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Market Insights Today: More tech pain, Oil nears $88, BOC pivots, AUD and Kiwi rally as USD falls– Oct 27, 2022

Equities 3 minutes to read
Jessica Amir

Market Strategist

Summary:  The Nasdaq 100 & S&P 500 snap their 3-day winning streak as big tech drags; with Alphabet down 9%, Microsoft down 8%, triggering a sell off that wiped off more than $400 billion in market value off some of the biggest US companies. After Microsoft posted its weakest quarterly sales growth in five years, crippled by the surging dollar, slumping PC demand and faltering advertising revenue, we wonder if these trends will continue and hurt businesses’ forward earnings. Meta plummeted 18% in late trade. Amazon and Apple report next. Crude oil pops up 3%. All eyes on Fortescue Metals and Lynas' results today for clues on the outlook for iron ore and rare earths.

What’s happening in markets?


Big picture

Google-parent- Alphabet, Microsoft Corp and semiconductor giant Texas Instruments Inc., reported weaker than expected results, triggering a sell off, wiping off more than $400 billion in market value off some of the biggest US companies. The Bank of Canada (BOC) made a surprisingly dovish hike, pushing the US 10-year yields down 9 bps to 4.01%. That pressured the US dollar, with the Aussie and kiwi leading the G-10 basket higher. Oil continued to move up, rising 3.5%, which supported oil and gas stocks higher, while gold rose 0.8% to a two week-peak. And US-listed Chinese stocks rallied again, erasing most of Monday's record selloff; while most Asian-Pacific equity futures are higher with China and Australia’s markets tipped to rise the most.

The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) snap 3-day winning streak as big tech drags; while BOC makes a dovish hike

The Nasdaq fell 2.04% and the S&P500 lost 0.7% as investors sifted through disappointing earnings, from Google-parent- Alphabet (GOOGL shares lost 9%), as well as Microsoft (MSFT shares sank 7.7%) and semiconductor giant Texas Instruments Inc., which triggered a sell off, wiping off more than $400 billion in market value off some of the biggest US companies. The quarterly reports underscored growing pressure on everything from corporate IT budgets to digital ad spending and chips for industrial machinery. Meanwhile, computer hard-drive maker Seagate is slashed 3,000 jobs, saying big buyers are cutting orders amid global uncertainty.Microsoft posted its weakest quarterly sales growth in five years, crippled by the surging dollar, slumping PC demand and faltering advertising revenue. This is something we are watching as we think the stronger dollar stronger dollar will continue to hurt businesses’ forward earnings, at a time when consumer demand is likely to fall, along with business spending with the reverse wealth effect expected to grip, with tech and consumer spending the most exposed. Meta published earnings after the close with META shares losing 18% after hours on disappointing numbers. Next to report Thursday is Amazon and Apple.

Meta plummets 18% in late trading after its fourth-quarter revenue forecast disappointed

...amid the ongoing ad market slowdown. Meta also expects higher expenses in 2023 as it pursues its ambitious, but costly, metaverse vision, saying operating losses will grow "significantly" year over year. "Prioritization and efficiency" are Meta's focus now, said Mark Zuckerberg, with some teams being downsized, and only priority teams getting to grow headcount.

Crude oil (CLX2 & LCOZ2) nears $88 on weaker US eco news, near-term tightness

WTI settled near $88 after EIA data showed the US exported a record amount of crude and fuel last week. The EIA noted Gasoline stockpiles on the US East Coast dwindled to their lowest seasonal level on a calendar basis since 2007. Overall reserves dropped by 1.48 million barrels. Crude inventory, by contrast, rose by 2.6 million barrels, the most since July 2021, with exports jumping to a new weekly high above 5.1 million b/d. JPMorgan maintained its price WTI forecast of $98 for next year. US natural gas futures clawed back losses. Metals gained and wheat rebounded.

Australia’s ASX200 (ASXSP200.1) posed to rise 0.4%, supported by the falling USD, rising commodity prices

On Thursday morning the S&P/ASX 200 futures suggest the market will lift 0.38% supported higher by oil prices rising over 3% to $88. Attention will be on Woodside, Santos, WorleyParsons and the like. Lots of quarterly results are on tap; with a focus on rare-earth giant Lynas, and iron ore major Fortescue, as well as gold miners Newcrest Mining, Gold Road Resources and Regis who also report results today. And in the thick of it, ANZ reports yearly results. Investors should pay attention to its net interest margin (a term that measures banking profitability). We think it will decline, given borrowing rates are declining and bad debts are rising. Markets will also pay attention to iron ore results from Fortescue Metals today, especially after China affirmed its zero-covid policy stance. As such the outlook for iron ore majors like FMG, BHP, Rio and Champion Iron might be downgraded by research houses.

What to consider?

Australian Federal Government Budget winners and losers  

Yesterday we spoke about the winners and losers of the Australian Federal Government Budget. Catch the video here or read the text here in 3 minutes. 


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