In a dramatic turn of events on Wednesday, the Nasdaq Composite experienced its worst day since December 2022, falling below the 18,000 mark for the first time since July 1. This sharp decline was driven by a significant sell-off in technology stocks, influenced by looming trade restrictions and geopolitical tensions. In stark contrast, the Dow
In a dramatic turn of events on Wednesday, the Nasdaq Composite experienced its worst day since December 2022, falling below the 18,000 mark for the first time since July 1. This sharp decline was driven by a significant sell-off in technology stocks, influenced by looming trade restrictions and geopolitical tensions. In stark contrast, the Dow Jones Industrial Average went against the trend, climbing to reach an unprecedented close of 41,198.08. Investors' rotation out of high-flying tech shares, fuelled by comments from former US President Donald Trump, underscores the shifting market dynamics as the Federal Reserve's potential interest rate cuts come into focus.
Key Takeaways:
Nasdaq Posts Worst Session Since 2022: The Nasdaq Composite tumbled 2.77% to close at 17,996.92, marking its steepest decline since December 2022. This significant drop also pushed the index below the 18,000 mark for the first time since July 1, reflecting the intense sell-off in technology stocks amid fears of increased trade restrictions and geopolitical uncertainties.
Dow Jones Surpasses 41,000 for the First Time: In contrast to the tech-heavy Nasdaq's decline, the Dow Jones Industrial Average climbed 243.60 points, or 0.59%, to close at a record high of 41,198.08. This unprecedented milestone was largely fuelled by a 4.5% surge in UnitedHealth shares, which benefitted from a positive Wall Street upgrade following its robust earnings report. This marked the first time since 2001 that the Nasdaq posted a loss exceeding 2.5% while the Dow registered a gain.
S&P 500 and Nasdaq Dragged Down by Tech: The S&P 500 fell 1.39%, closing at 5,588.27, as the rotation out of high-flying technology shares continued. Within the S&P 500, information technology and communication services were the two worst-performing sectors. Major tech stocks such as Meta Platforms, Netflix, Microsoft, and Apple saw significant declines, with Meta plunging 5.7% and Apple sliding 2.5%.
Chip Stocks Hit Hard by Geopolitical Tensions: Semiconductor stocks faced sharp declines where VanEck Semiconductor ETF (SMH) fell over 7%, its worst day since March 2020. Major players like Nvidia and US-listed shares of Taiwan Semiconductor dropped more than 6% nearly 8% respectively, showing the market's sensitivity to geopolitical developments.
European Markets Reflect Tech Sell-Off: European tech stocks mirrored the US sell-off, with the regional Stoxx 600 index closing 0.43% lower. Dutch semiconductor firm ASML saw its shares plummet 10.9%, contributing significantly to a 4.4% drop in European tech stocks. The FTSE 100 Index was up 0.28% while the CAC 40 dipped 0.1% lower. The broader European market sentiment remained negative, continuing the downtrend from the previous two trading sessions.
Asia-Pacific Markets Show Mixed Results: Asia-Pacific markets had varied outcomes, with Australia's S&P/ASX 200 reaching an all-time high, closing 0.73% higher at 8,057.9. Meanwhile, Japan's Nikkei 225 declined 0.43%, despite an increase in business optimism among large manufacturers. South Korea's Kospi dipped 0.8% to 2,843, highlighting regional disparities in market performance.
Currency Markets and Treasury Yields: The British pound climbed above $1.300 against the US dollar for the first time in a year following the release of mixed inflation data from the UK. This development led to reduced bets on an August rate cut by the Bank of England, with market expectations falling from 50% to 35%. Meanwhile, US Treasury yields remained relatively unchanged, with the 10-year yield at 4.16% and the 2-year yield at 4.44%, as investors weighed the current state of the economy and future interest rate movements.
Oil Prices Climb on Storage Data: Oil prices rose significantly, with West Texas Intermediate (WTI) crude increasing by 2.4% to $82.70 per barrel. This surge was driven by a larger-than-expected weekly drop in US crude stockpiles and a weaker US dollar, which overshadowed concerns about slower economic growth in China. Brent futures also saw an uptick, rising by 1.6% to $85.06 per barrel, reflecting a tightening market.
FX Today:
GBP/USD Surges Above 1.3000: The Pound Sterling breached the 1.3000 mark for the first time since July 19, 2023, trading at 1.3020, up by 0.36%. If the pair clears the psychological level of 1.3050, buyers could target the 1.3100 mark, with potential challenges at 1.3125 and last year's high at 1.3140. On the downside, support is seen at the cycle high turned support at 1.2894, followed by the demand zone at 1.2860 and 1.2805.
EUR/USD Advances Towards 1.1000: The EUR/USD pair moved further north, reaching fresh four-month highs near 1.0950. The pair faces resistance at 1.0948, followed by the March top of 1.0981 and the psychological level of 1.1000. On the downside, support is seen at the 55-SMA at 1.0861, the 200-SMA at 1.0790, and the June low of 1.0666. The euro's strength reflects continued positive sentiment, with traders eyeing potential gains if the pair consistently surpasses the 200-day SMA.
USD/JPY Plummets Below 157.00: The USD/JPY pair fell sharply by more than 1.30%, trading around 156.00 after dropping from a daily high of 158.62. The pair's immediate support is at 155.50/60, with further levels at the 153.60 and 151.88. If buyers regain momentum, resistance is expected at 157.00, with a potential re-test of the 158.85 level.
Canadian Dollar Slips, USD/CAD Rises to 1.3700: The Canadian dollar backtracked as investors reassessed the inflation data ahead of the Bank of Canada's next rate decision. The USD/CAD pair rose into the 1.3700 handle, supported by the 200-hour EMA at 1.3656. The pair's near-term momentum has shifted in favour of the US dollar, with potential further gains if Canadian inflation data suggests a premature rate cut by the BoC.
AUD/JPY Experiences Severe Losses: The AUD/JPY pair dropped to 105.05, marking a five-day losing streak from last week's close of 106.80. The pair remains below the 20-day SMA, indicating deepening bearish momentum. Immediate support levels are at 105.00 and 104.30, with buyers needing to reclaim the 106.00 mark to reverse the downtrend and target the 106.50 level.
Market Movers:
UnitedHealth Group Surges on Upgrade: UnitedHealth Group (UNH) shares jumped 4.5%, closing higher, after receiving an upgrade from "hold" to "buy". The positive rating came on the heels of a strong earnings report, helping to lift the Dow Jones Industrial Average to a record close.
GlobalFoundries Gains on Speculation: Semiconductor contract manufacturing companies with US manufacturing capabilities saw notable gains. GlobalFoundries (GFS) surged more than 6%, on speculation they could benefit from potential semiconductor industry restrictions on China and Taiwan.
ASML Holding Plummets Amid Trade Concerns: ASML Holding NV (ASML) led the declines in the Nasdaq 100, with its shares plunging over 12%. The drop was driven by reports of the Biden administration considering tighter export restrictions on chip technology to China, which heavily impacted the semiconductor sector.
VanEck Semiconductor ETF Suffers: The VanEck Semiconductor ETF (SMH) experienced its worst day since March 2020, dropping over 7%. The ETF's decline was primarily due to the broad sell-off in semiconductor stocks following the news of potential tighter US export controls.
Five Below Plummets on Sales Forecast: Five Below (FIVE) saw its shares tumble more than 24%, after the company forecasted a Q2 comparable sales decline of 6% to 7%, which was weaker than the consensus estimate of a 4.66% decline.
Uber Technologies Falls on Insider Selling: Uber Technologies (UBER) declined more than 7% following signs of insider selling. An SEC filing revealed that CEO sold $36 million worth of stock on Monday, raising concerns among investors.
Intel Edges Higher on Manufacturing Speculation: Intel (INTC) closed up 0.43%, buoyed by speculation that US semiconductor manufacturing companies might benefit from potential industry restrictions on China and Taiwan.
GitLab Rises on Sale Speculation: GitLab (GTLB) shares surged more than 9% after Reuters reported that the company was exploring a sale following interest from potential bidders, driving up investor enthusiasm.
Gates Industrial Added to S&P SmallCap 600: Gates Industrial (GTES) climbed more than 3% after S&P Dow Jones Indices announced the stock would be added to the S&P SmallCap 600 Index before trading opens on July 22.
VF Corp Soars on Supreme Brand Sale: VF Corp (VFC) shares jumped more than 13% after announcing the sale of its Supreme brand to EssilorLuxottica for $1.5 billion in cash, significantly boosting the stock.
Aehr Test Systems Surges on Revenue Beat: Aehr Test Systems (AEHR) surged more than 22% after reporting Q4 revenue of $16.6 million, exceeding the consensus estimate of $15.5 million. The company also forecasted 2025 total revenue of at least $70 million, stronger than the expected $67.9 million.
While the Nasdaq Composite suffered its worst day since December 2022, driven by a significant pullback in technology shares, the Dow Jones Industrial Average achieved a record close above 41,000, strengthened by gains in rate-sensitive stocks like UnitedHealth. The semiconductor sector faced substantial headwinds amid concerns over tighter US export restrictions, causing notable declines in companies like ASML and Nvidia. Meanwhile, the mixed performance in Asia-Pacific and European markets, coupled with the fluctuations in currency values and oil prices, underscores the global market's sensitivity to geopolitical tensions and economic policy shifts. As investors continue to rotate out of high-flying tech stocks, the market's direction will likely hinge on upcoming earnings reports and central bank decisions.
