Stocks Fall as Tech Tensions Exacerbate by Geopolitics: Markets Turn

(Bloomberg) — U.S. stock futures fell on Wednesday, as recent earnings reports from the likes of Microsoft stoked concerns about the health of American companies, and investors became concerned that Berlin’s decision to approve the re-export of German-made tanks could spark an escalation in the Ukraine war.

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Futures signaled that Wall Street is on its way to a crash, with contracts for the Nasdaq 100 down more than 1% and those on the S&P 500 only marginally better. The Nasdaq rally halted for two days on Tuesday after Microsoft warned of slowing revenue growth in its cloud computing business and other major names such as 3M Corp. and Texas Instruments Inc. Shares in Microsoft and other technology companies such as Salesforce Inc. and Tesla Inc. and Amazon.com with between 1% and 2% in initial trading in New York.

The flight to havens lifted bonds, especially in Europe where the German 10-year bond yield fell by five basis points. The dollar stabilized as the global mood soured after Germany pledged to supply Ukraine with more than 100 Leopard 2 tanks.

Investors are now awaiting updates from the likes of Tesla Inc. and IBM Corp. The tough outlook, a looming US recession and fears of escalation in the Ukraine-Russia war are all contributing to the stocks slide, according to Kenneth Brooks, a strategist at Societe Generale.

“The market is certainly worried about slowing earnings growth, especially in technology, so there was a sense that the market wanted to continue selling technology and dollars,” Brooks said. “But the huge danger now is what happens in Ukraine, if there is an escalation of the conflict and Europe being drawn into the conflict.”

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The European stock index Stoxx 600 also fell, as software companies such as SAP SE and Sage Group Plc felt pressure from Microsoft, while Dutch chip maker ASML Holding NV fell after it reported a profit loss.

The concern is that “investors are not adequately reflecting these tough earnings expectations in their investment decisions,” Michael Strobeck, Credit Suisse’s chief investment officer, warned in a report. He said he expected further pressure on earnings.

Elsewhere, oil prices rose. Gold fell after recent gains pushed the precious metal to its highest level since April. Bitcoin pared the decline which marked its first drop in two days this year.

Main events this week:

• This week’s earnings include: Abbott Laboratories, ASML Holdings, AT&T, Boeing, International Business Machines, NextEra Energy, Tesla (Wednesday); American Airlines, Blackstone, Comcast, Diageo, Intel, LVMH Moet Hennessy Louis Vuitton, Mastercard, SAP, Southwest Airlines, Visa (Thursday); American Express, Charter Communications, Chevron, HCA Healthcare (Friday)

• US mortgage applications, non-manufacturing activity of the Federal Reserve Bank of Philadelphia, Wednesday

• US GDP for the fourth quarter, new home sales, initial jobless claims, Thursday

• US Personal Income/Spending, PCE Deflator, University of Michigan Consumer Confidence, Pending Home Sales, Friday

Some of the major movements in the markets:

Stores

• S&P 500 futures were down 0.8% as of 8:21 a.m. New York time.

• Nasdaq 100 futures fell 1.3%.

• Dow Jones Industrial Average futures fell 0.6%.

• The Stoxx Europe 600 fell 0.6%.

• The MSCI World Index was little changed

currencies

• The Bloomberg Spot Dollar Index fell 0.1%.

• The euro was little changed at $1.0885

• The British pound was little changed at $1.2333

• The Japanese yen rose 0.3% to 129.75 per dollar

Digital currencies

• Bitcoin fell 0.9 percent to $22,702.44

• Ether fell 2.3% to $1,562.14

bonds

• The yield on the 10-year Treasury fell 2 basis points to 3.43%.

• Germany’s 10-year yield fell five basis points to 2.10%.

• The UK 10-year yield fell seven basis points to 3.20%.

goods

• West Texas Intermediate crude rose 0.3 percent to $80.37 a barrel

• Gold futures fell 0.4 percent to $1,943.70 an ounce

This story was produced with help from Bloomberg Automation.

— With assistance from Richard Henderson, Katie Greifeld, and Vildana Hajrick.

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