) said on Thursday that it would reduce its global workforce by about 15% this year. This would result in the elimination of approximately 1,000 full-time positions worldwide. Hasbro stock fell 5% in after-hours trade, joining a growing list of businesses that are cutting jobs this week, including major industrial names like Dow and 3M.
(NYSE:) American Express likewise Colgate-Palmolive are among the businesses that will report on Friday.
Stock futures are back in the red ahead of Friday’s opening, following gains of more than 1% for the major Wall Street indices on Thursday to new year’s highs. The dollar and yields on U.S. Treasurys were slightly higher.
Japan’s yen strengthened overseas following news that Tokyo’s annual core consumer prices increased by 4.3% in January, the fastest increase in nearly 42 years.
Prime Minister Fumio Kishida insisted that a return to deflation could not be ruled out because domestic demand remains weak, despite the fact that the data keeps the Bank of Japan under pressure to phase out its ongoing monetary stimulus and cap on government borrowing rates.
In the meantime, Jeremy Hunt, the British finance minister, said he would use post-Brexit finance reforms to boost growth to address the country’s low productivity, but he said he would still use tax increases to combat high inflation. “A reduction in inflation is currently the best tax cut,” he stated.
As a scathing report from a U.S. short seller triggered a rout in the conglomerate’s listed firms, Adani Enterprises’ shares fell 20% on Friday, raising questions about how investors will react to the company’s record $2.45 billion secondary offer.
Since Wednesday, seven listed companies that are part of the Adani conglomerate, which is owned by one of the richest men in the world, Gautam Adani, have lost $48 billion in market capitalization.
Adani firms’ U.S. bonds also fell after a report on debt levels and the use of tax havens from Hindenburg Research on January 24 raised concerns.
