US Stock Futures Gain as Chip Rout Loses Steam: Markets Wrap
(Bloomberg) — US stocks are recovering some ground after last week’s rout in chipmakers, marking a positive start to a week in which earnings will put the artificial-intelligence trade to the test once again.
Nasdaq 100 contracts climbed 1.3% to snap a weeklong selloff of 5.5%. S&P 500 futures rose 0.5%. An exchange-traded fund tracking chip names rallied 3.6% in US premarket trading, leaving it set for a first daily gain in 10 sessions. Europe’s Stoxx 600 fell 0.9% following a weekend of violent protests in France.
Shorter-dated Treasuries were modestly lower after bond markets drew haven demand during the selloff in equities. Selling was heavier in Europe, where French debt led declines, widening the yield premium over safer German bunds.The euro was the worst performer among major currencies. The dollar was trading flat. Brent crude slipped from a five-month high.
This week’s earnings from Meta Platforms Inc. will provide a fresh proving ground for investor confidence in the AI trade. Tesla Inc. is also due to report. The sector has taken a beating amid worries over whether companies can sustain their rapid pace of earnings growth and support an investment spree financed by increasingly costly debt.
“Last week was a financing scare, not a demand scare,” said Aneeka Gupta, director of research at WisdomTree. “That’s why the bounce is credible and why it’s fragile at the same time.”
CoreWeave Inc. rose more than 6% in early trading after last week’s 25% slump. The company has been at the forefront of concerns over how AI companies will fund themselves, with those worries sending yields on the cloud-computing provider’s junk bonds to 15%.
Volatility in French stocks may persist beyond the European winter and through to the next presidential election, depending in part on whether parliament has enough power to push through debt reforms, said Beata Manthey, head of European equity strategy at Citigroup Inc.
France was gripped over the weekend by a wave of attacks on public buildings, shops and restaurants as social unrest over the cost of living intensified. Yet a heavy debt burden and a budget deficit among the largest in the euro area mean the government has little scope to increase spending in response.
“A lot of the bad news is in the price, however it can be volatile,” Manthey said. “It is going to be oscillating up and down.”
More broadly, the pullback in parts of the equity market is nearing an end and investors should prepare to add risk to their portfolios, said Morgan Stanley’s Michael Wilson.
A pattern of outperformance by so-called quality stocks and weakness in the equal-weighted S&P 500 is set to fade, creating an opportunity to snap up equities, the strategist said.
“We advise investors to be ready for either a very rapid reconciliation or a slower bleed into November because in our view, that will be the time to add risk rather than shun it,” Wilson said in a client note.
What Bloomberg’s Strategists Say…
“The real risk is contagion. AI is important enough to the economy that funding stress could become a broader growth problem, as last week’s haven bid indicated. But there is little evidence of that yet. Equity weakness has remained concentrated around the AI funding trade, while investors are rotating beneath the surface rather than simply cutting exposure.”
Corporate News:
Kimberly-Clark Corp. is selling investment-grade bonds in as many as five parts to help fund its pending acquisition of Tylenol maker Kenvue Inc. JPMorgan Chase & Co. deployed $230 billion of capital in the first year of its decade-long effort to plow $1.5 trillion into industries that bolster US economic security. Anthropic PBC said it plans to put 5% of its shares into a new so-called public benefit fund that allows it to make donations that can address “the public good,” including mitigating AI’s impact on the job market. Nscale Ltd. is facing opposition to the valuation target it’s pursuing in its initial public offering, according to people familiar with the matter, after a series of market setbacks for artificial intelligence companies. The Bank of England’s Prudential Regulation Authority is evaluating whether Barclays Plc misrepresented illiquid private credit loans, potentially understating their risk, the Financial Times reported. Lindt’s Chief Executive Officer Adalbert Lechner will leave the company with immediate effect, less than a month after the confectionary maker cut its guidance for a second time this year. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.5% as of 8:29 a.m. New York time Nasdaq 100 futures rose 1.3% Futures on the Dow Jones Industrial Average fell 0.2% The Stoxx Europe 600 fell 0.9% The MSCI World Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index was little changed The euro fell 0.2% to $1.1221 The British pound was little changed at $1.3325 The Japanese yen fell 0.2% to 158.26 per dollar Cryptocurrencies
Bitcoin rose 2% to $82,475.73 Ether rose 3.2% to $2,422.83 Bonds
The yield on 10-year Treasuries advanced two basis points to 5.09% Germany’s 10-year yield advanced one basis point to 3.44% Britain’s 10-year yield advanced three basis points to 5.40% Commodities
West Texas Intermediate crude fell 1% to $100.43 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rose Henderson, Levin Stamm and Ruhell Amin.
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