Market snapshot: investors suffer tech issues as stocks slump

The switch out of technology stocks was given a further nudge as potential trade concerns added momentum to the recent descent.

Reports that the Biden administration could be considering technology trade restrictions against China were in addition to comments from Donald Trump the day previous on Taiwan, sending the Philadelphia Semiconductor index lower by almost 7%, and in turn dragging the tech-heavy Nasdaq down by almost 3%.

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Specifically, the most recent stock market darling NVIDIA Corp (NASDAQ:NVDA) shed over 6%, while there was also weakness in names such as Meta Platforms Inc Class A (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT) and Apple Inc (NASDAQ:AAPL), all of which have been riding the euphoric wave surrounding AI over the recent past. 

Meanwhile, the Dow Jones index bucked the downward trend once more, edging higher to record its third consecutive closing high. The recent rally in UnitedHealth Group Inc (NYSE:UNH) shares continued as the shares rose by over 4%, while figures from Johnson & Johnson (NYSE:JNJ) were well received, sending the shares some 3% higher.

Although still in its infancy, the current reporting season has so far beaten estimates for both revenues and profit, adding to the optimism that the fabled economic soft landing could well be in sight.

Indeed, comments from two Federal Reserve officials indicated that the likelihood of loosening monetary policy was moving sharply closer, consolidating the recent market consensus which now sees a rate cut in September as virtually guaranteed. The most recent economic data has pointed towards some softening of inflation and the labour market, without upsetting the growth trajectory which has led investors to the conclusion that recession is eminently avoidable. 

For the market as a whole, the recent moves have rebalanced some of the gains seen so far this year, although overall the more tech-exposed indices remain some way ahead. As such, the Dow Jones is now up by 9.3% in the year to date, while the S&P 500 and Nasdaq have added 17.1% and 20% respectively.

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Asian markets were inevitably weaker overnight, hit by the double whammy of trade tensions at the country level as well as some sharp downward moves in technology shares. Investors in China will now await the outcome of a four-day economic meeting of leaders in China, which finishes today. Such meetings usually set policy and strategy for the forthcoming decade, and are widely expected to reveal further planned advances in technology, which will gain extra significance given developments overnight.

Japan’s Nikkei index also fell on tech pressure, as well as a recent strengthening of the yen suspected to have arisen from intervention by the central bank. The move has lessened the attraction of the country’s hugely important exporting businesses, which have forged ahead in recent months given the relative overseas appeal of its goods arising from a weaker currency.

In the UK, the guessing game on interest rate cuts continues after the latest economic release on wage growth and unemployment. Wage growth in the three months to May cooled, but remains higher by 5.7% which of itself would normally rule out the likelihood of an imminent cut.

Inflation numbers from the previous day did little to detract from the growing conviction that a loosening of policy in August is moving further off the table, with only around 35% of investors now expecting the Bank of England to move. Even so, the news was enough to move the FTSE 250 marginally higher given improving economic conditions, with the index now having added 7.4% so far this year.

Meanwhile, the premier index made a rather more convincing start, helped along by a strong set of full-year numbers from sports fashion retailer Frasers Group (LSE:FRAS).

Shares rose over 7% after the company upped its profit guidance after reporting improved profits fuelled by the continued international expansion of the business. Recent events such as the Euros, alongside the likes of Wimbledon and the imminent Olympics are also likely to have had a beneficial impact on the company’s fortunes.

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Investors were for the most part on the front foot in opening exchanges, despite the usual headwinds of a number of stocks being marked ex-dividend on a Thursday and a lukewarm response to a trading update from specialised product provider Diploma (LSE:DPLM). 

The FTSE 100 is now ahead by 6.9% in the year to date, further underlining its credentials as being part of a market which is potentially returning to form.