S&P500 Forecast: Stocks fall after strong Q3 GDP growth, earnings in focus

US futures

Dow futures -0.01% at 33039

S&P futures -0.25% at 4177

Nasdaq futures -0.38% at 14360

In Europe

FTSE -0.46% at 7380

Dax -0.90% at 148723

• US Q3 GDP rises to 4.9% annualized
• Meta falls after guidance worries overshadow EPS and revenue beat
• Amazon to report after the close
• Oil falls with the Middle East still in focus

US Q3 GDP rises to 4.9% annualized

U.S. stocks are pointing to a lower open, extending yesterday’s losses as investors digest the latest GDP data and as earnings continue to come in thick and fast.

Data showed that the US economy grew faster than expected, up 4.9% in Q3. This was up from 2.1% growth in Q2 and ahead of the 4.3% growth forecast. Delving deeper into the figures, the data showed that consumer spending jumped 4%, which was the most in almost two years, but the core PCE price index, which is the Federal Reserve's preferred inflation gauge, came in cooler than expected at 2.4% which is down from 3.7% in the previous quarter.

This suggests that despite the strength in the US economy, inflation continues to cool towards the central bank's 2% target. The 10-year treasury yield is inching lower after resuming its rise towards 5% earlier in the day.

The data comes ahead of tomorrow's core PCE data for September, which is expected to show a further easing to 3.7% from 3.9%.

Next week, the Federal Reserve will announce its interest rate decision and is widely expected to leave rates unchanged at 5.25 to 5.5%.

Meanwhile, earnings continue to roll in, with the tech sector failing to live up to high high expectations. After the strong rally in the Magnificent Seven this year, there was little room for disappointment in the reports or guidance.

Corporate news

Meta is falling despite the company posting better-than-expected earnings and revenue for the third quarter. Instead, investors were spooked by the warning of softening advertising revenue in the current quarter.

Ford shares are rising after reaching a deal with the United Auto Workers union, which it hopes will end strike action, which has been disrupting operations for weeks. Ford has offered a 25% pay hike over a four-year contract.

Hasbro, the toymaker, fell 9% ahead of the open after weaker expected Q3 earnings. Hasbro posted EPS of $1.64 on $1.5 billion in revenue. This was below the $1.70 in earnings and revenue of $1.64 billion forecast.

Amazon shares trade around a 5-month low ahead of the release of its quarterly results following the closing bell today. Easy comparisons could flatter the results this quarter; however, mixed results from other big tech players and an uncertain economic outlook could pose a threat for the stock.

S&P500 forecast – technical analysis.

The 200 sma fell below the falling trendline support to a low of 4150 before recovering and is testing the falling trendline resistance at 4180. A rise above here and 4200 brings the 200 sma at 4250 back into focus. Failure to rise above the falling trendline resistance could see sellers test 4150 the October low, with a break below here bringing 4150 into play.

FX markets –USD rises, EUR falls

The USD is rising for a third straight day as investors digest the stronger-than-expected US GDP data despite the US 10-year treasury yield easing slightly. GDP data showed that core PC prices across the quarter eased by more than expected to 2.4%.

EUR/USD is falling after the ECB left interest rates unchanged at 4%, the record high after ten straight rate hikes. The meeting comes as inflation cools to 4.3% in September and as data shows that the eurozone economy has weakened. However, the governing council also said that it expects inflation to stay elevated for longer, suggesting that rates will stay high for longer.

GBP/USD is falling amid a lack of fresh fundamental drivers for GBP, leaving it vulnerable to sentiment. Attention is turning to the BOE meeting next week. The central bank is widely expected to leave interest rates unchanged as wage growth eased and business activity contracted for a third straight month. The market is increasingly convinced that the Bank of England has reached peak rates.

EUR/USD -0.13% at 1.0575

GBP/USD -0.07% at 1.2130

Oil falls with the Middle East still in focus

Oil prices are falling after a rise in US crude stockpiles, amid a stronger dollar and as the Middle East remains in focus.

Oil had risen over 2% in the previous day but quickly pared those gains on reports that Israel had agreed to delay a ground invasion of Gaza, at least for now.

Meanwhile, crude oil inventories rose by 1.4 million barrels, well ahead of the 240,000 gains forecast.

The macroeconomic outlook is also a headwind for oil prices amid concerns that the Federal Reserve will keep interest rates higher for longer and after data earlier this week showed that the eurozone could be heading for a recession.

WTI crude trades -2.8% at $82.86

Brent trades -2.4% at $87.07

Looking ahead