US equities and Treasuries fell Thursday as investors digested a round of disappointing tech earnings and a spike in commodity prices including wheat.
(Bloomberg) — US equities and Treasuries fell Thursday as investors digested a round of disappointing tech earnings and a spike in commodity prices including wheat.
The tech-heavy Nasdaq 100 fell 0.6%, with Netflix Inc. set for its biggest intraday decline since December after missing sales estimates and issuing a disappointing revenue forecast. Tesla Inc. slid after profitability shrank in the second quarter, a sign the electric-vehicle maker’s margins are being squeezed.
Meanwhile, the yield on the US 10-year rose six basis points as traders weighed the potential for agricultural commodities to drive inflation higher. Wheat prices extended their biggest daily surge in a decade on Wednesday after Russia warned that any ships to Ukraine would be considered military vessels.
Traders were hitting the pause button on a blistering rally Thursday that has seen the Nasdaq soar 45% this year, outpacing the S&P 500’s 19% rise, on excitement about the potential for artificial intelligence.
However, such returns on the back of a handful of tech stocks are “overdone” and may be the precursor to a downturn, Aegon Asset Management strategist Cameron McCrimmon warned.
“The breadth of returns on the S&P 500 has become increasingly narrow, driven by a few mega-cap tech stocks on AI optimism, which is a classic sign of an ageing bull,” McCrimmon wrote in a note.
On the flip side, a rare streak of muted declines for the S&P 500 suggests stocks have room to run. And while tech was the catalyst, the rally is starting to embrace a broader group of companies.
Read more: Rare Streak for S&P 500 Matches Its Runup to All-Time High
“Already we’re seeing improved breadth,” Lewis Grant, senior portfolio manager at Federated Hermes, wrote in a note. “If this earnings season can confirm that recession is not inevitable then we expect to seek opportunities throughout the market cap spectrum, with small and mid-cap growth names becoming interesting once more.”
In Europe, tech stocks including ASML Holding NV slumped after Taiwan Semiconductor Manufacturing Co. cut its outlook despite the boom in AI development. That was offset by Anglo American Plc’s second-quarter beat which put the main equity gauge back into the green.
Elsewhere, the offshore yuan advanced 0.7% against the dollar and was the best performing currency in Asia after the People’s Bank of China stepped in Thursday, setting its daily fixing of the yuan with the largest bias since November.
China’s efforts to revive growth, from cutting rates to closing out a regulatory crackdown on tech firms, have so far done little to support growth in the world’s second-largest economy.
The dollar reversed losses to trade slightly stronger against major peers. Gold declined and oil was higher.
Key events this week:
- Existing home sales, Conf. Board leading index, Thursday
- Japan CPI, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.2% as of 9:31 a.m. New York time
- The Nasdaq 100 fell 0.6%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.2% to $1.1184
- The British pound fell 0.5% to $1.2870
- The Japanese yen fell 0.1% to 139.82 per dollar
Cryptocurrencies
- Bitcoin rose 0.9% to $30,250.81
- Ether rose 1.1% to $1,919.65
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.81%
- Germany’s 10-year yield advanced two basis points to 2.46%
- Britain’s 10-year yield advanced one basis point to 4.22%
Commodities
- West Texas Intermediate crude rose 0.9% to $76.04 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Kurt Schussler, Tassia Sipahutar and Joel Leon.
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