Stock benchmarks in Japan and South Korea fell more than 1% in early trading in Asia. The Nasdaq 100 lost 1% after tepid outlook from Texas Instruments Inc. and a 10% slump at Netflix Inc. In the late hours, Tesla Inc. fell as profits missed expectations despite a sales increase.
Adding to nerves, traders were watching developments in Washington after the Trump administration said it was considering curbing software exports to China, which would stoke new trade tensions. Meanwhile, oil prices rose nearly 3% after the US announced sanctions on Russia’s biggest producers in its latest attempt to pressure President Vladimir Putin to negotiate an end to the war in Ukraine.
Ten-year government bond yields remained stable after falling one basis point to 3.95% on Wednesday. A $13 billion sale of 20-year bonds was strong. The dollar index was little changed. Gold withdrew for a third session.
In the US, assets favored by retail momentum traders suffered the biggest losses, including precious metals, cryptocurrencies and artificial intelligence companies. Indices used by quantitative investors to track stock market themes, such as the Bloomberg US Pure Momentum Portfolio, have fallen sharply in recent days.
Over the past week, enthusiasm for parts of the market that have gone “parabolic” since early August has waned significantly, according to Bespoke Investment Group. “It appears that, at least temporarily, the music has stopped and the party is over for the most speculative names,” the Bespoke strategists said. “No one knows when the music will pick up again, but usually the higher they go, the harder they fall.” In Japan, newly appointed Prime Minister Sanae Takaichi has ordered a new set of economic measures to help households and businesses cope with persistent inflation. The shares of Disco Corp. and Lasertec Corp. fell by more than 4%, leading to losses on the Nikkei 225.
American profits
At a time when the stock market rally has weakened, the downside is that the percentage of U.S. companies beating earnings estimates this quarter is the highest since 2021. Most S&P 500 companies typically hit expectations, but this season stands out considering analysts set the bar higher.
Companies should continue to deliver superior earnings growth, supported by a robust AI investment cycle, persistent budget deficits and a still-resilient consumer, says JPMorgan Chase & Co’s Dubravko Lakos-Bujas.
Meanwhile, the Federal Reserve has shown other U.S. regulators the outlines of a revised plan that would dramatically loosen a Biden-era bank capital proposal for Wall Street’s biggest lenders, according to people familiar with the matter.
In addition, the U.S. Federal Reserve no longer receives private sector employment data from an independent provider, contributing to the lack of timely information about the economy among policymakers amid the ongoing federal government shutdown.
Payroll services company ADP Research stopped providing the data, which covers about 20% of the U.S. private workforce, after a speech by Fed Governor Christopher Waller on Aug. 28 that referenced the statistics, according to a person familiar with the situation.
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