September S&P 500 E-Mini futures (ESU26) are down -1.26%, and September Nasdaq 100 E-Mini futures (NQU26) are down -2.47% this morning as renewed concerns about sky-high tech valuations prompted investors to revisit their holdings.
Chip and AI infrastructure stocks cratered in pre-market trading as a selloff in Korean and Japanese chipmakers fueled concerns about the sustainability of the AI-driven rally. Micron Technology (MU) slumped over -8%, Marvell Technology (MRVL) slid more than -7%, and Intel (INTC) sank over -6%. Tuesday’s selloff in chipmakers followed a retreat in megacap tech stocks a day earlier as investors questioned whether future returns could justify current heavy AI spending. The prospect of a Federal Reserve interest rate hike this year is also driving the pullback.
“We have seen tech stocks go vertical and become very overbought. What we’re doing now is getting rid of that overbought situation,” said Joachim Klement at Panmure Liberum.
Meanwhile, oil prices edged lower on Tuesday amid signs that negotiations toward a lasting peace agreement between the U.S. and Iran got off to an encouraging start. The U.S. issued a 60-day license permitting Iran to sell crude and petrochemical products on the international market. Also, U.S. Vice President JD Vance said Iran had agreed to allow nuclear inspectors to return to the country. However, The Wall Street Journal reported that Tehran has not yet acknowledged that concession.
Market participants are now awaiting U.S. business activity data and an earnings report from shipping giant FedEx.
In yesterday’s trading session, Wall Street’s main stock indexes closed mixed. Alphabet (GOOGL) sank about -5% to lead megacap technology stocks lower after announcing that John Jumper, a Nobel Prize-winning AI researcher at Google DeepMind, was departing the company to join Anthropic. Also, software stocks slid, with Palantir Technologies (PLTR) falling more than -6% and Oracle (ORCL) dropping -5%. In addition, SpaceX (SPCX) tumbled over -16% after the rocket, satellite, and AI conglomerate announced its first-ever offering of investment-grade bonds. On the bullish side, Super Micro Computer (SMCI) jumped more than +15% and was the top percentage gainer on the S&P 500 after GF Securities upgraded the stock to Buy from Hold with a $48 price target.
Despite the latest pressure on equities, Tom Hainlin at U.S. Bank Asset Management Group continues to see a favorable backdrop, particularly for U.S. large-cap stocks. “If you look at who’s got the most wherewithal and transparency and earnings, it’s still the U.S. for right now, given the fact that we’re not concluding that [Middle East] conflict, given the fact that [oil] flows aren’t fully back to normal yet and given the fact that the U.S. still has its own energy supplies,” Hainlin said.
Today, investors will focus on preliminary U.S. purchasing managers’ surveys, set to be released in a couple of hours. Economists expect the June S&P Global Manufacturing PMI to be 54.6 and the S&P Global Services PMI to be 51.1, compared to the previous values of 55.1 and 50.7, respectively.
The U.S. Richmond Fed Manufacturing Index will also be released today. Economists foresee this figure coming in at 8 in June, compared to 13 in May.
In addition, investors will monitor earnings reports from several prominent companies, with shipping giant FedEx (FDX), AI chip developer Cerebras Systems (CBRS), and cruise company Carnival Corporation (CCL) slated to release their quarterly results today.
Investor attention for the remainder of the week is on the U.S. May core PCE price index, the Fed’s preferred inflation gauge, remarks from Fed officials, and an earnings report from memory chipmaker Micron Technology.
“Even though oil prices have retreated, the Fed is taking pains to focus on inflation, which could give additional weight to this week’s PCE Price Index reading,” said Chris Larkin at E*Trade from Morgan Stanley.
U.S. rate futures have priced in a 67.9% chance of no rate change and a 32.1% chance of a 25 basis point rate hike at the July FOMC meeting.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.49%, down -0.66%.
The Euro Stoxx 50 Index is down -1.53% this morning as a global selloff in technology stocks spilled over into Europe. Chip and other AI-related stocks were among the biggest losers on Tuesday as investors took profits after a recent rally amid concerns about sky-high valuations. Mining stocks also sank, tracking weakness in precious metal prices. A survey released on Tuesday showed that Eurozone private-sector activity contracted for the third consecutive month in June, though at a slower rate, as a modest rebound in tourism and leisure demand was insufficient to fully offset a continued decline in new business. Chris Williamson, chief business economist at S&P Global Market Intelligence, said, “The Eurozone economy is showing enough resilience to just about stay out of recession. The flash PMI registered only a slight drop in business activity in June, meaning the survey is indicative of unchanged GDP over the second quarter.” Meanwhile, European Central Bank Chief Economist Philip Lane said on Tuesday that Eurozone inflation could remain above the central bank’s 2% target for an extended period, even if peace in the Middle East is achieved. Separately, ECB Governing Council member Peter Kazimir said the impact of the conflict in the Middle East cannot be undone overnight and that policymakers still have work to do. In corporate news, Signify NV (LIGHT.NA) tumbled over -14% after the lighting company said it would not restart its buyback program and announced its midterm targets.
Eurozone’s Composite PMI (preliminary), Eurozone’s Manufacturing PMI (preliminary), and Eurozone’s Services PMI (preliminary) data were released today.
Eurozone’s June Composite PMI has been reported at 49.5, stronger than expectations of 49.1.
Eurozone’s June Manufacturing PMI came in at 51.3, weaker than expectations of 51.6.
Eurozone’s June Services PMI arrived at 48.9, stronger than expectations of 48.6.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -1.37%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -3.55%.
China’s Shanghai Composite Index closed lower today, tracking weakness across regional peers. Non-ferrous metal stocks slumped on Tuesday as a stronger U.S. dollar weighed on gold prices amid growing expectations of a Fed rate hike this year. Technology stocks also fell as investors locked in profits following a recent rally. Sentiment was also dampened by fresh data pointing to weak consumer demand in the world’s second-largest economy. Online sales during China’s mid-year “618” shopping festival, which ran from May 13th to June 18th, increased 4.0% from a year earlier to 934.0 billion yuan ($137.86 billion), according to data provider Syntun’s official WeChat account. That represented a sharp deceleration from the 15% growth recorded during last year’s festival. In other news, China reduced its cumulative fiscal deficit for the first time in more than two years, continuing its push for austerity despite weak domestic demand and slowing economic growth. In corporate news, battery parts maker Shenzhen Senior Technology Material surged over +24% in its Hong Kong trading debut, highlighting continued investor confidence in China’s rapidly growing battery industry. Investor attention this week is on China’s industrial profit data for May.
Japan’s Nikkei 225 Stock Index closed sharply lower today, snapping an eight-session winning streak as investors sold some of this year’s top-performing tech stocks amid concerns they had risen too far, too fast. The pullback followed a strong rally fueled by sustained buying in chip and other AI-related stocks, which had propelled the Nikkei to a series of record highs. Chipmaker Kioxia Holdings plunged over -15% and tech conglomerate Softbank Group slumped more than -10% on Tuesday, weighing heavily on the benchmark index. “The market had already been looking overheated for quite a while as richly valued names kept rising, so it would not have been surprising to see a correction at any time,” said Masahiro Ichikawa at Sumitomo Mitsui DS Asset Management. A survey released on Tuesday showed that Japan’s manufacturing sector maintained strong growth in June, with new orders rising at their fastest pace in more than four years, although cost pressures continued to intensify due to the fallout from the Iran war. Meanwhile, the Japanese yen hovered near its weakest level against the dollar since 1986. Investors remained on high alert for intervention following a call between Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent. Japan’s Chief Cabinet Secretary Minoru Kihara said on Tuesday that officials stand ready to act as needed to support the yen. Investor focus this week is on Japan’s Tokyo Core CPI for June, which is expected to reflect the impact of rising energy prices, although the underlying inflation trend may be clouded by the effects of subsidies. Market participants will also closely monitor speeches from Bank of Japan Deputy Governor Ryozo Himino and board member Naoki Tamura, along with the summary of opinions from the BOJ’s June meeting. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +6.49% to 31.34.
The Japanese June S&P Global Manufacturing PMI (preliminary) stood at 54.9, stronger than expectations of 54.5.
Pre-Market U.S. Stock Movers
Chip and AI infrastructure stocks cratered in pre-market trading, with Micron Technology (MU) slumping over -8% and Marvell Technology (MRVL) sliding more than -7%.
Most members of the Magnificent Seven stocks slid in pre-market trading, with Tesla (TSLA) and Nvidia (NVDA) falling over -3%.
Mining stocks dropped in pre-market trading as gold and silver prices sank. Freeport McMoRan (FCX) was down over -5%, Newmont (NEM) was down more than -3%, and Coeur Mining (CDE) was down over -2%.
Primoris Services (PRIM) plummeted more than -35% in pre-market trading after the construction company cut its full-year guidance.
International Business Machines (IBM) rose over +4% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $291.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - June 23rd
FedEx (FDX), Cerebras Systems (CBRS), Carnival Corporation (CCL), Sunbelt Rentals Holdings (SUNB), Korn Ferry (KFY), KB Home (KBH), Worthington Enterprises (WOR), Enerpac Tool Group (EPAC).
