Asian equities began the week on a subdued note as high U.S. Treasury yields tested Wall Street's lofty valuations, keeping the U.S. dollar near multi-month highs. Market Performance : MSCI Asia-Pacific Index dipped 0.2% but remains 16% up for the year. Japan’s Nikkei slid 0.9%, still boasting a 20% annual gain. Chinese blue chips rose 0.3%, with most of their 16% yearly gain achieved after Beijing’s September stimulus promises. South Korea's index edged up 0.3% but is down 9% for the year, weighed by political uncertainties and events like Jeju Air’s recent plane crash. Global Futures : EUROSTOXX 50 futures gained 0.1%. U.S. futures saw slight declines, with S&P 500 and Nasdaq futures down 0.1%. Economic Drivers and Concerns U.S. Treasury Yields : Yields on 10-year Treasuries are near eight-month highs at 4.631%, up 75 basis points for the year. Rising yields reflect revised expectations of less restrictive monetary policy, raising concerns about potential impacts on corpo...
The Nasdaq dropped 1% on Tuesday as chip and megacap shares took a hit ahead of Big Tech earnings, while strength in financial stocks kept the Dow afloat in anticipation of a key US Federal Reserve policy decision this week.
Key Highlights:
Tech and Chip Stocks:
- Microsoft, a frontrunner in the AI race, will release its quarterly results after markets close. Its stock was down nearly 1%.
- Other megacap stocks, including Apple, Amazon.com, Meta Platforms, Alphabet, and Tesla, fell between 0.1% and 2%.
- Nvidia slumped 5%, leading a decline in chip stocks and pushing the Philadelphia SE Semiconductor index down 2.4%.
Market Performance:
- The Dow Jones Industrial Average rose 65.08 points, or 0.16%, to 40,605.01.
- The S&P 500 lost 24.87 points, or 0.46%, to 5,438.67.
- The Nasdaq Composite lost 184.53 points, or 1.06%, to 17,185.68.
- The S&P 500 Financials index outperformed with a 1.3% jump, and a banking index climbed 1.5%.
Investor Sentiment:
- Investors are cautious ahead of tech earnings scheduled through the week.
- Coupled with Tesla's disappointing results, Alphabet's higher expenditure forecast caused a broad-based market sell-off last week.
- "Big Tech has had a great rally and for it to continue, they're going to have to show benefits of AI and the investments they made in it," said Brian Klimke, chief market strategist at Cetera Investment Management.
Market Trends:
- Hopes of early rate cuts have prompted a shift to mid- and small-cap stocks, away from tech-related sectors.
- The Russell 2000 small-caps index advanced 0.2%, poised to outperform major US stock indices in July, while the Dow is set for its best month in 2024.
Federal Reserve:
- The Fed is expected to hold rates at their highest level in over two decades this week, with traders watching for hints of potential policy easing.
- The Job Openings and Labor Turnover Survey showed 8.18 million job openings in June, ahead of economists' expectations.
Corporate Results:
- Procter & Gamble slumped 6% after missing expectations for fourth-quarter sales.
- Merck lost 10% after cutting its annual profit forecast.
- CrowdStrike shed 9% after a report of Delta Air Lines seeking compensation for a global cyber outage.
- Cybersecurity and cloud services company shares jumped 11.2% after forecasting fourth-quarter results above estimates.
Market Breadth:
- Advancing issues outnumbered decliners by a 1.16-to-1 ratio on the NYSE and by 1.31-to-1 on the Nasdaq.
- The S&P 500 posted 62 new 52-week highs, while the Nasdaq Composite recorded 92 new highs and 80 new lows.
Conclusion: Investors remain cautious ahead of Big Tech earnings and the Federal Reserve's policy decision, influencing market movements and sector performances. The financial sector showed strength, while tech and chip stocks faced declines amid broader market uncertainty.
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