Overnight Market Wrap: 27 October 2022

Overnight Market Wrap: 27 October 2022

Key Points:

  • US Stocks Brace for Pain on Fresh Earnings Blows
  • The S&P 500 closed lower and the Nasdaq 100 fell more than 2%
  • Treasuries gained; the 10-year yield briefly dropped below 4%

Wall Street saw a session of twists and turns on Wednesday, with stocks snapping a three-day rally as earnings from megacap firms highlighted the toll the Federal Reserve, and consequently the surging dollar, had on the economy. 

The S&P 500 closed lower and the Nasdaq 100 fell more than 2%. Meta Platforms Inc. dropped 12% postmarket on a softer-than-expected revenue view and Ford Motor Co. also fell after it warned of a profit shortfall due to inflation. Snap Inc. and Pinterest Inc. also dipped in extended trading.

Treasuries gained, with the 10-year yield briefly dropping below 4% as investors mulled the Fed’s path after the Bank of Canada announced a smaller-than-expected rate hike. 

Data that released this week showed a contraction in the services and manufacturing sectors and a drop in sales of new US homes, indicating that Fed tightening is starting to hit the economy. But investors still expect the central bank to raise rates by three-quarters of a percentage point during its next meeting before pondering the end of its tightening regime. 

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.”

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