Stocks opened lower as investors continue to digest the impact of disappointing Big Tech earnings reports, coupled with rising bond yields.
The tech-heavy Nasdaq (^IXIC) and S&P 500 (^GSPC) dropped about 0.5% and 0.4%, respectively, while the Dow Jones Industrial Average (^DJI) hugged the flatline.
Tech stocks remain under pressure after booking their worst single-day performance in eight months on Wednesday.
Earnings are in the drivers seat for stocks, as investors punish megacaps whose third-quarter reports turned out more downbeat than hoped.
While Meta’s (META) earnings beat on the top and bottom lines, its shares reversed initial gains after the Facebook parent warned geopolitical unrest could drag on its ad business. The flow of earnings resumes Thursday, with Amazon (AMZN), Intel (INTC), Ford (F) and Chipotle (CMG) the highlights on the docket.
Concerns are growing that valuations are too high in a world of surging Treasury yields.
On Thursday, the benchmark 10-year yield (^TNX) fell a modest 3 basis points to trade near 4.92% after the latest GDP reading came in hot, with the US economy growing at its fastest pace in nearly two years.
The Bureau of Economic Analysis’s advance estimate of third quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 4.9% during the period, faster than consensus forecasts.
The strong data comes despite the Federal Reserve’s higher for longer interest rate mantra, which has failed to constrain the American consumer. The Fed’s next interest rate decision is scheduled for Nov. 1
Other central banks are beginning to shift their monetary policy. On Thursday, the European Central Bank held interest rates steady for the first time in over a year following ten consecutive rate increases.
The ECB said it would hold its deposit rate at a record high 4%. The bank maintained its previous guidance of steady policy moving forward.
Ford, UAW reach tentative deal
Ford (F) and the United Auto Workers (UAW) reached a tentative labor deal late Wednesday — a sign that the autos strike, now the longest in 25 years, could be nearing an end.
Ford shares were flat in early trading on Thursday following the news.
As Yahoo Finance’s Pras Subramanian reports:
The UAW said the tentative agreement includes a 25% base wage increases through April 2028 and will cumulatively raise the top wage by over 30% to more than $40 an hour, and raise the starting wage by 68%, to over $28 an hour. The lowest-paid workers at Ford will see a raise of more than 150% over the life of the agreement, with some workers receiving an 85% increase immediately upon ratification.
The UAW also revealed COLA (cost-of-living allowance) provisions were reinstated, along with a new three-year wage progression scale (previously it was 8 years), as well as the end of wage tiers. The union said it secured gains for workers with pensions and 401K plans, but did not reveal exact specifics.
The deal is still subject to approval by UAW’s Ford national council, and ratification by simple majority vote of the UAW’s 57,000 Ford workers.
Read more here.
Stocks fall at market open
Stocks opened lower with the tech-heavy Nasdaq Composite (^IXIC) the biggest loss leader of the early morning session, down about 0.5% on the heels of disappointing tech earnings. The Dow Jones Industrial Average (^DJI) dipped 0.1% while the benchmark S&P 500 (^GSPC) dropped about 0.4%.
GDP: US economy grows 4.9% amid strong consumer spending
The US economy grew at its fastest pace in nearly two years during the past three months as consumers stepped up their spending despite a high interest rate environment.
As Yahoo Finance Josh Schafer reports:
The Bureau of Economic Analysis’s advance estimate of third quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 4.9% during the period, faster than consensus forecasts. Economists surveyed by Bloomberg estimated the US economy grew at an annualized pace of 4.5% during the period.
The reading came in higher than second quarter GDP, which was revised down to 2.1%.
The GDP release highlights the resilience of the US consumer despite ongoing concerns of a slowdown. But many economists see this as the high water mark for economic growth before the credit tightening induced by the Federal Reserve’s interest rate hikes and the recent rise in bond yields grabs hold of business development and consumer spending.
Read more here.
Stock futures point to a return to sell-off
Wall Street stocks were on track Thursday to add to the previous day’s sharp losses, as investors looked ahead to fresh earnings releases.
Futures on the Dow Jones Industrial Average (^DJI) were down 0.41%, or 136 points, while S&P 500 (^GSPC) futures shed 0.67%. Contracts on the tech-heavy Nasdaq 100 (^NDX) were 0.95% lower.
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