ASX flat, tech stocks fall after Nasdaq has worst day since 2022
The Australian sharemarket is trading largely flat with a slow start to the session, as local tech companies track the hefty losses of their US peers on Wall Street overnight.
The S&P/ASX 200 slipped 8 points, or 0.09 per cent, to 8048.20 as of 11.28am, with seven out of the 11 industry sectors trading lower.
Tech stocks posted the biggest declines after the tech-heavy Nasdaq had its worst day in 18 months amid concern about tighter US restrictions on chip sales to China, which triggered a selloff in the industry that has powered the bull market.
It’s been a rocky session on the New York Stock Exchange.Credit: Bloomberg
Energy stocks advanced, with Woodside gaining 0.8 per cent and Santos adding 0.4 per cent after oil prices rose overnight and Santos reported quarterly sales revenue of US$1.3 billion ($1.9 billion).
Banks also edged higher, with the Commonwealth Bank, the biggest stock on the local market, up slightly by 0.1 per cent and the other Big Four lenders also trading higher.
Accent Group, which operates footwear chains such as Hype and Platypus, jumped 8.9 per cent after saying it will close almost half of its Glue youth fashion stores because they are underperforming.
Gold company Evolution Mining gained 4.2 per cent after saying its June quarter gold production was up 14 per cent and reporting record quarterly cash flow.
On the downside, Domino’s Pizza plunged 7.9 per cent after the pizza chain said it would close stores in Japan and France and lowered its forecasts for store openings over the next 10 years.
Local tech stocks Next DC (down 2.7 per cent), Xero (down 2.3 per cent) and WiseTech Global (down 3.9 per cent) got caught up in the global tech sell-off, taking the tech sector down 2.2 per cent.
A report that the Biden Administration was considering severe trade restrictions as part of a chip clampdown against China weighed on chipmakers around the world, sending the Philadelphia Semiconductor index spiralling 6.8 per cent and giving the tech-heavy Nasdaq its worst day since December 2022.
From the US to Europe and Asia, semiconductor stocks came under heavy pressure. American powerhouses Nvidia, Advanced Micro Devices and Broadcom declined. In Europe, ASML Holding tumbled over 10 per cent even after the Dutch giant reported strong orders. Those moves followed a plunge in Tokyo Electron, which led a slide in Japan’s Nikkei 225 Stock Average.
“This news on the chip front is the kind of UFO (Un-Foreseen Occurrence) that could indeed create the kind of selling that could be the catalyst for a tradable correction in the stock market,” said Matt Maley at Miller Tabak + Co. “Broad indices have become very overbought.”
On Wall Street, the S&P 500 fell 1.4 per cent, while the Nasdaq Composite sank 2.8 per cent. A gauge of the “Magnificent Seven” giant companies, which include the likes of Amazon, Apple, Nvidia and Microsoft, slipped 3.4 per cent. Wall Street’s “fear gauge” — the VIX — spiked toward the highest since early May.
Wednesday’s action on the US market reprised a recent trend in which capitalisation-weighted indexes performed far worse than the average stock, a consequence of weakness in the mega-caps that dominate them. With firms such as Apple and Microsoft each making up 7 per cent of the S&P 500, losses are hard to offset even when most of the index’s constituents are up — as they were overnight.
Intel and GlobalFoundries were among the few chipmakers defying the selloff. The Dow Jones Industrial Average climbed for a sixth straight day, closing up 0.6 per cent at another record. Financial shares outperformed, with US Bancorp surging on solid results.
The Biden administration told allies that severe curbs would be considered if companies like Tokyo Electron and ASML kept giving China access to advanced semiconductor technology. The US is also weighing more sanctions on specific Chinese chip firms linked to Huawei Technologies.
The bond market saw small moves. The Federal Reserve’s Beige Book showed slight economic growth and cooling inflation. The most notable Fed speaker overnight was governor Christopher Waller, who said the US central bank was getting “closer” to cutting rates but was not there yet.
The tech underperformance comes after a first half that saw mega-caps like AI giant Nvidia, Microsoft and Google parent company Alphabet propel the market higher, stretching valuations for these names and leaving them with a tougher setup for the rest of 2024.
“Much of this year’s equity gains have come from a handful of names currently under direct threat from the political arena,” said Jose Torres at Interactive Brokers. “An important question is if the rest of the market, which generally lacks thrilling tales on a relative basis, can offset the waning momentum in ‘Magnificent Seven’ stocks.”
with Bloomberg/Reuters
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.