Stocks Tumble, Bonds Rise With Yen on Haven Bid: Markets Wrap

(Bloomberg) — Global stocks extended losses after suffering their steepest drop in nearly a month on concerns over elevated valuations. Bonds advanced and investors sought the safety of haven currencies such as the yen.

US equity-index futures slipped, signaling further losses for the S&P 500 and Nasdaq 100 indexes after the gauges pulled back with tech shares hit the hardest. Sentiment was further dented as Super Micro Computer Inc. shares slumped in late trading and Advanced Micro Devices Inc. failed to impress investors with its revenue forecast.

Asian shares dropped 2.1%, the biggest intraday loss since April. South Korea’s Kospi — a poster child for the artificial intelligence boom and one of this year’s top-performing markets — plunged 5% after AI-fueled gains drove its benchmark to a record earlier this week. The Nikkei fell by over 4%.

As investors sought safety, Treasuries advanced across the curve, with the yield on the 10-year falling three basis points to 4.05%. Gold rebounded after the biggest drop in more than a week. The yen strengthened to 153.12 against the dollar.

The pause in the global stock rally came after the booming outlook for artificial intelligence and hopes the Federal Reserve will keep cutting rates sent the US stock benchmark up by almost 40% from its lows in April. But those gains have been confined to fewer shares as sentiment and technical indicators showed signs of overheating, leading Wall Street chiefs to note the possibility of a retreat as a healthy development.

“The stock market is ripe for some sort of material pullback over the near-term, no matter where it’s going over the intermediate/longer-term,” according to Matt Maley at Miller Tabak.

Warnings about frothy stock valuations are easy to find after a record-breaking rally pushed prices to levels typically associated with exuberance. Optimism has turned intense in recent months, with many traders focused on chasing gains rather than questioning lofty prices.

Yet those solid gains, combined with the recent narrowness of the advance, spurred vulnerability worries.

Corporate earnings are strong but “what’s challenging are valuations,” Mike Gitlin, chief executive officer of Capital Group, said during a financial summit organized by the Hong Kong Monetary Authority on Tuesday.

Contracts for the S&P 500 dipped 0.7% and those for the Nasdaq 100 index 1% after US stocks fell amid warnings from Wall Street executives for investors to prepare for a market pullback.

Advanced Micro and Super Micro shares fell in extended trading.

“The bar is simply getting higher, so now a modest earnings beat does not translate into price reaction,” Anna Wu, a cross-asset strategist at Van Eck Associates in Sydney, said in a Bloomberg TV interview.

What Bloomberg strategists say…

Given that it’s a broad-based slump across Asia, there is a feeding frenzy among investors to exit positions. That is developing into an old school sell stocks, buy bonds theme as funds head to the safety of the sidelines.

— Mark Cranfield, MLIV strategist. For full analysis, click here.

MSCI’s gauge for Asian shares fell 2.1%, with technology stocks leading the losses. South Korea briefly halted sell orders for program trading after Kospi 200 futures dropped more than 5%, triggering a so-called sidecar for the first time since April.

Elsewhere, the Australian dollar surged to a 12-year high against the kiwi early Wednesday after a jump in New Zealand’s jobless rate.

Oil fell, extending its decline after an industry report indicated the biggest increase in US inventories in more than three months.

“It’s a sea of red across broad markets, and one that offers a gloomy and damp portrayal of risk,” Chris Weston, head of research at Pepperstone Group, wrote in a note to clients.

Corporate News:

Advanced Micro Devices Inc., the main contender to Nvidia Corp. in the artificial intelligence chip market, failed to impress investors with its revenue forecast after an eye-popping rally sent expectations soaring. Super Micro Computer Inc. shares tumbled in late trading after the server maker missed reduced estimates for first-quarter sales and profit and gave a disappointing earnings forecast for the current period. Apple Inc. is preparing to enter the low-cost laptop market for the first time, developing a budget Mac aimed at luring away customers from Chromebooks and entry-level Windows PCs. Nintendo Co.’s stock rose by its most in six months after the company raised its Switch 2 outlook, a strong signal of confidence in the marquee console’s momentum ahead of the critical holiday season. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.6% as of 10:57 a.m. Tokyo time Japan’s Topix fell 2.8% Australia’s S&P/ASX 200 fell 0.6% Hong Kong’s Hang Seng fell 0.9% The Shanghai Composite fell 0.4% Euro Stoxx 50 futures fell 1.4% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1493 The Japanese yen rose 0.3% to 153.16 per dollar The offshore yuan was little changed at 7.1334 per dollar Cryptocurrencies

Bitcoin rose 0.4% to $100,665.72 Ether rose 1% to $3,244.53 Bonds

The yield on 10-year Treasuries declined three basis points to 4.05% Japan’s 10-year yield declined 2.5 basis points to 1.650% Australia’s 10-year yield declined five basis points to 4.30% Commodities

West Texas Intermediate crude fell 0.7% to $60.16 a barrel Spot gold rose 0.2% to $3,939.88 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Abhishek Vishnoi.

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