What moved
- US: Wall Street ended Wednesday higher. The S&P 500 closed up 0.28% at 7,743.98, the Nasdaq Composite rose 0.27% and the Dow 0.19%. Futures are the only live read on the US day, and they have turned lower. Nasdaq 100 futures are down 1.27% and S&P 500 futures are 0.41% lower at 7,751.25.
- Europe: Trading higher into the afternoon. The DAX is up 1.01%, the CAC 40 1.09%, the FTSE 100 0.61% and the Euro Stoxx 50 0.38%.
- Asia: Closed split. The Nikkei finished 1.10% higher. The Kospi fell 1.24%, Taiwan 1.42%, the Shanghai Composite 0.82% and the Hang Seng 0.59%.
Why
Alphabet is the story. Its third-quarter results came out after Wednesday's close. They fell short on search advertising, and free cash flow was minus $9.07bn because capital spending ran ahead of the cash the business generated. Cloud revenue more than doubled, but the market is focused on the cash burn, and the shares sold off hard after hours. That reopens the question hanging over the whole AI trade: will the spending pay for itself? It also explains why Nasdaq 100 futures are falling three times as fast as the S&P's. Microsoft is the counterpoint. Azure grew 48%, earnings of $4.92 a share beat the $4.72 expected, and its shares rose. ServiceNow and Fortinet both slid sharply after their results, so software is under pressure too. Asia showed the same nerves, with Samsung's results disappointing and our Asian technology median falling 3.71%.
The interest-rate backdrop is no worse this morning. The Fed held rates at 3.75–4.00% on Wednesday. Two officials, Lisa Cook and Beth Hammack, voted for a hike, and the statement said inflation remains elevated, so a December increase is a real possibility. This morning's data gave the case for a hike little new support. Growth beat forecasts, but core inflation only matched them, and Treasury yields are lower, with the 10-year down 3.8bp at 5.007%.
Oil is helping. Brent is down 4.22% at $110.45 on reports of new mediation efforts in the Iran conflict. That probably accounts for much of Europe's firmer tone, though no single clean catalyst for the European rally stands out.
Sentiment & risk appetite
The nerves are concentrated in tech, not spread across the market. The VIX is at 17.14, up only 0.23 points, and the MOVE index of bond-market volatility closed Wednesday at 94.55, down 3.32. That is not a market braced for a shock. Safe havens are calm: the dollar index is flat at 102.16 and gold is 0.38% lower at $4,036.40. Wednesday's US gains were broad, with 3,289 advancers to 2,777 decliners across PrimerIQ's US universe. But technology (+0.8%) and utilities (−0.84%) sat at opposite ends of the sector table, which shows how much of the leadership rests on one theme, the one Alphabet has just called into question. Asia was the clear risk-off region, with 9,524 decliners against 2,889 advancers in our universe.
Economic calendar
The 08:30 ET releases are out. The first estimate of third-quarter GDP showed annualised growth of 3.4%, ahead of the 3.2% expected and up from 2.2% in the second quarter. Core PCE inflation for September, the Fed's preferred inflation gauge, rose 3.1% on the year. That matched forecasts and was up from 3.0%. Initial jobless claims came in at 194,000 against 198,000 expected, so the labour market is still tight.
Still to come today: the ECB rate decision at 09:15 ET (14:15 CET), where a hold is expected. Christine Lagarde's press conference follows at 09:45 ET and is likely to be dominated by her announced departure in February. The US Treasury auctions seven-year notes at 13:00 ET.
Earnings
The results released before the open have been mostly solid. Eli Lilly earned $7.48 a share against roughly $6.35 expected, and its shares are higher before the bell. Merck ($2.49 against $2.12), Quanta Services ($6.06 against $5.03), Mastercard and Caterpillar also beat, while CRH narrowly missed at $2.09 against $2.14. So far, none of it makes up for Alphabet's drag on the index heavyweights.