Investing.com -- Amazon shines with its third-quarter earnings, helping push Wall Street into a positive close to the week. The Fed's favorite gauge is due later in the session, while crude prices gain on elevated Middle East tensions. Next week's Bank of Japan meeting also looms large.
1. Amazon shines in third quarter
Amazon (NASDAQ:AMZN) was the latest of the major tech companies to report third-quarter results, and the e-commerce giant topped expectations as growth in its cloud business continued to stabilize and advertising growth jumped.
Amazon Web Services, its cloud business segment, grew revenue 12% to $23.1 billion, while advertising revenue jumped 26% to $12.06 billion from a year earlier.
"[O]ur AWS growth continued to stabilize, our advertising revenue grew robustly, and overall operating income and free cash flow rose significantly,” said CEO Andy Jassy.
The company has sought to bolster its cloud presence, taking on major rivals Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT), with a deal to invest up to $4 billion in chatbot-maker Anthropic, and has also reorganized its delivery network, letting it fulfill orders faster than before, and more cheaply.
Its stock jumped more than 5% premarket, with the results released after the close Thursday, even while warning that consumers remained wary about spending going into the holiday quarter.
"We still see customers remaining cautious about price, trading down where they can and seeking out deals," said CFO Brian Olsavsky.
2. Futures higher, helped by strong Amazon numbers
U.S. stock futures edged higher Friday, ending a difficult week on a positive note after strong earnings from e-commerce giant Amazon.
At 04:40 ET (08:40 GMT), the Dow futures contract climbed 107 points or 0.3%, S&P 500 futures rose by 25 points or 0.6%, and Nasdaq 100 futures rose by 138 points or 1%.
The major indices closed sharply lower Wednesday, with the tech-heavy Nasdaq Composite shedding 1.8%, on course for weekly losses of about 3% and on pace for its third straight losing week.
The broad-based S&P 500 index closed 1.2% lower, off 2% on the week, while the blue chip Dow Jones Industrial Average dropped 0.8%, its sixth negative session in seven, set for a weekly loss of 1%.
However, the tone has turned Friday following the release of strong numbers from Amazon [see above].
More earnings are due from oil giants Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) before the opening bell, as well as from consumer product company Colgate-Palmolive Company (NYSE:CL).
3. Fed’s favorite inflation gauge due
The U.S. Federal Reserve is seen as a near certainty to pause on further interest rate hikes at its meeting next week, but Thursday's unexpectedly strong reading on third quarter gross domestic product has created an element of doubt over December’s meeting.
This means Friday's report on inflation in the form of the personal consumption expenditures index will carry extra significance, given the core reading of which is the Fed's preferred inflation gauge.
Analysts expect the September headline reading to rise 3.4% for the year and 0.3% for the month, while the core PCE, which strips out fuel and energy prices, is expected to rise 3.7% for the year and 0.3% for the month.
Fed Chair Jerome Powell was at pains to point out last week that above-trend economic growth could "put further progress on inflation at risk and could warrant further tightening of monetary policy."
With the GDP data surprising to the upside, any indications that inflation is starting to grow again could change the narrative surrounding further Fed decisions.
4. BOJ meeting looms large
Next week sees central bank policy-setting meetings in the U.S., the U.K. and Japan. While the Fed gathering always attracts the most attention, it may well be Bank of Japan officials that have the most to discuss.
The Japanese central bank will face growing pressure to shift further away from its controversial bond yield control, amid rising global bond yields and persistent inflation.
The BOJ has been laying the groundwork for an eventual end to negative interest rates, but this meeting is expected to be too early for such a move with BOJ governor Kazuo Ueda warning of the fallout from slowing global growth.
That said, Tokyo CPI rose 3.3% on the year in October, remaining persistently above the central bank’s 2% target, while the widening gap between U.S. and Japanese interest rates has seen the yen trade above 150 against the U.S. dollar, near the three-decade low of 151.94 that prompted government intervention a year ago.
A weak yen tends to boost imported food and fuel prices.
5. Crude rises on U.S. strikes on Syria
Crude prices rose Friday on concerns of a widening of the Israel-Hamas conflict, potentially impacting supply in this oil-rich region.
By 04:45 ET, the U.S. crude futures traded 2% higher at $84.89 a barrel, while the Brent contract climbed 2% to $89.70 a barrel.
The crude market rose after the Pentagon confirmed that the U.S. had launched strikes on two facilities in eastern Syria that it claimed were used by Iran's Islamic Revolutionary Guard Corps, and were in response to recent attacks on U.S. troops in Iraq and Syria.
These strikes increased worries of a wider war in the Middle East, potentially impacting crude shipments from Saudi Arabia, the world's largest oil exporter, and other large producers in the Gulf.
However, both benchmarks are still on track to post their first weekly drop in three weeks as the geopolitical premium built on these fears has ebbed as there has been no disruption of oil supply so far.