20.10.202315:13 Forex Analysis & Reviews: Economists reduced likelihood of recession in US

Following a recent speech by the Fed Chair and some significant economic data issued over the past two weeks, many economists have revised their forecasts regarding the growth of the US economy up to the beginning of 2024. They have also reduced the likelihood of a recession.

According to a monthly survey by Bloomberg, "the economy probably expanded at an annualized 3.5% rate in the third quarter, the fastest in nearly two years, as forecasters marked up their household spending forecasts. And while growth is seen slowing in the following two quarters, economists in the latest Bloomberg monthly survey still marked up their estimates for gross domestic product." The study also mentions that growth is expected to slow down over the next two quarters.

The labor market remains strong, supporting household expenditures despite high borrowing costs and inflation. Employment forecasts for the coming year have also been adjusted upward. This change explains why economists now see equal chances of a recession next year.

"The US economy has had a stellar summer, with third-quarter GDP growth set to come in close to 4% annualized. Robust consumer spending has been the main driver, with households keen to maintain their lifestyles by tapping savings and borrowing on credit cards while inflation continues to eat into spending power," ING Think wrote.

Some of the surveyed respondents also predict that the core Personal Consumption Expenditures (PCE) index will rise on average by 2.6% in 2024, matching last month's forecast.

Premarketing session:

SolarEdge shares dropped by 20% after the solar company reduced its third-quarter revenue forecast to $720–730 million, down from a previous estimate of $880–920 million. CEO Zvi Lando noted that the company faced significant unexpected order cancellations and recalls from its European distributors.

Intuitive Surgical shares fell by 7% as their third-quarter revenue report fell short of expectations, showing $1.74 billion instead of the anticipated $1.77 billion. The company reported adjusted earnings per share of $1.46, exceeding analyst predictions of $1.41 per share.

Western Alliance, a regional US bank, saw a 3% increase in its shares. It reported a third-quarter profit of $1.97 per share, whereas analysts surveyed by FactSet had predicted $1.91 per share. Their net interest income was $587 million, exceeding the predicted $559.1 million.

CSX, a transportation company, reported a drop in its shares of about 1% after their third-quarter earnings failed to meet analyst expectations. CSX earnings came at 42 cents per share, while analysts surveyed by LSEG had forecast 43 cents per share. However, their revenue surpassed expectations at $3.57 billion, compared to the anticipated $3.55 billion.

Regarding the technical picture of the S&P 500, demand for the index remains weak. Bulls need to defend the $4,229 level and take control of $4,268. This will help halt the downward trend and pave the way for a potential surge to the new $4,304 level. Another key target for the bulls is to control $4,332, which will strengthen the buyers' position. If there is a downward movement due to decreased risk appetite, buyers should become active at $4,229. A breach would quickly push the trading instrument back to $4,203 and open the path to $4,175.