The pre-market data paints a gloomy picture for U.S. stocks. S&P 500 futures are down 1%, Nasdaq 100 futures are off by 1.5%, and even the usually steadier Dow is dipping 0.2% below fair value. It’s not the cheeriest way to start our Wednesday, but let’s dig into what’s driving this sentiment.
Semiconductor stocks are taking a beating. Why? Well, there’s chatter that President Biden might tighten the screws on chip imports from China. As someone who’s weathered many a market storm, I can tell you this isn’t just about semiconductors. It’s about the broader U.S.-China relationship and its impact on global trade.
Adding fuel to the fire, ASML, a big player in chip equipment, served up some lukewarm guidance for Q3. When a sector leader stumbles, the whole group tends to feel the tremors.
Now, let’s talk bonds. Treasury yields are inching up, with the 10-year note yield at 4.18% and the 2-year at 4.47%. For those newer to investing, remember this: when bond yields rise, it often puts pressure on stocks. It’s like a seesaw – as one goes up, the other tends to go down.
US Market Highlights
Despite the gloomy outlook, there’s always a silver lining if you know where to look. Here are some bright spots in the U.S. market:
- Housing starts in June hit 1.353 million, beating expectations. As someone who’s seen his fair share of housing cycles, I can tell you this is a positive sign for the construction sector.
- Building permits are also up, totaling 1.446 million in June. This suggests builders are feeling optimistic about future demand.
- The MBA Mortgage Applications Index jumped 3.9%. More people applying for mortgages? That’s usually a good sign for the housing market and the broader economy.
But it’s not all rosy. Let’s look at some corporate news:
- Five Below is having a rough day. They’ve lowered their Q2 guidance, and their CEO is stepping down. It’s a double whammy that’s sent their stock tumbling.
- Johnson & Johnson beat earnings expectations but lowered their full-year guidance. It’s like getting a delicious meal but being told the next one might not be as good.
- Spirit Airlines cut its Q2 revenue outlook. As someone who’s seen many business cycles, I can tell you the airline industry is often a canary in the coal mine for broader economic trends.
Global Highlights
Let’s take a quick trip around the world:
- Asian markets were mixed. Japan’s Nikkei dipped 0.4%, while Hong Kong’s Hang Seng eked out a 0.1% gain.
- European markets are seeing red across the board. The STOXX Europe 600 is down 0.6%, with Germany’s DAX taking the biggest hit, down 0.8%.
A interesting tidbit from Down Under: New Zealand’s inflation came in cooler than expected. This has pushed rate cut expectations to October/November. It’s a reminder that inflation isn’t just a U.S. problem – it’s a global issue that central banks worldwide are grappling with.
