Stocks Extend Losses as Worries Go Beyond AI Froth: Markets Wrap

(Bloomberg) — A wave of earnings misses and worries about US economic growth are driving losses across global markets, adding extra fuel to a selloff that was first sparked by traders pulling out of megacap tech. 

US stock futures pointed to more losses. The Europe Stoxx 600 lost 1.5% as results from Nestle SA and Gucci owner Kering SA showed consumers are cutting spending on everything from food to luxury handbags. Ford Motor Co. sank in premarket trading on earnings that missed estimates.

Traders have also started ramping up bets that the Federal Reserve will have to cut interest rates sooner than expected to sustain the US economy. Yields on two-year Treasuries dropped seven basis points to 4.35%. The yen rallied more than 1% on bets the rate gap between Japan and the US will shrink. 

“We are getting disappointment after disappointment,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management. “The message is that maybe growth is weaker than the US data led us to think, and maybe it’s time to reshuffle allocations away from US large tech.”

The US will release data on gross domestic product and initial jobless claims later on Thursday. Concern about the economy kicked into high gear on Wednesday after former New York Fed President William Dudley called for lower borrowing costs — preferably at next week’s gathering. Such a move could be worrisome as it would indicate officials rushing to avoid a recession, some analysts said. 

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Still, the most dramatic moves have been in high-flying chipmakers, with investors taking profits after this year’s massive rally. STMicroelectronics NV and BE Semiconductor Industries NV both sank more than 10% in European trading. 

“If there was a bubble in the AI and Magnificent 7-part of the market, then last night saw it pop,” said Steve Clayton, head of equity funds at Hargreaves Lansdown. 

Corporate Highlights: 

• Nestle SA lowered its sales outlook for the year as consumers balked at price increases on branded food, water and pet-care products.
• Stellantis NV’s shares plummeted as much as 10% after the carmaker said it was bringing back old models and mulling price cuts to cope with a massive drop in sales during the first six months of the year.
• Kering warned that profit will tumble in the second half of the year as luxury demand cools and the turnaround effort at its biggest brand sputters.
• Universal Music Group NV fell as much as 30%, the biggest decline since the company’s initial public offering, after subscription and streaming revenue growth disappointed investors.
• STMicro shares fell as much as 9.5% to the lowest since April 2023 after the chipmaker reduced full-year outlook for a second consecutive quarter, citing a prolonged slump in demand for chips used in cars.
• Unilever Plc shares rose after it increased volumes and raised profitability in the first half of the year as Chief Executive Officer Hein Schumacher’s turnaround begins to gain some traction.
• Roche Holding AG raised its profit forecast as new drugs like Vabysmo for eye disease drove revenue for the latest quarter and first half of the year.

Key events this week:

• Germany IFO business climate, Thursday
• US GDP, initial jobless claims, durable goods, Thursday
• US personal income, PCE, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.3% as of 6:38 a.m. New York time
• Nasdaq 100 futures fell 0.5%
• Futures on the Dow Jones Industrial Average were little changed
• The Stoxx Europe 600 fell 1.5%
• The MSCI World Index fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was little changed at $1.0849
• The British pound fell 0.2% to $1.2884
• The Japanese yen rose 1.1% to 152.14 per dollar

Cryptocurrencies

• Bitcoin fell 3% to $64,033.26
• Ether fell 6.3% to $3,162.2

Bonds

• The yield on 10-year Treasuries declined seven basis points to 4.22%
• Germany’s 10-year yield declined five basis points to 2.39%
• Britain’s 10-year yield declined five basis points to 4.10%

Commodities

• West Texas Intermediate crude fell 1.8% to $76.18 a barrel
• Spot gold fell 0.8% to $2,377.48 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu and Richard Henderson.

©2024 Bloomberg L.P.