The U.S. economy grew at a 2.8% annualized rate in Q3, slightly below estimates. Key growth drivers were consumer spending, up 3.7%, and a 9.7% rise in federal spending, especially in defense. Higher imports, which detract from GDP, offset some gains. The Fed is expected to lower rates despite ongoing inflation concerns. The personal consumption expenditures (PCE) index, the Fed's preferred inflation gauge, rose 1.5%—below its target—while core inflation increased 2.2%, keeping economic sentiment mixed.

In October, U.S. private companies added 233,000 jobs, well above expectations of 113,000, according to ADP. This surge marked the strongest month for private job creation since July 2023, defying projections of a slowdown due to hurricanes and labor strikes. Hiring was concentrated in larger companies, particularly in sectors like education, health, and trade. However, manufacturing saw declines, primarily from Boeing’s strike. This ADP report sets the stage for the upcoming nonfarm payroll report, which is anticipated to show slower growth.

Ernst & Young (EY) resigned as Super Micro’s auditor over concerns with internal controls, board independence, and accounting practices, citing an unwillingness to endorse the company's financial statements. Super Micro’s stock plunged after this disclosure, while the company is also reportedly under federal investigation and has yet to release its 2024 financials. EY flagged issues earlier, prompting Super Micro to form a special committee and hire external firms for a review. This follows a 2020 SEC penalty for similar issues with revenue reporting.

Headlines

1. Alphabet shares rose after beating Q3 expectations. The main driver of returns was a rise in cloud computing sales.

2. Eli Lilly stock was down after missing Q3 estimates and lowering its future outlook.

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