In a turbulent trading session on Thursday, stocks took a nosedive as investors grappled with the fallout from lackluster earnings reports from major tech companies and a surge in bond yields. The Nasdaq, heavily weighted towards technology stocks, led the downturn with a sharp 1.8% decline, while the S&P 500 followed suit with a 1.2% drop, edging perilously close to correction territory. The Dow Jones Industrial Average also experienced a substantial dip, shedding 0.8% or over 250 points.
Tech stocks remained under considerable pressure after enduring their most challenging single-day performance in eight months on Wednesday. Heightened concerns are emerging over lofty valuations in the face of escalating Treasury yields. On Thursday, the benchmark 10-year yield retreated by 11 basis points, settling near 4.85%, in response to the latest Gross Domestic Product (GDP) figures, revealing the US economy’s most robust growth in nearly two years. The Bureau of Economic Analysis’s advance estimate for third-quarter US GDP disclosed an annualized growth rate of 4.9%.
Despite the Federal Reserve’s persistent stance on higher-for-longer interest rates, which has yet to curtail the spending habits of the American consumer, other central banks are beginning to pivot their monetary policies. On Thursday, the European Central Bank maintained interest rates at their current level for the first time in over a year, following ten consecutive rate hikes, while upholding their previous commitment to a steady policy course.
The substantial losses witnessed in the stock market, despite the encouraging strides in the US economy, are indicative of investors’ keen focus on the repercussions of elevated valuations and the sudden surge in US bond yields, leaving stocks languishing in a state of uncertainty. The upcoming interest rate decision from the Federal Reserve on November 1st is anticipated to offer greater clarity on the trajectory of the economy and the potential depth of the ongoing stock market correction.
In summary, Thursday saw another bleak day for stocks as disappointing Big Tech earnings and the surge in bond yields continued to deter investors. Despite robust US economic indicators, investors are confronted with pivotal decisions regarding the broader implications of the pause in rate hikes and the valuation levels within US markets. The markets remain on tenterhooks as they await further developments in the economic landscape.
Source: Yahoo Finance
