Tech Giants Signal Rebound as Amazon, Intel Rally: Markets Wrap

(Bloomberg) -- Tech giants looked set for a rebound from a selloff that drove the Nasdaq 100 down to its lowest since May, with Amazon.com Inc. and Intel Corp. rallying in late hours after reporting solid earnings.

A $192 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) rose in late trading after slumping almost 2% on Thursday. The selloff also put the S&P 500 on the brink of a “correction” — with the gauge down almost 10% from its July peak. Ford Motor Co. sank after the close on disappointing numbers. Treasury yields fell as economic data suggesting inflation pressures continue to dissipate despite solid growth kept traders betting on a Federal Reserve pause.

Read: How Low Can It Go? Getting to the Bottom of the Nasdaq Selloff

“Earnings season has left much to be desired as typically economically sensitive stocks, that have held up well against a difficult backdrop, begin to creak under the pressure,” said Geir Lode, head of global equities at Federated Hermes Ltd. “Good results are no longer enough for these economically sensitive stocks to gain traction as investors are concerned about a weaker macroeconomic backdrop.”

Traders also kept a close eye on geopolitical developments, with Israel’s military saying it killed Hamas’s deputy head of intelligence, who it said was responsible for helping plan the Oct. 7 attacks. The army overnight also made a limited ground raid into northern Gaza. Oil dropped below $84 a barrel. The euro edged lower as the European Central Bank kept rates unchanged as expected.

Two-year yields, which are more sensitive to imminent Fed moves, dropped eight basis points to 5.04%. Swap contracts project 32% odds for one more Fed hike in the current tightening cycle.

Treasury Secretary Janet Yellen said that the surge in longer-term bond yields in recent months is a reflection of a strong economy and expectations that interest rates may have to stay higher for longer.

A survey conducted by 22V Research shows that 71% of the investors polled don’tthink the 10-year yield — which recently hit 5% — has peaked. They expect it to keep increasing, with the median expectation for the peak at 5.5%. Nineteen percent see the yield peaking at or above 6%.

“The stock market isn’t ready to rally until bond yields are sharply lower, which probably won’t happen until we see inflation a lot closer to the Fed’s target,” said Edward Moya, senior market analyst for the Americas at Oanda.

The US economy grew at the fastest pace in nearly two years last quarter amid a surge in consumer spending. A closely watched measure of underlying inflation cooled more than expected to the slowest pace since 2020.

Wall Street’s Reaction to GDP:

• Lindsay Rosner, head of multi-sector fixed-income investing at Goldman Sachs Asset Management:

“It does not move the needle for the November FOMC meeting — which is certainly a skip. Higher and hold, yes. Higher and hiking, no.”

• Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office:

“The odds may favor no change to interest rates next week, but today’s stronger-than-expected economic data also means no change to the Fed’s hawkish stance.”

• Callie Cox at eToro:

“A recession still isn’t out of the question. But as the days pass and data improves, it sure does look like the Fed is achieving a soft landing with minimal harm to the economy. If you’re a broad-market investor, I’d take some comfort in the fact that the worst-case scenario seems to be off the table.”

• Richard Flynn, managing director at Charles Schwab UK:

“While these numbers are the latest in a string of indicators that paint a picture of economic resilience, investors will likely remain cognizant that the risk of recession lingers.

• Chris Zaccarelli, chief investment officer at Independent Advisor Alliance:

“If the recession that people have been predicting for the past 18 months doesn’t materialize this year and economic trends that are currently in place persist, then the market will bounce back from its lows, just like it did at the end of last year.”

Corporate Highlights:

• Mastercard Inc. fell after the payments network predicted revenue growth for the coming quarter that undercut analyst forecasts, even as consumers continued to weather rising rates with robust spending on their cards.
• Western Digital Corp. sank after deal negotiations with Kioxia Holdings Corp. broke down, quashing hopes for a combination of their flash memory businesses.
• Hasbro Inc. slid after reporting quarterly results that missed Wall Street estimates on sales and earnings and lowering its annual revenue forecast due to a softer toy market heading into the holiday season.
• Harley-Davidson Inc. sank as profit missed estimates and sales plunged amid elevated borrowing costs in the US and economic weakness around the globe.
• Comcast Corp. retreated after reporting drops in broadband and cable subscribers, and predicting more losses to come.
• Hertz Global Holdings Inc. slid after missing profit estimates as it grapples with higher depreciation costs for its vehicles, which were unusually low in 2022.
• International Business Machines Corp. gained as it reported better-than-expected sales and affirmed its full-year outlook, suggesting the company’s focus on software and hybrid cloud services is paying off.
• First Citizens BancShares Inc., the regional lender that acquired Silicon Valley Bank when it failed in March, said deposits beat estimates helped by growth in its direct bank channel. The shares rallied.
• Bunge Ltd. climbed after raising its earnings outlook after posting third-quarter profits that blew up beyond the highest estimates.

Key events this week:

• 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:

Stocks

• The S&P 500 fell 1.2% as of 4 p.m. New York time
• The Nasdaq 100 fell 1.9%
• The Dow Jones Industrial Average fell 0.8%
• The MSCI World index fell 1.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0556
• The British pound was little changed at $1.2121
• The Japanese yen fell 0.1% to 150.42 per dollar

Cryptocurrencies

• Bitcoin fell 1.8% to $34,048.4
• Ether rose 0.2% to $1,791.9

Bonds

• The yield on 10-year Treasuries declined 11 basis points to 4.84%
• Germany’s 10-year yield declined three basis points to 2.86%
• Britain’s 10-year yield declined one basis point to 4.60%

Commodities

• West Texas Intermediate crude fell 2.2% to $83.48 a barrel
• Gold futures were little changed

This story was produced with the assistance of Bloomberg Automation.

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