Tech Sector Pressure and Rising Yields Lead Dow's Wednesday Plunge  | Daily Market Analysis

Key events:

• USA - Initial Jobless Claims
• USA - Philadelphia Fed Manufacturing Index (Oct)
• USA - Existing Home Sales (Sep)
• USA - Fed Chair Powell Speaks
• USA - FOMC Member Bostic Speaks

The Dow closed in negative territory on Wednesday as Nvidia continued to put pressure on the tech sector for a second consecutive day while rising Treasury yields added to the downward pressure on stocks.

The Dow Jones Industrial Average declined by 0.98%, equivalent to 332 points, the Nasdaq dropped by 1.6%, and the S&P 500 saw a 1.4% decrease.

New York Federal Reserve President John Williams stated on Wednesday that the Fed is likely to maintain higher interest rates for an extended period to control inflation and bring it closer to the 2% target.

These remarks were made just one day before Fed Chairman Jerome Powell's scheduled speech at the Economic Club of New York on Thursday at 12 pm ET.

Many are closely monitoring whether Jerome Powell will endorse recent statements from fellow Fed members suggesting that the recent increase in Treasury yields could serve as a substitute for interest rate hikes.

Meanwhile, Treasury yields continued to rise, with the yield on the 10-year Treasury exceeding 4.9% for the first time since 2007.

According to  CME's FedWatch Tool, there is strong anticipation of a pause in rate hikes for November.

Gold prices retreated from over two-month highs on Thursday as caution ahead of a speech by Federal Reserve Chair Jerome Powell somewhat offset safe-haven demand driven by the Israel-Hamas conflict.

The surge in gold prices earlier in the week was triggered by concerns that the Israel-Hamas conflict could spill over into the broader Middle East, leading to increased demand for traditional safe-haven assets.

This trend was interrupted by a rebound in the dollar and a rise in US Treasury yields to multi-year highs, as the markets prepared for higher interest rates.

Nonetheless, gold prices remained close to the two-month peak reached earlier in the week, with market participants awaiting further developments in the Israel-Hamas conflict. The cancellation of a summit involving US, Egyptian, and Palestinian leaders had also heightened safe-haven demand for gold.

The prospects for further increases in gold prices remained uncertain, particularly ahead of Powell's speech, where he is expected to reiterate the Fed's stance on maintaining higher interest rates.

The recent rise in Treasury yields this week indicated that the markets are pricing in higher interest rates, especially in light of unexpected increases in US inflation as suggested by recent data. Overnight comments from other Fed officials also reiterated the central bank's hawkish outlook.

The dollar benefited from this speculation, rising by 0.3% overnight, and this dampened the rally in most commodity markets, including gold.

In company news, Tesla (NASDAQ: TSLA) CEO Elon Musk expressed concerns about the impact of high interest rates on car buyers as the company fell short of Wall Street expectations in terms of third-quarter gross margin, profit, and revenue.

On the other hand, Netflix (NASDAQ: NFLX) exceeded expectations for new customer additions in the third quarter, despite Hollywood labor disputes that disrupted a significant portion of US production. Netflix produces many of its shows and movies overseas, which accounted for the majority of its new sign-ups.

The somber sentiment is expected to persist as Europe begins its trading day. Futures are pointing towards a weaker start for stock markets in the region, with Eurostoxx 50 futures down 0.61%, German DAX futures down 0.59%, and FTSE futures showing a 0.35% decrease.

Today's data calendar is rather uneventful, with only the US Philadelphia manufacturing index and weekly jobless claims scheduled for release.

Federal Reserve Chair Powell is set to deliver a speech on the economic outlook at the Economic Club of New York this evening. As the Federal Open Market Committee's blackout period commences this Saturday, this presents a significant opportunity to provide guidance to the market ahead of the November meeting. However, it's worth noting that the market has already factored in the expectation that the Fed will maintain its current stance while leaving the door open for a possible final interest rate hike in December or January.

In addition to Powell's speech, there will be other Federal Reserve officials speaking today, including Jefferson, Goolsbee, Barr, and Bostic.

Overnight, it is expected that the People's Bank of China will keep the Loan Prime Rates unchanged, in alignment with the unchanged medium-term lending facility rate that was announced earlier this week.