Tech giants weigh in on US futures; Treasuries gain: Market recap

(Bloomberg) – U.S. stock futures fell as megacap tech stocks tumbled in premarket trading, spoiling a three-day rally on Wall Street and raising fresh doubts about whether the selloff of $5.5 trillion this year is approaching a low.

Bloomberg’s Most Read

Nasdaq 100 contracts fell more than 1% after disappointing quarterly updates from Microsoft Corp., Google parent Alphabet Inc. and Texas Instruments Inc. S&P 500 futures fell by about 0.5%. Treasuries extended their gains, with the 10-year yield falling to around 4.04%, and a gauge of the dollar falling for a second day to its lowest level in three weeks.

Stocks have been buoyed in recent days by mostly strong earnings and speculation that the Federal Reserve could dampen the pace of rate hikes as its aggressive tightening begins to weigh on the economy. About a quarter of S&P 500 companies reported third-quarter results, with more than two-thirds beating analyst estimates despite the big tech setback. But there are growing fears that the slowdown in production could hurt corporate profits in the months ahead.

“Yeah, we’re seeing beats in earnings right now,” Mike Ingram, senior market strategist at ActivTrades, told Bloomberg TV. “But where I’m starting to have a bit of a problem at this point is that some earnings expectations for next year still look a bit punchy.”

The Stoxx Europe 600 index fluctuated amid a string of mostly positive earnings from heavyweights such as Barclays Plc, Deutsche Bank AG and Mercedes-Benz Group AG. The technology sector, however, weighed on the benchmark as it fell more than 1%, while brewer Heineken NV plunged after missing analyst estimates for volume growth.

Stocks rose in China, Japan and South Korea. Positive signs for Asia include China’s central bank and foreign exchange regulator indicating that they will maintain the healthy development of stock and bond markets, while reiterating that the yuan will be “fundamentally stable”.

A nearly 5% rebound in the gauge of Chinese stocks listed in the United States on Tuesday helped recoup some of the record loss suffered following President Xi Jinping’s rift with China’s collective leadership. Hong Kong’s tech gauge made solid gains for a second day, but still hasn’t recovered from Monday’s nearly 10% drop. The offshore yuan gained up to 1.1% against the dollar.

The yen weakened to around 148 to the dollar ahead of the Bank of Japan’s policy decision on Friday, as monetary parameters are expected to remain unchanged. Meanwhile, the central bank boosted purchases of longer-dated government bonds as rising yields threatened to loosen its grip on the yield curve.

While recent US data has not changed expectations that the Fed will raise interest rates by 75 basis points next month, it is fueling speculation that the end of aggressive tightening may come next year. Analysts are also predicting challenges for now in Europe, with a giant 75 basis point hike expected from the European Central Bank on Thursday. It was even then that many economists now believe that a recession has begun in the euro region.

“The feeling is still incredibly fragile. We expect to see more market volatility,” Catherine Yeung, chief investment officer at Fidelity International, told Bloomberg Radio. “All eyes are still on the rate cycle globally as well as the direction of inflation. I think at the end of the year, again, it’s going to be volatile.

Elsewhere, oil held steady as an industry report showed rising inventories of U.S. crude and investors worried about weaker demand amid slowing growth. Gold edged higher in Asia as lower Treasury yields supported the precious metal. Bitcoin climbed for a second day, heading towards $21,000.

Key events this week:

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

  • Bank of Canada rate decision Wednesday

  • ECB rate decision Thursday

  • US GDP, durable goods orders, first 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 major movements in the markets:

Shares

  • The Stoxx Europe 600 was little changed at 10:11 am London time

  • S&P 500 futures fell 0.6%

  • Nasdaq 100 futures fell 1.5%

  • Dow Jones Industrial Average futures are little changed

  • The MSCI Asia-Pacific index rose 1.3%

  • The MSCI Emerging Markets Index rose 0.9%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.7%

  • The euro rose 0.7% to $1.0033

  • The Japanese yen rose 0.7% to 146.90 per dollar

  • The offshore yuan rose 1.7% to 7.1930 to the dollar

  • The British pound rose 1.1% to hit $1.1599

Cryptocurrencies

  • Bitcoin rose 2.2% to $20,624.15

  • Ether rose 4.1% to $1,534.03

Obligations

  • The yield on 10-year Treasury bills fell five basis points to 4.05%

  • Germany’s 10-year yield was little changed at 2.16%

  • The UK 10-year yield was little changed at 3.64%

Goods

  • Brent rose 0.1% to $93.62 a barrel

  • Spot gold rose 1.2% to $1,673.22 an ounce

–With help from Allegra Catelli and Tassia Sipahutar.

Bloomberg Businessweek’s Most Read

©2022 Bloomberg LP