Market Update – October 26

Stocks and bonds were routed midweek. Tech shares were slammed after poor earnings news from Alphabet knocked its shares down nearly -10%, spreading gloom across the sector. A surge in Treasury yields added to the selloff. Meanwhile, ongoing signs of the strength in the economy after a pop in new home sales did not help. Instead, it added to expectations that a big jump in GDP on Thursday will keep a Fed rate hike in the picture later in the year or early 2024. That and fears over other big headwinds ahead added to a negative feedback loop that growth will slow sharply next year, further hurting investor sentiment.

Stock markets: The US100 crashed -2.43%, its worst slide since February. The US500 lost -1.43%, falling below the key 4200 level. The US30 slid -0.32%. The JPN225 underperformed and corrected -2.1, amid disappointing big tech earnings.
Futures are lower across Europe and the US as markets wait for key central bank decisions, with the ECB kicking things off today.
Alphabet shares logged their worst session since March 2020 overnight, dropping 9.5% as investors were disappointed with stalling growth in its cloud division.
META fell 4% on Wednesday and another 3% in after-hours trade after publishing results showing better-than-expected revenue but a cloudy outlook, with expenses seen topping Wall Street estimates.
USDJPY has broken back above the 150.00 mark, hitting 150.80 (highest since October 3rd) after finding courage to test the MoF again. The combination of expectations for more evidence of the strong US economy including GDP, and the potential for another rate hike from the FOMC, are boosting the buck versus JPY, especially with still-fragile Japanese growth, along with rising expectations the BOJ will maintain its uber accommodative stance at its policy meeting next week.
USDCAD rose to a high of 1.381 after the BOC’s announcement, the highest since early March and the SVB bank failure.
USOIL recovered to $85 after a fall due to a rise in US crude stockpiles and a climb in the US Dollar.
Gold retests week’s resistance at $1988.
Today: ECB meeting, US Durable Goods and Advanced GDP.

Interesting Mover: USDIndex got legs after the BOC left policy unchanged and downgraded its GDP forecasts.

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Andria Pichidi

Market Analyst

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