Stocks Slip as Weekend Caution Curbs Risk Taking: Markets Wrap

(Bloomberg) — Stocks slipped as traders reduced their exposure ahead of the weekend, with the fragile truce in the Middle East keeping geopolitical risk front of mind.

S&P 500 futures fell 0.1% after a rally in chipmakers drove the benchmark to its highest level since mid-June. Europe’s Stoxx 600 headed for its first weekly loss in five. SK Hynix Inc. dipped 0.3% in Seoul before the memory maker’s US debut. Nasdaq 100 contracts dropped 0.5%.

Brent traded near $77 a barrel, swinging between gains and losses to extend a choppy stretch. Talks between the US and Iran are continuing despite days of fighting that drove a steep drop in traffic through the Strait of Hormuz. The risk of further escalation is expected to keep investors cautious as they close out the week.

“Over the weekend, discussions between the US and Iran are expected to continue,” said David Manso, chief investment officer at CaixaBank AM. “Oil prices could provide a useful gauge of investor sentiment and expectations regarding the evolution of the situation.”

The dollar fell 0.1% in a third straight day of losses. Bonds extended a rebound, with the yield on 10-year Treasuries falling one basis point to 4.54%. The yen outperformed major currencies, rising 0.3% against the dollar after Japanese Finance Minister Satsuki Katayama said authorities want pension funds to increase investment in domestic assets.

While geopolitics are keeping sentiment in check for the time being, the focus will soon shift to the second-quarter earnings season when it gets into full swing next week. Strong forecasts have pushed artificial intelligence infrastructure suppliers to the forefront, fueled by the massive spending of hyperscalers.

After an unprecedented rally in chipmakers and other AI buildout stocks helped markets shrug off higher oil prices and elevated bond yields, the bar is now high for companies to justify their lofty valuations. For hyperscalers, the onus is on proving that the spending can generate strong returns.

“What remains to be confirmed is whether growth can hold up despite that pressure, with the AI capex cycle continuing to support investment, revenues and earnings,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “Expectations are high, but the real test is whether earnings can keep validating the expansion story.”

SK Hynix’s debut may set the tone for US markets on a day with no significant data releases or central bank officials scheduled to speak. The firm raised $26.5 billion in an offering of American depositary receipts, which begin when-issued trading on the Nasdaq Global Select Market.

Corporate News:

Delta Air Lines Inc. reaffirmed its full-year profit guidance and said strong demand for premium, corporate and international travel helped offset the highest quarterly fuel expense in its history. Shein Group Ltd. is moving ahead with preparatory work for a possible Hong Kong initial public offering, people familiar with the matter said, potentially capping a yearslong effort by the fast-fashion giant to go public. EasyJet Plc received a fresh offer from private equity firm Apollo Global Management for 715 pence a share that beats a rival proposal from Castlelake LP. French billionaire Xavier Niel has agreed to buy a stake in Vodafone Group Plc from Emirates Telecommunications Group Co. for about $6 billion to become the biggest shareholder in the British telecommunications company. Volkswagen AG plans to cut its sprawling model lineup by as much as half, part of a savings push that fell short of expectations for progress on deeper workforce reductions and plant closures in Germany. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.1% as of 8:11 a.m. New York time Nasdaq 100 futures fell 0.5% Futures on the Dow Jones Industrial Average rose 0.1% The Stoxx Europe 600 was little changed The MSCI World Index was little changed Currencies

The Bloomberg Dollar Spot Index fell 0.1% The euro was unchanged at $1.1430 The British pound rose 0.1% to $1.3422 The Japanese yen rose 0.3% to 161.86 per dollar Cryptocurrencies

Bitcoin rose 1.8% to $64,433.43 Ether rose 3.1% to $1,801.96 Bonds

The yield on 10-year Treasuries declined one basis point to 4.54% Germany’s 10-year yield declined one basis point to 3.07% Britain’s 10-year yield was little changed at 4.89% Commodities

West Texas Intermediate crude rose 0.5% to $72.46 a barrel Spot gold fell 0.5% to $4,104.13 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Subrat Patnaik.

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