A look at the day ahead in U.S. and global markets from Mike Dolan
The selloff in Wall Street stocks is starting to snowball as even megacap tech beats get batted away by a fresh wave of bond market turbulence and Middle East tension.
Even though Facebook parent Meta beat expectations for third-quarter profits and revenue and a 2024 outlook, its stock dropped almost 4% out of hours as it suggested the conflict in Israel and Gaza could dampen fourth-quarter sales.
But with Google-parent Alphabet plunging 9% on Wednesday after its results, appetite for Big Tech was absent and the Nasdaq lost 2.4% – its biggest one-day loss since February. The Philadelphia SE Semiconductor index plummeted 4.1% in its biggest plunge of the year.
With Amazon due to report later, there was no respite for the so-called ‘Magnificent Seven’ Wall St behemoths or the wider market ahead of Thursday’s open. S&P500 and Nasdaq futures were down heavily overnight and the world stocks index at its lowest since March.
Even as Israel appeared to prepare for an imminent ground invasion of Gaza, a renewed spike in long-term borrowing rates rankled alongside it – with 10-year Treasury yields rising back to within a whisker of the 16-year peak of 5% it hit earlier in the week.
The dollar surged to its highest level in almost three weeks, breaching 150 yen to hit its highest against the Japanese currency in more than a year – with no sign of Bank of Japan intervention so far.
A busy week of debt auctions continues with 7-year note sales later as markets brace for confirmation that U.S. third-quarter economic growth accelerated to more than 5% – more than twice the rate in the June quarter.
Fresh evidence of that strength was seen on Wednesday as new single-family home sales surged to a 19-month high last month even as mortgage rates hit 23-year peaks near 8%.
The bond market seemed unimpressed even as the U.S. House of Representatives ended a three week hiatus by electing Republican Mike Johnson, a conservative with little leadership experience, as speaker.
In his speech, Johnson said he would establish a bipartisan commission to tackle the $33 trillion national debt. But his first task will be to respond to President Joe Biden’s $106 billion spending request for aid to Israel, Ukraine and border security.
Equally, there was little bond market cheer from news the United Auto Workers union reached a tentative labor deal with Ford – as the proposed accord provides a record 25% wage hike over the 4-1/2-year contract.
European stocks and the euro dropped sharply, meantime, as regional banking shares were hit ahead of the European Central Bank’s policy decision later in the day.
The ECB is expected to signal the end of its interest rate tightening campaign amid mounting signs of economic weakness in the bloc, but markets are watching closely for information on its balance sheet rundown and possible quicker reduction of its bond stash.
Standard Chartered shares slumped 11.3% and were set for their worst day in over three years as the lender’s third-quarter pre-tax profit dropped 33% amid losses in China. BNP Paribas fell 4.1% on reporting a fall in trading revenue.
Despite confirmation of a default by ailing property developer Country Garden, Chinese stocks seemed to buck the global trend and ended marginally higher after the week’s slew of stimulus measures – including state fund buying and a plan to issue 1 trillion yuan ($137 billion) of sovereign bonds.
Key developments that should provide more direction to U.S. markets later on Thursday:
* European Central Bank policy decision and press conference. Turkish Central Bank policy decision
* U.S. Q3 GDP; Sept durable goods orders, advance trade balance, pending home sales and wholesale/retail inventories; Kansas City Fed Oct business survey; weekly jobless claims
* U.S. corporate earnings: Amazon, Intel, UPS, Honeywell, Merck, Comcast, Mastercard, Capital One, Principal Financial, Chipotle, Verisign, First Energy, Mohawk, Eastman Chemical, Weyerhauser, Camden Property, AO Smith, Bunge, Hasbro, PG&E, Bristol-Myers Squibb, Boston Scientific, Hershey, Northrop Grumman etc
* U.S. Treasury auctions 7-year notes and 4-week bills
* Chinese Foreign Minister Wang Yi meets U.S. Secretary of State Antony Blinken in Washington
* European Union summit in Brussels
(By Mike Dolan, editing by Emelia Sithole-Matarise; mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
