(Bloomberg) — A giant exchange-traded fund tracking the Nasdaq 100 (QQQ) whipsawed in late hours as a post-earnings rally in Meta Platforms Inc. failed to spur a rebound after the tech-heavy gauge’s worst slide of 2023.
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Wall Street grappling with a batch of corporate earnings sent stocks lower on Wednesday amid heightened Treasury volatility, with traders also keeping an eye on the latest geopolitical developments. The S&P 500 dropped about 1.5%. The Nasdaq 100 slid 2.5% as Google’s parent Alphabet Inc.’s disappointing cloud figures outweighed Microsoft Corp.’s sales. A gauge of chipmakers slid 4.1% on Texas Instruments Inc.’s bearish forecasts.
“The question now turns to earnings as earnings drive stock prices,” said Howard Ward, chief investment officer of Growth Equities and portfolio manager at Gabelli Funds. “This is where the rubber meets the road. A recession would result in higher unemployment, less consumer spending, slower gross domestic product growth and lower earnings, which implies lower stock prices.”
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Longer-dated US yields outpaced those in shorter-maturity bonds — a process known as “bear steepening.”
Economists often look to the Treasury market for clues about when a recession might come. Specifically, they examine the so-called yield curve. When it’s “inverted,” as it has been since about mid-2022, that almost always means a recession is looming. But by mid-2023, the curve began to “disinvert” – or steepen in industry parlance — in a way that raised the question of whether the US had managed to dodge a recession or whether one was about to start.
Treasury yields surged Wednesday after poor demand for a sale of five-year notes deepened anxiety about auction size increases expected to be announced next week. Yields were already rising before the auction, reinforced by stronger-than-expected September new home sales data.
Thirty-year US yields climbed 15 basis points to 5.09%, while those on two-year notes were little changed at 5.12%. The yield on 10-year bonds advanced 13 basis points to 4.95%.
Elsewhere, the yen dropped to its weakest level this year against the dollar as the wide yield gap with the US continued to weigh on the Japanese currency. the Bank of Canada kept interest rates unchanged for a second straight meeting, but left the door open to more tightening even as officials forecast weaker economic growth. The loonie declined.
Oil topped $85 a barrel after a news report that Israel agreed to delay the ground invasion of Gaza to protect US troops.
Boeing Co. maintained its cash-flow target and said it’s moving ahead with higher aircraft output, reassuring investors even as manufacturing defects forced the company to lower its annual delivery goal for the top-selling 737 model.
Apple Inc. raised prices of its Apple TV+, Arcade gaming and News+ subscription services on Wednesday, in a move that could generate more revenue for its increasingly key services division.
Visa Inc. and Mastercard Inc. are facing a new round of regulatory challenges, with the Federal Reserve proposing lower caps on the fees banks and payment companies can charge merchants when consumers swipe their debit cards at checkout.
T-Mobile US Inc. posted third-quarter profits that beat estimates, buoyed by better-than-expected mobile customer gains.
Short-seller Carson Block said he’s shorting Sunrun Inc. again, part of a short theme he calls the “ESG hustle.”
Sunrun says it fully stands behind its reporting of metrics, including subscribers, in response to the short report from Muddy Waters released earlier Wednesday.
Deutsche Bank AG said it will accelerate payouts to shareholders, seeking to lift the lender’s stock and close a valuation gap with peers. It’s also starting another round of job cuts.
Worldline SA sent a fresh shockwave through Europe’s fintech sector on Wednesday, cutting its sales outlook and warning of economic challenges that pushed its stock down by more than half.
Key events this week:
European Central Bank interest rate decision; President Christine Lagarde holds news conference, Thursday
US wholesale inventories, GDP, US durable goods, initial jobless claims, pending home sales, Thursday
Intel, Amazon earnings, Thursday
China industrial profits, Friday
Japan Tokyo CPI, Friday
US PCE deflator, personal spending and income, University of Michigan consumer sentiment, Friday
Exxon Mobil earnings, Friday
Some of the main moves in markets:
The S&P 500 fell 1.4% as of 4 p.m. New York time
The Nasdaq 100 fell 2.5%
The Dow Jones Industrial Average fell 0.3%
The MSCI World index fell 1%
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.2% to $1.0568
The British pound fell 0.4% to $1.2113
The Japanese yen fell 0.1% to 150.06 per dollar
Bitcoin rose 3.3% to $34,761.32
Ether rose 1.1% to $1,790.6
The yield on 10-year Treasuries advanced 12 basis points to 4.94%
Germany’s 10-year yield advanced six basis points to 2.89%
Britain’s 10-year yield advanced seven basis points to 4.61%
West Texas Intermediate crude rose 1.8% to $85.26 a barrel
Gold futures rose 0.3% to $1,992 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Edward Dufner.
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