Marketmind: Tech melts, buck bounces

[October 28, 2022]  A look at the day ahead in U.S. and global markets from Mike Dolan.

A brutal week for technology stocks worldwide got even worse on Friday as Amazon became the latest mega-cap to plunge, underscoring recession fears and stoking speculation that central bank tightening has hit a nerve and may soon tone down.

Shares in the world's biggest online retailer cratered 15% after the bell on Thursday after the firm forecast a slowdown in sales growth for the holiday season, disappointing Wall Street and warning consumers and businesses had less money to spend.

Although Apple barely managed to avoid the market trapdoor with more soothing earnings, Amazon's slide was the latest hit to a sector hammered this week by worrying updates on the impact from inflation, rate rises, and looming recession.

Meta stock crashed almost 25% on Thursday and in China, Hong Kong's tech shares have been decimated this week amid fears about the political direction of Beijing's new ruling cabinet.

All of which raises some questions about the price at which Elon Musk eventually agreed to buy Twitter. Musk took ownership of Twitter late Thursday, firing top executives immediately but providing little clarity over how to achieve the lofty ambitions he outlined for the social media platform.
 

Big Oil earnings from Exxon and others later on Friday are likely to be far stronger that Big Tech - but rumblings of windfall taxes around the world may limit any market positivity.

Major bourses and S&P500 futures were all down about 1%.

Worries from the corporate world about an economic downturn merely fueled talk the U.S. Federal Reserve will downshift its tightening campaign after a fourth straight 75 basis point rate rise next week.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 17, 2022. REUTERS/Brendan McDermid

But the dollar rallied on Friday as other central banks looked to more than match any easier Fed tilt. Eyes are shifting to another U.S. inflation update later, with European growth and inflation numbers surprising to the upside.

The Bank of Japan kept ultra-low interest rates and maintained its dovish guidance, cementing its status as an outlier among global central banks tightening monetary policy.

Although spurred back higher on Friday by the inflation news, European bond markets had a dovish take on Thursday's doubling of European Central Bank interest rates to 1.5%. The ECB soundings, mounting demand fears and ebbing energy prices this month have all dragged the implied ECB "terminal rate" next year as low as 2.75% from 3%.

Key developments that should provide more direction to U.S. markets later on Friday:

* U.S. September PCE price index, personal income and consumption. Dallas Fed Trimmed Mean PCE Price Index for September, U.S. September pending home sales, University of Michigan October sentiment.

* Italy auctions government bonds

* U.S. Corporate Earnings: Exxon, Chevron, Nextera Energy, Abbvie, Colgate Palmolive, WW Grainger, Newell Brands, DaVita, Charter Communications, Church & Dwight.

(By Mike Dolan, editing by Tomasz Janowski; [e-mail]. Twitter: @reutersMikeD)

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