Meta averse, ECB decides and CS slides

A look at the day ahead in U.S. and global markets from Mike Dolan.

Meta added a deep pothole to an already bumpy U.S. earnings season – another obstacle to a market pumped-up by bets of some central bank relief on the horizon as G7 economies slow.

The Facebook parent’s shares (META.O) plunged almost 20% after the bell on Wednesday after the firm forecast a weak holiday quarter and higher costs next year, while investors grew skeptical of its pricey metaverse bets

With Apple (AAPL.O) and Amazon reporting later on Thursday, sentiment toward tech giants remains on edge. Beyond the interest rate cheer at the banks and energy crunch windfalls for Big Oil, other real sector readouts weren’t much better than the tech world and Boeing (BA.N) stock fell almost 10% on Wednesday after its profit miss too.

But the big digital damage has cut across this month’s powerful market rally, an updraft based largely on the slightly vague hopes that the U.S. Federal Reserve may next week signal yet another jumbo 75 basis point interest rate rise could be the last of such magnitude in this cycle.

The Bank of Canada certainly added fuel to that fire on Wednesday with a smaller-than-expected half-point rate hike and said it was getting closer to the end of its historic tightening campaign as the economy is set to stall next year.

The European Central Bank is the latest of the G7 to decide on policy on Thursday, with markets assuming its lagged tightening cycle will – unlike the Canadians – see it deliver the expected 75 bps and detail some further adjustments and rowback to more extraordinary easing measures.

The euro stalled and euro government bond yields edged higher in advance.

The vigil partly also reversed this week’s eye-catching recoil in U.S. Treasury yields (.MIWD00000PUS) and the U.S. dollar – both of which perked up ahead of the ECB decision and the release of third-quarter U.S. gross domestic product data. U.S. GDP is expected to show a hefty 2.4% growth rebound following first half contractions.

But after two-week, trough-to-peak bounce of almost 10%, global stock indices (.MIWD00000PUS) struggled to make much headway for the second session on Thursday. Asia bourses were mixed, Europe in the red and U.S. futures up marginally.

The mood wasn’t helped much by Switzerland’s ailing Credit Suisse (CSGN.S). CS shares plunged 15% after it revealed a long-awaited restructuring plan that raises 4 billion Swiss francs in stock sales, slashes thousands of jobs and spins off its investment bank to stanch a string of heavy losses.

Better news emerged in dealmaking, with Twitter shares (TWTR.N) up 1% after reports banks have started to send $13 billion in cash backing Elon Musk’s takeover of Twitter in a sign that the deal is on track to close by the end of the week.

Key developments that should provide more direction to U.S. markets later on Thursday:

  • European Central Bank policy decision and press briefing; Bank of Japan begins two day policy meeting
  • U.S. Q3 GDP, Sept durable goods orders, Kansas City Fed Oct manufacturing index
  • U.S. Treasury auctions 7-year notes
  • U.S. Corporate Earnings: Apple, Amazon, Intel, Eastman Chemical, Caterpillar, Honeywell, Mastercard, Merck, McDonalds, Keurig Dr Pepper, Comcast, American Electrical Power, Western Digital, AO Smith, Textron, Teleflex, International Paper, Xcel Energy, Borgwarner, Stanley Black & Decker, Allegion, Northrop Grumman, S&P Global, Principal Financial, Capital One, Verisign, Fiserv, Baxter, Weyerhauser, Mohawk Industries, Southwest Airlines, Altria, Hartford Financial, Monolithic Power, Vertex Pharma, Gilead Sciences, Bio Rad Labs, Republic Services, Arthur J Gallagher, Resmed, Edwards Lifesciences, Camden Property, VICI, LKQ, Wills Towers Watson, Southern, American Tower, CBRE, Linde, Dexcom