US futures
Dow futures -1.6%, S&P 500 futures -2.5% & Nasdaq futures -4.5%
European futures
FTSE 0.05%, DAX 2%
· US stocks plunge with chip stocks leading the charge
· Qualcomm fell sharply after a weaker-than-expected earnings forecast.
· U.S. jobless claims fall to the lowest level in 57 years.
· Oil rebounds 2% after falling 8% yesterday.
U.S. stocks, FX and oil – tech stocks weigh on sentiment
U.S. trade sharply lower investors resume the tech selloff as the post election euphoria is quickly unwound and as attention turns to upcoming economic data.
Despite yesterday’s gains, the Nasdaq is plunging 4.5% as investors sell out of chipmakers and AI-related stocks. There are concerns that Democrats could slow the pace of data centre expansion, given their election victories in key states where data centres are facing public opposition.
This comes at a time when there are already concerns following earnings season about the huge levels of spending and whether timely returns will be made.
The S&P 500 recorded its largest one-day jump in months on Wednesday, supported by lower yields, falling oil prices and hopes that a more gridlocked political backdrop could bring greater stability and less uncertainty.
Attention is now turning to U.S. data, with nonfarm payrolls due tomorrow. This comes as jobless claims fell to 189,000, their lowest level in 57 years, in a low-hire environment.
Expectations are for 65,000 jobs to have been added in the U.S. in October. The data comes as the market is pricing in an 80% probability that the Fed will hike rates by 25 basis points in December. Strong data could cement expectations for a December rate hike, potentially dampening demand for U.S. stocks.
Corporate movers
Qualcomm, the chipmaker, is plunging 9% even after posting a slight earnings beat in its fiscal Q4 results. Qualcomm sees adjusted EPS of $2.15 to $2.35 per share in the current quarter, below the $2.26 expected at the midpoint.
Neo-cloud stocks continue to move lower on concerns over the pace of data centre expansion under a Democratic Congress.
Hyperscalers continue to rise, as a slower buildout pace is seen as supportive.
Shake Shack is rising 3.8% after the fast-food chain published Q3 earnings ahead of forecasts, although revenue was just below expectations.
Peloton, the fitness equipment maker, is up 7% after posting fiscal Q1 revenue of $559 million, ahead of estimates of $554 million. However, earnings of 19 cents missed the 21 cents expected.
S&P 500 forecast – technical analysis
The S&P 500 recovered from yesterday’s low of 7,460 ran into resistance around 7,700 and has rebounded lower. The aggressive move lower turns attention to the 200 EMA at 7360 below which sellers could gain traction.
Any recovery would need to retake horizontal resistance at 7,500, a level seen at the September low above here 7620 comes into play with a rise above here puts the price on a more stable footing.
FX markets – USD rises, GBP/USD steady
The U.S. dollar is rising after yesterday’s losses. Despite the political shift in the U.S., expectations are for further Federal Reserve rate hikes. The market is pricing in a 90% probability of a hike in December, up from 77% yesterday. Treasury yields are also moving higher as oil prices rise.
EUR/USD is falling amid a stronger U.S. dollar and as oil prices remain in focus following a 2% rise today. Meanwhile, lingering concerns over France’s fiscal and political woes remain as protesters take to the streets.
GBP/USD is down 0.1% amid a stronger U.S. dollar, despite a more hawkish-than-expected Bank of England decision. The BoE hiked interest rates by 25 basis points, in line with expectations, to 4%. However, the 9–0 vote was more hawkish than the 7–2 split expected. Catherine Mann also voted to hike rates by 50 basis points. The inflation forecast was upwardly revised to 4.9% by Q2 next year.
Oil – prices recover as geopolitical uncertainty remains
Oil prices are rising on Thursday as investors weigh up the outlook for the U.S.-Iran war after Trump and the Republicans suffered heavy losses in the midterm elections.
While oil prices fell 8% in the previous session, settling at their lowest level since August 31, prices are rising by around 2% today.
Markets are weighing up the likelihood that a Democratic Congress could make it more likely that the Middle East conflict ends sooner rather than later.
However, this is by no means a done deal, and there could still be plenty of volatility ahead. This may particularly be the case if Trump decides to focus his powers on foreign policy amid limited control domestically.
In the meantime, attacks around the Strait of Hormuz continue, with Iran’s Islamic Revolutionary Guard Corps saying on Thursday that two oil tankers had caught fire in separate incidents.
The market will want to see shipments through the key waterway recover to pre-disruption levels for oil prices to continue falling.
