Stocks Hit Hard on Tech Warnings – Nasdaq Down 2.75%
US stock indices plummeted in trading yesterday as investor concerns over the cost of AI implementation in major tech firms mounted, despite positive numbers reported by Meta and Microsoft. The Nasdaq bore the brunt, falling 2.76% on the day, followed by the S&P and Dow, which ended 1.86% and 0.90% down, respectively. US Treasury yields pushed higher, with the 2-year yield rising by 1 basis point to 4.166%, and the benchmark 10-year yield adding 1.8 basis points to reach 4.282%. Oil prices surged following reports that Iran is preparing for a strike on Israel; Brent climbed 0.84% to $73.16, and WTI rose 0.95% to $69.26. Meanwhile, gold retreated from record highs as traders took profits ahead of tonight’s key US jobs numbers, losing 1.6% to close the New York session at $2,740.45 per ounce.
Investors Brace for More Volatility Next Week
Investors are bracing for heightened volatility in the coming trading week as geopolitical risks and upcoming US elections increase uncertainty. Yesterday’s stock market downturn from earnings updates may only be a prelude, with some market participants fearing a stronger correction if next week’s US election stirs up the markets further. While polling indicates a close race, betting markets currently favour Donald Trump, with his win probability sitting at 63%. Betting markets are, of course, skewed by their risk management protocols, which could simply reflect that more money is being placed on Trump than on Harris. Financial markets, however, are pricing in a more even race, which could lead to sharp price movements as results begin to roll in, with the Asian session on Thursday likely to feel the initial impact.
Busy End to a Volatile Week for Traders
After a turbulent few trading sessions, volatility looks set to persist through the close of the New York session later today. Investors continue to digest a series of macroeconomic updates, with three more major sessions remaining. Little is scheduled for Asia today, although further Yen movement is anticipated following yesterday’s Bank of Japan meeting. The London session’s early focus will be on Switzerland’s latest CPI data, but once again, the New York session is expected to be the most active. All eyes will be on the latest US employment figures, with the Fed meeting approaching and expectations high for a 25-basis-point rate cut next week. A forecasted 111k increase for the headline non-farm payrolls figure, a 0.3% rise in Average Hourly Earnings, and a steady 4.1% Unemployment Rate have set the tone, though any significant deviation could spark additional market volatility. Later, the ISM Manufacturing data will also be released, though the jobs report is likely to dominate market sentiment.
