United States
Tech stocks experienced a decline on Tuesday as investors took profits in several of the top-performing AI stocks, continuing to wait for speeches at the Jackson Hole symposium hosted by the Federal Reserve later in the week. The market opened lower and remained subdued throughout the day, with trading volumes falling below average.
The Nasdaq Composite saw the largest decline, dropping 314 points, or 1.46%, to close at 21,314. In contrast, the Dow managed a modest 10-point gain (+0.02%), closing at 44,922. The S&P 500 ended the day at 6,411, down 0.59%. While seven sectors advanced, nearly 2% declines in the tech sector led the major indexes into the red.
The declines in tech stocks appeared to lack any significant catalysts. Instead, they seemed to be driven by investors rebalancing their portfolios, moving away from tech and rotating into other sectors. Additionally, market sentiment was influenced by comments from OpenAI CEO Sam Altman, who suggested in an article that AI stocks might be in a bubble. Nvidia fell 3.5% to $175.64, while Meta dropped 2.07%. Palantir extended its slide from last week, falling another 9.35% on Tuesday, bringing its decline to 17% over the past five trading days. Despite reporting strong earnings and raising guidance earlier in the month, Palantir’s stretched valuation led sellers to step in.
In contrast, Intel saw a nearly 7% jump after announcing a $2 billion investment in its shares by Softbank. Rumors are circulating that the U.S. government may also be considering a stake in the company.
The Dow held steady, aided by Home Depot’s quarterly profits report. While the company missed analysts’ expectations, it maintained its forward guidance, pushing its shares up 3.17%. Similarly, shares of fellow home improvement retailer Lowe’s rose 2.18%.
In economic data, housing starts showed an improvement, with the number of single-family homes under construction rising by 2.8% in July. Bond yields edged lower, with the 10-year yield at 4.31%, down 3 basis points for the day. Traders are awaiting further clarity from the upcoming Fed Reserve meeting minutes and the Jackson Hole symposium. The U.S. dollar remained steady.
Europe
Hopes raised by the meeting between European leaders, Ukraine, and the U.S. regarding the Russian-Ukrainian war led European investors to push the EuroStoxx 600 higher in Tuesday’s trading. The EuroStoxx 600 gained 0.69%, closing at 557.81, with individual country indexes also showing strong advances, particularly the French CAC, which rose by 1.21%. The rally was broad-based, with all sectors, except for real estate, finishing in the green. The top performers were consumer discretionary and materials. In the UK, the FTSE 100 also rose, adding 0.34% to reach 9,189.22.
The gains in consumer discretionary and the French CAC index were driven by luxury goods manufacturers and spirits makers. Demand for these stocks surged following a conference in China promoting trade programs with these companies, aimed at boosting consumption growth. Shares in LVMH and Richemont both rose by more than 3%, while Pernod Ricard gained 3.4%.
However, optimism about a potential peace or ceasefire in Ukraine led to a pullback in defence stocks, with the defence stock index falling 2.6%.
Bond yields in Europe remained steady, with the 10-year German bond yield at 2.75%, down by 1 basis point
Australia
The company reports on Wednesday had a significant impact on the Australian equity market, with the ASX200 falling 63 points, a decrease of 0.70%, to close at 8,896.20. Despite the overall decline, seven of the eleven sectors saw gains. The best-performing sector was communication services, led by Seek, which surged 7.99%. The worst-performing sector was healthcare, with CSL dropping 16.89%, closing at $225.50 after a fall of $45.82.
CSL reported a full-year profit of $3 billion, which disappointed investors. The company also announced a restructuring plan, which includes spinning off its vaccine business, Sequiris, and cutting costs by $500 million annually. Analysts questioned the strength of the result, as it was largely driven by a lower tax rate, and CSL’s Behring unit missed estimates. The spin-off raised concerns about management’s strategy, with analysts noting the high execution risk of the demerger.
Job advertiser Seek posted better-than-expected annual profit results, increased its dividend, and projected further revenue growth. The final dividend was raised to 22c, compared with 6% last year. The stock advanced $2.05 to close at $27.72.
Other companies that reported results were BHP and Woodside. BHP’s results were in line with expectations, but the stock fell to its lowest level in five years. The decline was attributed to weaker Chinese demand for its key products, including iron ore and coking coal. The company announced a final dividend of US$0.60 (A$0.93 at current exchange rates). BHP shares rose by 1.57%, closing at $42.12, while its mining peers drifted lower.
The energy sector performed poorly, with both Woodside and Santos experiencing losses. Woodside reported a 32% drop in net income for its first-half results, as well as a lower interim dividend of US$0.53 (A$0.82) compared to last year’s US$0.69. Analysts raised concerns about the increase in Woodside’s net debt, which stood at US$8.7 billion. CEO Meg O’Neill stated that Woodside is looking to sell 20-30% of its Louisiana LNG asset and is currently in negotiations, but emphasized that the company is “in no rush” and will remain “disciplined.” Woodside shares fell 2.79%, closing at $26.14. Santos also made headlines, as it announced a delay in the approval process for its takeover by an Abu Dhabi-led group. The consortium, which includes Abu Dhabi Development Holdings and the Carlyle Group, has yet to agree on binding conditions and will not be able to do so before the exclusivity period with Santos ends on Friday. Santos shares fell 2.64%, closing at $7.75.
In economic data, the Westpac-Melbourne Institute Consumer Sentiment index rose to 98.5 in July, up from 93.1 in June, buoyed by the Reserve Bank of Australia’s recent rate cut. This increase in confidence led to some selling in the bond market, with the Australian 10-year bond yield rising by 6 basis points to 4.32%, and the 2-year bond yield increasing by 5 basis points to 3.36%.
The futures market saw a slight bounce overnight, recovering 20 points after Tuesday’s decline, reflecting a 0.23% increase and suggesting a higher opening. Meanwhile, the Australian dollar continued to slide against the US dollar, starting the day at 0.6458.
Commodities
Oil prices declined on Tuesday after U.S. President Trump called for a summit between Russian President Putin and Ukrainian leader Zelensky, urging flexibility from both sides. West Texas Intermediate (WTI) crude fell by 1.69% to US$62.35, hitting a two-month low. Brent crude also dropped, losing 62 cents to close at US$65.98. These declines stemmed from traders’ concerns about an oversupply of oil, which could outweigh any potential increase in supply from Russia if some sanctions were lifted. Adding to this unease, the U.S. administration announced plans on Tuesday to hold more auctions for gas leases in the Gulf of Mexico and Alaska over the next 15 years, fuelling longer-term supply concerns.
Gold prices fell as geopolitical tensions eased, and traders took profits after recent gains. Gold slid by 0.51%, closing at US$3,315, while silver dropped 1.69%, finishing at US$37.39. Traders remained cautious about any new developments on rates and the economy from the upcoming Jackson Hole meeting. Bitcoin also experienced a 2.5% drop to US$113,554 as investors reduced risk exposure in the tech sector.
Iron ore continued its downward trend in overnight trading in the U.S., closing at US$100.40, down US$1.10 from the previous 24 hours. Negative sentiment was further exacerbated by the expansion of the 50% tariff on steel and copper announced on Tuesday. Copper also saw a decline, dropping US$41 (-0.42%) to settle at US$9,692 per tonne.
Economic Calendar
NZ:
- RBNZ Interest Rate Decision – 2:00pm
China:
- Loan Prime Rates – 11:00am
US:
- Fed Reserve FOMC Meeting Minutes – 3:00am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
