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In today’s edition,
- US economy: Growth stays strong
- Alphabet’s AI push
- Musk eyes new funding for xAI
- Apple’s holiday sales uncertainty
Market Snapshot
U.S. markets ended their second consecutive losing week, recovering slightly on Friday after a tech-driven plunge on Halloween. Treasury yields hit four-month highs as October’s job growth sharply missed expectations, adding only 12,000 jobs versus the anticipated 113,000. The low job gains were partly due to storms and strikes, with unemployment holding steady at 4.1%.
Revised August and September job numbers removed 112,000 jobs, suggesting the Fed’s recent rate cuts were in line with a slowing labor market. These adjustments boosted expectations for further rate cuts in November and December.
The week closed with the S&P 500 down 1.80% at 5,728.80, the Dow down 0.50% at 42,052.19, and the Nasdaq down 2.19% at 18,239.92. Elevated volatility and economic uncertainty reflected investors’ cautious stance ahead of the upcoming election and potential Fed policy changes.
Stock market closing data for the week of Oct 28th to Nov 1st, 2024
Special Coverage: US Economy
The U.S. economy kept its steady growth pace through the third quarter, driven by strong consumer spending and a boost in government funding.
GDP grew at 2.8%, a bit under the 3.1% expectation. Consumers stepped up their spending by 3.7% compared to the previous quarter’s 2.8%, with high demand for goods like cars and prescription meds. Meanwhile, rising exports and government defense spending gave the economy an additional lift, though business investments slowed slightly, especially in building projects.
Despite this solid spending pattern, the housing market stayed weak.
High mortgage rates led to a 5.1% drop in residential investment for the second quarter in a row. Many homeowners locked in low rates before, so they’re shielded for now, but buyers entering the market are feeling the pinch. Still, underlying demand stayed strong with final sales to private buyers up to 3.2%, suggesting consumers and businesses are keeping up momentum.
With signs of strong consumer support, the Fed may stick to its rate cut path, especially with recent hurricanes likely to impact upcoming jobs data.
Though the economic fundamentals are solid, inflation has some households rethinking daily purchases, while many companies report robust spending on travel and events, keeping growth above long-term trends.
News Summaries
Alphabet’s Q3 2024 profit rose 34% to $26.3 billion, driven by strong gains in Google Cloud, where revenue increased 35% to $11.4 billion and operating profit surged to $1.9 billion. Core search and ad revenue climbed 10% to $65.9 billion, while YouTube contributed with $8.9 billion in ad and subscription revenue. Capital expenditure grew to $13.1 billion, mostly for AI infrastructure. Similar spending is expected in Q4. CEO Sundar Pichai noted a surge in demand for Alphabet’s AI tools, such as “AI Overviews” for search. These tools make responses quicker and cheaper. Alphabet ranks third in the cloud market, trailing Amazon and Microsoft. It faces regulatory challenges, including a U.S. antitrust ruling on its search practices and cases related to its app store and ad tech.
Elon Musk is in talks with top Middle Eastern investors to potentially double his AI start-up xAI’s valuation to $45 billion. He’s approached sovereign wealth funds in Qatar and Saudi Arabia, along with current investors like Sequoia Capital and Valor Equity Partners, as he seeks fresh capital to rival OpenAI, valued recently at $150 billion. Valor is expected to lead this round, though terms are still flexible. This interest in xAI reflects the Gulf states’ ambitions to lead in AI, backed by significant financial resources. Musk’s recent engagement with Saudi Arabia also marks a shift after past tensions with the kingdom over his 2018 Tesla take-private attempt. Musk’s growing involvement in the U.S. presidential race has aligned him with Trump supporters, and he’s using his platform X to amplify this position. AI start-ups have drawn over 40% of U.S. venture funding this year. So, xAI’s pursuit of Gulf capital reflects the industry’s constant need for funds to support the massive computing resources needed for AI model training.
Apple’s holiday quarter forecast was cautious, predicting low to mid-single-digit growth. This fell short of Wall Street’s expectations, causing a 1.9% drop in after-hours trading. In Q4, Apple reported a 6% revenue increase to $94.9 billion, surpassing the $94.4 billion estimate. iPhone sales hit $46.2 billion, and services revenue rose 12% to $24.9 billion. Sales in China were flat year-on-year at $15 billion, though this was an improvement over declines seen earlier in 2024. New AI features launched in its “Apple Intelligence” lineup, including a revamped Siri and AI-powered photo tools, showed early success, as downloads of the latest operating system doubled over last year’s. Apple’s CFO noted that initial iPhone 16 sales exceeded those of the iPhone 15, but it’s unclear if AI will drive significant holiday sales. Apple’s net income was $14.7 billion after a $10.2 billion EU tax-related charge, bringing EPS to $0.97. The company plans to roll out more AI features this year, including possible ChatGPT integrations. But, both CEO Tim Cook and CFO Luca Maestri were cautious about AI’s impact on this quarter’s sales.
From the World of Crypto
BlackRock’s iShares Bitcoin Trust ETF (IBIT) is the fastest-growing ETF ever. It hit $30 billion in assets in just 293 days.
This pace beats JPMorgan’s JEPI ETF, which took 1,272 days, and major Gold ETFs, which took 1,790 days, to hit the same mark. Bloomberg data shows IBIT crossed $30 billion after strong inflows and a Bitcoin price boost on October 29. Currently, the fund holds over 417,000 Bitcoin, about 2% of the total Bitcoin supply.
Analysts believe IBIT could accumulate over 500,000 Bitcoin by the end of 2024 if this growth continues.
That would make it the third-largest Bitcoin holder globally, behind Coinbase and Binance. This success shows a growing role for institutional investors in Bitcoin. Fidelity’s FBTC and Bitwise’s BITB funds attracted $133.86 million and $52.49 million, respectively. On October 29, Bitcoin ETFs had a net inflow of $870 million. This marked one of the highest totals since their launch.
Data from CryptoQuant suggests that institutional demand for Bitcoin has been rising steadily. Over the past year, about 278,000 Bitcoin from retail investors flowed into U.S. spot ETFs. Meanwhile, 670,000 Bitcoin moved into large “whale” wallets. This shows institutions are accumulating Bitcoin at twice the rate of retail investors. This growth shows how major funds like BlackRock’s IBIT are driving demand and reshaping the Bitcoin market.
