On Thursday, data released by the US Department of Commerce showed that the actual GDP of the United States in the third quarter increased by 4.9% year-on-year (QoQ), more than twice the 2.1% increase in the previous quarter, stronger than the market's expected 4.3%, and the fastest growth rate since the fourth quarter of 2021.
Strong consumer spending is the main factor driving up overall economic growth, with a year-on-year increase of 4% and the highest growth rate since 2021. The increase in service expenditure was the largest in two years, while expenditure on goods also accelerated.
The strong GDP growth data may prompt the Federal Reserve to raise interest rates at next week's meeting, coupled with the underperformance of large technology stocks, leading to a collective decline in the three major US stock indices. The Dow fell 0.76%, the Nasdaq fell 1.76%, and the S&P 500 index fell 1.18%. The Nasdaq has dropped by more than 10% from its intra-year closing high set in July, officially entering the adjustment range. The S&P 500 index also fell to the adjustment range during the trading session, closing down nearly 10% from its high set in July.
US GDP hit a new two-year high in the third quarter
Consumer spending is the main driving force
Thanks to the surge in consumer spending, the US economy achieved a new two-year high in growth in the previous quarter. According to preliminary data released by the government on Thursday, the annualized growth rate of US GDP has accelerated to 4.9%, more than double the previous quarter. The main growth engine of the economy, namely personal consumption expenditure, increased by 4%, which is also the highest level since 2021. At the same time, the core inflation indicator has slowed to its lowest level since 2020. Amidst high prices and rapidly rising borrowing costs, the US economy has maintained stable growth, repeatedly exceeding forecasters' expectations and easing concerns about recession. The main driving factor for this resilience is the continued strength of the job market, which continues to drive the growth of household demand.
Specifically, the initial annualized quarterly GDP rate of the United States in the third quarter was 4.9%, reaching a new high since the fourth quarter of 2021; Expected 4.3%, previous value 2.10%.
The annualized quarterly rate of the core PCE price index in the third quarter of the United States was initially 2.4%, setting a new low since the first quarter of 2021; Expected 2.50%, previous value 3.70%.
The initial quarterly rate of actual personal consumption expenditure in the United States in the third quarter recorded 4%, reaching a new high since the second quarter of 2021.
The number of initial claims for unemployment benefits in the United States reached 210000 in the week ending October 21, reaching a new high since the week ending October 7, 2023; Expected 208000 people, with a previous value of 198000 people.
The monthly rate of durable goods orders in the United States in September was 4.7%, with an expected 1.7% and a previous value of 0.10%. After two consecutive months of decline, the growth of durable goods orders in September exceeded expectations, indicating that the outlook for the US manufacturing industry is improving. Among them, transportation equipment orders also rose after two consecutive months of decline, with the largest increase of 12.7%.
Due to the UAW strike and millions of Americans resuming student loan repayments, growth in the United States may slow down in the fourth quarter. Most economists have revised their predictions, believing that the Federal Reserve can achieve a "soft landing" for the economy.
Financial markets expect the Federal Reserve to maintain interest rates unchanged from October 31 to November 31. According to FedWatch data from CME Group, the Federal Reserve has raised its benchmark overnight interest rate by 525 basis points since March, to the current range of 5.25% to 5.50%.
The three major US stock indices closed lower, while large tech stocks generally fell
On Thursday local time, the three major US stock indices collectively closed lower. As of the close, the Dow fell 251.63 points, or 0.76%, to 32784.30 points; The Nasdaq fell 225.61 points, or 1.76%, to 12595.61 points; The S&P 500 index fell 49.54 points, or 1.18%, to 4137.23.
Large technology stocks generally fell, with Microsoft, Meta, NVIDIA, and Tesla falling more than 3%, Google, Chaowei Semiconductor, Apple, and eBay falling more than 2%, and Cisco, Netflix, and Amazon falling more than 1%.
Facebook's parent company, Meta Platforms, had a revenue of $34.15 billion in the third quarter, a year-on-year increase of 23%, the highest growth rate in nearly two years, better than the market's expected $33.51 billion; Earnings per share were $4.39, a year-on-year increase of 168%, far exceeding the expected $3.63.
From a business perspective, advertising revenue from social media platforms remained the main component of Meta's revenue in the third quarter, with a year-on-year increase of 24% to $33.643 billion, accounting for over 98.5% of the total revenue. The financial report shows that the Meta application series Family of Apps (FoA), including Instagram, Facebook, and WhatsApp, has driven revenue growth, with revenue reaching $33.936 billion in the third quarter, a year-on-year increase of 24%.
On the other hand, Reality Labs, which is responsible for AR (augmented reality) and VR (virtual reality) businesses, suffered a huge loss of $3.742 billion in the third quarter, up from $3.672 billion in the same period last year. Since the first quarter of last year, the total loss of the department has been close to $25 billion in the past two years.
In addition, the company hinted that the conflict between Israel and Gaza may affect fourth quarter sales, and its stock price fell by as much as 6%. As of the close, Meta's decline was 3.73%.
At the third quarter financial report conference call for the 2023 fiscal year, Meta CEO Zuckerberg emphasized that he believes that the related technologies of generative AI will make people use various applications more meaningful. In the future, Meta may even use AI to directly generate content for users based on their interests. For the subsequent development of the company, Zuckerberg stated that in 2024, AI will become Meta's largest investment area in terms of engineering and computing resources. In addition, Zuckerberg added that in order to avoid assigning a large number of new employees, the company will lower the priority of some non AI projects and shift relevant personnel to AI work.
Tesla closed 3.14% lower. According to data released by the Association of Automotive Manufacturers and Traders (SMMT) on Thursday, only 6427 Tesla cars were registered in the UK last month, compared to 9975 cars in the same period last year, a decrease of 35.6%. Tesla's market share in the UK has dropped to only 2.36%, and its Model Y model has fallen out of the top ten best-selling models in the UK in September. However, in the first nine months of this year, Model Y still ranked fourth with sales of 28177 units.
After Thursday, Intel released its third quarter financial report, with revenue of $14.2 billion and market expectations of $13.54 billion. Adjusted earnings per share for the third quarter were $0.41, with market expectations of $0.21.
Energy stocks mostly fell, with ConocoPhillips falling more than 1%, Shell, ExxonMobil, Petrobras, Chevron, BP, and Murphy slightly falling, Western Oil closing flat, and US Energy rising more than 2%.
Warren Buffett's Berkshire Hathaway recently increased its stake in his beloved Western Petroleum company. According to a document submitted by Berkshire to the US SEC on Wednesday (October 25th), Berkshire purchased 3.9 million shares of Western Petroleum common stock, increasing its holdings to 228 million shares, with a total value of $14.5 billion.
International oil prices have fallen, and the price of light crude oil futures for December delivery on the New York Mercantile Exchange has dropped by $2.18 to close at $83.21 per barrel, a decrease of 2.55%; The London Brent crude oil futures for December delivery fell $2.20 to close at $87.93 per barrel, a decrease of 2.44%.
Chinese concept stocks rose slightly, with the Nasdaq China Golden Dragon Index rising 0.46%. Tuniu rose by over 12%, Monster Charging rose by over 8%, Xiaopeng Automobile, Yixian E-commerce, JD.com, and Wuxin Technology rose by over 3%, Dingdong Maicai, Futu Holdings, and Vipshop rose by over 2%, Alibaba, Ideal Automobile, Bilibili, New Oriental, Ctrip, and iQiyi rose by over 1%, while Baidu, NIO, and Pinduoduo rose slightly. New oxygen fell by over 5%, Xiaoniu Electric and Gaotu fell by over 4%, Mingchuang Youpin and Douyu fell by over 3%, while Zhongtong Express and Weibo slightly declined.
The European Central Bank maintains three key interest rates unchanged
Meets market expectations
The European Central Bank maintains its main refinancing rate unchanged at 4.50%, the deposit mechanism rate unchanged at 4.00%, and the marginal lending rate unchanged at 4.75%. The European Central Bank has maintained its three major interest rates unchanged, in line with market expectations, and has suspended interest rate hikes for the first time since July 2022, after a cumulative increase of 450 basis points.
The European Central Bank has stated that inflation will remain high for an extended period of time. Determined to ensure that inflation returns to the mid-term target of 2% in a timely manner. Inflation significantly decreased in September, including a strong benchmark effect, with most core inflation indicators continuing to slow down. The European Central Bank stated that past interest rate hikes are still strongly transmitted into financing conditions. If interest rates remain at the current level for a sufficient period of time, it will make a significant contribution to the timely return of inflation to the target. Future decisions will ensure that policy interest rates remain at a sufficiently restrictive level for the necessary time.
Since the end of the eight year era of negative interest rates in July last year, the European Central Bank has raised interest rates 10 times in a row, totaling 450 basis points, marking the fastest tightening pace in history.
Türkiye raises interest rates sharply again
Responding to the resurgence of inflation
Türkiye's central bank raised interest rates considerably on Thursday to control inflation, which is expected to be close to 70% this year. The Monetary Policy Committee, chaired by Hafize Gaye Erkan, raised the benchmark interest rate from 30% to 35%, in line with most market expectations. Bank stocks in Türkiye continued to rise after the announcement of this decision, and Türkiye's lira trading was basically flat. When inflation is expected to slow down from the second quarter of next year, interest rates need to be raised to attract foreign capital to Türkiye's local bond market. However, although the key interest rate has increased from 8.5% since Erkan took over in June, the official borrowing cost remains far below zero after adjusting for inflation. The central bank assists in tightening monetary policy through other measures aimed at suppressing domestic demand.
9 countries issue a joint statement condemning Israel
According to a report by the Israel Times on October 26th, nine Arab countries, including the United Arab Emirates, Jordan, Bahrain, Saudi Arabia, Oman, Qatar, Kuwait, Egypt, and Morocco, issued a joint statement calling on the United Nations Security Council to immediately adopt a draft resolution on a humanitarian ceasefire in the Gaza Strip.
In the joint statement, it was mentioned that these nine countries condemned Israel for killing civilians in the Gaza Strip, stating that "self-defense cannot be a reason for violating international law and deliberately ignoring the legitimate rights of the Palestinian people." They also accused Israel of implementing "collective punishment" against Palestinians, causing them to be displaced.
