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Technology and banking set new US records as China retreats

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Technology and banking set new US records as China retreats

A look at the day ahead in the US and global markets by Mike Dolan

The US bond market returns from holiday to see Wall Street stocks soar higher to new all-time highs, with Big Tech and Big Banks fueling earnings season excitement even as Chinese markets see demand concerns and doubts about turn our backs on stimulus measures.

The S&P 500 and the Dow Jones set new record highs, with the former quickly reaching 6,000 after rising 22% so far this year, and the Dow Jones closing above 43,000 for the first time.

With Taiwanese giant chipmaker TSMC, the leading producer of advanced chips used in artificial intelligence applications, expected to report a 40% jump in third-quarter earnings on Thursday and Europe’s ASML reporting tomorrow, tech stocks headed higher. latest stage higher.

The semiconductor index rose 1.8% on Monday to a more than two-month high – helped by Arm’s 6.8% rise and a 2.4% rise in market heavyweight Nvidia to its best-ever close. That boosted Nvidia’s market value to $3.39 trillion – just below Apple’s $3.52 trillion and above Microsoft’s $3.12 trillion.

The Nasdaq is now back within 1% of July’s record high.

But on Tuesday, attention will return to the financial figures, with Bank of America, Goldman Sachs, Citigroup and State Street reporting alongside pharmaceutical giant Johnson & Johnson.

The first blush of bank results on Friday showed sector shares soaring and annual earnings growth estimates for the financial sector have doubled to 4% since the start of the month.

Overall, forecasts for the S&P500’s third quarter annual earnings growth are for a decline this quarter to 5%, with the biggest negative impact being in the energy and resources sectors. But the exuberance is all about an expected quick return to double-digit growth for the index in the next quarter and next year.

And there’s little in the robust economic news to make investors reconsider that idea.

The latest monthly survey from Bank of America fund managers showed optimism among investors globally, with equity allocations this month posting the biggest increases since June 2020. Cash allocations fell to 3.9%, while equity exposure rose to a net overweight of 31% – and bond allocations fell to a record 3.9%. a net underweight position of 15%.

With stock index futures off marginally ahead of Tuesday’s bell, energy stocks remained the biggest hurdle, with oil prices falling again.

U.S. crude fell as much as $4 to a nearly two-week low below $70 a barrel, reflecting weaker global demand prospects from struggling China and after a media report said Israel is prepared not to attack Iranian oil targets. reducing fears of an oil crisis. major disruption to supply.

The world oil market is heading for a significant surplus in the new year, the International Energy Agency said on Tuesday.

The annual decline in crude oil prices is once again more than 20% – a balm for the returning government bond market so recently roiled by persistent US inflation data.

As a result, the dollar took a small step back, although the euro continued to lag ahead of Thursday’s widely expected European Central Bank rate cut.

But Chinese markets suffered again on Tuesday, reflecting concerns about domestic demand in the world’s second-largest economy – with lingering doubts that a recent burst of policy stimulus can stem a real estate sector-driven slump in growth.

A looming trade war with Europe and geopolitical tensions surrounding Chinese war games over Taiwan this week and the upcoming US election are all dampening optimism there.

The Shanghai Composite fell 2.5% in heavy trading Tuesday, while the blue-chip CSI300 lost 2.7%. Hong Kong’s Hang Seng fell 3.7% and the offshore yuan fell to a one-month low.

A report from Caixin Global that China could raise another 6 trillion yuan ($850 billion) over three years to finance continued stimulus measures appeared to have little effect and investors say they want to hear more details soon.

Elsewhere, the pound rose even on news that British wages grew at the slowest pace in more than two years in the three months to August and job openings fell again.

And in European earnings, Ericsson shares rose 8% after the Swedish company reported third-quarter revenue that beat expectations as demand for 5G equipment recovered in North America.

Key developments that should give more direction to US markets later on Tuesday:

* US corporate profits: Bank of America, Goldman Sachs, Citigroup, State Street, PNC, Progressive, Charles Schwab, Omnicom, Johnson & Johnson, Walgreens Boots Alliance, Unitedhealth, United Airlines, JB Hunt etc.

* New York Fed September Manufacturing Survey, NY Fed October Survey of Consumer Inflation Expectations; Canada September CPI inflation

* Federal Reserve Governor Adriana Kugler, San Francisco Fed President Mary Daly and Atlanta Fed Chief Raphael Bostic all speak. Christine Lagarde, President of the European Central Bank, speaks

* The US Treasury Department sells 3- and 6-month notes

(By Mike Dolan; Editing by Peter Graff; mike.dolan@thomsonreuters.com)

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