Markets Today: Stocks Mixed After U.S. GDP Report but Meta Plunges

Morning Markets

This morning the Dow Jones is up +0.9% but the S&P 500 is down -0.3% and the Nasdaq is falling 1.26% on a massive -22% drop in Meta due to the disappointing late-Wednesday earnings report.  Stocks are being undercut by today’s +3 bp rise in the 10-year T-note yield to 4.04%.

U.S. stock indexes saw some support after today’s U.S. Q3 GDP report of +2.6% (q/q annualized) was a bit stronger than the consensus of +2.4%.  In addition, Q3 personal spending rose +1.4% (q/q annualized), stronger than the consensus of +1.0%.  The core PCE inflation measure rose +4.5%, down from Q2’s +4.7% and in line with the consensus.  U.S. GDP in Q3 snapped the 2-quarter string of losses in Q1 (-1.6%) and Q2 (-0.6%), which some defined as a technical recession. 

Today’s Sep U.S. durable goods orders report of +0.4% m/m was weaker than expectations of +0.6% but August was revised higher to +0.2% from -0.2%.  In a negative development, Sep capital goods orders ex defense and aircraft, a proxy for capital spending, fell -0.7%, weaker than expectations of +0.3%.

U.S. weekly initial unemployment claims rose +3,000 to 217,000, which showed a bit stronger labor market than expectations for a rise to 220,000.  However, continuing claims rose +55,000 to 1.438 million, showing a weaker labor market than expectations for a small rise to 1.390 million.

The Euro Stoxx 50 index is down -0.25% today as the market absorbs today’s +75 bp rate hike by the European Central Bank (ECB), which was the third straight rate hike but was expected by the market.  The ECB also said it “expects to raise interest rates further.”  The markets are waiting for some color commentary as ECB President Lagarde is scheduled to hold her press conference shortly.

The markets are expecting the ECB to implement another +25 or +50 bp rate hike in December and then back off in the new year to reassess.  The markets are expecting the ECB in 2023 to implement quantitative tightening by allowing its bond portfolio to slowly mature, thus reducing the amount of reserves in the banking system.

European stocks were undercut today by a sharp -13% drop in Credit Suisse after the bank reported its fourth straight loss. However, Shell is up +4.7% after posting a large profit and raising its dividend.

Asian markets today closed lower.  China’s Shanghai Composite closed down -0.55%, and Japan’s Nikkei Stock Index closed down -0.32%. 

Pre-Market U.S. Stock Movers

Meta Platforms (META) is sharply lower by -23% in pre-market trading after the company took a hit from weak advertising revenues and investors showed little confidence in CEO Zuckerberg’s heavy spending budget.  Mr. Zuckerberg asked investors for patience with the company’s expensive development efforts in the metaverse, short-form video (“Reels” to compete with Tik-Tok), and business messaging.  Meta’s quarterly revenue fell -4.5% y/y for only the second such drop in the company’s history.  The company’s guidance was for full-year 2022 expenses to be $85-87 billion and to grow to $96-101 billion in 2023.

The plunge in Meta sparked weakness in other social media companies, which have taken a hit this year on a sharp slowdown in advertising revenues and general concern that some mega-tech companies have already seen their day in the sun.  Snap (SNAP) is down -0.7% and Pinterest (PINS) is down -2.4%.

Shopify (SHOP) bucked the trend and is up +4% in pre-market trading after the company reported better-than-expected revenue and said it expects sales volume to outperform overall retail sales in Q4.

Twitter (TWTR) is up +1% in pre-market as Elon Musk visited Twitter headquarters on Wednesday and insisted that his $44 billion purchase of Twitter will close this Friday.  Mr. Musk will reportedly address Twitter staff on Friday.

Teleadoc Health (TDOC) is up +10% in pre-market trading after the company’s 2023 guidance was a bit better than expected.

Today’s U.S. Earnings Reports (10/27/2022)

A O Smith Corp (AOS), Allegion plc (ALLE), Altria Group Inc (MO), Amazon.com Inc (AMZN), American Electric Power Co Inc (AEP), American Tower Corp (AMT), Apple Inc (AAPL), Arthur J Gallagher & Co (AJG), Baxter International Inc (BAX), Bio-Rad Laboratories Inc (BIO), BorgWarner Inc (BWA), Camden Property Trust (CPT), Capital One Financial Corp (COF), Carrier Global Corp (CARR), Caterpillar Inc (CAT), CBRE Group Inc (CBRE), CMS Energy Corp (CMS), Comcast Corp (CMCSA), Dexcom Inc (DXCM), DTE Energy Co (DTE), Eastman Chemical Co (EMN), Edwards Lifesciences Corp (EW), Fiserv Inc (FISV), Gilead Sciences Inc (GILD), Hartford Financial Services Group (HIG), Honeywell International Inc (HON), Intel Corp (INTC), International Paper Co (IP), Keurig Dr Pepper Inc (KDP), Kimco Realty Corp (KIM), L3Harris Technologies Inc (LHX), Laboratory Corp of America Hol (LH), Linde PLC (LIN), LKQ Corp (LKQ), Mastercard Inc (MA), McDonald's Corp (MCD), Merck & Co Inc (MRK), Mohawk Industries Inc (MHK), Monolithic Power Systems Inc (MPWR), Northrop Grumman Corp (NOC), PG&E Corp (PCG), Pioneer Natural Resources Co (PXD), Principal Financial Group Inc (PFG), Republic Services Inc (RSG), ResMed Inc (RMD), S&P Global Inc (SPGI), Southern Co/The (SO), Southwest Airlines Co (LUV), Stanley Black & Decker Inc (SWK), T Rowe Price Group Inc (TROW), Teleflex Inc (TFX), Textron Inc (TXT), T-Mobile US Inc (TMUS), VeriSign Inc (VRSN), Vertex Pharmaceuticals Inc (VRTX), VICI Properties Inc (VICI), West Pharmaceutical Services Inc (WST), Western Digital Corp (WDC), Weyerhaeuser Co (WY), Willis Towers Watson PLC (WTW), Xcel Energy Inc (XEL).

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