Tech-Stocks Retreat Deepens Ahead of US Payrolls: Markets Wrap

(Bloomberg) — The latest bout of volatility in technology stocks entered a second day, with chipmakers in South Korea bearing the brunt of the selling and declines following through to Europe’s tech sector and the Nasdaq 100. The dollar fell and Treasuries wavered ahead of the June US payrolls report.

Nasdaq futures dipped as much as 0.9% before paring declines, after semiconductors led Wall Street lower in the previous session. S&P 500 contracts were flat. Memory makers SK Hynix Inc. and Samsung Electronics Co. lost a combined $290 billion in value to drive a 7.9% slump in South Korea’s Kospi index. In Europe, the Stoxx 600 rose 0.6%, with technology among only two of the 20 index sectors to lose ground.

The frequent swings in the market’s biggest drivers come as traders react to any sign that a near-parabolic rally in chipmakers, the biggest beneficiaries of the vast outlays on AI infrastructure, has run too far.

In the latest instance, Meta Platforms Inc.’s plan to sell computing power raised questions about a glut of capacity.

Meanwhile, investors are rotating into laggards that stand to benefit from a strengthening economic outlook just as money-market bets on tighter monetary policy recede. Consumer-orientated stocks led gains in Europe on Thursday, tracking Wednesday’s US moves when a majority of S&P 500 stocks advanced.

By contrast, memory, storage and processing names were again among the biggest decliners in US premarket trading. Sandisk Corp. fell more than 3%, while Seagate Technology Holdings Plc, Western Digital Corp. and Micron Technology Inc. were down more than 2%.

“The market recognizes the risks associated with a potential overvaluation in the tech sector,” said Guillermo Hernández Sampere, head of trading at MPPM. “Whether a major shift away from the tech sector is underway will become apparent by the next round of quarterly earnings reports.”

Investors will also focus on the US jobs report at the end of a holiday-shortened week. The data will offer fresh clues on the path for interest rates after comments Wednesday by Federal Reserve Chair Kevin Warsh dampened speculation of a hike this year.

Bloomberg Economics expects payrolls to rise at a robust pace, exceeding even May’s strong gain. Hiring likely was especially strong in leisure and hospitality — boosted by the World Cup — while government employment should post its fastest increase of the year.

As recent data point to a strengthening labor market, giving the Fed scope to focus more on its inflation mandate, traders expect the latest reading to have a limited impact. That said, a weaker print could prompt markets to further pare back expectations for Fed tightening, especially at a time when energy prices are falling.

“It seems somewhat inconsistent that markets are still pricing at least one Fed rate hike over the coming months,” said Roberto Scholtes, head of strategy at Singular Bank. “A NFP print below 100,000 could be a catalyst for that hike to be partially priced out.”

WTI crude fell 1.3% to $67.30 a barrel, extending its slide to pre-war levels as flows through the Strait of Hormuz increased and traders grappled with signs of oversupply. The yen strengthened sharply against the dollar amid rising speculation that the currency’s continued weakness may prompt a fresh round of intervention by Japan.

Corporate News:

The SEC is looking into Susquehanna International Group’s allegations that unknown insider traders made $100 million on options bets ahead of a recent Chinese regulatory crackdown on cross-border brokerages, according to a person familiar with the matter. Google lost its long-running fight against a €4.1 billion ($4.7 billion) European Union antitrust fine after the bloc’s top judges said regulators were right to punish the US giant for abusing Android’s market power. OpenAI has begun preliminary discussions about giving the US government a 5% stake in the ChatGPT-developer, the Financial Times reported, citing two people familiar with the talks. Apple Inc. is in negotiations to purchase chips from two Chinese semiconductor makers on a Pentagon blacklist to help reduce the impact of a global memory shortage that’s forced the company to raise prices across its product line. UBS Group AG already has enough capital to meet proposed new requirements in the reform pushed by the Swiss government, according to the Swiss National Bank. SAP SE said it will cut back hiring and travel to save costs as Europe’s largest software company devotes more resources to developing artificial intelligence technologies. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 7:53 a.m. New York time Nasdaq 100 futures fell 0.1% Futures on the Dow Jones Industrial Average rose 0.2% The Stoxx Europe 600 rose 0.7% The MSCI World Index rose 0.1% Currencies

The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1404 The British pound rose 0.3% to $1.3314 The Japanese yen rose 0.7% to 161.49 per dollar Cryptocurrencies

Bitcoin rose 1.9% to $61,200.28 Ether rose 2% to $1,648.1 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.49% Germany’s 10-year yield advanced four basis points to 2.92% Britain’s 10-year yield advanced five basis points to 4.81% Commodities

West Texas Intermediate crude fell 1.9% to $67.29 a barrel Spot gold rose 1% to $4,071.23 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Subrat Patnaik, James Hirai and Sagarika Jaisinghani.

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