Tech Sector Weakness May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to move to the downside after ending last Friday’s choppy session mixed.

Weakness among technology stocks may weigh on the markets, as reflected by the 0.5 percent drop by the Nasdaq 100 futures.

Shares of Intel (INTC) and Advanced Micro Devices (AMD) are likely to come under pressure after a report from the Financial Times said China has introduced new guidelines to phase the company’s microprocessors out of government PCs and servers.

As part of a campaign to replace foreign technology with homegrown solutions, FT said stricter government procurement guidance also seeks to sideline Microsoft’s (MSFT) Windows operating system and foreign-made database software in favor of domestic options.

News that Atlanta Federal Reserve President Raphael Bostic has scaled back his forecast to just one interest rate cut this year after previously projecting two rate cuts may also generate some negative sentiment.

Projections provided along with the Fed’s monetary policy announcement last week suggested Fed officials still expect three rate cuts this year.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the release of some key economic data in the coming days.

Traders are likely to keep an eye on reports on durable goods orders, consumer confidence and pending home sales, although a report on personal income and spending that includes readings on inflation said to be preferred by the Fed will be released when the markets are closed for Good Friday.

After trending higher for several sessions, stocks turned in a relatively lackluster performance during trading on Friday. The major averages fluctuated over the course of the session before eventually ending the day mixed.

While the Nasdaq inched up 26.98 points or 0.2 percent to a new record closing high of 16,428.82, the S&P 500 edged down 7.35 points or 0.1 percent to 5,234.18 and the Dow slid 305.47 points or 0.8 percent to 39,475.90.

Despite the mixed performance on the day, the major averages all moved sharply higher for the week. The Nasdaq spiked by 2.9 percent, the S&P 500 surged by 2.3 percent and the Dow jumped by 2.0 percent.

Profit taking contributed to modest weakness in early trading, with some traders looking to cash in on the recent strength in the markets.

Selling pressure remained relatively subdued, however, as traders remain optimistic about the outlook for interest rates following the Federal Reserve’s monetary policy announcement earlier in the week.

While the timing of the first rate remains somewhat uncertain the chances of a quarter point rate cut in June have rebounded to 66.5 percent, according to CME Group’s FedWatch Tool.

Nvidia (NVDA) helped lead a subsequent rebound by the tech-heavy Nasdaq, with the chipmaker surging by 3.1 percent.

The AI darling, which has recently been a key driver of trading on Wall Street, ended the day at a record closing high.

Shares of FedEx (FDX) also spiked by 7.4 percent after the delivery giant reported fiscal third quarter results that beat expectations and announced a new $5 billion share repurchase program.

Meanwhile, shares of Lululemon (LULU) plunged by 15.9 percent after the athletic apparel retailer reported better than expected fiscal fourth quarter results but provided disappointing guidance.

Athletic footwear and apparel giant Nike (NKE) also tumbled by 6.9 percent after reporting fiscal third quarter earnings and revenues that exceeded estimates but slowing growth in China.

Most of the major sectors showed only modest moves on the day, but financial stocks saw considerable weakness after moving sharply higher over the two previous sessions.

Reflecting the weakness in the sector, the NYSE Arca Broker/Dealer Index slid by 1.7 percent and the KBW Bank Index fell by 1.5 percent.

Notable weakness was also visible among telecom stocks, as reflected by the 1.5 percent loss posted by the NYSE Arca North American Telecom Index.

Gold, commercial real estate and airline stocks also moved to the downside on the day, although selling pressure was relatively subdued.

Commodity, Currency Markets

Crude oil futures are rising $0.29 to $80.92 a barrel after falling $0.44 to $80.63 a barrel last Friday. Meanwhile, after tumbling $24.70 to $2,160 an ounce in the previous session, gold futures are climbing $16.30 to $2,176.30 an ounce.

On the currency front, the U.S. dollar is trading at 151.18 yen versus the 151.41 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0828 compared to last Friday’s $1.0808.

Asia

Asian stocks ended mostly lower on Monday after a busy week of central bank meetings. A cautious undertone prevailed as the trade war between the U.S. and China escalated and Atlanta Federal Reserve president Raphael Bostic trimmed his forecast to just one rate cut this year.

The Japanese yen halted its decline amid fears that authorities could intervene again in the currency markets. The yuan rebounded sharply against the dollar after China’s central bank signaled its support for the managed currency by setting a firmer fix for the currency.

Gold was marginally higher in Asian trading, while oil ticked higher after a three-day drop on signs of a tightening market, driven by sanctions, geopolitical risks and OPEC+ supply cuts.

Chinese markets fluctuated before ending notably lower as Beijing announced new guidelines to phase out U.S. microprocessors from Intel and Advanced Micro Devices in government PCs and servers.

The guidelines also aim to replace Microsoft’s Windows operating system and foreign-made database software with domestic alternatives, according to the Financial Times.

China’s Shanghai Composite Index fell 0.7 percent to 3,026.31, while Hong Kong’s Hang Seng Index slipped 0.2 percent to 16,473.64.

Japanese markets fell sharply as the threat of currency intervention from authorities stalled the yen’s decline. The Nikkei 225 Index slumped 1.2 percent to 40,414.12, snapping a four-day winning streak ahead of Tokyo inflation data due later in the week.

The broader Topix Index settled 1.3 percent lower at 2,777.64. Staffing agency Recruit Holdings tumbled 3.6 percent, while Toyota Motor, Honda, Nissan, Tokyo Electron and Sony dropped 1-3 percent.

Seoul stocks ended lower in cautious trading, as investors awaited this week’s industrial production and retail sales data for directional cues.

Traders also awaited cues from U.S. and European inflation data this week, with the U.S. core personal consumption expenditure (PCE) price index likely to show a 0.3 percent rise in February, keeping the annual pace at 2.8 percent.

The benchmark Kospi settled 0.4 percent lower at 2,737.57, extending losses for a second day running. Automaker Hyundai Motor fell 1.6 percent after announcing it would expand eco-friendly mobility services in Red Sea coastal development project.

Australian markets bucked the weak regional trend to end higher, led by mining and bank stocks. The benchmark S&P/ASX 200 Index rose 0.5 percent to 7,811.90 ahead of key Australian inflation data due later in the week. The broader All Ordinaries Index closed up 0.6 percent at 8,071.50.

Europe

European stocks are broadly lower on Monday ahead of a short week of trading before the long Easter weekend.

A cautious undertone has prevailed as the trade war between the U.S. and China escalated and Atlanta Federal Reserve president Raphael Bostic trimmed his forecast to just one rate cut this year.

Traders also awaited cues from U.S. and European inflation data this week, with the U.S. core personal consumption expenditure (PCE) price index likely to show a 0.3 percent rise in February, keeping the annual pace at 2.8 percent.

While the German DAX Index is nearly unchanged, the French CAC 40 Index is down by 0.3 percent and the U.K.’s FTSE 100 Index is down by 0.5 percent.

SKF, a Swedish bearing and seal manufacturing company, has fallen after joining a new research and innovation project.

Pennon Group, a water utility company, has also declined about after delivering full year financial performance in line with the management expectations.

Home improvement retailer Kingfisher has also slumped after its pre-tax profit for fiscal year ended January 31 fell 22.3 percent to 475 million pounds from last year’s 611 million pounds.

Property development company Henry Boot has also moved lower after its fiscal 2024 profit before tax fell 18 percent to 37.3 million pounds from last year’s 45.6 million pounds.

Delivery Hero SE shares have also tumbled. The German food delivery company said Chief Financial Officer Emmanuel Thomassin will leave the company at the end of September and that the Supervisory Board is engaged in evaluating successors.

Direct Line Insurance Group has also moved sharply lower after Belgian insurer Ageas said it won’t make a third takeover offer.

Meanwhile, real estate group SBB has surged after an announcement that it would buy back debt at a 60 percent discount to the original value.

Gamma Communications, a provider of communication products and services, has also risen as it reported an increase in pre-tax income for the full year, supported by improved revenue, mainly from its Gamma Business and Gamma Enterprise segments.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on new home sales in the month of February at 10 am ET. Economists expect new home sales to surge to an annual rate of 680,000 in February after jumping to a rate of 661,000 in January.

At 10:30 am ET, Federal Reserve Board Governor Lisa Cook is due to give a lecture on “The Dual Mandate and the Balance of Risks” before an “Ec10b: Principles of Economics Lecture” event hosted by Harvard University.

The Treasury Department is scheduled to announce the results of this month’s auction of $66 billion worth of two-year notes at 1 pm ET.

Stocks In Focus

Shares of Masimo (MASI) are moving sharply higher in pre-market trading after the medical technology company announced its board has authorized management to evaluate a proposed separation of its consumer business.

Sportswear and footwear retailer Foot Locker (FL) is also likely to see initial strength after Evercore ISI upgraded its rating on the company’s stock to Outperform from In-Line.

On the other hand, shares of Scotts Miracle-Gro (SMG) may move to the downside after Raymond James downgraded its rating on the lawn care company’s stock to Market Perform from Strong Buy.