Stocks fell on Wednesday as Wall Street struggled with a slew of corporate earnings and increased volatility in the Treasury market, all while traders kept a watch on the most recent geopolitical events. The S&P 500 saw a 1.5% decline. The Nasdaq 100 fell 2.5 percent after Microsoft Corp.’s sales were eclipsed by Google’s parent company Alphabet Inc.’s dismal cloud statistics. As a result of Texas Instruments Inc.’s negative projections, a measure of chipmakers fell 4.1%.
Howard Ward, Gabelli Funds portfolio manager and chief investment officer of Growth Equities, stated, “The question now turns to earnings as earnings drive stock prices.” This is the point where the road meets the rubber. Higher unemployment, decreased consumer spending, slower GDP growth, and lower earnings—all of which imply lower stock prices—would be the outcomes of a recession.
The Treasury market is frequently cited by economists as a source of information regarding impending recessions. They specifically look at what is known as the yield curve. When it is “inverted,” as it has been since around the middle of 2022, a recession is nearly always on the horizon. However, the curve started to “disinvert”—a term used in the business to describe a steepening—by mid-2023, raising concerns about whether the US had avoided a recession or if one was about to begin.
Treasury rates jumped on Wednesday as concerns over the projected auction size increases to be revealed next week intensified due to weak demand for a sale of five-year notes. Prior to the auction, yields were already increasing, as seen by higher-than-expected September new home sales figures.
US rates on 30-year notes increased by 15 basis points to 5.09%, while yields on two-year notes hardly moved at 5.12%. The 10-year bond yield increased by 13 basis points to 4.95%.
In other news, the Japanese currency continues to be negatively impacted by the large yield differential with the US, as the yen fell to its lowest level this year vs the dollar. Even though policymakers anticipate slower economic growth, the Bank of Canada maintained interest rates at their current level for the second consecutive meeting while leaving the door open to further tightening. The loonie turned down.
After word broke that Israel had decided to postpone the ground invasion of Gaza in order to protect US forces, oil prices surged beyond $85 per barrel.
Boeing Co. reassured investors by maintaining its cash-flow target and stating that it is proceeding with increasing aircraft output, despite the fact that manufacturing flaws prompted the firm to reduce its annual delivery target for the best-selling 737 model.
On Wednesday, Apple Inc. increased the cost of its subscription services for Apple TV+, Arcade gaming, and News+. This might result in more income for the company’s growing services segment.
Additionally, it intends to completely revamp its AirPods product line, revitalising a range of goods that has grown to be one of the business’s best-selling categories.
The Federal Reserve is proposing lower limitations on the fees banks and payment processors may charge shops when customers swipe their debit cards at checkout, raising a new set of regulatory problems for Visa Inc. and Mastercard Inc.
Driven by stronger-than-expected growth in mobile customers, T-Mobile US Inc. reported third-quarter profits that above projections.
As part of a brief theme he refers to as the “ESG hustle,” short seller Carson Block said that he is shorting Sunrun Inc. once more.
In reaction to the brief analysis from Muddy Waters published earlier on Wednesday, Sunrun claims it completely stands behind its reporting of data, including subscribers.
In an effort to boost the lender’s shares and reduce a value discrepancy with competitors, Deutsche Bank AG said that it will quicken shareholder distributions. Additionally, it is initiating a new wave of employment layoffs.
On Wednesday, Worldline SA sent another tsunami through the European fintech industry when it lowered its sales forecast and issued a warning about economic issues, which caused its shares to drop by more than half.
Major happenings this week:
Interest rate decision by the European Central Bank; President Christine Lagarde will conduct a press conference on Thursday
US durable goods, GDP, first unemployment claims, pending home sales, and wholesale inventories in the US on Thursday