Volatility Grips Stocks Roiled by Tech Losses: Markets Wrap

(Bloomberg) — Volatility gripped US stocks on Wednesday as investors contended with losses from big-tech firms after a batch of lackluster earnings underscored how the Federal Reserve’s tightening is impacting the economy.

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The tech-heavy Nasdaq 100 pared losses that topped 2% earlier in the session, while the S&P 500 wavered. Microsoft Corp. had plunged the most since March 2020 after its earnings highlighted the impact of the surging dollar. Google parent Alphabet Inc. also fell after presenting lackluster earnings. Meta Platforms Inc., Amazon.com Inc. and Apple Inc. are among major companies still reporting this week.

Treasury yields slumped after data showed the US merchandise-trade deficit widening. Sales of new US homes fell in September, another indication that the economy is starting to see the effects of the Fed raising rates sharply. A gauge of the dollar declined for a second day to its lowest level in three weeks.

Stocks had been buoyed in recent days by mostly solid earnings and speculation the Federal Reserve may curb the pace of rate increases. About a quarter of S&P 500 companies have reported third-quarter results, with more than two-thirds beating analysts’ estimates despite the big-tech setback. But investors are still concerned that slowing output will dent corporate profits in coming months.

“This year has been difficult for equities as investors try to assess what unwinding a prolonged period of easy money means for valuations,” Megan Horneman, chief investment officer at Verdence Capital Advisors, wrote in a note. “In addition, a stubbornly high inflation environment has been difficult for corporations to absorb, and we are starting to see the negative ramifications in margins that are falling from record highs.”

Goldman Sachs Group Inc. strategists said conditions for a trough in US equities are not visible yet as the asset class doesn’t fully reflect the latest rise in real yields and odds of a recession. In case of a severe economic downturn, the Goldman team said it expects the S&P 500 Index to drop to 2,888, implying 25% fall from Tuesday’s close.

Meanwhile, the British pound held an advance after the government said a much-anticipated fiscal statement will be delayed until November. Sterling had rallied earlier after New Prime Minister Rishi Sunak named an experienced Cabinet to lead the UK through what he called a “profound economic crisis.”

Gold rose as lower Treasury yields supported the precious metal. Bitcoin climbed for a second day.

Key events this week:

  • Earnings due this week include: Apple, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Intel, McDonald’s, Merck, Samsung Electronics, Shell, Vale, Volkswagen

  • ECB rate decision, Thursday

  • US GDP, durable goods orders, initial jobless claims, Thursday

  • Bank of Japan policy decision, Friday

  • US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Inventory

  • The S&P 500 was little changed as of 10:28 am New York time

  • The Nasdaq 100 fell 1.2%

  • The Dow Jones Industrial Average rose 0.6%

  • The Stoxx Europe 600 pink 0.2%

  • The MSCI World index rose 1.6%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.6%

  • The euro rose 0.6% to $1.0028

  • The British pound rose 0.9% to $1.1573

  • The Japanese yen rose 0.9% to 146.60 per dollar

Cryptocurrencies

  • Bitcoin rose 3.1% to $20,813.7

  • Pink ether 6.7% to $1,572.7

Leaps

  • The yield on 10-year Treasuries declined seven basis points to 4.03%

  • Germany’s 10-year yield declined four basis points to 2.13%

  • Britain’s 10-year yield declined six basis points to 3.57%

Commodities

  • West Texas Intermediate crude rose 1.9% to $86.90 a barrel

  • Gold futures rose 1% to $1,674 an ounce

–With assistance from Allegra Catelli, Abigail Moses, Robert Brand and Vildana Hajric.

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