Tech knocked on Wall Street as bond markets keep groaning

Stocks on Wall Street were on track for a third decline as long-dated government bonds continued to hit multi-decade highs, knocking the likes of chip stocks Intel and Nvidia as investors rethink lofty valuations for tech companies.

Meanwhile, Anthropic was reportedly seeking to expand its credit facility ahead of a planned initial public offering, while OpenAI launched protections to limit high-risk topics that teens can access as Meta Platforms defends claims that the social media giant designed Facebook and Instagram to keep minors hooked.

Oil prices remained elevated as the temporary truce between the US and Iran expired, while Middle Eastern energy giants were pushing to build larger stockpiles elsewhere and BP resumed trading Venezuelan oil.

And Australian futures are pointing to a soft start to the trading day for the ASX, while dairy prices rose at the latest Global Dairy Trade auction.

Nervous times

Global markets remained uneasy as yields on 30-year government bonds hit new highs before easing back from their peaks, with the Middle East conflict showing no sign of abating and the debt-fuelled artificial intelligence infrastructure build-out adding another layer of concern for bond traders.

Japan’s SoftBank Group is the latest to tap bond markets to fund its AI investments, with Nikkei Asia reporting the tech investor planned to issue ¥1 trillion of corporate bonds.

“With many investors still on holiday and enjoying a hot Northern Hemisphere summer, market volatility remains suppressed,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Most media outlets are reporting that long-term global bond yields have extended their rise to fresh multi-decade highs.”

Stocks on Wall Street were on track for a third daily decline, with the S&P 500 down 0.6% and the tech-heavy Nasdaq Composite sliding 1.3% as chipmakers and semiconductor firms wore the brunt of the sour mood. The Dow Jones Industrial Average slipped a more modest 0.2%, with Caterpillar, Nvidia and Goldman Sachs leading the blue-chip index lower.

Drone maker XTI Aerospace slumped 15% after the company said chief executive and chairman Scott Pomeroy resigned amid an internal review of the executive and other corporate governance matters, without providing details. The review will delay the firm filing its quarterly report with the Securities and Exchange Commission.

Softer earnings from Chinese tech companies Xiaomi and Baidu added to the downbeat tone for the tech sector, although beat-up software firms such as Salesforce were among the day’s gainers and Home Depot advanced after beating earnings expectations and reaffirming its annual outlook.

Bloomberg reported Anthropic planned to expand its credit facility above its US$10 billion target ahead of a proposed IPO, four times the US$2.5 billion funding line it secured last year.

For the kids

Meanwhile, rival OpenAI launched a new version of ChatGPT with parental controls to limit conversations about high-risk topics and provide educational tools to help students learn rather than simply giving them the answer.

That comes as Meta faces a claim brought by California, Colorado, Kentucky and New Jersey on behalf of 29 states that it designed its Facebook and Instagram platforms to addict children. The social media giant has said penalties could be as high as US$1.43 trillion.

Brent crude oil futures nudged up 0.2% to US$91.06 after the temporary truce between the US and Iran expired yesterday. The New York Times reported Middle Eastern energy giants have sought to shift more oil into stockpiles outside the Persian Gulf, with Saudi Arabia and the United Arab Emirates reportedly urging Japan to expand its reserves.

Meanwhile, BP resumed trading Venezuelan oil following the US removal of former President Nicolás Maduro, while Equinor and Chevron Corp have partnered to explore a prospect in Namibia’s Orange Basin.

Bitcoin rose 0.7% to US$64,737 with large holders of the cryptocurrency adding to their positions in recent weeks, according to CryptoQuant.

Across the Atlantic, European stock markets were broadly weaker, with Germany’s DAX and France’s CAC 40 both down 0.8%. The UK’s FTSE 100 edged up 0.1%.

London-listed Frasers Group gained 1.8% after saying it now held almost 48% of Hugo Boss shares after the acceptance period for its takeover offer ended.

The downbeat tone is set to continue into the antipodes, with futures pointing to a 0.1% dip for the S&P/ASX 200 index when trading opens across the Tasman.

The kiwi dollar traded at 58.72 US cents at 7am in Auckland from 58.80 cents yesterday after prices rose at the latest Global Dairy Trade auction. The GDT price index rose 2.3%, with the average winning price at US$3,873 a tonne. Whole milk powder prices gained 3% to US$3,591/tonne.

Earnings season continues in New Zealand with Fletcher Building and Ebos Group among those on the calendar, while Turners Automotive Group and My Food Bag hold their annual meetings, and Statistics New Zealand’s quarterly producer prices index is due.

Reporting by Paul McBeth. Image from Levart_Photographer on Unsplash.