Global equity momentum fizzled on Friday, after chipmaker Intel Corp.’s grim quarterly forecast added to investors’ trepidation over company earnings, and a robost set of US economic data raised the possibility of continued rate hikes from the Federal Reserve.
(Bloomberg) — Global equity momentum fizzled on Friday, after chipmaker Intel Corp.’s grim quarterly forecast added to investors’ trepidation over company earnings, and a robost set of US economic data raised the possibility of continued rate hikes from the Federal Reserve.
Europe’s equity benchmark, the Stoxx 600, struggled to build on its 0.4% gain from Thursday, while futures on the tech-heavy Nasdaq 100 dropped about 0.5%, with Intel down as much as 11% in premarket trading after issuing one of its weakest ever quarterly forecasts.
US stocks remain on track for their best month since July, while the Stoxx index has gained almost 7% so far, but caution has seeped in as company earnings trickle out. On Friday, French distiller Remy Cointreau SA and luxury goods firm LVMH posted slower sales growth, sending their shares lower.
Before the Intel report on Thursday, the S&P 500 index achieved its highest close in more than a month and the Nasdaq 100 rose 2% to a four-month high.
“You are seeing more and more companies turn cautious about the earnings outlook,” said Dan Boardman-Weston, chief investment officer at BRI Wealth Management. “If there is a recession, earnings will have to decline and price-to-earnings ratios have to come down.”
Data on Thursday also showed US gross domestic product expanded at a faster-than-forecast pace into the end of 2022. That encouraged hopes the world’s biggest economy can achieve a soft landing, but could temper expectations of a Federal Reserve pivot towards rate cuts later this year.
“Stronger data may negate the argument for recession, but then, it means the Fed has to be more hawkish,” Boardman-Weston said. “Markets are in a bit of a Catch-22.”
Investors could get fresh clues on the outlook for prices from the upcoming US PCE core deflator index and the University of Michigan’s inflation expectations survey.
Signs of US economic resilience kept the dollar higher for the second day against Group-of-Ten rivals, while Treasury yields rose about four basis points.
While the Fed is set to hike interest rates by 25 basis points next week — shifting away from last year’s bigger moves — hopes for end-2023 rate cuts are “a step too far” and may end up being frustrated, according to Erick Muller, head of product and investment strategy at Muzinich & Co. Ltd.
“We will probably see the Fed say ‘we are entering the final phase but listen carefully guys: we will continue to raise rates,” Muller said. “A lot of volatility in rates will depend on the path of inflation from here.”
Another dampener was the continued rout in companies linked to Indian billionaire Gautam Adani. His corporate empire has shed some $50 billion of market value in less than two sessions following an explosive report from short seller Hindenburg. The losses dragged India’s Nifty 50 index to three-month lows.
Elsewhere, oil prices extended gains, benefiting signs of a resilient US economy and China’s continued recovery. Investors are looking ahead to earnings from Big Oil, with Chevron set to report later in the day.
Analysts at Goldman Sachs predicted crude prices to head to $100 a barrel later this year from current levels just above $80.
Key events:
- American Express, Charter Communications, Chevron, HCA Healthcare to report results Friday
- US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 10:36 a.m. London time
- S&P 500 futures fell 0.3%
- Nasdaq 100 futures fell 0.5%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.4%
- The MSCI Emerging Markets Index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0890
- The Japanese yen rose 0.4% to 129.75 per dollar
- The offshore yuan fell 0.2% to 6.7517 per dollar
- The British pound fell 0.2% to $1.2377
Cryptocurrencies
- Bitcoin fell 0.5% to $22,975.38
- Ether fell 1.3% to $1,581.39
Bonds
- The yield on 10-year Treasuries advanced four basis points to 3.53%
- Germany’s 10-year yield advanced four basis points to 2.26%
- Britain’s 10-year yield advanced two basis points to 3.34%
Commodities
- Brent crude rose 1.2% to $88.51 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Matthew Burgess and Tassia Sipahutar.
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