Stocks Drop as Euphoria From BOC’s Decision Fades: Markets Wrap

(Bloomberg) — US stocks dropped as investors parsed fresh economic data and disappointing earnings while mulling the Federal Reserve’s path after the Bank of Canada announced a smaller-than-expected rate hike.

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The S&P 500 struggled for direction before pushing lower. Boeing Co. plunged after it reduced its annual forecast for deliveries of its 737 narrowbody jets. US Secretary of State Antony Blinken’s comments also dampened sentiment in the afternoon after he said he doesn’t see Iran nuclear talks advancing in the short term.

Treasuries rallied after data showed the US merchandise-trade deficit widening. Sales of new US homes fell in September, another indication that the economy is starting to see the effects of the Fed raising rates sharply. A gauge of the dollar declined for a second day to its lowest level in three weeks.

Stocks had been buoyed in recent days by mostly solid earnings and speculation the Federal Reserve may curb the pace of rate increases. Sentiment took a hit on Wednesday after earnings from megacap companies including Alphabet Inc. and Microsoft Corp. highlighted the impact the Fed, and consequently the surging dollar, had on the economy.

The Bank of Canada unexpectedly slowing its pace of interest-rate hikes amid fears of a recession briefly boosted markets. But that wore off as some investors decided that it doesn’t necessarily mean the Fed will follow suit.

In any case, it’ll be challenging for the Fed to announce that they’re going to be less hawkish, as they have to manage investors’ expectations along the way, according to Dustin Thackeray, chief investment officer at Crewe Advisors.

“They obviously don’t want to be too dovish and the market is obviously looking for any sort of a sign from the Fed that we’re hitting the break, so to speak, on rate increases,” he said by phone. “If they continue on their too hawkish stance, there is a risk that things kind of get out of hand on that end as well. So they’re definitely walking a very fine line.”

Key events this week:

Earnings due this week include: Apple, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Intel, McDonald’s, Merck, Samsung Electronics, Shell, Vale, Volkswagen
ECB rate decision, Thursday
US GDP, durable goods orders, initial jobless claims, Thursday
Bank of Japan policy decision, Friday
US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

The S&P 500 fell 0.4% as of 1:41 p.m. New York time
The Nasdaq 100 fell 1.8%
The Dow Jones Industrial Average rose 0.3%
The MSCI World index rose 1.6%

Currencies

The Bloomberg Dollar Spot Index fell 0.8%
The euro rose 1.1% to $1.0072
The British pound rose 1.2% to $1.1607
The Japanese yen rose 1% to 146.43 per dollar

Cryptocurrencies

Bitcoin rose 2.7% to $20,740.62
Ether rose 5.3% to $1,552.32

Bonds

The yield on 10-year Treasuries declined eight basis points to 4.02%
Germany’s 10-year yield declined six basis points to 2.11%
Britain’s 10-year yield declined six basis points to 3.58%

Commodities

West Texas Intermediate crude rose 2.9% to $87.78 a barrel
Gold futures rose 0.7% to $1,668.90 an ounce

–With assistance from Allegra Catelli, Abigail Moses, Robert Brand, Vildana Hajric and Peyton Forte.