Stocks drop as investors digest Microsoft, Meta earnings

by Robert Brand and Sagarika Jaisinghani

Stocks extended declines on the busiest day of the earnings season as investors digested results from Microsoft Corp. and Meta Platforms Inc. as well as economic data that blurred the picture for Federal Reserve interest-rate cuts.

US equity futures fell after a muted session on Wall Street, with Nasdaq 100 contracts retreating more than 1%. Microsoft and Meta were both down about 4% in pre-market trading. The slide in the two stocks combined represented half of the losses in the Nasdaq futures, according to Bloomberg calculations. Amazon Inc. and Apple Inc. are due to report today. 

The “disappointing” set of results from Microsoft and Meta was hurting sentiment, said Marija Veitmane, a senior multi-asset strategist at State Street Global Markets. 

“The market is concerned with the continued increase in investments, and that is likely to weigh on stocks in the short term,” she said. “In the medium term, however, we still see weakness in tech stocks as a buying opportunity. It’s a very crowded position, so it is getting sold on any sign of disappointment, but we always see investors coming back as there’s no other alternative if you want quality.”

The dollar was steady, and on pace for its best month in over two years, after investors trimmed bets on Fed policy easing after robust economic-growth and jobs data Wednesday. One-week implied volatility on the Bloomberg Dollar Spot Index rose to the highest since December 2022, indicating that traders expect wild swings in the greenback over the US presidential election.

“Yesterday’s US GDP data once more evidenced the continued ‘US exceptionalism’ theme which still underpins much of the USD’s recent strength,” said Michael Brown, a senior research strategist at Pepperstone Group Ltd. “I still find it tough to bet against the greenback in such an environment, and would be buying any pre-election USD dips.”

The two-year Treasury yield, which is most sensitive to interest-rate moves, rose to a three-month high. In addition to the resilient US economy, investors are worried that a resurgence in inflation after the US election may delay or prevent interest-rate cuts.

“Who becomes president changes the perspective of the investment cycle,” Daniel Yoo, head of asset allocation, Yuanta Securities, said on Bloomberg Television, highlighting the potential effects of higher tariffs and lower corporate taxes under a potential Donald Trump presidency. “That will probably accelerate the process of inflation pressure and therefore the lowering of interest rates may be taken at a slower pace or not even happen.”

The Stoxx Europe 600 retreated for a third day, on track for its biggest monthly decline in a year. French lender BNP Paribas SA was the biggest drag on the index, plunging more than 7% after reporting third-quarter earnings. Peers BBVA SA, Banco Sabadell SA and ING Groep NV also dropped after their results. Societe Generale SA stood out among lenders, soaring 11% after beating estimates.

Shares in Japan, Australia and South Korea declined, weighing on an index of the region’s equities, which headed for its worst monthly performance since August 2023. Mainland Chinese shares were mixed and those in Hong Kong rose, after a report showing monthly Chinese manufacturing data registered its first expansionary reading since April. 

The BOJ kept its benchmark interest rate unchanged after uncertainties increased over the outlook of the economy and the stability of the government after the ruling coalition suffered its worst electoral result since 2009. The yen strengthened below 153 per dollar.

Oil edged higher, extending its gains from the previous session. Gold declined after touching a fresh record in the prior session. Demand for the precious metal was partly supported by the uncertainty posed by next week’s vote.

Key events this week:

• Eurozone CPI, unemployment, Thursday
• US personal income, spending and PCE inflation data, initial jobless claims, Thursday
• Amazon, Apple earnings, Thursday
• China Caixin manufacturing PMI, Friday
• US employment, ISM manufacturing, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.8% as of 9:38 a.m. London time
• S&P 500 futures fell 0.8%
• Nasdaq 100 futures fell 1.1%
• Futures on the Dow Jones Industrial Average fell 0.6%
• The MSCI Asia Pacific Index fell 0.3%
• The MSCI Emerging Markets Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0857
• The Japanese yen rose 0.6% to 152.50 per dollar
• The offshore yuan was little changed at 7.1287 per dollar
• The British pound was unchanged at $1.2962

Cryptocurrencies

• Bitcoin fell 0.7% to $72,340.98
• Ether fell 1.4% to $2,639.84

Bonds

• The yield on 10-year Treasuries was little changed at 4.30%
• Germany’s 10-year yield advanced five basis points to 2.43%
• Britain’s 10-year yield advanced nine basis points to 4.44%

Commodities

• Brent crude rose 0.4% to $72.81 a barrel
• Spot gold fell 0.3% to $2,778.42 an ounce

This story was produced with the assistance of Bloomberg Automation.