As London and European traders head home, the main story is the liquidation in US stocks. AI and chip names are taking the hardest hit as investors weigh the path forward after the US midterm elections. Yesterday, the Dow surged nearly 1,600 points even as parts of the AI trade struggled. Today, the Dow has given back most of that gain, the Russell 2000 is down more than 4%, and the Nasdaq 100 is down more than 5%. The selling has reached beyond the chipmakers into the power and infrastructure names tied to the AI buildout.
The Nasdaq indices have bounced off their lows, but the Dow and Russell are still right on theirs. For the S&P 500, the September low near 7,511 is the first level buyers need to get back above to take some pressure off. Stay below it, and the 200-day moving average near 7,323 and the swing area at 7,300–7,321 come into focus.
European stocks finish mixed as the BOE hikes
Spain’s IBEX 35 led the gains at +0.59%, followed by France’s CAC 40 at +0.34%. Germany’s DAX and the UK’s FTSE 100 each fell 0.43%, while Italy’s FTSE MIB was the weakest of the major indices, down 1.03%.
The Bank of England raised Bank Rate by 25 basis points to 4.00%, as expected. The vote was 8–1 on the quarter-point move, with Catherine Mann preferring a 50-basis-point hike. Governor Andrew Bailey said there was a case for another quarter-point hike if the war continued. UK construction PMI went the other way, falling to 43.6 from 46.1 and missing the 46.4 forecast. GBPUSD reached 1.3506 before easing back to 1.3481.
Fed officials favor gradual hikes as Treasury yields fall
Cleveland Fed President Beth Hammack said policy needs to become restrictive to get inflation back to 2% and favored smaller, more frequent rate increases. Richmond Fed President Tom Barkin described policy as roughly neutral and also favored a gradual pace of hikes. He said he sees little sign that inflation is coming down and noted that firms are still looking to pass on higher costs.
On the data front, initial jobless claims fell to 189K versus 196K expected and a revised 195K previously. Continuing claims rose to 1.718 million from a revised 1.695 million. Third-quarter nonfarm productivity rose at a 3.6% annualized pace, while unit labor costs fell 0.7%. The next test comes Friday at 8:30 a.m. ET with the October employment report.
Treasury yields moved lower across the curve, with the biggest declines at the short end. The 2-year fell 9.2 basis points to 4.489%, the 5-year fell 7.8 basis points to 4.610%, the 10-year fell 5.7 basis points to 4.835%, and the 30-year fell 2.8 basis points to 5.252%. In Europe, Germany’s 10-year yield fell 3.1 basis points to 3.248%, while Italy’s rose 4.5 basis points to 4.364%. That widened the Italy–Germany spread by about 7.6 basis points.
The yen and gold catch a bid as Bitcoin slides
The dollar was mixed. USDJPY fell to 157.75, near its session low of 157.68, and USDCHF slipped to 0.8148. EURUSD edged up to 1.1236. The Australian dollar took the biggest hit among the majors shown, with AUDUSD down 0.76% at 0.6951, near its 0.6949 session low. NZDUSD fell to 0.5611, while USDCAD edged up to 1.3984.
Spot gold rose 1.20% to $4,109.17 as Treasury yields fell. Silver gained 0.29% to $52.40, while copper fell 2.29% to $6.2820. WTI crude rebounded 2.66% to $90.46. Bitcoin was down 5.56% at $75,960, trading more like the Nasdaq than gold in this session.
For the rest of the US session, I’ll be watching whether the Nasdaq bounce can get some help from the Dow and the Russell. Both are still leaning on their lows. A break below those lows would put the sellers back in position to extend the move.
This article was written by Greg Michalowski at investinglive.com.
