United States
Wall Street delivered another rollercoaster session overnight as investors continued wrestling with the implications of artificial intelligence for corporate earnings, leaving the S&P 500 barely clinging to gains by the closing bell.
After sliding close to 1% at its worst point, the S&P 500 managed to recover and finish up just 0.1% at around 6,843, holding above its 100-day moving average in what many will view as a minor victory for the bulls. The Nasdaq 100 slipped 0.1%, while the Dow Jones Industrial Average finished little changed. The equal-weighted S&P 500 fell 0.3%, reflecting the uneven nature of the session beneath the surface.
The dominant theme remains AI disruption, and it is becoming increasingly difficult to separate from broader market sentiment. What began as a software-sector selloff has since spread in rolling fashion to transportation, wealth management, insurance, and commercial real estate as investors ask which industry might be caught in the crossfire next. Mentions of AI disruption on earnings calls have nearly doubled compared to the previous quarter, underscoring just how central the theme has become.
The tension runs in two directions. On one hand, there is genuine fear that AI will displace business models before companies can adapt. On the other, a growing chorus of investors is questioning whether the hundreds of billions of dollars being ploughed into data centres and chips will ever generate meaningful returns. Bank of America’s latest fund manager survey found a record number of participants believe companies are overinvesting, with around 30% nominating big-tech AI capital expenditure as the most likely source of a future credit crisis.
Despite the gloom, JPMorgan strategists maintained a constructive view on the major hyperscalers, noting that AI-related capital expenditure is projected to grow by 53% over the next 12 months and that spending is coming from a position of financial strength. The S&P 500’s ability to hold above key technical support will be closely watched in coming sessions.
On the corporate front, Apple is accelerating development of three new AI-powered wearable devices, Danaher agreed to acquire Masimo in a deal valued at roughly $9.9 billion, and Bayer announced a $7 billion-plus settlement push to resolve current and future lawsuits linked to its Roundup weedkiller. Strategy Inc. purchased nearly $170 million in additional Bitcoin, and Genuine Parts confirmed it will split into two separately listed companies.
On the rates front, Federal Reserve Governor Michael Barr reiterated that policy should remain steady until there is clearer evidence inflation is heading back toward the 2% target, though Chicago Fed President Austan Goolsbee left the door open to further cuts if conditions allow.
Europe
European stocks edged modestly higher, with the Stoxx 600 advancing 0.4% in a session defined by defensive rotation as AI-related uncertainty kept investors cautious.
Healthcare was a standout, closing at its highest level since September 2024 and gaining 1.4%. Bayer surged 7.4% after confirming its $10.5 billion push to settle Roundup cancer litigation, providing a significant lift to the sector. Real estate was the top performer overall, climbing 1.8% to its best close since October 2024, with investors gravitating toward rate-sensitive sectors after UK unemployment data came in at a five-year high, fuelling expectations of additional Bank of England rate cuts. The British pound fell 0.5% against the US dollar in response.
Banks gained 1.1%, led by Barclays, SocGen and UniCredit, while the consumer products and services sector rose 1.1% with UK housebuilders helping lead gains on the back of the jobs data.
On the downside, basic resources fell 1.6% as copper and gold prices retreated. Antofagasta slid 3.4% after a disappointing set of results, while KGHM dropped 6.5%. Energy shed 0.6% as progress in US-Iran nuclear talks reduced the geopolitical risk premium embedded in oil prices, dragging Equinor and Orlen lower. Defence stocks also softened as fresh Russia-Ukraine peace talks and the Geneva nuclear negotiations dampened the sector’s recent momentum. Food stocks declined 0.9%, with Kerry Group falling 6.4% after volume growth missed expectations and currency headwinds weighed on the outlook.
Australia
The local market is shaping up for a positive open, with S&P/ASX 200 futures pointing to early gains of around 0.3-0.4% near the 8,939 level.
Earnings season is gathering pace. Fletcher Building returned to profit in the first half following cost cuts, Iluka Resources posted underlying EBITDA above estimates, and Mirvac maintained its full-year operating earnings per share guidance. Suncorp’s first-half net income of $263 million fell well short of the prior corresponding period’s $1.1 billion, reflecting the impact of elevated claims. Lottery Corp, Magellan Financial, Netwealth and Santos are all due to report today.
In rating changes, Baby Bunting was lifted to outperform at Macquarie with a price target of $3.30, Seek was raised to buy at Morgans with a $27.50 target, and Medibank Private was upgraded to neutral at Barrenjoey. Reliance Worldwide was cut to neutral at Jarden Securities. On the institutional front, Macquarie Group’s infrastructure arm agreed to acquire IHS Towers’ Latin American operations in a deal worth approximately $952 million. Health insurer Medibank will raise premiums by an average of 5.1%, with rival Nib lifting its own rates by 5.47%.
Australian bond yields eased slightly, with the three-year down 3.3 basis points to 4.21% and the ten-year declining 2.4 basis points to 4.68%.
Commodities and currencies
Gold had a rough session, falling 2.2% to around $US4,881 an ounce as much of Asia remained closed for the Lunar New Year holiday, thinning demand from the world’s largest consuming region. The pullback follows an extended run higher, and traders will be watching whether buyers return when Asian markets reopen.
Oil prices also weakened, with Brent crude falling 1.9% to around $US67.37 a barrel and West Texas Intermediate slipping 1% to $US62.25, as signals of progress in US-Iran nuclear negotiations reduced supply disruption fears. Copper fell as global stockpiles rose, adding to pressure on the basic resources sector.
The Australian dollar edged higher, gaining 0.2% to US70.83 cents. The euro held steady at around $US1.1848, while the yen strengthened marginally to 153.26 per dollar. Bitcoin fell 1.6% to around $US67,698, continuing its February retreat, while ether slipped 0.2% to $US1,994.
Economic Calendar
AU:
- Westpac Leading Index MoM 10:30
US:
- Durable Goods Orders 00:30
- Housing Starts Dec 00:30
- Industrial Production MoM 01:15
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
