United States
Wall Street bounced back overnight as battered technology stocks found their footing, with traders taking heart from signs the artificial intelligence disruption narrative may have been overdone.
The S&P 500 climbed 0.7% at of 3pm New York time with consumer discretionary and industrials leading eight of the benchmark’s 11 sectors higher. The Dow Jones Industrial Average gained 0.9%, while the tech-heavy Nasdaq 100 rallied 1%, recouping some of the heavy losses inflicted during last week’s AI-fuelled sell-off.
The recovery was led by software firms, which have been among the hardest hit since Anthropic’s release of new tools triggered a broad market rethink about which businesses might be rendered obsolete by advancing AI capabilities. In a notable shift in messaging, Anthropic sought to calm nerves by emphasising that its Claude chatbot is being developed alongside partners to complement existing software rather than replace it, countering a viral blog post that had intensified the sell-off.
Advanced Micro Devices surged 9% after Meta Platforms confirmed plans to spend billions on AMD’s AI-related equipment, in a deal reminiscent of the chipmaker’s arrangement with OpenAI last year. The agreement underscored the enormous capital flowing into AI infrastructure, even as questions swirl about which companies will ultimately benefit. Six of the so-called Magnificent Seven traded higher, with Apple rising 2.3% and IBM recovering 2.7% after crashing in the prior session. Meta edged up marginally.
Consumer confidence also improved, providing an additional tailwind for equities. However, not all earnings impressed. Texas Instruments slid on concerns about heavy capital spending, a reminder that even within the semiconductor space, investors are becoming more discerning.
The yield on 10-year Treasuries held steady at 4.03%, while short-dated bonds underperformed as the two-year yield ticked up two basis points to 3.46%. All eyes now turn to Nvidia’s results on Wednesday, which traders expect will either validate or intensify concerns about the AI trade, followed by President Donald Trump’s State of the Union address.
Europe
European equities eked out modest gains as solid earnings from select companies offset renewed concerns about the financial sector and lingering trade uncertainty.
The Stoxx Europe 600 edged up 0.2% at the close, with chemicals and utilities leading the advance. Spanish utility Endesa jumped 7.1% after reporting better-than-expected profit, while autos and mining shares also outperformed.
Banks were the notable drag after JPMorgan Chase chief Jamie Dimon drew parallels to the period before the 2008 financial crisis, warning that the credit cycle will eventually turn. His comments added to existing jitters about the financial industry’s exposure to software companies caught up in the AI disruption trade.
Danish drugmaker Novo Nordisk fell 3.1% following a wave of analyst downgrades after disappointing data for its next-generation obesity treatment CagriSema, while Germany’s MTU Aero Engines dropped 6.6% on underwhelming cash flow.
Trade tensions remained a backdrop. President Trump’s new 10% global tariff took effect on Tuesday, though EU officials believe Washington may soon streamline its broad levies on steel and aluminium products. Market strategists noted that European resilience owes partly to the region’s heavier weighting toward financials and industrials rather than technology, though cautioned that investor confidence remains fragile and could easily shift back into risk-off territory.
Australia
Australian shares are poised to open higher on Wednesday, tracking the overnight tech recovery in New York. ASX 200 futures were pointing up 62 points, or 0.7%, to 9,043 near 6.30am AEDT.
The setup follows a flat session on Tuesday where the S&P/ASX 200 dipped just 3.70 points to 9,022.30. Fresh AI anxiety weighed on local technology names, with WiseTech Global falling 3.7%, Xero dropping 4.6% and TechnologyOne shedding 3.8%. Insurance stocks also came under pressure after the launch of an AI tool from Insurify renewed fears about sector disruption, with Insurance Australia Group down 3.3% and Steadfast losing 5.4%.
Energy was Tuesday’s standout performer. Woodside Energy rose 2.4% after full-year profit, while down 24%, still beat expectations. Viva Energy surged 8.1% on a strong earnings beat. Miners also rallied, with BHP touching a record high of $55.33 before settling 1.4% higher, while lithium names caught fire as Chinese futures for the battery metal climbed following the new year holiday break. Liontown jumped 8.7%, PLS gained 8% and Mineral Resources added 6.5%.
Wednesday shapes as a massive day for corporate results, with Fortescue, Woolworths, WiseTech Global, Flight Centre and Domino’s Pizza Enterprises among more than 20 companies reporting. January CPI data is due at 11.30am, with economists expecting headline and trimmed-mean inflation to hold broadly steady. Reserve Bank governor Michele Bullock will also speak at a Melbourne University dinner this evening.
Commodities and currencies
Commodity markets retreated, with oil pulling back from recent highs. Brent crude slipped 1.1% to $US70.72 a barrel and West Texas Intermediate eased 0.8% to $US65.77, unwinding some of the gains that had pushed prices to their highest since August.
Gold extended its pullback, falling 1.4% to $US5,151.88 an ounce after its recent record-breaking run. Iron ore bucked the trend, rising 0.8% to $US96.65 a tonne on the back of stronger Chinese demand signals.
The Australian dollar was largely flat, edging up 0.04% to 70.58 US cents. The euro held steady at $US1.1781, while the Japanese yen weakened 0.7% to 155.77 per dollar after reports that Prime Minister Sanae Takaichi expressed reservations about further rate hikes from the Bank of Japan.
Bitcoin dipped 1% to $US64,301, with ethereum falling 0.5%.
Economic Calendar
AU:
- Inflation 11:30
EU:
- Inflation 21:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
