By Jamie McGeever
ORLANDO, Florida, Oct 29 (Reuters) – The big three US stock indices fell on Thursday, despite weaker oil prices, lower bond yields and upbeat economic growth data, as a record fall in Alphabet’s shares following the company’s latest earnings pummeled communication services stocks and revived investor concerns over AI spending.
In my column today, I look at why the issue of Fed credibility is back on the table after Chair Kevin Warsh on Wednesday struggled to explain why the central bank left interest rates on hold. By his own admission, growth is strong, inflation is too high, and financial conditions aren’t tight. So why not raise rates?
Today’s Key Reads
• ECB President Lagarde resigns at a time of mounting challenges for Europe
• ECB keeps December rate hike on the table amid mounting inflation risks
• Fed highlights economic strength but muddies outlook for Treasuries
• Robust consumer spending, AI-related investment power US economy in third quarter
• Cash is king as investors draw new battle lines in AI spending boom
• Today’s Key Market Moves STOCKS: South Korea, China -1%. Japan +1%. Europe hits 7-week high, UK +0.3%. Brazil -1%, still no rebound from post-election plunge. Nasdaq -1.4%, Dow and S&P 500 -0.3%.SECTORS/SHARES: Three sectors on the S&P 500 fall, eight rise. Healthcare +2.5%, comms services -6.6% in biggest fall since Feb 2022. Alphabet -12.6%, a record fall. Amazon -12%, Intel -20% after the bell. ServiceNow -27%.FX: Dollar -0.2%, euro +0.2%. Canadian dollar hits 6-week high.BONDS: Japan yields rise ahead of BOJ, French/German spread widens to 155 bps. US yields fall, curve steepens. 7-year US auction draws strong domestic, weak overseas demand.COMMODITIES/METALS: Oillower, Brent -0.4%, WTI -0.8%. Gold -1.5%, flirts with break below $4,000. US shipper costs hit 5-year high.
Today’s Talking Points:
Lagarde resigns
European Central Bank President Christine Lagarde resigned on Thursday, with her departure confirmed for February next year, eight months before her term expires. She stands down at a critical juncture — economically, the euro zone faces weak growth, high energy prices, and rising inflation risks; politically, it is grappling with unrest in France, a potentially historic election there early next year, and the ongoing Ukraine-Russia war.
Lagarde says she is resigning because she wants to speak more freely about major, but unidentified, events. “I don’t think that I can remain neutral.” European leaders have more than one key ECB position to fill in the coming months — executive board member Isabel Schnabel leaves in January, and the central bank’s chief economist Philip Lane is due to depart in May.
