World Markets Pause Amid Growing Valuation Worries

Barry Adams
05 Mar, 2024
New York City

Stocks turned lower, and volatile tech stocks faced resistance after surging in previous weeks on valuation worries ahead of the release of non-farm payroll and JOLT reports. 

The S&P 500 index and the Nasdaq Composite eased, extending losses in the previous session.

Investors debated the future direction of interest rates amid moderating but tight labor market conditions and better-than-expected earnings despite multiple rate hikes over the last eighteen months. 

Market participants have generally bid up high-growth tech stocks linked to the expected boom in artificial intelligence applications across the economy.

Energy stocks were also in focus after crude oil prices traded volatile because of the elevated tensions in the Middle East and rising Houthi rebel activities in the Red Sea. 

Moreover, drought conditions in Panama have slowed down the passage of container ships from Asia to the U.S. East Coast, as the canal operator has restricted the flow of daily vessels by half. 

 

U.S. Factory Orders Decline Accelerated 

New orders for manufactured goods in January, down three of the last four months, decreased $21.5 billion or 3.6% to $569.7 billion, the U.S. Census Bureau reported today. 

This followed a 0.3% decline in December.

The monthly decline was the largest since April 2020, driven by 16.2% fall in transportation orders, and orders excluding transportation orders decreased 0.8%. 

 

U.S. Indexes and Yields

The S&P 500 index decreased 0.9% to 5,085.84, and the Nasdaq Composite decreased 1.5% to 15,963.81. 

The yield on 2-year Treasury notes increased to 4.58%, 10-year Treasury notes inched down to 4.17%, and 30-year Treasury bonds edged down to 4.31%.

WTI crude oil decreased $0.39 to $78.33 a barrel, and natural gas prices decreased 1 cent to $1.91 a thermal unit.

Gold increased by $15.27 to $2,130.27 an ounce, and silver fell 11 cents to $23.76. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.88.

 

U.S. Stock Movers

Apple decreased 2.2% to $171.25 after a research report from Counter Point estimated the company's iPhone sales in China dropped as much as 24% in the first six weeks of 2024, facing tougher competition from Huawei. 

Target Corp. soared 8.2% to $162.99 after the retailer reported better-than-expected holiday-quarter sales and earnings. 

Revenue in the fiscal fourth quarter ending on February 3 rose to $31.9 billion from $31.4 billion, net income soared 58% to $1.38 billion from $0.87 billion, and diluted earnings per share advanced to $2.98 from $1.89 a year ago. 

Operating margin in the quarter improved to 5.8% from 3.7% a year ago after consumers returned to buy higher-margin items like apparel and beauty products. 

For the first quarter of 2024, the company expects comparable sales to fall between 3% and 5%, and first quarter GAAP and adjusted EPS are both expected to range from $1.70 to $2.10. 

For the full year, the company expects a modest increase in comparable sales in a range from flat to 2%, and GAAP EPS and adjusted EPS are both expected to range from $8.60 to $9.60.

GitLab plunged 23.8% to $56.75 after the database developer estimated weaker-than-expected sales in the current year. 

AMD decreased 1.9% to $201.55 after a Bloomberg News report suggested that the company's sales in China hit the U.S. regulatory hurdles that will prevent the company from selling advanced semiconductors to process artificial intelligence applications. 

 

European Markets On Hold Ahead of Rate Decisions 

European markets headed lower ahead of the European Central Bank's interest rate decision on Thursday and the UK's general budget on Wednesday. 

Benchmark indexes in Frankfurt, Paris, and London decreased on the ongoing rate path worries compounded by China's lack of stimulus measures to tackle the protracted downturn in the property market. 

 

Spain's Private Sector Expanded Third Consecutive Month

Spain's private sector showed notable expansion for the third month in a row in February, according to the latest survey released by S&P Global. 

The HCOB Spain PMI increased to 53.9 in February from 51.5 in the previous month, after the service sector expanded at the fastest pace in nine months and the manufacturing sector rebounded. 

Rising operating costs forced businesses to pass on the largest increase in prices to their customers. 

 

France's Industrial Output Eased in January 

France's industrial production declined from the previous month but rose from a year ago in January, the statistical agency INSEE reported Tuesday. 

Industrial production decreased 1.1% monthly and increased 0.8% from the previous year after manufacturing output declined 1.6% compared to a rise of 0.5%, construction activity growth slowed to 0.3% from 1.8%, and mining and quarrying rebounded to 1.6% from the decline of 0.3% in the previous month, respectively. 

On a yearly basis, industrial output rose 0.8% after rising 0.9% in December. 

 

China's Economic Measures Fall Short of Expectations

The Chinese government set 2024 economic growth, inflation, and unemployment targets that are likely to push the country's already high den to new record levels. 

The second-largest economy in the world is aiming to expand its economy by "around 5%," retail inflation at 3%, and create 12 million urban jobs to keep urban unemployment level at 5.5%. 

The Chinese government has little room to provide financial stimulus and fund wasteful infrastructure projects as the country's official debt-to-GDP ratio hovers at 286%, the largest among the top 20 economies in the world. 

The government is also planning to sell special Treasury bonds to raise one trillion yuan, or $139 billion. 

Chinese policymakers are struggling to balance economic growth above 5% with weak productivity growth and a shrinking and aging labor force. 

The government's plan failed to quell investor anxieties, and investors resumed selling in Hong Kong. 

 

Europe Indexes and Yields

The DAX index decreased by 0.2% to 17,698.40, the CAC-40 index fell 0.3% to 7,932.82, and the FTSE 100 index inched higher by 0.1% to 7,646.16.

The yield on 10-year German bonds edged down to 2.38%; French bonds inched lower to 2.84%; the UK gilts edged lower to 4.08%; and Italian bonds inched lower to 3.77%.

The euro edged higher to $1.085, the British pound inched higher to $1.268, and the U.S. dollar weakened to 88.60 Swiss cents.

Brent crude decreased $0.54 to $82.32 a barrel, and the Dutch TTF natural gas increased by €0.57 to €27.47 per MWh.

 

Europe Stock Movers

Energy explorer Shell, BP. Repsol, and TotalEnergies traded volatile after crude oil extended losses for the second day in a row despite OPEC+ nations extending voluntary production quotas to June. 

The two-month-long crude oil price rally has stalled on the lack of demand growth from China and the steady supply growth in the U.S. 

Thales SA increased 8.2% to €149.70 after the defense electronics maker increased its dividend and estimated organic sales growth between 4% and 6%. 

Ashtead Group declined 5.5% to 5,412.0 pence after the power equipment rental company narrowed its full-year growth outlook, citing weak demand in North America. 

Spirent Communication soared 59% to 172.64 pence after the UK-based telecom company agreed to be acquired by telecom equipment company Vivavi Solutions for £1.01 billion. 

Bayer AG decreased 1.7% to €27.77 after the biotechnology and pharmaceutical company reported a decline in sales in the fourth quarter. 

Schaeffler AG declined 3.75 to €6.32 after the precision bearing product maker reported lower fiscal year earnings. 

Net earnings attributable to shareholders in 2023 decreased to €310 million from €557 million a year ago. 

Inchcape plc dropped 11.1% to 605.50 pence after the vehicle distribution company estimated moderate revenue growth in the current fiscal year. 

Lindt & Spruengli dropped 1.8% to CHF 105,800.0 after the Swiss chocolate maker reported higher profit despite cost headwinds in fiscal year 2023. 

Greggs plc jumped 3.9% to 2,817.91 pence after the UK-based bakery chain reported a 13% increase in its annual profit in 2023. 

 

Asian Stock and Commodities Markets Turn Lower After China Disappointments

Stock market sentiment in Asia was mixed as investors remained cautious after China set economic targets and failed to provide specific measures to tackle the protracted property market slump. 

Market indexes in Japan eased following the weakness in New York, and indexes in India declined on valuation worries. 

 

Nikkei 225 In Tokyo Edged Lower 

Market indexes in Japan edged lower following the weakness in tech stocks in overnight trading in New York. 

In domestic economic news, the Tokyo area's core inflation rate rose to 2.5% in February from 1.8% in the previous month, crossing above the target rate of 2% set by the Bank of Japan. 

Also, Japan's service purchasing managers' index was revised higher to 52.9 in February from 52.6 in January, a four-month low, S&P Global reported Tuesday. 

The Nikkei 225 Stock Average fell 0.06% to 40,083.37, and the Topix index rose 0.5% to 2,719.07. 

Stock market sentiment remained positive in the hopes of a stronger-than-expected rebound in corporate earnings in the March quarter because of the economic strength in the U.S. and the sharply lower yen in the year. 

SoftBank, Advantest, Tokyo Electron, and Disco declined between 1.2% and 1.7%. 

Leading conglomerates, also known as Sogo Shosha, Marubeni, Sumitomo, Mitsubishi, Mitsui, and Itochu, gained between 0.3% and 1.6%. 

 

China's Economic Measures Fall Short of Expectations

The Chinese government set 2024 economic growth, inflation, and unemployment targets that are likely to push the country's already high den to new record levels. 

The second-largest economy in the world is aiming to expand its economy by "around 5%," retail inflation at 3%, and create 12 million urban jobs to keep urban unemployment level at 5.5%. 

The Chinese government has little room to provide financial stimulus and fund wasteful infrastructure projects as the country's official debt-to-GDP ratio hovers at 286%, the largest among the top 20 economies in the world. 

The government is also planning to sell special Treasury bonds to raise one trillion yuan, or $139 billion. 

Chinese policymakers are struggling to balance economic growth above 5% with weak productivity growth and a shrinking and aging labor force. 

The government's plan failed to quell investor anxieties, and investors resumed selling in Hong Kong. 

The CSI index increased 0.4% to 3,556.97, and the Hang Seng index dropped 2.5% to 16,189.27. 

Moreover, foreign investors are still lowering their holdings in China, and foreign direct investment has plunged by 90% over the last two years after tensions between the nation and the U.S. rose. 

Tech stocks led the decliners, with Alibaba Group, JD.com, Tencent, and Baidu declining between 2% and 4%. 

Chinese property developers plunged after a lack of specific measures to revise the protracted slump in the property market. 

China Resources Land, China Vanke, Henderson Land, and Longfor Group dropped between 2% and 6%. 

 

India Stocks Trend Lower

Stocks in Mumbai traded sideways as investors looked abroad in the absence of domestic economic news. 

The Sensex and the Nifty indexes traded down in early trading amid weak global sentiment, and market indexes in the U.S., Japan, India, Germany, and France traded near record highs. 

Crude oil continued to advance as Houthi rebels stepped up attacks in the Red Sea, with no end in sight of the conflict between Israel and Palestine. 

Precious metals, such as gold and silver, edged higher after investors bid up prices in the hopes of a rate cut in the U.S. and the Euro Area and rising demand from China and India. 

Closer to home, market sentiment remained positive after India's economic growth accelerated in the December quarter, driven in part by sustained infrastructure spending by the government. 

Moreover, foreign investors are still lowering their holdings in China, and foreign direct investment has plunged by 90% over the last two years after tensions between the nation and the U.S. rose. 

The Sensex index decreased 0.2% to 73,730.21, and the Nifty index fell 0.1% to 22,373.35.

On the Mumbai stock exchange, 116 stocks traded at their 52-week highs and 25 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.06%, and the Indian rupee strengthened to ₹82.91 against the U.S. dollar.