Strong Earnings, Markets Await Inflation Data

- Major developments are starting to unfold. The Fed held its benchmark interest rate at 3.75–4.00% in a 10–2 vote. Governor Lisa Cook and Cleveland Fed President Beth Hammack favored a 25-basis-point increase, but Chair Warsh maintained a neutral stance at the press conference, offering no guidance on the next decision. Still, he reiterated that inflation remains elevated. My interpretation is that another hike before year-end remains firmly on the table if September PCE data, due today at 9:30 p.m. Korean time, confirms that inflation remains high. The U.S. 10-year Treasury yield finished modestly higher, rising roughly 4 basis points to 5.03%. Sources: Federal Reserve FOMC statement · Bloomberg on the Fed’s decision and remarks · BEA release schedule · eOption on U.S. Treasury yields

- Following Anthropic, SK Hynix delivered another positive catalyst. Third-quarter revenue came in at KRW 104.6155 trillion, with operating profit of KRW 83.3338 trillion, roughly 8% above consensus of around KRW 77 trillion. Its operating margin was approximately 80%. On capital spending, the company said it would assess customers’ financial health and financing capacity while adding production capacity in line with demand, helping ease concerns about excessive expansion. That was enough to fuel a rebound in semiconductor stocks both in Korea and abroad. U.S. chip stocks extended their gains as well, and I believe the rebound still has room to run. Samsung Electronics’ earnings are up next. Sources: Newsis on SK Hynix’s earnings and consensus estimates · Yonhap on investment plans · Yahoo Finance on U.S. semiconductor stocks

- U.S. Big Tech earnings also arrived. Microsoft reported revenue of $92.3 billion, beating expectations of roughly $90.6 billion. Google, however, posted revenue of $63.35 billion in its core search business, below expectations of $64.96 billion. This revived concerns that AI could be weighing on its existing advertising model, sending shares down roughly 8% after hours. While Anthropic’s IPO disclosures raised hopes for AI monetization, Microsoft’s and Google’s results underscored the continuing burden of heavy capital spending. Quarterly cash capital expenditures totaled $39.4 billion and $51.4 billion, respectively. Microsoft’s free cash flow fell roughly 27% year over year to $18.63 billion, though it exceeded expectations of $8.54 billion. Alphabet’s free cash flow came in at negative $9.07 billion, worse than the expected negative $2.7 billion. The contrast between earnings and cash flow suggests that fears over cash generation at downstream AI companies have yet to subside. Sources: Microsoft’s official earnings release · Reuters on Microsoft’s earnings and free-cash-flow estimates · TheStreet on Alphabet’s earnings and the market reaction

- Israel’s general election is shaping up to leave neither bloc with a majority. With 85.6% of votes counted on October 28, Netanyahu’s bloc had 53 seats and the main opposition bloc had 48, both short of the 61 needed for a majority. Netanyahu’s effort to buy time is effectively getting underway. I continue to see a high probability of large-scale airstrikes in the Middle East after the U.S. midterm elections. Oil prices also remain elevated, with WTI rising 2.88% yesterday to $102.78 a barrel. Still, with both the U.S. and Iran leaving the door open to dialogue, progress in negotiations could send oil prices lower at any time. Anything can happen in a week like this. Sources: Times of Israel on the partial election results · eOption on Middle East risks and the oil market close · Reuters on Middle East negotiations