Tech Stocks May Regain Ground Following Yesterday’s Sell-Off

The major U.S. index futures are currently pointing to a higher open on Thursday, with tech stocks likely to regain ground following yesterday’s sell-off.

Traders may look to pick up tech stocks at relatively reduced levels following the steep drop on Wednesday, which saw the tech-heavy Nasdaq record its worst day since December 2022.

Optimism about the outlook for interest rates may also generate early buying interest after the Labor Department released a report showing first-time claims for U.S. unemployment benefits climbed by much more than expected in the week ended July 13th.

The Labor Department said initial jobless claims rose to 243,000, an increase of 20,000 from the previous week’s revised level of 223,000.

Economists had expected initial jobless claims to edge up to 230,000 from the 222,000 originally reported for the previous week.

The major U.S. stock indexes turned in a mixed performance on Wednesday, with geopolitical concerns and profit warning from Dutch semiconductor firm ASML rendering the mood cautious.

Among the major averages, the Dow moved reached a new record high, while the tech-heavy Nasdaq ended sharply lower.

The Dow ended with a gain of 243.60 points or 0.6 percent at 41,198.08. The S&P 500 settled with a loss of 78.93 points or 1.4 percent at 5,588.27, while the Nasdaq plunged 512.42 points or 2.8 percent to 17,996.92.

Semiconductor stocks fell sharply, resulting in the Philadelphia Semiconductor Index suffering a loss of nearly 7 percent.

The sell-off by semiconductor stocks came after a report from Bloomberg said President Joe Biden’s administration is considering tougher trade rules against companies in its chip crackdown on China.

Bloomberg said the administration has told allies that it’s considering using the most severe trade restrictions available if companies continue giving China access to advanced semiconductor technology.

Citing people familiar with recent discussions, Bloomberg said the U.S. is mulling whether to impose a measure called the foreign direct product rule, which lets the country impose controls on foreign-made products that use even the tiniest amount of American technology.

Negative sentiment was also generated after former President Donald Trump suggested Taiwan should pay the U.S. for defense, claiming the country took “about 100%” of America’s chip business.

Nvidia fell 6.6 percent. Advanced Micro Devices plunged more than 10 percent. Applied Materials lost 10.6 percent, Micron Technology tumbled 6.25 percent, and KLA Corporation fell 10 percent.

Meta Platforms ended 5.6 percent down. Applied Materials shares plunged more than 10 percent. Apple Inc., Microsoft Corporation, Alphabet, Eli Lilly, Amazon, Tesla, Broadcom, Oracle Corporation, Qualcomm and Texas Instruments also ended sharply lower.

ADP, Progressive Corporation, AT&T, Comcast Corporation, Pfizer, Verizon Communications, Philip Morris International, Abott Laboratories, McDonald’s Corporation, Cisco Systems, Wells Fargo, PepsiCo, Coca-Cola, and Chevron Corporation posted strong gains.

On the economic front, the Commerce Department released a report showing a significant rebound by new residential construction in the U.S. in the month of June.

The report said housing starts shot up by 3.0 percent to an annual rate of 1.353 million in June after plunging by 4.6 percent to a revised rate of 1.314 million in May.

Economists had expected housing starts to jump by 2.6 percent to a rate of 1.310 million from the 1.277 million originally reported for the previous month.

The Commerce Department said building permits also surged by 3.4 percent to an annual rate of 1.446 million in June after tumbling by 2.8 percent to a revised rate of 1.399 million in May.

Building permits, an indicator of future housing demand, were expected to rise by 0.3 percent to an annual rate of 1.390 million from the 1.386 million originally reported for the previous month.

A separate report released by the Federal Reserve showed industrial production in the U.S. increased by more than expected in the month of June.

The Fed said industrial production climbed by 0.6 percent in June after jumping by 0.9 percent in May. Economists had expected industrial production to rise by 0.3 percent.

Commodity, Currency Markets

Crude oil futures are edging down $0.14 to $82.71 a barrel after surging $2.09 to $82.85 a barrel on Wednesday. Meanwhile, after slipping $7.90 to $2,459.90 an ounce in the previous session, gold futures are climbing $12.20 to $2,472.10 an ounce.

On the currency front, the U.S. dollar is trading at 156.44 yen versus the 156.20 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0929 compared to yesterday’s $1.0939.

Asia

Asian stocks fell broadly on Thursday as tech shares came under heavy selling pressure on signs of worsening trade tensions between China and the United States.

Media reports suggested that Washington was mulling tighter curbs on exports of advanced semiconductor technology to China.

Separately, Republican presidential nominee Donald Trump suggested Taiwan should pay the U.S. for defense in a controversial interview.

The dollar lingered near a four-month low in Asian trading after the Japanese yen scaled a six-week high, sparking speculation of official intervention.

Gold edged near to record highs on U.S. rate cut speculation, while oil extended gains from the previous session after a drop in U.S. crude stockpiles.

China’s Shanghai Composite Index rose 0.5 percent to 2,977.13 and Hong Kong’s Hang Seng Index edged up 0.2 percent to 17,778.41 as China’s ruling Communist Party wrapped up a top-level meeting, with investors expecting policies to help revive growth.

Japanese markets tumbled amid a sell-off in the tech sector. The yen’s strengthening against the dollar also dragged export-oriented issues.

The Nikkei 225 Index plunged 2.4 percent to 40,126.35, while the broader Topix Index fell 1.6 percent to 2,868.63.

Tokyo Electron, which ships advanced semiconductor technology to China, plunged 8.8 percent. Screen Holdings lost 8.4 percent, Advantest gave up 4.9 percent and SoftBank Group shed 6.1 percent.

Investors ignored data that showed Japan posted a trade surplus in June for the first time in three months.

Seoul stocks ended lower, with the Kospi falling 0.7 percent to 2,824.35, dragged down by tech stocks. SK Hynix shares fell 3.6 percent and automaker Hyundai Motor declined 3 percent, while shipbuilder Samsung Heavy Industries rose 1.3 percent.

Australian markets fell from a record high reached in the previous session as data showed employment jumped beyond expectations in June, sparking fears of rate hikes.

The benchmark S&P/ASX 200 Index dropped 0.3 percent to 8,036.50, with banks and tech stocks pacing the declines. The broader All Ordinaries Index settled 0.4 percent lower at 8,272.70.

Domino’s Pizza Enterprises plunged 8.2 percent after the company reported a weak outlook for its store growth.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index inched up 0.3 percent to 12,329.44.

Europe

European stocks have moved mostly higher on Thursday after the European Central Bank announced its widely expected decision to leave interest rates unchanged.

While the French CAC 40 Index has advanced by 0.8 percent, the U.K.’s FTSE 100 Index is up by 0.7 percent and the German DAX Index is up by 0.3 percent.

Data showed U.K. wage growth softened in the three months to May period, raising hopes of interest rate cuts ahead of the Bank of England’s rate decision next month.

Wage growth slipped below 6 percent for the first time in almost two years in a sign that the labor market is cooling.

In corporate news, Swedish hygiene products maker Essity has rallied after its second quarter core earnings beat expectations.

3i Group has also moved to the upside after the private equity and infrastructure investment firm said it had an “encouraging start” to the new financial year.

Frasers Group has also surged. The fashion and retail giant released targets for its current fiscal year above market forecasts.

Publicis Groupe has also jumped. The French advertising group raised its organic growth target for 2024 after reporting better than expected results for the first half of the year.

Automakers have also moved sharply higher after industry data showed new car sales in the EU recovered strongly in June, driven by gains in three out of the region’s four major markets.

New car registrations rose 4.3 percent year-over-year to 1.089 million units in June, reversing a 3.0 percent fall in May.

On the other hand, Industrial bearings maker SKF has tumbled after its second quarter profit missed estimates.

Swiss engineering group ABB has also slumped after orders dropped 3 percent to $8.44 billion in the second quarter from prior year’s $8.67 billion.

Finnish telecom equipment maker Nokia has also plummeted after the company reported a 32 percent drop in second quarter operating profit due to weak demand for its 5G equipment.

U.S. Economic Reports

A report released by the Labor Department on Thursday showed first-time claims for U.S. unemployment benefits climbed by much more than expected in the week ended July 13th.

The Labor Department said initial jobless claims rose to 243,000, an increase of 20,000 from the previous week’s revised level of 223,000.

Economists had expected initial jobless claims to edge up to 230,000 from the 222,000 originally reported for the previous week.

The report said the less volatile four-week moving average also crept up to 234,750, an increase of 1,000 from the previous week’s revised average of 233,750.

Meanwhile, the Federal Reserve Bank of Philadelphia released a report on Thursday showing the pace of growth reaccelerated by much more than expected in the month of July.

The Philly Fed said its diffusion index for current general activity jumped to 13.9 in July from 1.3 in June, with a positive reading indicating growth. Economists had expected the index to inch up to 2.9.

The report said most future activity indicators also rose, suggesting more widespread expectations for overall growth over the next six months.

At 10 am ET, the Conference Board is scheduled to release its report on leading economic indicators in the month of June. The leading economic index is expected to decrease by 0.3 percent in June after falling by 0.5 percent in May.

The Treasury Department is due to announce the details of this month’s auctions of two-year, five-year and seven-year notes at 11 am ET.

At 1:45 pm ET, Dallas Federal Reserve President Lorie Logan is scheduled to give opening remarks before the “Exploring Conventional Bank Funding Regimes in an Unconventional World” conference.

San Francisco Federal Reserve President Mary Daly is due to participate in a fireside chat before the “Exploring Conventional Bank Funding Regimes in an Unconventional World” conference at 6:05 pm ET.

At 7:30 pm ET, Federal Reserve Board Governor Michelle Bowman is scheduled to speak before the “Exploring Conventional Bank Funding Regimes in an Unconventional World” conference.