Stock Market Outlook
Markets face a challenging session today following yesterday’s sell-off, which saw the Dow Jones Industrial Average drop 334 points (-0.71%) to close at 46,590.41, while the S&P 500 fell 0.53% to 6,699.40 and the Nasdaq Composite shed 0.93% to 22,740.40. The decline was driven by escalating US-China trade tensions and disappointing corporate earnings from key technology companies.
Treasury Secretary Scott Bessent confirmed that the White House is weighing export curbs on products made with US software destined for China, following President Trump’s announcement of export restrictions on “any and all critical software” by November 1. This development has heightened investor concerns about the potential impact on technology companies and broader market sentiment.
The semiconductor sector bore the brunt of the selling pressure after Texas Instruments dropped 5.6% on weak earnings and a soft fourth-quarter forecast. The ripple effects were felt across the industry, with On Semiconductor declining nearly 6%, Advanced Micro Devices slipping more than 3%, and Micron Technology falling about 2%. The VanEck Semiconductor ETF also declined approximately 2%, reflecting the sector-wide weakness.
Netflix added to the negative sentiment, plunging 10% after earnings missed estimates due to a dispute with Brazilian tax authorities. However, not all news was negative—Intuitive Surgical rallied nearly 14% on strong earnings and revenue, demonstrating that quality results can still drive significant gains.
Looking ahead to today’s session, investors will be closely watching earnings reports from the “Magnificent Seven” megacap technology group, with Tesla’s results setting the tone after yesterday’s close. More than three-quarters of S&P 500 companies that have reported so far have beaten expectations, according to FactSet, suggesting that the earnings season remains fundamentally strong despite recent high-profile disappointments.
Asian markets have extended the cautious tone overnight, with MSCI’s Asian equities gauge retreating around 0.6%, reflecting concerns about corporate earnings and trade tensions. Gold, which had set an all-time high on Monday, pulled back approximately 0.4%, indicating a slight reduction in safe-haven demand.
Forex Market Outlook
The currency markets are exhibiting a risk-off tone today, with the US Dollar drawing support from increased risk aversion as traders approach Friday’s crucial US inflation data with caution. The ongoing government shutdown and resulting data blackout have added to market uncertainty, prompting investors to seek safety in the greenback.
GBP/USD is extending its losing streak for the fifth consecutive day, trading around 1.3340 during Asian hours and slipping below the 1.3350 level. The pair faces technical headwinds after breaking below the 18-month rising wedge support at 1.2682, with the Relative Strength Index (RSI) in negative territory. Key support levels to watch are 1.2037, 1.1802, and 1.1500, with a potential move toward the 1.1000 mark if selling pressure intensifies. On the upside, recovery attempts face resistance at 1.2900, with bullish momentum only confirmed above 1.3490.
The Dollar’s recent rebound is showing signs of exhaustion, which could open the door for EUR/USD and GBP/USD to recover ahead of key US inflation and jobs data. However, the near-term bias remains tilted toward Dollar strength as traders adopt a cautious stance.
Central bank policy divergence continues to shape currency market dynamics. The Federal Reserve is signaling a more cautious approach to monetary policy as it navigates strong economic growth and rising inflationary pressures under the new Trump administration. In contrast, the Bank of England has adopted a more dovish stance amid a fragile UK economy, with markets pricing in up to three quarter-point cuts in 2025. This divergence is expected to provide underlying support for the US Dollar against the British Pound over the medium term.
Key Themes for Today
Traders should focus on several critical factors as the session unfolds. Trade tensions between the US and China remain at the forefront, with any new developments likely to trigger volatility across equity and currency markets. The ongoing earnings season continues to provide mixed signals, with strong overall results offset by high-profile disappointments in the technology sector.
The US Dollar’s safe-haven appeal is likely to remain elevated as traders position ahead of Friday’s inflation data, particularly given the data blackout caused by the government shutdown. This creates an environment of heightened uncertainty that typically favors defensive positioning.
For equity markets, the focus will be on whether the “Magnificent Seven” technology giants can deliver results that justify their elevated valuations and restore confidence after recent setbacks. The semiconductor sector will also be closely watched for any signs of stabilization following yesterday’s sharp declines.
In the currency markets, traders should monitor the 1.3300 level in GBP/USD as a critical support zone, while EUR/USD faces similar pressure from Dollar strength. Any signs that the Dollar’s rebound is losing momentum could trigger short-covering rallies in major currency pairs, but such moves are likely to be limited until the inflation data provides clearer direction.
Overall, today’s session is likely to be characterized by cautious trading and heightened volatility as investors navigate trade uncertainties, mixed earnings signals, and positioning ahead of key economic data releases.
