Wall Street’s tech selloff keeps US earnings in focus

A rout among Wall Street tech stocks on Friday is keeping US earnings season firmly in focus, with Meta Platforms seen as a key result to test investor appetite for artificial intelligence-exposed firms and as Microsoft pulled out of a major UK data centre deal.

Oil prices climbed heading into the weekend, with Ukraine’s renewed strikes on Russian refineries keeping traders uneasy about supply, while Ukrainian President Volodymyr Zelenskyy said the US was sharing intelligence with his nation again.

French President Emmanuel Macron is due to deliver a televised address after France was rocked by widespread protests over the weekend about cost-of-living complaints and the poor state of health and education.

And Australian markets are pointing to a muted start to the week for the ASX, in what will be a busy week domestically, with 13 annual meetings for NZX-listed companies and Statistics New Zealand’s quarterly inflation data in view on Thursday.

General unease

Stocks on Wall Street tumbled on Friday, with the tech-heavy Nasdaq Composite down 2.1% as investors remained nervous about the AI sector and the capital spending needed to deliver its infrastructure. The S&P 500 fell 1.1%, while the Dow Jones Industrial Average was down a more muted 0.3%, with Alphabet, Salesforce and Cisco Systems at the bottom of the leaderboard.

“The VIX jumped 21.5% to 19.99, signalling a sharp increase in demand for protection against further market volatility,” said Moomoo market strategy consultant Greg Boland, referring to the Cboe’s volatility index.

Meta’s earnings on Wednesday in the US is seen as the next major test for the AI sector, along with semiconductor firms Lam Research and Texas Instruments, and Elon Musk’s SpaceX and Tesla.

“Results and forward guidance will help determine whether corporate earnings can support valuations as AI enthusiasm cools,” Boland said in a note. “Investors will also be weighing the approach of the US midterm elections, with policy uncertainty potentially adding to market sensitivity.”

Meanwhile, UK neocloud firm Nscale said Microsoft pulled out of a data centre deal, which had been contending with delays over power constraints.

The Financial Times reported Claude developer Anthropic was offering Blackstone a yield of more than 10% to finance its latest chip deal in what was described as the biggest chip financing to date.

Separately, Politico reported Anthropic pitched a draft bill to US legislators to regulate AI safety and security.

Expensive oil

Elevated oil prices added to the broad unease in markets, with Brent crude oil futures up 3.6% at US$109.69 a barrel heading into the weekend, with no sign of Russia and Ukraine adhering to a ceasefire on attacking energy targets.

Ukrainian President Zelenskyy told NBC’s ‘Meet the Press’ programme that the US was sharing intelligence with his nation again.

European stock markets rallied on Friday, with the UK’s FTSE 100 up 0.4%, Germany’s DAX gaining 1% and France’s CAC 40 increasing 0.3%.

The French government was in crisis talks on Sunday after widespread protests descended into violence, with more than 2,000 people arrested amid growing discontent over the cost of living and the state of health and education. President Macron was scheduled to address the nation, with the nation grappling to get on top of growing debt amid the expanding demands for more money.

Meanwhile, China has proposed export controls on some technology to make solar equipment amid a broader clamp down on AI and biotechnology, while India’s food regulator issued notices to local arms of Nestlé and Unilever in a nationwide safety crackdown.

Australian futures are pointing to a 0.1% decline for the S&P/ASX 200 index when trading opens across the Tasman, while the kiwi dollar traded at 56.51 US cents at 7am in Auckland from 56.52 cents on Friday.

The ASX 200 rose 1% last week, outperforming a marginal gain for New Zealand’s S&P/NZX 50 index, while the S&P 500 dropped 2% last week.

Local data today include the BNZ-Business NZ performance of services index, following a sharp rise in its sister manufacturing gauge, while Stats NZ’s monthly merchandise trade figures are also on the calendar.

Reporting by Paul McBeth. Image from Robb Miller on Unsplash.