United States
Negative earnings news whacked US equities with growth stocks hit hardest after Meta shocked investors with an earnings miss and poor guidance. Rising global bond yields after hawkish news from the European Central Bank and Bank of England added to the selloff in growth names. The Dow Jones industrial average lost 1.5 percent, the S&P 500 lost 2.4 percent, and the NASDAQ dropped 3.7 percent.
Meta's plunge, down 26 percent, along with Spotify, down 17 percent, spelled trouble for internets and digital businesses generally, with Snap down 24 percent and Pinterest down 10 percent as the market priced in more earnings disappointments from businesses driven by digital advertising. Google lost 3.6 percent.
The washout hit technology, including Qualcomm, which fell 4.8 percent despite topping earnings and revenue expectations, Texas Instruments, down 6.5 percent, and Qorvo, another chipmaker, fell 10.3 percent. Among growth/momentum high-fliers, Salesforce lost 5.4 percent, Zoom Video fell 6.9 percent, Amazon fell 7.8 percent, and Tesla was off 1.6 percent.
Among old economy stalwarts, Honeywell lost 7.6 percent on disappointing results. Lincoln National, the insurer, fell 3.7 percent after an earnings miss. On the positive side, Humana rose 6.2 percent on expectations for strong results. Managed care stocks, pharma, media, and consumer staples held up best.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.49 to US$91.03 while spot gold rose 55 cents to US$1,806.15. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond rose 4 basis points to 2.15 percent, and the 10-year note gained 5 basis points at 1.83 percent.
Europe
Hawkish noises from European Central Bank President Christine Lagarde hit European equities and government bonds as investors priced in rate hikes in June and September. The Europe-wide STOXX 600 dropped 1.8 percent, the German DAX fell 1.6 percent, the French CAC slipped 1.5 percent, and the UK FTSE 100 declined 0.7 percent.
The ECB "will not be complacent" about record-high eurozone inflation, a more hawkish view expressed by long-term dove Christine Lagarde. "Compared to December, inflation risks are tilted to the upside, particularly in the near term," Lagarde told reporters following the ECB's governing council meeting on Thursday. The bank's statement on policy reflected the view that "inflation is more likely to overshoot than undershoot," she said.
Separately the Bank of England's 25 basis point rate move matched expectations but the 5-4 vote, with four policy-makers favoring a more aggressive 50 basis point move, surprised markets. The bank raised its inflation outlook with consumer price inflation expected to "peak at around 7.25 percent" in April, up from the 6 percent high predicted in December. Consumer prices in the UK (data released last month) surged to an annual rate of 5.4 percent in December, the fastest pace since March of 1992.
Among sectors, industrials, technology, and travel & leisure lagged while basic resources and banks held up best. Among companies reporting, Royal Dutch Shell rose 1.4 percent after raising its dividend and buybacks. On the downside, Infineon, a leading supplier of microchips for automakers, fell 5.6 percent despite a better revenues forecast.
Asia Pacific
Mixed earnings news and profit-taking after recent gains weakened most Asia/Pacific markets. Activity was limited as Chinese markets remained on holiday.
Concern over rising Covid cases and company results weighed on Japan, including disappointing earnings from Meta after the US close. The Nikkei 225 fell 1.1 percent and the Topix declined 0.9 percent. Sony fell 6.1 percent and Panasonic lost 6.9 percent as investors focused on the impact of chip shortages.
The South Korean KOSPI popped up 1.7 percent on the market's return from holiday as the market caught up with a better showing for tech stocks on Wall Street this week. Upbeat manufacturing purchasing managers data bolstered sentiment. The PMI headline index rose from 51.9 in December to a six-month high of 52.8 in January.
Profit-taking after gains this week hit India with the Sensex down 1.3 percent. Tech stocks, oil & gas, and capital goods lagged while autos held up best.
Late earnings news from Wall Street dampened Australian equities with the All Ordinaries index down 0.3 percent and the ASX 200 off 0.1 percent. Tech and health care lagged while materials and telecom held up better.
Looking ahead*
In Asia/Pacific, South Korean CPI and Reserve Bank of Australia Statement on Monetary Policy are scheduled. In Europe, German manufacturers orders, French industrial production, UK PMI construction, and Eurozone retail sales are on tap. In North America, US Employment Situation, Canadian Labour Force Survey, and Canadian Ivey PMI reports are on tap.
