Stocks Dip on Walmart Woes, Alibaba Stumbles, and Gold Surges Amid Economic Uncertainty | Daily Market Analysis

Key events: 

• Eurozone - CPI (YoY) (Oct)
• USA - Building Permits (Oct)

On Thursday, US stocks experienced a decline, driven by a downturn in Walmart and concerns about the economy amidst a series of economic data that mostly fell below expectations. The Dow Jones Industrial Average saw a decrease of 143 points, or 0.2%, with the S&P 500 and NASDAQ Composite both down 0.1%.

Walmart, the largest retailer in the US, raised its annual guidance, projecting an adjusted EPS of $6.40 to $6.48. However, this fell short of the estimated EPS of $6.50, offsetting quarterly results that surpassed expectations on both the top and bottom lines. Consequently, Walmart shares tumbled by more than 7%.

According to Chief Financial Officer John David Rainey, consumers impacted by inflation are delaying significant purchases, and awaiting promotional periods. This echoes sentiments expressed by fellow retailer Target, which highlighted ongoing pressures on consumers due to higher interest rates and reduced savings. Cisco Systems' stock also experienced a significant decline of over 11% after the company adjusted its full-year revenue and profit forecasts, signaling a slowdown in demand for its networking equipment.

Despite this, some analysts on Wall Street remain optimistic about Cisco's long-term prospects, citing potential benefits from "multiple long-term demand tailwinds," such as security and artificial intelligence. Oppenheimer maintained its outperform rating on the company but adjusted the price target from $58 to $54.

Apart from that, Alibaba stock concluded at $79.10, marking a 9.15% decline. The market responded negatively to the fiscal second-quarter earnings results of the Chinese e-commerce giant, with Alibaba falling short of the quarter's sales consensus by $230 million. Additionally, management opted against spinning off its cloud business, citing US semiconductor restrictions.

Despite its robust financial position, Alibaba introduced a dividend for foreign investors who have been disappointed by BABA stock's inability to recover from a 75% sell-off that commenced over three years ago.

The economic data released included higher-than-expected weekly jobless claims and a Philadelphia Fed index that surpassed expectations but remained in contraction, raising concerns about the deceleration of the economy at a time when the Federal Reserve is expected to maintain higher interest rates for an extended period.

In a positive development, a US government shutdown was averted after the Senate approved a stopgap spending bill late Wednesday, sending it to President Joe Biden for signing into law before the weekend deadline.

In the commodities market, Spot Gold exhibited a significant rise on Thursday, resuming its upward trajectory. XAU/USD breached the $1,975 resistance area, reaching the highest level in over a week. This surge was fueled by a weaker US Dollar and declining Treasury yields, with the price climbing more than $20, driven in part by technical factors.

The data reinforces the perception that the Federal Reserve (Fed) has concluded its interest rate hikes, contributing to Gold's continued strength while the US Dollar remains under pressure. Looking ahead, attention is focused on the weekly close for XAU/USD, and while upcoming US data on Friday is not expected to be a game-changer, the volatile bond market and risk sentiment remain key factors.

On the currency front, the US Dollar traded flat on Thursday, oscillating within the 104.00 to 104.30 range. Ongoing pressure on the USD is attributed to market expectations of a less aggressive stance by the Federal Reserve (Fed), particularly following weak Jobless Claims and Industrial Production figures from the US.

The US economy is displaying signs of cooling down, characterized by a weakening labor market and receding inflation, making it increasingly improbable that the Fed will raise interest rates in the upcoming December meeting. However, the central bank will await additional CPI and nonfarm payrolls reports before making its final decisions for 2023, which could influence the ultimate determination on whether to pursue a rate hike or maintain the current status quo.