Nasdaq Futures Tumble 1.6% as Chip Rout Deepens: Markets Wrap
(Bloomberg) — Nasdaq 100 futures tumbled 1.6% as the global selloff in chipmakers gathered pace, with traders rushing to exit positions in stocks that had fueled this year’s rally but whose valuations grew increasingly rich.
S&P 500 contracts were also under pressure, falling 0.9% as an exchange-traded fund tracking semiconductor firms dropped 3% in premarket trading. The rout extended throughout Asia, with Taiwanese stocks falling into a technical correction and the region’s main benchmark hitting a two-month low. Declines were more measured in Europe, where exposure to tech is lower.
Chipmakers are under growing scrutiny over whether massive gains fueled by the buildout of artificial intelligence have run too far to justify their elevated valuations. At the heart of the matter is whether the hundreds of billions of dollars in spending by AI hyperscalers will eventually deliver strong returns and sustain elevated demand for chips.
“When there’s panic, no one wants to be the last one in a selloff, so the selling pressure increases,” said Guillermo Hernández Sampere, head of trading at MPPM. “With the start of reporting, the suspicion of overvaluation has been confirmed and will continue for a bit.”
Another day of attacks and counterstrikes in the Middle East also weighed on sentiment. Concerns are growing that the US and Iran will intensify hostilities, making oil tanker operators wary of transiting the Strait of Hormuz.
Brent crude is heading for its biggest weekly gain since April, with the benchmark trading around $86 a barrel. Treasuries caught a bid despite the rise in oil prices, sending 10-year yields four basis points lower to 4.52%.
The dollar fluctuated, while gold rebounded from a November low. Traders continued to dial down expectations for Federal Reserve interest-rate hikes this year.
Stock investors are taking profits on crowded positions in chip-related stocks, with a key gauge of industry giants still up 68% this year. For Francisco Simon, European head of strategy at Santander Asset Management, the selloff still looks moderate in comparison to the preceding rally.
“We would distinguish between fundamentals and positioning,” he said. “From a fundamental perspective, the picture remains solid: earnings momentum has been exceptional this year, and results are still coming in strongly.”
Early US trading showed investors selling holdings across sectors tied to the AI buildout. Nvidia Corp. dropped 2.6% to lead declines among the Magnificent Seven. Chip-equipment makers, optical and energy names also fell sharply. Netflix Inc. tumbled 10% after a disappointing forecast.
Selling by US corporate insiders raised another red flag about investor caution. Executives sold $77.6 billion of stock during the first half, according to EPFR Global Market Intelligence, the second-highest amount in more than 20 years.
Cash would offer good protection in the near term, Simon at Santander Asset Management said. Bonds are a less attractive option as higher oil prices could undermine the defensive characteristics of sovereign debt.
“The key reassurance would probably come from the earnings season,” he said. “If companies continue to deliver solid results, and valuations become more attractive after the correction, that could help bring longer-term buyers back.”
Corporate News:
Netflix Inc. forecast a second consecutive quarter of slowing sales growth, contributing to investor anxiety about the streaming giant’s future. SpaceX said it will aim to launch its Starship rocket again in a few days after aborting Thursday’s mission when some of its engines didn’t fire up, sending shares lower. Airbus SE won an order from Air China for 15 A350-900 widebody aircraft as well as 40 A320neo series for its Shenzhen Airlines subsidiary, with a total transaction value of about $12.4 billion. Germany is preparing core demands for possible discussions with UniCredit SpA over Commerzbank AG, according to people familiar with the matter, highlighting how Berlin’s focus is shifting from stopping the proposed takeover to shaping it. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.9% as of 7:22 a.m. New York time Nasdaq 100 futures fell 1.6% Futures on the Dow Jones Industrial Average fell 0.6% The Stoxx Europe 600 fell 0.6% The MSCI World Index fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.1% to $1.1428 The British pound fell 0.3% to $1.3435 The Japanese yen was little changed at 162.36 per dollar Cryptocurrencies
Bitcoin fell 1.6% to $63,037.87 Ether fell 1.9% to $1,834.3 Bonds
The yield on 10-year Treasuries declined four basis points to 4.52% Germany’s 10-year yield declined two basis points to 3.12% Britain’s 10-year yield declined three basis points to 4.94% Commodities
West Texas Intermediate crude rose 2.6% to $80.98 a barrel Spot gold rose 0.5% to $3,994.82 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Neil Campling, Subrat Patnaik and Michael Msika.
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