US index futures fell as megacap technology shares slumped in premarket trading, marring a three-day rally on Wall Street and raising new doubts over whether this year’s $5.5 trillion selloff is nearing a bottom.
(Bloomberg) — US index futures fell as megacap technology shares slumped in premarket trading, marring a three-day rally on Wall Street and raising new doubts over whether this year’s $5.5 trillion selloff is nearing a bottom.
Contracts on the Nasdaq 100 fell 2% after disappointing quarterly updates from Microsoft Corp., Google parent Alphabet Inc. and Texas Instruments Inc. S&P 500 futures were down about 1%. Treasuries gained, with the 10-year yield falling to around 4.07%, while a gauge of the dollar declined for a second day to its lowest level in three weeks.
Stocks have been buoyed in recent days by mostly solid earnings and speculation the Federal Reserve may curb the pace of rate increases as evidence mounts that its aggressive tightening is starting to weigh on the economy. 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 concern is mounting that slowing output will dent corporate profits in coming months.
“Yes we’re seeing earnings beats at the moment,” Mike Ingram, a senior market strategist at ActivTrades, said on Bloomberg TV. “But where I do start to have a bit of a problem at this juncture is that some earnings expectations going into next year are looking still a bit punchy.”
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.
The Stoxx Europe 600 index fluctuated amid a raft of mostly positive earnings from heavyweights including Barclays Plc, Deutsche Bank AG and Mercedes-Benz Group AG. The technology sector dropped more than 1%, weighing on the benchmark, while brewer Heineken NV plunged after missing analysts’ estimates for volume growth.
Meanwhile, the British pound held an advance against the greenback after the government said a much-anticipated fiscal statement will be delayed until November. Sterling rallied earlier after New Prime Minister Rishi Sunak named an experienced Cabinet to lead the UK through what he called a “profound economic crisis.”
Yuan Surges
Equities advanced in China, Japan and South Korea. Positive signs for Asia included China’s central bank and foreign-exchange regulator indicating it would maintain the healthy development of stock and bond markets, while reiterating that the yuan would be “basically stable.”
A near 5% rebound in a gauge of US-listed Chinese stocks on Tuesday helped claw back some of the record loss suffered in the wake of President Xi Jinping breaking with China’s collective leadership. Hong Kong’s tech gauge made strong gains for a second day but was still short of recouping Monday’s near 10% slide. The offshore yuan surged by a record 1.8% against the dollar.
The yen fluctuated ahead of the Bank of Japan’s policy decision Friday, when monetary settings are expected to be kept 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 the recent US data haven’t changed expectations that the Fed will hike interest rates by three-quarters of a percentage point next month, they’re fueling speculation that an end to aggressive tightening may come next year. Analysts are also projecting challenges for now in Europe, with a jumbo hike of 75 basis points expected from the European Central Bank on Thursday. That’s even as many economists now reckon a recession has begun in the euro region.
“Sentiment’s still incredibly fragile. We do expect to see further market volatility,” Catherine Yeung, investment director at Fidelity International, said on Bloomberg Radio. “All eyes are still on the rate cycle globally speaking as well as where inflation does go. I think going into the end of the year, again, it’s going to be volatile.”
Elsewhere, oil fluctuated as an industry report showed a rise in US crude stockpiles and investors fretted about weaker demand amid slowing growth. Gold rose as lower Treasury yields supported the precious metal. Bitcoin climbed for a second day, heading toward $21,000.
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:
Stocks
- Futures on the S&P 500 fell 1% as of 8:45 a.m. New York time
- Futures on the Nasdaq 100 fell 2%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 fell 0.3%
- The MSCI World index rose 1.6%
Currencies
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.4% to $1.0010
- The British pound rose 0.8% to $1.1568
- The Japanese yen rose 0.5% to 147.18 per dollar
Cryptocurrencies
- Bitcoin rose 1.8% to $20,554.36
- Ether rose 3.3% to $1,521.96
Bonds
- The yield on 10-year Treasuries declined three basis points to 4.07%
- Germany’s 10-year yield advanced three basis points to 2.20%
- Britain’s 10-year yield advanced three basis points to 3.67%
Commodities
- West Texas Intermediate crude rose 1.3% to $86.45 a barrel
- Gold futures rose 0.8% to $1,670.60 an ounce
–With assistance from Allegra Catelli and Rheaa Rao.
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