On Tuesday morning, U.S. stock futures experienced a slight decline, with both the Nasdaq Composite and the S&P 500 breaking a four-day streak of negative performance. This downturn is part of an overall losing trend seen across the major stock averages throughout the month.
Futures linked to the Dow Jones Industrial Average saw a decrease of 35 points, equivalent to a 0.1% drop. Similarly, futures tied to the S&P 500 and the Nasdaq 100 both showed a decrease of around 0.1%.
During the primary trading session on Monday, the Nasdaq Composite showed its most significant upward movement for the entire month, recording a rise of 1.6%. The S&P 500 also experienced a gain of nearly 0.7%. In contrast, the Dow witnessed a slight decline of 0.1%.
Remarkably, both the general market index and the technology-focused Nasdaq managed to achieve gains, despite the fact that the yield on the 10-year Treasury bond reached its highest point since November 2007, rising by approximately 9 basis points to settle at 4.34%.
It’s worth noting that tech shares traditionally face challenges in a high-interest-rate environment, which makes their simultaneous rise with yields on Monday even more remarkable and noteworthy for the financial community.
Katy Kaminski, the Chief Market Strategist at AlphaSimplex, shared her perspective on the situation, stating, “We are observing a positive upturn in the stock market, a trend that was absent last week.
Our view is that interest rates will remain elevated for an extended duration, and perhaps the stock market is comfortable with this scenario.” She conveyed her thoughts during a segment “Closing Bell.”
However, it’s important to acknowledge that certain analysts hold reservations regarding the sustainability of this rally over an extended period of time.
Experts Weigh In on Treasury Yields, Tech Stocks, and Market Trends
“Traditionally, surges in Treasury yields reveal vulnerabilities in other sectors. The increase in yields will further exacerbate the challenges of refinancing debt. … Another factor contributing to the rise in yields is that investors are starting to adopt a more realistic outlook on the Federal Reserve’s trajectory, considering the possibility of additional interest rate hikes,” remarked Megan Horneman, who serves as the Chief Investment Officer at Verdence Capital Advisors.
Horneman further elaborated on this point, stating, “This presents a risk to tech stocks and growth stocks characterized by high price-to-earnings ratios. Consequently, we anticipate the equity market could experience further declines.”
In the upcoming session, retail giants Lowe’s and Macy’s are slated to announce their quarterly earnings before the market opens. Investors are closely monitoring Nvidia’s earnings report, scheduled for Wednesday.
The company’s stock registered an increase of over 8% on Monday, making it one of the most prominent gainers in the tech sector. Given its substantial influence on the AI-driven market and market sentiment, Nvidia is widely perceived as a bellwether.
In terms of economic data, the attention of the financial community will be directed towards the nonmanufacturing survey conducted by the Philadelphia Fed, along with the forthcoming outcomes of the Richmond Fed’s manufacturing survey. Additionally, data concerning existing home sales for the month of July is slated for disclosure on Tuesday morning.
Market participants are also eagerly awaiting the statements from Fed Chairman Jerome Powell at the Jackson Hole conference, scheduled for Friday. These remarks are expected to provide a deeper understanding of the central bank’s perspective on inflation trends.
European Stocks Open Higher
European stock markets initiated the day with gains, which extended during early trade. The Stoxx 600 index surged 0.9% at 9:07 a.m. BST.
Every sector saw advances, including a 2% rise in tech stocks, following positive performances in U.S. and Asia-Pacific markets.
Softbank Shares Experience an Increase in Value
SoftBank Group’s shares surged by up to 3.36% on Tuesday following the announcement that its subsidiary, Arm, has submitted a filing for listing on the Nasdaq exchange. While the listing has not disclosed a specific share price, consequently lacking a valuation at this stage, it has been projected by Reuters to be “the largest of the year.”
However, the initial gains in SoftBank’s shares moderated as the trading session progressed, and the current increase stands at 2.16%.
Consumer Sentiment in South Korea Experiences a Decline for the First Time Since February
In August, consumer sentiment in South Korea experienced its initial weakening in six months, as indicated by a survey conducted by the Bank of Korea.
The consumer sentiment index recorded a slight decrease from 103.2 in the previous month to 103.1. A value above 100 signifies a dominance of optimists or pessimists in the survey, while a value below 100 indicates the reverse.
The evaluation of current domestic economic conditions by consumers, as well as their prospects for future domestic economic conditions, deteriorated in July.
Nonetheless, sentiment regarding future living standards and anticipated household income displayed a minor improvement from the previous month, partly counterbalancing the overall decline.
The Inflation Rate in Hong Kong
Hong Kong experienced a greater-than-anticipated deceleration in its inflation rate during July, marking a rate of 1.8%, in contrast to the economists’ consensus of 2% as polled by Reuters. This figure also registers a decline from the 1.9% recorded in the preceding month of June.
The census and statistics bureau of Hong Kong highlighted that the most significant price surge in July was observed in the category of alcoholic drinks and tobacco, which exhibited a noteworthy year-on-year increase of 18.4%.
The sectors of electricity, gas, and water (showing a year-on-year uptick of 9.9%), as well as clothing and footwear (rising by 6.6%), constituted the second and third positions respectively in terms of experiencing substantial price hikes throughout July.
Conversely, durable goods and essential food items experienced price drops on a year-on-year basis in July, declining by 3.3% and 0.5% respectively.
Market trends, U.S. stock futures dipped, Nasdaq and S&P 500 rebounded amid rising Treasury yields. Katy Kaminski’s optimism on the market’s response noted.
Concerns about rally sustainability arise, tech stocks vulnerable. Lowe’s, Macy’s, Nvidia earnings awaited; economic data, Powell’s Jackson Hole remarks in focus. SoftBank surged, South Korea’s sentiment weakened, Hong Kong’s inflation slowed.