MARKET WRAPS
Watch For:
New Home Sales for September; EIA Weekly Petroleum Status Report; Bank of Canada Interest Rate Decision; earnings from Boeing, Ford, Meta Platforms, Kraft Heinz
Opening Call:
Today's Headlines:
-Big Tech hammered premarket
-Intel Prices IPO for Self-Driving Car Unit Mobileye
-Bitcoin Rises Back Above $20,000
-Deutsche Bank Posts Jump in Profit on Rising Rates
Follow WSJ markets coverage here.
Technology stocks dropped sharply on Wednesday after earnings from Alphabet, Microsoft and Texas Instruments gave investors plenty of reasons to worry.
The declines rippled across the sector. Facebook parent Meta Platforms lost 3.4%, Snap fell 3.3% and Amazon declined 3.5%.
Texas Instruments added to concerns about the tech industry when it forecast lower-than-expected revenue for the December quarter on Tuesday, citing demand weakness in nearly all sectors of the economy. Its shares fell 4% premarket.
"These companies are really important bellwethers on advertising and on flows of goods and services," said Fahad Kamal, chief investment officer at Kleinwort Hambros.
"If advertising growth is slowing, it is adding weight to that fear of an earnings slowdown."
Though their shares have fallen this year, mega-cap technology stocks still hold tremendous sway over major indexes. Together, six stocks-Apple, Microsoft, Alphabet, Amazon, Netflix and Meta-account for nearly 23% of the S&P 500's value, FactSet data show.
Forex:
The dollar hit a three-week low in early European trading, as investors appeared to increasingly expect the Fed to slow the pace of interest rate rises soon, UniCredit Research said.
"Weaker data...such as the S&P CoreLogic index and the Conference Board's consumer confidence survey are just reinforcing this view amid lower U.S. long-term yields and the dollar index slipping back below 111," UniCredit said.
GBP/USD is near 1.15 and EUR/USD is near parity, key levels that can attract more buying interest if broken, UniCredit said.
ING said sterling could extend its recovery against the dollar after rising above the key 1.15 level, led by investors shifting away from safe-haven assets. A break above this level could see the correction extend to GBP/USD 1.1750, ING said.
"Such a correction would more likely be driven by a global re-assessment of risk [dollar negative] than a further re-rating of U.K. prospects."
For EUR/GBP, 0.8650-0.8750 looks to be the near-term trading range, ING said.
Other Insight:
EUR/USD has likely started a corrective rebound, based on technical charts, according to UOB Global Economics & Market Research.
EUR/USD rose on Tuesday to close clearly above both the top of a descending channel and the 55-day exponential moving average for the first time since February, UOB said.
However, the currency pair must break clearly above the top of the daily Ichimoku cloud, which is currently at 1.0090, before a sustained and significant recovery is likely.
Other News:
Bitcoin traded at its highest level in three weeks Wednesday after a bout of rangebound trading.
It has traded between about $18,000 to $20,000 apiece in recent weeks and stood at $20,313 in the London morning.
Despite the price rise, cryptocurrency traders aren't expecting a strong rally soon. A tightening economic backdrop and a rising cost of living has sapped individual investors' trading interest.
Energy:
Oil futures extended their retreat in Europe, falling more than 1%, after API data showed a large build in U.S. inventories added to worries about global demand.
"The prospect of a global economic slowdown and tighter monetary policy has been outweighing the specter of supply reductions in recent weeks," ANZ said.
Metals:
Metals carried gains from Asia into the European open, with more positive sentiment from China helping traders pivot to risk assets.
Marex said there was rising aluminum buying in China, with worries over a possible LME ban on Russian metal. It added that onshore equities in China were "risk on" with multiple government departments speaking out in an attempt to shore up the economy.
"The PBOC and the Foreign Exchange Bureau have said they will strengthen departmental collaboration to maintain the healthy development of the stock, bond, and property markets."
Other Insight:
The aluminum market is expected to move into a greater surplus in 2023 as poor construction demand in China offsets production cuts in Europe, according to BMO Capital Markets.
BMO was projecting a 890,000 metric ton surplus in 2023, up from 410,000 tons in 2022. It noted that demand from China's construction sector was particularly weak, and cuts to output from Yunnan province were possible.
BMO also saw small market surpluses for nickel and copper but the market was likely to remain tight. Zinc though will remain in deficit at 66,000 tons in 2023 from 288,000 tons in 2022.
TODAY'S TOP HEADLINES
Intel Prices Widely Anticipated IPO for Self-Driving Car Unit Mobileye
Intel Corp.'s self-driving car unit Mobileye Global Inc. priced its initial public offering at $21 a share, a dollar above the top of its targeted range, according to people close to the deal.
Mobileye raised $861 million by selling 41 million shares, valuing the company at roughly $17 billion, the people said. That is more than the $15.3 billion that Intel paid for the Mobileye in 2017 but a far cry from the $50 billion or more that the chip giant originally set its sights on when it unveiled plans for the listing late last year.
Apple Executives Say Privacy Controls and Advertising Can Coexist
LAGUNA BEACH, Calif.-Apple Inc.'s software chief said advertising and privacy can coexist as iPhone changes rolled out more than a year ago continue to roil the digital-ad market.
Speaking at The Wall Street Journal's annual Tech Live conference, Craig Federighi, senior vice president of software engineering, said the iPhone maker was uncertain about the short-term ramifications of the new requirements it introduced last year that require third-party apps to seek user permission to track their digital footprints.
Sequoia Capital's Roelof Botha Predicts Success for Elon Musk at Twitter
Roelof Botha, the head of Sequoia Capital, said he thinks there are large improvements to be made for Twitter Inc.'s current business and that Elon Musk's takeover bid for the social-media company will be a success.
Mr. Botha, speaking at The Wall Street Journal's Tech Live conference, said he thought Twitter could find better ways to make money beyond advertising and improve its product. Sequoia has committed $800 million for the deal. The funding is set to come from Sequoia's main venture funds, its wealth management business called Heritage, and its crossover fund Sequoia Capital Global Equities.
Deutsche Bank Posts Jump in Profit on Back of Rising Rates
Deutsche Bank AG's net profit rose sharply in the third quarter as it charged higher interest on loans and traded more currencies and bonds for clients in a volatile market.
But in a sign of challenges ahead, Germany's biggest bank set aside more money to cover possible defaults from borrowers amid a looming recession in its home market and farther afield.
Barclays Profit Jumps on Market Volatility
British bank Barclays PLC said Wednesday that its third-quarter profit rose 10% from a year earlier, reflecting increased use of consumer credit cards and market volatility that boosted trading revenue.
Net profit rose to GBP1.5 billion, equivalent to $1.7 billion, in the three months through September. Analysts had expected it to report a profit of about GBP1.2 billion, according to estimates compiled by the London-based bank.
Canada Sets Terms Under Which It Will Approve Shaw Wireless Sale to Quebecor
OTTAWA-Canada on Tuesday set out some of the terms under which it is willing to approve the multibillion-dollar sale of Shaw Communications Inc.'s wireless assets to Quebecor Inc. - a transaction required to save a bigger $16 billion merger between Shaw and Rogers Communications Inc.
Canadian industry minister François-Philippe Champagne said approval of the wireless transfer hinges on at least two factors. First, Montreal-based Quebecor would need to hold Shaw's wireless spectrum licenses for a minimum of 10 years. "We don't want someone to flip these licenses. We want someone to be in it for the long term," Mr. Champagne said at a late Tuesday afternoon press conference in Ottawa.
Bristol Myers's Third-Quarter Profit Rose, Revenue Declined
Bristol-Myers Squibb Co.'s net profit rose slightly in the third quarter, mostly due to the stronger performance of its in-line and new product segments.
The U.S.-listed pharmaceutical company said in a release Wednesday that its third-quarter net profit rose to $1.60 billion from $1.50 billion a year earlier.
Chip Maker SK Hynix Slashes Capital Spending
SEOUL-SK Hynix Inc., one of the world's biggest chip makers by revenue, halved its planned investments for next year due to deteriorating market conditions, as the semiconductor industry's downturn continues.
Predicting a prolonged oversupply of memory chips, the South Korea-based SK Hynix said it would cut capital expenditure by more than 50% from the current year. The company said its 2022 spending would be between 10 trillion and 20 trillion won, equivalent to between $7 billion and $14 billion.
Chipotle's Increase in Burrito Prices Contributes to Store-Sales Boost
Chipotle Mexican Grill Inc. said consumer demand remained strong for its burritos and bowls even after it raised prices again in recent months, though the chain's chief executive said inflation is wearing on some consumers.
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10-26-22 0532ET
