Wall Street Reverses Direction After Opening to Decline: Amazon’s Business Slowdown and Strong Inflation Data in Focus

Investing.com – Wall Street’s major indexes opened lower on Friday after Amazon (NASDAQ:) warned of a slowdown in its cloud business, but is now relatively stable with a tilt to the upside.

Meanwhile, strong inflation data reinforced expectations that the US Federal Reserve will raise rates again next week.

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Recently released data

The annualized index recorded an increase of 4.6%, while experts expected it to rise by 4.5%, while it recorded 4.7% in the previous reading. The Fed aims to drop this number to 2% only.

On a monthly basis, the index rose to 0.3%, according to experts’ expectations, after recording the same percentage last month.

As for the main index, on an annual basis, it increased by 4.2%, and it had recorded, in the last reading, an increase of 5.1%. And on the basis of a record of 0.1%, less than expectations that expected it to rise by 0.3%.

The data just released suggests that the Fed needs to do more to bring down inflation, as rates came in higher than expected on an annual basis and slightly lower than the previous reading. While it did not decrease on a monthly basis and came as the previous reading. This indicates that prices did not decline as desired by the Fed, as rates are still far from the 2% target.

This data supports the rise of the dollar and the decline of gold, as it supports the continuation of the tightening monetary policy and raising interest rates at the next meeting. This explains why the dollar maintained its gains on the one hand, and the continuation of gold in its downward range and the lack of changes after the release of the data.

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S&P Outlook

JP (EGX:) Morgan analysts reiterated their view that the S&P 500 is overvalued and that a major decline is on its way.

JPMorgan (NYSE:) strategists have issued consistent warnings that the index is at risk of a correction, given both macroeconomic and earnings risks.

“We viewed 4100-4200 as a major resistance area and an area we did not expect the market to break in a lasting or meaningful way in the first half of 2023,” the analysts said in the client note.

Mid-term support is seen around 3,760 before the index can test ‘key levels near 3,500 by early summer’.

“We believe this will eventually put a bottom in the cycle, especially if this poor performance is accompanied by a steepening yield curve.”

On the upside, the resistance levels are 4115, 4200, and 4239.

Amazon business slowdown

Amazon indicated Thursday that its cloud business will slow further as its business customers brace for disruption and clamp down on spending, overshadowing the company’s better-than-expected quarterly sales and earnings.

In extended trading, Amazon stock initially added about $125 billion in value on its upbeat view of consumer sentiment and the company holding its own among cloud rivals, only to see the entire gain fade in a matter of minutes.

The drop in the share price followed comments by Chief Financial Officer Brian Olsavsky, who told analysts that cloud customers continued to try to reduce their bills as of the second quarter and that Amazon was helping them do so to build long-term relationships.

He said this means that revenue growth rates decreased by about 5 percentage points in April compared to the first quarter, referring to the period that witnessed consecutive declines.

Pointers now

It rose 0.4 percent to 33,960.43 points.

It rose by 0.5 to 4155.63 points.

While the compound rose by 0.45 percent to 12,194.54 points.

Gold and the dollar now

It fell by 0.25% at 1983 dollars an ounce.

While US gold futures fell 0.35% to 1991 dollars.

It rose by 0.25%, to record 101.5 points.