U.S. Major Averages Drop as Tech Selloff Deepens, Nvidia Drops 6%

Alexander Garcia
30 Jul, 2024
Miami

U.S. indexes erased early gains, and tech-heavy indexes dropped sharply after investors sold artificial intelligence stocks. 

The S&P 500 index and the Nasdaq Composite fluctuated around the flatline in early trading but accelerated the decline in the afternoon following the 6% plunge in Nvidia. 

The sudden and swift decline in Nvidia drove down other chip stocks, lowering the Nasdaq and the S&P 500 index. 

Nvidia stock is down more than 20% from its high of $135 on July 10 as investors reassess the surge in artificial intelligence-linked stocks. 

Earnings dominated market sentiment amid a flood of quarterly results, including updates from Merck, Pfizer, JetBlue, F5, Woodward, and Procter & Gamble. 

Microsoft, Starbucks, and AMD are scheduled to release their quarterly results after the close of regular market trading hours. 

The Federal Reserve is also scheduled to announce its monetary policy decisions on Wednesday, and investors are widely anticipating the central bank to hold Fed Funds rates steady between 52.5% and 5.50%. 

On the economic front this week, investors are also awaiting the release of June's nonfarm payroll data. 

Job openings in June edged slightly lower to 8.18 million from 8.23 million in May, according to the Job Opening and Labor Turnover Survey released by the U.S. Bureau of Labor Statistics. 

The hiring levels declined by 554,000 over the year to 5.3 million, and the hire rate as a share of the workforce eased to 3.4%, the lowest since October 2013, excluding pandemic-era layoffs in April 2020.

The number of people quitting their jobs eased to 3.3 million, the lowest since November 2020. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.8% to 5,421.80, the Nasdaq Composite declined 1.5% to 17,118.65, and the Russell 2000 index fell 0.1% to 2,232.35.

The yield on 2-year Treasury notes edged lower to 4.38%, 10-year Treasury notes decreased to 4.16%, and 30-year Treasury bonds decreased to 4.41%.

WTI crude oil decreased $0.65 to $75.15 a barrel, and natural gas prices edged up 20 cents to $2.10 a thermal unit.

Gold increased by $11.04 to $2,392.32 an ounce, and silver rose by $0.27 to $28.09. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 104.75.

 

U.S. Stock Movers 

JetBlue jumped 21.6% to $7.21 after the regional airline unexpectedly reported profit in its latest quarter. 

Procter & Gamble plunged 6% to $159.73, and the household products maker reported weaker-than-expected revenue due to weak sales in China. 

Merck & Company dropped 8.6% to $116.61 after the pharmaceutical company reported stronger-than-expected quarterly results, but the company's annual guidance fell short of investor expectations. 

Pfizer declined 2.9% to $116.61 despite the pharmaceutical company reporting better-than-expected second quarter results and lifting its annual outlook.

F5 Inc. soared 10.7% to $196.71 after the cyber security network management software company reported better-than-expected revenue and earnings in the fiscal third quarter. 

Woodward Inc. dropped 16.5% to $152.91, and the aerospace company's revenue in the fiscal third quarter of $847.7 million fell short of market expectations. 

 

European Markets Struggled to Advance, Steady GDP Growth In Eurozone 

European markets were mixed as investors reviewed a slew of corporate results and key economic data and awaited monetary policy decisions from major central banks. 

Benchmark indexes in London, Paris, and Frankfurt traded around flatline ahead of the U.S. Federal Reserve's monetary policy decisions on Wednesday. 

The Euro Area gross domestic product expanded 0.3% on quarter in the second quarter, matching the rate in the first quarter, Eurostat reported Tuesday. 

On an annual basis, seasonally adjusted GDP in the second quarter rose by 0.6% and by 0.7% in the eurozone and European Union and accelerated from 0.5% and 0.6% in the first quarter, respectively. 

Seasonally adjusted GDP from a year ago contracted in Germany by 0.1%, rose by 2.9% in Spain, 1.1% in France, and expanded 0.9% in Italy. 

In a separate report released by the French statistical office INSEE, GDP in the second quarter rose 0.3% sequentially and matched the upwardly revised rate in the first quarter. 

Total production rebounded in the second quarter to 0.5% from a decline of 0.1%, and household consumption was stable after shrinking 0.1% in the previous quarter, respectively. 

 

Europe Indexes and Yields

The DAX index increased by 0.5% to 18,411.18; the CAC-40 index rose by 0.4% to 7,474.94; and the FTSE 100 index decreased by 0.2% to 8,274.11.

The yield on 10-year German bonds edged higher to 2.35%, French bonds inched higher to 3.06%, the UK gilts inched higher to 4.05%, and Italian bonds increased to 3.75%.

The euro edged lower to $1.08; the British pound inched lower to $1.284; and the U.S. dollar weakened to 88.59 Swiss cents.

Brent crude decreased $0.92 to $78.85 a barrel, and the Dutch TTF natural gas fell by €5.38 to €39.25 per MWh.

 

Europe Stock Movers

Standard Chartered Bank increased 6.2% to 771.60 pence after the Asia-focused financial services company reported stronger-than-expected second quarter results.

The bank also announced a $1.5 billion stock repurchase plan. 

BP plc rose 1.3% to 458.85 pence after the energy company reported better-than-expected second quarter profit. 

The company reiterated its plans to buyback its stocks and increase its dividend. 

Revenue in the second quarter declined to $48.2 billion from $49.9 billion, net income attributable to shareholders swung to a loss of $129 million from a profit of $1.8 billion, and diluted earnings per share were a loss of 0.78 cents compared to a profit of 10 cents. 

Diageo plc dropped 6.6% to 2,380.0 pence after the spirits and alcohol drink distributor reported lower-than-expected annual profit. 

Net sales declined 1.4% to $2.03 billion from $20.6 billion, net income attributable to shareholders fell to $3.9 billion from $4.4 billion, and basic earnings per share fell to $1.73 from $1.96 a year ago. 

Ocado Group declined 6.4% to 404.80 pence after the UK-based online supermarket and technology group extended its debt maturity to fund its growth plans. 

 

Japan's Jobless Rate Eased In June, Komatsu Reiterated Outlook 

Stocks in Tokyo struggled to find a clear direction as the Bank of Japan kicked off its two-day policy meeting. 

The Nikkei 225 increased by 0.4% and the Topix declined by 0.2% as investors debated the future rate path amid growing calls for the central bank to provide clarity about its plan to shore up the yen. 

The Bank of Japan is expected to leave its key lending rate range unchanged between zero and 0.1%, despite growing calls for a rate hike and demands to support the faltering yen. 

The yen closed at 154.88 against the U.S. dollar in Tokyo trading as investors dialed down expectations of an imminent rate cut. 

Policymakers are also expected to provide clarity about the central bank's plans to taper the government bond purchase program over the next two years. 

On the economic front, Japan's unemployment rate unexpectedly declined to 2.5% in June, an improvement from 2.6% in May, according to the Ministry of Internal Affairs and Communications reported Tuesday. 

The number of employed people increased from 370,000 to 68.2 million, a record high since record-keeping began in 1953. 

The total number of jobless fell 3.3% to a seasonally adjusted 1.76 million, as voluntary separations declined in the month. 

The job availability ratio eased by 0.01 percentage points to 1.23, the third monthly decline, according to a separate report released by the Ministry of Health, Labor, and Welfare. 

The latest update showed that there were 123 jobs available for every 100 job seekers. 

 

Japan Movers 

The Nikkei 225 stock average increased by 0.4% to 38,525.95, and the Topix decreased by 0.2% to 2,754.45. 

Advantest Corp. increased 0.7% to ¥5,772.0, Tokyo Electron advanced 0.8% to ¥28,880.0, and Screen Holdings rebounded from a 0.5% loss to close unchanged at ¥11,810.0. 

Disco Corp. declined 1.7% to ¥46,750.0, Rakuten Group fell 1.6% to ¥889.70, and Nippon Electric Glass decreased 3.7% to ¥3,528.0. 

Komatsu dropped 4.8% to ¥4,304.0 despite the construction machinery maker reporting an increase in revenue and earnings in the fiscal first quarter ending in June. 

Sales in the quarter increased to 959.8 billion yen from 899.5 billion yen, net income rose to 109.7 billion yen from 105.4 billion yen, and diluted earnings per share rose to 116.47 yen from 111.48 yen a year ago. 

The company reiterated full-year sales to ease 0.1% to 3.86 trillion yen, net income to fall 11.8% to 347 billion yen, and diluted earnings per share to 366.81 yen. 

The company estimated the full-year dividend to remain unchanged at 167 yen per share. 

 

 

China Stocks Reverse Previous Day's Gains Ahead of Factory Activity Data 

Investors sat on the sidelines ahead of the release of key economic data on Wednesday and the tepid policy response. 

Market sentiment was reversed after indexes soared as much as 2% following the rebound in corporate profits for industrial enterprises in the period between January and June. 

The Hang Seng and the CSI 300 indexes declined around 1% ahead of the release of factory activity surveys. 

The official manufacturing purchasing managers' index is expected to ease to 49.4 in June from 49.5 in May, largely because of weak domestic demand growth. 

The Hang Seng index is set to close down for the second month in a row as investors dial down expectations of market-supportive measures from policymakers. 

 

China FDI Plunged 29% In the First Half 

Foreign direct investment in China dropped 29.1% from a year ago to 498.9 billion yuan in the first six months of the year, according to the ministry of commerce. 

High-tech manufacturing increased 2.4 percentage points to 12.8% of foreign investments; medical equipment and instrument investments soared 87.5%; and professional and technical services investments jumped 43.4%. 

Germany accounted for 18.1% of total foreign investment, followed by Singapore with 10.5%. 

 

China Stock Movers 

The Hang Seng index declined 1.3% to 17,022.25, and the CSI 300 index dropped 0.9% to 3,359.23. 

Tech stocks, electric vehicle makers, and financial stocks led the decline in Hong Kong. 

Tencent Holdings declined 1.4% to HK $353.40, Alibaba Group decreased 0.2% to HK $76.40, and Baidu increased 0.3% to HK $87.05. 

Wuxi Apptec increased 4% to HK $29.85, and the biotech company said net profit declined 20% to 4.2 billion yuan. 

Wuxi Biologics dropped 0.8% to HK $10.48. 

Li Auto decreased 0.3% to HK $73.65, BYD dropped 3.3% to HK $223.60, and Xpeng declined 3.6% to HK $31.30. 

China Mengniu Dairy Company dropped 6.6% to HK $12.60, and Haidilao International dropped 3.3% to HK $12.18.