Global stocks are trying to limit recent sharp losses after the U.S. economy grew at its fastest pace since 2021. Markets also received a slight boost after the European Central Bank left interest rates unchanged as expected – after 10 straight rate hikes.
Global equity markets saw a brutal sell-off in recent sessions and also saw a weak opening today in Asia (China only positive thanks to stimulus measures), Europe and additional pre-market selling in the US. Shares of Facebook parent Meta Platforms Inc. fell after investors' hopes for a long-term recovery in the advertising industry were dashed – Meta warned of coming uncertainty. Other companies also lowered their expectations, such as UPS and Southwest Airlines. We are also seeing more and more companies warning about high interest rates/yields and high labor costs. The concerns of a weakening economy will rise and will overall lead to more selling.
The so-called “Magnificent Seven” that have driven this year's rally in the U.S. stock markets are reporting disappointing earnings that have seen $200 billion of their market value disappear, pushing the S&P 500 into a correction and the Nasdaq 100 to lows last seen in May. From a technical perspective, some of the heavily sold stocks are oversold in the short term, although valuations remain high and further selling is fundamentally supported.
In addition to Meta, Google parent Alphabet and Tesla have also slumped since the release of results, while Microsoft is the only bright spot so far. Amazon releases its results today after the market closes, but has already seen heavy selling in the last session. We continue to see very volatile markets. Given the brutal losses, we may see some dip buying initially, but that will not lead to a sustained rally given increasing signs of further slowing sales growth.
Geopolitical tensions continue to escalate as Israel appears to be stepping up its airstrikes on the besieged territory in Gaza. While this is not a full-scale invasion by the Israeli army, we are seeing raids in Gaza to gather intelligence on Hamas and hostages.
We see a dollar approaching its 2023 high again. Given the relative resilience of the U.S. economy and deteriorating risk sentiment, USD strength will persist. Strong safe haven demand will also continue to support gold. Oil prices have extended their recent losses, but should soon find a floor amid rising tensions between the West/US and Iran.
👁 ROB'S MARKET OVERVIEW:
October 26, 2023
🇺🇸 US Markets ↗️/↕️/↘️ (Rebound, high volatility and returning profit taking before Amazon earnings)
Cyclical Stocks ↗️/↕️/↘️
Tech/Growth Stocks ↗️/↕️/↘️
Financial Stocks ↗️/↕️
Defensive Stocks ➡️/↗️
Energy Stocks ↘️/➡️
Materials Stocks ➡️/↘️
GBP, CAD, JPY, CHF ➡️
EUR ↕️/↘️ (ECB to signal rate peak has reached)
⚒ Commodity Markets ↕️/↘️
Oil prices ↘️/↕️/➡️
Natural Gas prices ↘️/➡️
Metal prices ↗️/↕️/↘️
⚡️Cryptos ↕️/↘️ (ETF optimism fading – bad risk sentiment weighs)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)