Investors focus on tech earnings as S&P and Nasdaq drop
Wall Street fell on Monday as investors feared that "stubbornly" high oil prices would force the Federal Reserve into raising interest rates. They also awaited guidance for a busy week of quarterly earnings from major technology companies.
Microsoft, Amazon Meta, and Apple will?report?quarterly results this week. Investors questioned whether the multi-year rally fuelled by optimism over artificial intelligence was losing steam.
Last week, investors were shocked by the quarterly results of Alphabet and Tesla that showed high spending on artificial-intelligence.
On Monday, crude oil fell to its lowest level in a week as U.S. president Donald Trump announced that Washington is having "good discussions" with Iran, and that there was a possibility of a peaceful deal. However, he warned U.S. attacks would resume if negotiations failed to produce. Brent futures surpassed $100 per barrel last week after new attacks on Middle East shipping.
Nvidia dropped 4.9%, and Advanced Micro Devices fell 7.3%. These and other chipmakers' losses weighed heavily on the S&P 500 & Nasdaq.
The PHLX Chip index fell 3.5%, and was down 22% from the record high closing on June 22, 2012. The chip index is still up 61% by 2026.
The stellar debut of Chinese chipmaker CXMT Corp on Monday, and the report that the country has begun manufacturing its own DUV chipmaking tool also signals an intensifying competition in the U.S. Semiconductor industry.
The S&P 500 consumer?stuffs index rose by 1.7%, while the health care index grew by about 1%.
Bill Merz is the head of capital market research and portfolio development at U.S. Bank Asset Management Group. He said that today's market represents a continuation in rotation. "Part of the reaction in the market may be due to that creeping suspicion about a possible rate hike."
The S&P500 was down by 0.24% to 7,394.28. The Nasdaq fell 0.56% to 24,835.82, while the Dow Jones Industrial Average rose 0.25% to 52,078.55
As the S&P 500 fell, the ratio of advancing to falling issues within the index was 1.6:1. The S&P 500 recorded 28 new highs, three new lows. The Nasdaq registered 88 new peaks and 150 new troughs.
Brent crude prices fell?8%, to $89 per barrel. This was the latest strategic U-turn by President Obama in the five-month conflict.
Exxon Mobil and Occidental Petroleum, two oil companies, fell by 3.2% and 1.4% respectively.
According to CME FedWatch, traders project that the Fed will make its monetary policy announcement on Wednesday. They predict a 62% probability of the central bank keeping rates the same, and a 38% likelihood of a 25-basis-point increase.
Personal Consumption Expenditures Prices for June are due a day following the central bank decision. This index will play a key role in determining market expectations of interest rates for later this year.
According to LSEG, analysts?on average? expect S&P500 aggregate second-quarter earnings?to jump 39% from a previous year, with AI stocks accounting for?much? of this growth.
According to LSEG, the S&P 500 trades at about 20 times expected earnings compared to a 10 year average of 20.
(source: Reuters)
