Snap, Intel Shock, Powell Speaks, Dems Spending Mess

By Geoffrey Smith 

Investing.com — Snap (NYSE:)’s quarterly earnings send a shiver through the social media sector. Intel (NASDAQ:) also disappoints as the disruption of chipmaking stretches out ever longer. The Democrats still can’t say how they’re going to fund their spending increases. China Evergrande magics some money out of nowhere to avoid formal default and Jerome Powell will address a market increasingly spooked by inflation worries as Treasury yields hit a five-month high. Here’s what you need to know in financial markets on Friday, 22nd October. 

1. Snap’s unsurprising earnings shock

New privacy settings on Apple’s iOS operating system are every bit the game changer that they promised to be.

Snap stock fell as much as 27% in after-hours trading on Thursday after the parent company of Snapchat said revenue fell well short of expectations in the third quarter, as advertisers refused to spend big money on ads without the comfort of underlying data. The only surprise was that people were surprised: the company had warned of exactly this at its last quarterly update.

Facebook (NASDAQ:) stock fell 4.0% and Twitter (NYSE:) stock fell 4.4% in premarket trading as the market priced in similar developments at other social media companies. Youtube owner Alphabet (NASDAQ:) fell 1.9%, while Snap – which expects the impact to be repeated in the current quarter – trimmed its losses to 20%.

2. Biden’s tax hike plans derailed

Confusion continued to reign over how the Democratic Party intends to fund its spending promises.

Various reports suggested that the Biden administration has dropped its plans to raise the corporate income tax rate to 28% from 21%, one of its key election promises, after dogged resistance from centrist Democrat Senators.

However, Politico and Bloomberg reported that Kyrsten Sinema, one of the Senators who extracted that concession, is still open to other measures that would fund an overall increase in spending of $2 trillion over 10 years. They didn’t provide details of which measures she was prepared to support, but noted that leves on unrealized stock gains and on corporate stock buybacks were under discussion.

3. Stocks set to open mixed as rising bond yields dampen optimism; Powell speech eyed

U.S. stock markets are set to open mixed later, with evidence of an ongoing recovery in the U.S. offset by concerns about inflation – and about the outlook for some Big Tech names after Snap’s results.

By 6:20 AM ET (1020 GMT), were up 34 points, or 0.1%, while were up less than 0.1% and were down 0.2%. The S&P had closed at a new record high on Thursday.

Pressure from the bond market continued to be felt, with the 10-year benchmark Treasury yield hitting 1.70% for the first time since May in the overnight session. Federal Reserve Chairman Jerome Powell is due to speak at 11 AM ET and his comments will be scanned for hints as to the future pace of interest rate hikes – as well as his explanation…