Tech-heavy equity indexes around the world fell yesterday as investors offloaded chip stocks, while oil futures gave up earlier gains even as the US and Iran stepped up attacks.
Chip stocks fell from Asia to the US, as higher-than-expected 77 per cent earnings growth from Taiwanese chip manufacturing giant TSMC was not enough to impress investors who have heavily leaned into technology stocks related to artificial intelligence.
“That tells you the AI trade isn’t being priced on growth anymore. It’s being priced on perfection. Any earnings report that’s merely great, instead of flawless, gets sold,” said Gene Goldman, chief investment officer at Cetera in El Segundo, California. U.S. retail sales increased marginally in June as lower gasoline prices weighed on receipts at service stations, though consumers continued to support underlying spending. The sales increase of 0.2pc was in line with the mean economist expectation.
And after two days of US equity gains on soft inflation data, Goldman said yesterday’s trade represents “the market catching its breath, not changing its mind.”
On Wall Street, the Dow Jones Industrial Average rose 9.02 points to 52,802.29, the S&P 500 fell 27.64 points, or 0.36pc, to 7,544.76 and the Nasdaq Composite fell 250.25 points, or 0.95pc, to 26,018.97.
The Philadelphia semiconductor index sank more than 4pc, putting it on track for a second straight day of losses.
MSCI’s gauge of stocks across the globe rose 3.23 points, or 0.3pc, to 1,124.91 and the pan-European STOXX 600 index edged down 0.01pc. Earlier, South Korea’s volatile KOSPI index fell more than 6pc, while Japan’s Nikkei closed nearly 3pc lower.
Iran and the United States exchanged fire yesterday, intensifying attacks that have persisted since the weekend and all but torn up the truce that paused fighting last month. While the two countries wrestle for control of the Strait of Hormuz, Iran signalled that it could prod Houthi allies in Yemen to close the Bab Al Mandeb Strait at the mouth of the Red Sea, another key oil route.
Oil prices gave up earlier gains, with US crude falling 0.3pc to $79.37 a barrel and Brent trading at $84.91 per barrel, down 0.1pc on the day. US Treasury yields rose after economic figures on consumer health and the labor market did little to alter investor expectations for the path of interest rates from the Federal Reserve.
The yield on benchmark US 10-year notes rose 2.84 basis points to 4.573pc from 4.545pc late on Wednesday, while the 30-year bond yield rose 2.11 basis points to 5.1041pc.
The two-year note yield, which typically moves in step with Fed interest rate expectations, rose 3.6 basis points to 4.164pc. The dollar edged higher against major peers though was still near a one-month low, reflecting expectations that the U.S. economy will remain resilient and that the Fed will hold rates steady this month.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.24pc to 100.70, with the euro down 0.17pc at $1.1444.
Against the Japanese yen, the dollar strengthened 0.15pc to 162.42. Sterling weakened 0.4pc to $1.348, slipping from the two-month high it reached on Wednesday following reports that soon-to-be British Prime Minister Andy Burnham will likely name fiscal conservative Shabana Mahmood as his new chancellor of the exchequer. Precious metals fell. Spot gold dropped 1.1pc to $4,014.81 an ounce and spot silver fell 2.3pc to $56.43 an ounce.
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