Caution over Meta’s AI spend weighs on Wall St
Trump and Xi’s meeting secured a truce between the US and China.
The tech-heavy Nasdaq Composite cast a pall over Wall Street as investors were wary of Meta Platforms’ efforts to stay in the artificial-intelligence race, with spending by the Magnificent 7 megacap companies set to keep rising, although attention will shift to Apple and Amazon when they report after the closing bell.
The US federal government’s shutdown didn’t deter software firm Navan from going public while staff at the Securities and Exchange Commission were furloughed, although its debut might be one to forget as it sank 16% in late trading.
Meanwhile, US President Donald Trump touted his amazing meeting with China’s Xi Jinping where the leaders of the world’s two-biggest economies reached a deal on tariffs, rare earth mineral access and fentanyl chemicals to cool what’s been a tempestuous relationship in recent weeks.
And the antipodes are looking a little perkier with Australian futures pointing to a gain for the S&P/ASX 200 index when trading opens across the Tasman, while ANZ’s consumer confidence survey will provide the latest insight into New Zealand’s tentatively recovering economy.
Sunk costs
Meta Platforms dropped 10% in late trading, while Microsoft was down 3% after the heavyweight tech firms said they’d be ramping up spending on AI in their latest quarterly earnings, which wasn’t well received by investors. The social media giant finalised pricing on a US$30 billion bond sale, with the yield on the notes jumping 12 basis points.
The Nasdaq Composite was down 0.9% in late trading, with the S&P 500 down 0.4%.
Google-parent Alphabet bucked the trend, rising 4% despite forecasting increased research and development spending, with surging revenue from its cloud business, which sells computing power to data centres, giving investors some heart.
Amazon and Apple report their quarterly earnings after trading closes.
That created a soft environment for software firm Navan to debut after its initial public offering, with the company down 16% in late trading after using the Securities and Exchange Commission’s workaround for firms to list through the federal government shutdown to join in the frothy sentiment.
Drugmaker Eli Lilly & Co advanced after beating earnings expectations on soaring demand for its Mounjaro weight-loss drug, while rival Novo Nordisk launched a bid for obesity drug firm Metsera.
Deep thoughts
Sentiment was already soft in stock markets as investors digested US Federal Reserve chair Jerome Powell’s comments that another rate cut wasn’t a done deal.
Meanwhile US President Donald Trump’s meeting with China’s Xi Jinping secured the well-signalled truce between the jostling superpowers, with the US providing tariff concessions and easing import restrictions while China will crackdown on exports of fentanyl precursor chemicals and provide access to rare earth minerals.
“Despite the positive tone, the deal lacks major reform,” ANZ Bank New Zealand economists said in a note. “The relatively muted reaction in global markets suggests some scepticism about lasting progress.”
European stock markets were similarly muted, with the UK’s FTSE 100 marginally higher and Germany’s DAX 30 just in the red, while France’s CAC 40 declined 0.5%. The European Central Bank kept its key rate unchanged as expected, noting the region’s economy has continued through the challenging environment.
Markets in the antipodes are less downcast, with Australian futures pointing to a 0.4% gain for the ASX200 when trading opens across the Tasman. New Zealand’s S&P/NZX50 index is on track for a positive October, having gained 1.3% so far this month.
The kiwi dollar fell to 57.45 US cents at 7am in Auckland from 57.77 cents yesterday.
Local data today include ANZ’s consumer confidence survey, following an upbeat report on business sentiment on Thursday, with retailers a bright spot in September.
Meanwhile, annual meeting season continues, with shareholders of SkyCity Entertainment Group, Port of Tauranga and Vulcan Steel gathering today.
Reporting by Paul McBeth. Image from Julio Lopez on Unsplash.
