Sale of Tech Stocks causes long faces
Delightful Inflation Data, Signs of an Upcoming Interest Rate Cut Multiply. However, Investors on Wall Street Prefer Cash with Tech Stocks. Heavies like Apple and Nvidia Shed Pounds. In contrast, Gold is in Demand.
Wall Street could not hold its gains after the US Inflation Report for June. Significant losses in large technology companies weighed on the US Markets. The Dow Jones Industrial Average of blue-chip stocks closed nearly unchanged at 39,753 points. The tech-heavy Nasdaq lost 1.9% to 18,283 points after a positive start. The broad-based S&P 500 shed 0.9% to 5,584 levels.
Long faces were caused by a sell-off in stocks of companies like Apple, Microsoft, Alphabet, and Nvidia, which lost between 2.3% and 5.5%. Analysts also pointed to a surprisingly large increase in the US Small Cap Russell 2000 Index. "A coincidence? It's still too early to say if something significant is brewing, but it could be the beginning of at least a short-term sector rotation," said Salah-Eddine Bouhmidi, a manager at broker IG.
Strategist Sameer Samana of the US Mega Bank Wells Fargo referred to the growing investor hope for imminent interest rate cuts in the US. "If the US Federal Reserve now shifts from monetary tightening to easing, it means better times for the economy and thus for a broader range of companies beyond the narrow group in the technology sector that investors have been betting on so far."
Currency strategists, in Jerome Powell's view, will ultimately win the battle against high inflation. However, he recently said at a hearing that "more good data" is needed for this. Many investors are betting on a rate hike in September, as signals of an economic slowdown are also intensifying. The price surge in the US is also abating further: Inflation fell to 3.0% in June from 3.3% in May. Economists had expected a decline to 3.1%. "The inflation test seems to have passed," concluded Timo Emden from research house Emden Research.
Disappointing Day for Airlines
Investors turned to Gold, Treasuries, Crude Oil, and Bitcoin after the report. The US dollar came under pressure, with the Dollar Index losing about half a percent to 104.48 points. The Euro gained the same amount against the dollar.
Delta's disappointing forecast weighed on the entire sector. The Atlanta-based airline's stocks fell around four percent. The stocks of rivals American Airlines and United Airlines lost 3.7% and 3.2%, respectively. Delta expects a normalized earnings per share of $1.70-$2.00 for the third quarter. Analysts had forecast $2.05. The background was a decline in industry prices. Experts note that the airlines have increased their capacities too much to take advantage of the latest increase in demand.
However, the shares of US megabank Citigroup came under pressure due to a fine. The papers lost nearly two percent. The US Federal Reserve and regulatory body OCC imposed a fine of $136 million on the bank. The background were "insufficient progress" by Citigroup in addressing some 2020 issues related to data quality assurance.
Asked against it were Pfizer's documents with a plus of good one percent. The pharmaceutical company is working on a new formulation of its weight-loss medication Danuglipron.
Further news on today's stock market events can be found here.
Despite the positive inflation data, leading to expectations of an interest rate cut, the Dow Jones did not see significant gains. Instead, tech stocks like Apple and Nvidia experienced losses, contributing to the overall downturn in the US Markets. (First sentence)
Investors, seeking safer alternatives in the wake of stock market volatility, showed interest in gold, treasuries, crude oil, and Bitcoin, causing these assets to gain value. (Second sentence)
