Wall Street is trading lower in pre-market trading with tech/growth leading losses after Microsoft, Google parent Alphabet and Texas Instruments delivered a mixed bag of big tech earnings numbers, setting the stage for other leadings tech companies to report this week. Ongoing optimism that Big Tech will continue to grow fast with in particular strong growth in cloud and AI services helped Wall Street to stabilize after recent losses – this is now being challenged more.
Alphabet fell as much as 7% in premarket trading after its cloud division reported lower-than-expected earnings. Microsoft, on the other hand, rose after its cloud division's results beat expectations. Texas Instruments slipped after reporting a disappointing sales forecast, suggesting that demand for a wide range of electronic components remains weak which increases concerns of slowing consumer / corporate spending.
Focus remains on earnings, with Meta Platforms scheduled to report in the evening, and Amazon on Thursday.
I am optimistic about Meta and believe that the social media giant has more room to rise. It will depend now on both Meta and Amazon to bring back optimism. However, it remains clear that the Big Tech companies (minus Tesla) continue to outpace Wall Street but it remains questionable for how long the strong performance of the “Magnificent Seven” (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla 📉 and Meta Platforms) can remain a driver for gains.
The mixed earnings picture also continued today, with for instance Deutsche Bank, Boeing and T-Mobile US reporting strong earnings, while Gucci parent Kering or home products company Reckitt Benckiser fell after sales missed expectations. French payment company Worldline plunged nearly 60%, the most ever, after lowering its outlook for this year.
Shares in Asia pushed higher after the government stepped up support for China’s economy and stock trading. However, the property-debt crisis continues to worsen.
We see US Treasury yields edging higher but the big swings are not seen anymore. However, the overall picture of the US economy and labor market remains: resilience – it should increase expectations that rates will remain “higher-for-longer” – meaning rather headwinds than tailwinds from the interest rate front. I don't expect a rate hike or any surprise from today's Bank of Canada rate decision. Fed Chair Powell will have a speech today in which he will reiterate that the Fed will wait for more economic data and decide data-driven.
Oil prices are stable but lost most of the gains since the Hamas terrorist attack. Gold, however, remains in demand showing that investors continue to be very cautious. We also see a stronger USD as we have predicted – another sign of caution.
I expect mostly sideways movement today – with possibly further profit taking in tech & cyclical stocks. Slightly rising yields will cause some rotation from growth stocks back to defensive sectors.
👁 ROB'S MARKET OVERVIEW:
October 25, 2023
🇺🇸 US Markets ➡️
Cyclical Stocks ➡️/↘️
Tech/Growth Stocks ➡️/↘️
Financial Stocks ↗️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ➡️
Materials Stocks ↗️ (benefiting from rising Asian/CN markets)
EUR, CAD, AUD, JPY ➡️
GBP, CHF ➡️/↘️
⚒ Commodity Markets ↕️/↗️
Oil prices ➡️
Natural Gas prices ↗️/➡️
Metal prices ➡️/↗️
Gold ↗️/➡️ (early gains – then stabilizing with also yields rising)
⚡️Cryptos ↕️/↗️ (still overall supported from ETF optimism – still resistance at $35K for BTC)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)