US shares look to start Friday’s session relatively unchanged; some of the international risk has been removed from the market after better GDP data in Europe so traders will be looking ahead to US retail sales and consumer confidence data as a precursor to the holiday shopping period.
Italy headed into another recession in the third quarter but it was avoided in Europe’s two largest France and Germany and that helped the region grow more than forecast.
US corporate earnings in Q3 have already demonstrated that exposure to Europe is fairly limited and concentrated within specific industries but nonetheless it has been a headwind and signs of a turnaround should be well received.
The consumer has been conspicuously absent in the US economic recovery as depressed wages haven’t kept up with sharply rising asset prices. That may be all about to change as inflation comes down driven by lower Crude Oil prices; increasing worker’s disposable income which it is hoped will be used to consume in greater numbers.
With oil trading at below $80 per barrel and prices at the pump below $3 per gallon in the US; retail sales expectations are for a rise of 0.2% in October up from the -0.3% seen in September.
Twitter Inc (NYSE:TWTR) shares dropped over 5% in late Thursday trading after rating agency Standard and Poor’s assigned the social network a junk credit rating with a stable outlook.
The sharp drop in Twitter’s share price reflects not so much a surprise over the credit rating but more a reflection of the concern that Twitter’s all-out focus on user growth has not resulted in the kind of active user growth seen at Facebook Inc (NASDAQ:FB).
If Twitter spends all its cash reinvesting in the company then user growth is expected to accelerate, but it actually added less new users in the last quarter than the previous one. From a shareholder perspective you want to see growing profits or accelerating user growth that should lead to higher future profits, Twitter are not providing either at the moment.
The longer it takes Twitter to build its active user base, the longer it will be before it can flip the switch and start monetising them and start making money and building up the kind of huge cash piles seen at Facebook.
Futures suggest the:
S&P 500 will open 2 points lower at 2,039 with the
Dow 30 expected to open 5 points higher at 17,657 and the
NASDAQ Composite 1 point lower at 4,214.
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