US Tech Stocks Slide as Earnings Disappoint – Nasdaq Drops 1.38%
US equity markets finished lower in trading yesterday as disappointing earnings updates from major technology companies weighed on investor sentiment. The Nasdaq led the declines, falling 1.38% to close at 26,184, as Alphabet’s Q3 results failed to meet market expectations, while Amazon added to the negative sentiment with its earnings announcement after the closing bell. The broader market also came under pressure, although losses were more contained, with the S&P 500 declining 0.30% to finish at 7,720 and the Dow Jones slipping 0.25% to close at 52,342.
US Treasury yields fell sharply following the release of Core PCE inflation data, which came in broadly in line with market expectations and contributed to a reduction in expectations for a Federal Reserve interest rate hike in December. The policy-sensitive 2-year Treasury yield dropped 10.0 basis points to close at 4.598%, while the benchmark 10-year yield declined 8.0 basis points to finish at 4.937%, moving further below the key 5% level. The US dollar also weakened against the major currencies as traders reassessed the outlook for US monetary policy, with the Dollar Index falling 0.29% to close at 101.85. The combination of softer yields and a weaker dollar reflected growing uncertainty over whether the Fed will deliver another rate increase before the end of the year.
Oil prices edged higher again as ongoing geopolitical tensions in the Middle East continued to support energy markets. Brent crude gained 0.16% to close at $115.50 per barrel, while WTI crude rose 0.11% to finish at $102.89. Traders remain concerned about the potential for further supply disruptions as hostilities continue across the region, with the prospect of additional attacks on energy infrastructure and shipping routes maintaining a significant geopolitical risk premium in oil prices. Despite ongoing diplomatic efforts to secure a peace agreement, the lack of meaningful progress continues to underpin the market, leaving oil vulnerable to further sharp moves as developments unfold.
Gold prices moved lower despite the weaker US dollar and declining Treasury yields, with the precious metal falling 1.15% to close at $4,020.42.
Gold Heavy in Volatile Markets
Gold once again felt heavy to traders in markets yesterday as it dropped back to key support levels. The decline saw gold retreat towards the psychologically important $4,000 support level, which is likely to remain a key focus for traders in the coming sessions.
The move against the traditional relationship between gold, the dollar and US yields suggests that other factors, including profit-taking and positioning adjustments, may be influencing price action.
With geopolitical uncertainty remaining elevated and expectations for Federal Reserve policy continuing to shift, gold is likely to remain sensitive to both economic releases and developments in the Middle East.
If we do see a clean break beneath the $4,400 level and the annual low at $3,942.99, then we could see the move pick up pace and the price fall even further despite other factors in the market.
Busy Day to Finish the Trading Week
Looking ahead, financial markets are facing another busy trading day to close out the week, with the Bank of Japan’s latest interest rate decision and subsequent press conference expected to dominate attention during the Asian session. Tokyo Core CPI data (exp. +2.6% y/y) is scheduled for release earlier in the day and will provide further insight into Japanese inflation pressures ahead of the central bank’s policy announcement. Traders will be particularly focused on any changes to the BoJ’s forward guidance and the implications for the yen and Japanese government bond yields.
The European session will also feature several important economic releases, with Germany’s preliminary CPI figures (exp. +0.1% m/m) due throughout the day and preliminary GDP data (exp. +0.1% m/m) early in the session.
Attention will then shift to North America, where the US Employment Cost Index (exp. +0.8% q/q) and Canadian GDP (exp. +0.2% m/m) figures are both scheduled for release shortly after the open. The US employment cost figures will be particularly important given the market’s renewed focus on inflation pressures and the likelihood of another Federal Reserve rate increase in December.
Explore all upcoming market events in the Economic Calendar.
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