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Dow posts monthly loss on economic concerns, AI-powered tech rally losses steam

Bear markets

Wall Street finished lower, with Nasdaq snapping a four-day winning streak, while Dow ended the month in the red, and S&P 500 pulled back from a 9-month high. The AI-powered tech rally lost steam as Nvidia fell 5% and AMD slid 6% after a one-week surge. Risk sentiment is in check as investors are eyeing the House vote on the debt ceiling bill.

On the economic front, The US Jolts job openings unexpectedly rose above 10 million after a two consecutive monthly decline, suggesting the labor markets may stay tight, and inflation could remain above the Fed’s targeted level for longer. The Fed Governor Philip Jefferson signalled a rate hike pause in June but likely more hikes afterward.

Overall, risk-off guided the last trading day in May as haven assets, such as gold, bonds, the Japanese Yen, and the US dollar index, all finished higher, while risk assets, including crude oil and commodity currencies, all slumped following China’s disappointing manufacturing PMI data. The world economy is certainly not healthy, with a recession risk mounting in the US, faltering China’s economic rebound, and stagnation in the EU. A possible selloff may start to set once the AI euphoria faded off in May, though Nasdaq was up 7% in the month and rose 24% year-to-date.

Asian markets all ended in the red on Wednesday as sentiment soured amid China’s weaker-than-expected economic data. Australian monthly CPI for April was much higher than expected, sparking concerns for more rate hikes by the RBA, dragging the ASX down. Futures are pointing to a lower open across Asia, with ASX 200 futures down 0.18%, the Hang Seng Index futures down 0.20%, and Nikkei 225 slipping 0.29%.

Price movers:

  • 7 out of 11 sectors in the S&P 500 finished lower, with energy and financials leading losses, down 1.88% and 1.14%, respectively. Notably, the rally on technology stocks took a breather, down 1%. And the defensive sectors, including consumer staples, healthcare, and utilities, were higher as investors sought safety. Real estate also climbed due to a slump in rates.
  • The artificial intelligence tech company, C3.ai’s shares tumbled 20% despite a beat on earnings expectations. The company provided less rosy-than-expected revenue guidance of between US470 million and $72. million for the current quarter. Its shares soared more than 160% in May amid the prevailing AI euphoria.
  • The Chinese offshore Yuan weakened to the lowest level against the US dollar since November 2022, with USD/CNH rising to 7.12.  The recent disappointing Chinese economic data and the geopolitical tension between the US and China continued to shift funds out of the world’s second-largest economy.  
  • Crude oil accelerated falling for the second straight trading day, reflecting the deteriorated economic outlook. WTI futures tumbled 2.7%, heading towards an 18-month low of above US$63 per barrel.
  • Gold extended gains on risk-off sentiment, despite a strengthened USD. However, the precious metal still faces technical resistance of about 1 990 as the double-top pattern is still in play.

ASX and NZX announcements/news:

  • Fonterra announced Anna Palairet as acting Chief Operating Officer (COO) to replace the current COO Fraser Whineray.

Today’s agenda:

  • Australian Q1 private capital expenditure.
  • China Caixin Manufacturing PMI. 

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