Wall Street starts the week on the back foot as the rally took a breather ahead of Fed Chair Jeromy Powell’s testimony before Congress. The cyclical sectors, such as energy and materials, sank following China’s disappointing rate cuts, while the AI-fuelled tech frenzy continued, offsetting some early losses in the S&P 500. Tesla’s shares jumped 5.4%, hitting a fresh 9-month high of above 274, and Nvidia notched a new high, up 2.6% to above 438.
The US dollar extended a three-day winning streak following the Fed’s rate hike pause last week as markets may expect consistent hawkish guidance at Powell’s testimony later today. The US 2-year bond yield slid slightly and stayed at a three-month high. The Australian dollar weakened against the greenback in particular after China’s rate cuts and RBA’s dovish statement in its meeting minutes release. Commodity prices fell in general due to a strengthened USD and China’s less-than-expected rate cuts.
Futures markets point to a lower open across Asia. ASX 200 futures were down -0.34%, Nikkei 225 fell 0.75%, and Hang Seng Index futures slumped 2.85%.
- 10 out of 11 sectors in the S&P 500 finished lower, with energy leading losses, down 2.3%. Consumer discretionary is the only sector that ended in the green, up 0.75%, lifted by Tesla’s outperformance.
- FedEx’s shares slipped 2.9% in after-hours trading due to a miss on the revenue expectations in the fiscal fourth quarter. The company reported earnings per share of US$4.94 on a US $21.9 billion revenue. The expectations were US$4.87 and US$22.66 billion, respectively. Its outlook for 2024 is between US$16.50 and US$18.50, with the midpoint slightly shy of an estimated US$18.31.
- India’s Prime Minister Modi will meet the US tech leaders on a visit to the US as China’s economic rebound falters and US-China geopolitical tension intensifies. Apple’s Tim Cook, Google’s Sundar Pichai, and Microsoft’s Satya Nadella will all attend the White House state dinner. Tesla’s Elon Musk will also likely join the meeting, discussing a local electric car factory in India.
- Alibaba appointed new CEO, Eddie Wu and Joseph Tsai, replacing Daniel Zhang. The two new leaders have a strong background in technology and strategy and aided Jack Ma in founding the empire at the very beginning. Alibaba split the business into 6 units in March and now faces growth challenges in the separate groups.
- Hang Seng Index fell following PBOC’s less-than-expected rate cuts, and Yuan weakened further against the USD. The PBOC cut the 1-year and 5-year Loan Prim Rates by 10 bps to 3.55% and 4.20%, respectively, less than some analysts’ expectations of a 15 bps reduction. The property sector dragged on the Chinese stock markets particularly on Tuesday, as the interest rate cuts were not enough to boost sentiment amid the recent sluggish economic development.
- Bitcoin popped to above 28,200 for the first time since late May. Leading cryptocurrencies, including Bitcoin and Ethereum, rebounded since BlackRock filed an application for a Bitcoin ETF to the SEC, marking the meaningful advance of cryptocurrencies into mainstream asset classes.
ASX and NZX announcements/news:
- Fletcher Building Limited (ASX/NZX: FBU) holds Investor Day, expecting FY23 EBIT to be NZ$800 million with a profit margin of more than 9%. The construction company expected the market to tighten further in FY24 due to softening demands in residential housing.
- BOJ Monetary Policy Meeting minutes
- UK CPI for May y/y
- Fed Chair Powell’s Testimony