US inflation surprised again in a negative way this week with September consumer prices jumping 0.4% versus August against market forecasts of a 0.2% increase (13 October).
The culprit was core inflation which rose 0.6% instead of 0.4% as anticipated due to higher ‘shelter’, energy and service sector prices.
In response US stocks slumped substantially at the open, amid speculation of even more aggressive moves by the US Federal Reserve on interest rates, but in a surprise turnaround, attributed in some quarters to technical factors, the market made a significant recovery to trade higher on the day.
It was a bad week for US semiconductor stocks after the Biden administration announced new restrictions on sales of computer chips in a move which Wired magazine said would ‘kneecap’ China's tech industry.
Many US chips stocks are already at multi-year lows after losses ranging from 20% to 60% since January and this week's news did little to help sentiment.
It was happier picture in Asia, where Taiwan Semiconductor (2330:TPE) posted a 48% increase in sales and an 80% increase in profits for the third quarter, beating market estimates thanks to strong demand for chips using its five-nanometer technology.
Meanwhile in Japan, chip start-up Socionext (6526:TYO) staged an impressive debut rising 15% in the largest IPO (initial public offer) to come to the Toyo market this year.
NETFLIX
Shares in Netflix (NFLX:NASDAQ) have been remarkably firm over the past month, nudging up 4.1% to $227.05 versus a 9.1% drop in the Nasdaq index.
Investors have started to reappraise the stock ahead of it launching a new pricing tier in November, with customers being offered a cheaper subscription package in exchange for being served advertisements before watching a TV show or film.
This new pricing model could help to drive subscription growth and bring in extra revenue. It will charge $6.99 per month in the US versus the cheapest package without adverts at $9.99 per month.
The next test for the share price will be Netflix's third quarter earnings which are published on Tuesday 18 October. The market will want to know if subscriber churn has got worse and guidance for how many new subscribers the company thinks it can attract in the coming months.
PEPSICO
Shares in PepsiCo (PEP:NASDAQ) popped after the beverages-to-snacks behemoth's third quarter results (12 October) beat estimates, with price rises helping to offset volume weakness in units such as the Frito-Lay North America division, and raised guidance for 2022.
Sales for the quarter ended 3 September fizzed 8.8% higher year-on-year to $21.9 billion, comfortably ahead of the $20.8 billion called for by analysts, while adjusted earnings per share of $1.97 beat the $1.85 Wall Street scribes were looking for.
Buoyed by the company's tasty year-to-date performance, the Pepsi, Mountain Dew and Quaker Oats brand owner's CEO Ramon Laguarta said PepsiCo now expects to deliver 12% organic sales growth for 2022, up from previous guidance of 10%, and upgraded earnings per share growth guidance from 8% to 10%.
PepsiCo also reiterated earlier guidance for total cash returns to shareholders of roughly $7.7 billion this year, comprised of $6.2 billion of dividends with share buybacks to make up the $1.5 billion balance.
AMERICAN AIRLINES
Shares in American Airlines (AAL:NASDAQ) gained over 5% this week after the company increased guidance ahead of its scheduled third quarter results (20 October).
The airline now expects revenues to be 13% above pre-pandemic levels, up from prior expectations of between 10%-to-12%.
Total revenues per available seat mile are expected to be around 25% higher than 2019, compared with previous guidance of between 20% and 24%. This metric is a proxy for profitability.
The better-than-expected performance reflects an increase in air travel demand following the relaxation of Covid restrictions and higher ticket prices which helped offset higher operating costs.
As a result of stronger demand, the company anticipates its pre-tax profit margin to be roughly 4.5% which is above the prior guided range of between 2%-to-4%.
The shares are down by around a third year-to-date, compared with a 25% fall in the S&P 500 index, reflecting the risks of recession as rising rates crimp consumer spending.
