Major technology stocks took a hit on the markets, contributing to a third straight session of losses for equities as traders digested a range of corporate earnings reports. Rising bond yields, driven by speculation over the Federal Reserve’s future interest rate policies, also weighed on investor sentiment.
Nvidia Corp. led the decline among tech giants, falling 2.5%, while Qualcomm Inc. faced its own setback after Arm Holdings Plc canceled a license agreement, which allowed Qualcomm to use Arm’s intellectual property in chip designs. Meanwhile, Tesla Inc. is poised to release its quarterly results, with Wall Street analysts focusing on signs of slowing sales and its impact on profit margins.
“Investors are anxiously awaiting reports from big tech companies during this earnings season,” said David Laut of Abound Financial. “This quarter is critical as it will reveal whether the heavy investments in artificial intelligence (AI) will translate into profits. Tech stocks are priced for perfection, and any sign of disappointment could lead to a market pullback.”
Economic data released ahead of the Federal Reserve’s Beige Book indicated that U.S. sales of previously owned homes dropped to their lowest level in nearly 14 years. Many potential buyers are holding off in hopes of lower mortgage rates and better asking prices, adding further uncertainty to the market.
By the close of trading, the S&P 500 had fallen 0.7%, the Nasdaq 100 dropped 1%, and the Dow Jones Industrial Average slid 0.9%. Boeing Co. was another major loser after signaling that it would take longer than expected to address its current challenges. However, Texas Instruments Inc. rallied as the company reported that customers were clearing out excess inventory, signaling the potential for new orders soon.
Bond yields rose as well, with the yield on 10-year U.S. Treasuries climbing by three basis points to 4.24%. The U.S. dollar strengthened, while the Canadian dollar weakened following an increase in the pace of interest rate cuts by the Bank of Canada. The Japanese yen hit its lowest level in nearly three months, prompting concerns of potential intervention from Japan’s government to support the currency. Meanwhile, oil prices slipped amid the broader market downturn.
Traders are now eagerly awaiting the Fed’s next moves. While swap prices suggest less certainty that the Fed will cut rates during its two remaining policy meetings of the year, the bond market is scaling back expectations of how aggressively the central bank will ease rates in the coming months. Next week’s release of a key U.S. labor market report for October is expected to provide more clarity.
Andrew Brenner of NatAlliance Securities noted that U.S. Treasury yields continue to rise despite Canada’s recent rate cuts. “In the U.S., the focus is on the election and the potential outcomes,” Brenner said. “That’s driving the current rate structure, but we might need a significant employment shock or an election surprise to see any reversal.”
Bank of America CEO Brian Moynihan has urged the Federal Reserve to proceed cautiously with interest rate cuts. “They were late to the game in raising rates last year,” Moynihan said in a recent interview. “Now they need to be careful not to go too far in the other direction.”
As the U.S. dollar strengthens against major currencies, UBS’s Chief Investment Office continues to hold a bearish view on the dollar. “Investors should consider hedging their portfolios against the risk of a depreciating dollar by reducing their exposure to U.S. assets,” said Solita Marcelli of UBS Global Wealth Management.
With earnings season in full swing, all eyes will be on the performance of big tech companies and their impact on an already volatile market.
-Bloomberg
