Marketmind: Haunted by 5% ahead of ECB, GDP and Amazon
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[October 26, 2023] 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.
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Traders work on the floor at the New York Stock Exchange (NYSE) in
New York City, U.S., October 23, 2023. REUTERS/Brendan McDermid/File
Photo
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)
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