U.S. stocks extended declines Thursday, following on the worst day for the Nasdaq since February, as muted outlooks for some of the biggest tech companies offset stronger-than-expected economic data and fading inflation risks
Stocks found some support however, from the better-than-expected reading for U.S. third quarter GDP, pegged at 4.9%, that also indicated an easing of inflation pressures tracked by the Federal Reserve.
"There will be many people who will try to overlook this good news by calling it 'temporary' or 'transitory', but regardless of all of the negativity, consumers are spending, businesses are re-stocking their inventories in anticipation of future spending and the United States is leading the world in a post-pandemic economy," said Chris Zaccarelli, CIO for the Independent Advisor Alliance in Charlotte, North Carolina.
Tech stocks were crushed yesterday, with the Nasdaq falling 2.4% and sliding into correction territory – defined as a 10% decline from a recent high – in the wake of a disappointing earnings report from Alphabet (GOOG) -) that lopped $166 billion in market value from the Google parent.
Related: U.S. economy rips as consumer spending powers Q3 GDP 4.9%, inflation pressures ease
A muted outlook from Meta Platforms (META) -) last night looks to add to the tech gloom as the social media giant crushed Street earnings forecasts, but said near-term ad sales could be affected by broader macro conditions, which it hinted were already weakening.
Treasury bond yields, meanwhile, were marching higher again in overnight trading, with 10-year notes testing the 5% mark, which it breached for the first time since 2007 earlier this week, following a disappointing auction of $52 billion in 5-year notes yesterday alongside stronger-than-expected new homes sales for the month of September.
Benchmark 2-year notes, however, were marked 10 basis points lower 5.029% in the New York session following the GDP data while the U.S. dollar index tested multi-month highs against its global peers at 106.861 after moving past the 150 mark against the Japanese yen. Benchmark 10-year notes were last seen trading at 4.851%.
Yields were also helped lower after the European Central Bank, as expected, held its three key policy rates unchanged Thursday in Frankfurt, snapping a streak of ten consecutive increases, as the broader economy looks headed for recession in the coming months.
"Inflation is still expected to stay too high for too long, and domestic price pressures remain strong," the ECB said. "At the same time, inflation dropped markedly in September, including due to strong base effects, and most measures of underlying inflation have continued to ease."
Market volatility gauges are also on the move, with the CBOE's VIX index up $0.50 to $20.67 a level that suggests daily swings of around 54 points, or 1.32% , for the S&P 500 over the next thirty days.
Investors will also need to navigate the busiest day of the third quarter earnings season, with updates from United Parcel Service (UPS) -), Comcast (CMCSA) -), Honeywell (HON) -), Bristol Myers (BMY) -), Merck (MRK) -) prior to the start of trading with Ford (F) -), Intel (INTC) -) and Amazon (AMZN) -) slated for after the closing bell.
Heading into the early afternoon of the trading day on Wall Street, the S&P 500, which is down 2.36% for the month, was marked 52 points lower, or 1.25%, while the Dow Jones Industrial Average fell 237 points.
The tech-focused Nasdaq fell 263 points, or 2.05%, with Meta shares falling 4.7% and Alphabet down another 3.1%.
In overseas markets, the region-wide Stoxx 600 fell 0.47% by the close of trading in Frankfurt, lead to the downside by banks and financials, following the ECB rate decision at 8:15 am EDT.
Overnight in Asia, markets were one hedge for currency market intervention from the Bank of Japan after the yen fell through the 150 mark against a surging dollar, with the Nikkei 225 also slumping 2.14% following last night's sell-off on Wall Street.
The region-wide MSCI ex-Japan benchmark, meanwhile, fell 1.2% to a fresh one-year low heading into the close of trading.
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