Market Snapshot: Dow struggles to hold gain as tech stumbles after disappointing earnings

What’s driving markets

The S&P 500 has rallied since Thursday’s close as investors assessed a generally positive third quarter earnings season. Meanwhile, the Bank of Canada’s smaller-than-expected rate rise on Wednesday buoyed hopes that the Federal Reserve may eventually be less aggressive in hiking rates.

Also helping to boosting the positive sentiment is the continued slide on Wednesday in bond yields
TMUBMUSD10Y,
4.018%
and the dollar
DXY,
-1.08%.
The yield on the 10-year Treasury retreated to 4.0624% from 4.109% as of Tuesday afternoon. The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was down 1.1% at 109.76, as offshore Chinese yuan
CNHUSD,
+1.59%
surged 1.8% to 7.1917 after Chinese banks were reported to sell the greenback to help drive the move.

“The U.S. dollar’s near parabolic rise against major currencies has eased as data releases, including manufacturing, housing, and even the seemingly stubborn labor market, suggest the economy is slowing in response to higher interest rates,” wrote Quincy Krosby, chief global strategist for LPL Financial, in a Wednesday note. “The stronger dollar has become a major headwind for S&P 500 multinationals, especially amid a backdrop of weaker global demand.”

Read: U.S. dollar rally takes a breather as currency slumps versus major rivals

Speculation has mounted over the potential for the Federal Reserve to reduce the size of its rate increases in December after delivering what’s expected to be another supersize 75 basis point jump when policy makers meet next week.

The Bank of Canada’s decision Wednesday to raise its key overnight lending rate by 50 basis points, or half a percentage point, to 3.75%, was seen reinforcing that expectation, analysts said. Nine of 12 economists surveyed by The Wall Street Journal had forecasted a 75 basis point rise.

Fed-funds futures traders see a 94% probability of a 75 basis point hike by the Fed next week, according to the CME FedWatch tool. But the probability of a 75 basis point rise in December fell to 39.5% from 50.8% on Tuesday, while the probability of a 50-basis point rise rose to 55.6% from 47.4%.

“I think it’s reasonable to believe that the Fed will slow (its rate hikes),” said Larry Cordisco, co-chief investment officer at Osterweis Capital Management. However, “where I think there may be too much hope in the market with people seeing the pause as sort of a way station on the way to a pivot,” Cordisco said.

“I just think the Feds going to be very reluctant to pivot, even if the economy’s in a bit of a recessionary period as long as inflation remains high. It’s tough to see how inflation comes down rapidly to their 2% target side,” Cordisco said.

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Still, the tech-heavy Nasdaq Composite was on course to snap a three-day winning streak after poorly-received earnings reports from Microsoft
MSFT,
-5.98%
and Google parent Alphabet
GOOG,
-7.98%.
Shares of both were trading 6.4% and 7.3% lower, respectively.

For Alphabet, advertising on both Google and YouTube was “a bit softer than what people wanted, even when you take into account foreign exchange headwinds,” said Cordisco. “That’s a sign of economy decelerating a little bit.”

Attention will next turn to results from Meta
META,
-5.18%,
due after the market close, and then Apple
AAPL,
-2.01%
and Amazon.com
AMZN,
-3.46%
on Thursday.

In U.S. economic data, the trade deficit in goods widened 5.7% in September to $92.2 billion as a strong dollar hindered exports.

Companies in focus

Boeing Co.
BA,
-7.65%
shares were down 4.8% after the aircraft maker reporting a widening third-quarter loss and revenue that missed analysts’ estimates by almost $2 billion amid what the company’s CEO described as a “challenging environment.”

Visa Inc.
V,
+4.39%
shares rose 4.2%, after the company topped earnings expectations for its latest quarter Tuesday. Payments volume at grew 10% in the fiscal fourth quarter, while processed transactions increased 12%. Visa’s revenue rose to $7.79 billion from $6.56 billion and came in ahead of the FactSet consensus, which was for $7.55 billion.

Chipotle Mexican Grill Inc.
CMG,
-5.34%
shared slid 5.4% after the restaurant chain on Tuesday reported continued growth, with third-quarter profit beating analysts’ expectations, though its price increases have caused lower-income customers to pull back.

Skechers USA Inc.
SKX,
-6.10%
shares dropped 6.2% after the maker of sneakers missed profit expectations for its latest quarter and delivered an outlook that came in below the consensus view.

—Jamie Chisholm contributed reporting