US stocks fell Monday as investors grew increasingly cautious of rising bond yields, while watching the latest batch of corporate earnings.
Investors will also watch on Tuesday for Federal Reserve Chairman Jerome Powell’s remarks before the Economic Club of Washington. Powell’s comments on disinflation caused investors to bid shares higher last week and overlook another rate hike out of the central bank.
Overnight the Dow Jones Industrial Average lost 0.1 per cent, making up some ground after losing more than 240 points earlier in the session. The S&P 500 slid 0.6, while the Nasdaq Composite dropped 1 per cent.
Investors were taking some profits after the stock market’s hot start to the year. The S&P 500 is up more than 7 per cent for 2023, while the Nasdaq Composite has advanced for the last five weeks, a streak not seen since November 2021.
Disney, Dupont and PepsiCo are among the major companies reporting earnings this week, which investors will be watching for any indications that prior interest rate hikes have hurt companies’ finances. With the earnings season about halfway over, profits for S&P 500 companies are on pace to be 2.7 per cent lower for the fourth quarter, according to Refinitiv.
On the ASX yesterday, Newmont, the world’s largest gold mining corporation, made a bid to acquire Australia’s Newcrest Mining (ASX:NCM). The deal would create a gold miner with a production of over 8 million ounces and a $56 billion industry behemoth. Rising operating costs have made the market cautious for gold miners, and consolidation has become a sensible option. The consensus is however, that Newcrest shareholders have not embraced the offer from Newmont. Overnight shares in Newmont closed 4.6 per cent lower while Newcrest closed 9 per cent higher yesterday.
In tech news, big tech companies’ recent layoff announcements and earnings calls have shared an overarching vision: That AI advancement is the future, and it’s time to shift more focus and funding toward machine learning projects. Three of the most influential tech companies—Alphabet, Microsoft, and Meta—have said that, in part, they’re using the period of retrenchment to try and elevate their in-house AI projects.
This quarter’s tech earnings calls resulted in tech execs using the terms AI, generative AI, and machine learning “two to six times as often as they did in the previous quarter,” according to a Reuters analysis.
Most sectors closed lower in a risk-off market environment with negative breadth, but some areas such as Social Media, Solid State Battery, and Gene Editing finished higher.
Big tech and energy were mostly lower, while the automotive sector was mixed, with Tesla performing well after Elon Musk won the "funding secured" lawsuit.
In commodity news, production interruptions in key copper-producing regions such as Latin America and Africa have increased the likelihood of a tighter market in 2023, but analysts believe it is too early to reduce global supply forecasts. Peru, the world's second-largest copper producer, is facing social unrest that is impacting key mines.
Futures
The SPI futures are pointing to a flat start.
Currency
One Australian dollar at 8:10 AM has weakened compared to the US dollar yesterday buying 68.82 US cents (Mon: 69.05 US cents).
Commodities
Iron ore futures are pointing to a 0.5 per cent fall. Iron ore is 1.7 per cent lower at US$124.05 tonne.
Gold added 0.3 per cent. Silver fell 0.5 per cent. Copper lost 0.5 per cent and oil added 1.4 per cent.
Figures around the globe
Across the Atlantic, European markets closed lower. London’s FTSE fell 0.8 per cent, Frankfurt also lost 0.8 per cent while Paris closed 1.3 per cent lower.
In Asian markets, Tokyo’s Nikkei added 0.7 per cent, Hong Kong’s Hang Seng lost over 2 per cent while China’s Shanghai Composite closed 0.8 per cent lower.
Yesterday, the Australian sharemarket closed 0.3 per cent lower at 7,539.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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