por admin » Jue Oct 27, 2022 12:11 pm
Stocks Swing in Seesaw Session as Bonds Rally: Markets Wrap
Investors digested conflicting earnings from major companies Earlier, the ECB lifted its policy rate by 75 basis points
Isabelle Lee
October 26, 2022, 6:24 PM EDT
Wall Street is dealing with another session of twists and turns as investors weigh conflicting earnings messages from major companies while parsing mixed economic data.
The S&P 500 fluctuated while the Nasdaq 100 fell more than 1%. Meta Platforms Inc. plunged as much as 25% as at least three investment banks downgraded the stock after disappointing earnings. But Caterpillar Inc. shares surged the most in two years after the bellwether company highlighted strong buyer demand.
Still, lackluster earnings reports from big-term firms this week has underscored the impact of Federal Reserve’s tightening regime and consequently, the surging dollar. Amazon.com Inc. and Apple Inc. are among major companies that are still to report earnings on Thursday.
Meanwhile, Treasuries gained, with the 10-year yield pushing below 4% on speculation of a Fed pivot. The dollar pared gains after data showed that US gross domestic product advanced for the first time this year. The stock and currency markets are digesting this information differently, showing that it’s difficult to tell what the Fed is planning to do next, said Fiona Cincotta, senior financial markets analyst at City Index.
“The US dollar is reading into this that perhaps it’s going to keep the Fed on that hawkish path for longer,” she said by phone. “Whereas the stock market seems to be reading it completely differently, almost as if it’s expecting the Fed to be sort of moving toward that less hawkish stuff.”
Read More: US Economy Rebounds as Consumers, Businesses Show Resilience
In any case, GDP numbers may not provide investors with a complete picture of the current state of the economy because they’re backward looking, said Tom Hainlin, national investment strategist at US Bank Wealth Management. Traders will be more focused on October’s inflation print and the upcoming jobs report for further clues on the Fed’s path of rate hikes, he said.
Economists still expect the Fed to hike by three-quarters of a percentage point for the fourth time in a row when it meets next week.
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“The number one driver of capital market performance right now is this discussion of where does the Fed end up with its rate hikes, how long does it stay there, and at what point does it start to reduce those rates once it gets to the inflation level it wants?” Hainlin said by phone. “The second would be corporate profits. Is it a shallow glide lower? Is it a big stair step lower in terms of the outlook for 2023? That’s still unknown.”
More opinions on the GDP data:
Chris Zaccarelli, chief investment officer for Independent Advisor Alliance
“On the one hand, it is good to see that the economy is continuing to grow and that should bode well for the stock market. However, given that we are in the middle of an inflation fight, the Federal Reserve will likely feel that they need to continue to be aggressive in their rate hikes.”
Richard Flynn, managing director at Charles Schwab UK
“Investors may be relieved by today’s GDP figures which exceeded expectations. This announcement follows strong September job data showing that, despite some stress fractures beneath the surface, the labor market remains strong in terms of net jobs created. That has helped bolster consumer spending; the downside is that credit card debt has increased, and savings rates have plunged due to still-hot inflation.”
Stan Shipley, economist at Evercore ISI
“Demands for the economy was fine as real GDP climbed a more-than-expected +2.6% in 3Q. The GDP deflator advanced less than expected +4.1%. The inflation story is probably the most influential part of this release. Attention will now shift to 4Q activity. Despite news stories of layoffs, initial unemployment claims stayed low. For now, the fixed income market is discounting the risk of a near term recession.”
Earlier, the European Central Bank lifted its policy rate by 75 basis points -- in line with expectations -- and signaled more tightening ahead. The euro fell.
Katerina Simonetti, Senior VP at Morgan Stanley Private Wealth Management, talks about the markets and sectors she sees as potentially performing well in 2022. Hosted by Paul Sweeney and Katie Greifeld.
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Key events this week:
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
The S&P 500 was little changed as of 1:06 p.m. New York time
The Nasdaq 100 fell 1.3%
The Dow Jones Industrial Average rose 1.2%
The MSCI World index was little changed