Stocks experienced a notable shift in momentum as blue-chip equities surged, prompted by growing concerns surrounding a potential Chinese ban on Apple Inc.’s iPhone and its potential ramifications for the tech industry, which has been the driving force behind this year’s market rally.
The S&P 500 managed to recover more than half of its earlier losses, buoyed by advances in defensive sectors like utilities and healthcare. Meanwhile, the Dow Jones Industrial Average registered gains, while the Nasdaq 100 underperformed due to a sharp 6.5 percent decline in Apple’s stock over a two-day span, resulting in a staggering loss of $190 billion in market value. This dip also affected Apple’s suppliers, including Qualcomm Inc. and Micron Technology Inc. Moreover, small-cap stocks faced downward pressure, with the Russell 2000 index breaching a critical technical level.
Keith Lerner, Co-Chief Investment Officer at Truist Advisory Services, commented, “We expect market choppiness to persist in the near term. September, like August, has historically been a more challenging month, and there remains a lack of obvious short-term catalysts for further stock gains as the market continues to digest substantial year-to-date increases.”
In 2023, the tech sector experienced significant growth, driven by the artificial intelligence frenzy and speculations surrounding the Federal Reserve’s approach to concluding its interest rate hikes. However, the nearly 40 percent surge in the Nasdaq 100 raised concerns about overextended valuations, leading some experts to believe that a correction might be imminent.
Data from Bank of America Corp. revealed that active managers leaned towards defensive holdings in the previous month. Hedge funds and active long-only funds increased their exposure to utility stocks compared to historical averages, while active equity exposure to “high beta stocks” remained below average levels, as stated by BofA strategists.
Economic Indicators and Fed Insights
Market participants closely monitored the latest economic data, with robust jobless claims figures strengthening the case for the Federal Reserve to maintain elevated interest rates.
Following an initial rise post-report, two-year US yields dipped below 5 percent. The US dollar experienced a modest gain after reaching nearly a six-month high earlier in the week.
John Williams, President of the Federal Reserve Bank of New York, remarked that US monetary policy is “in a good place.” Nevertheless, officials will scrutinize incoming data to determine the appropriate course of action regarding interest rates.
Meanwhile, the euro faced declines as the European region reported minimal growth in the second quarter. Additionally, the onshore yuan depreciated to a 16-year low, reflecting growing pessimism regarding China’s economy. Emerging-market currencies came close to erasing all gains made this year, and the oil market saw a decline following a nine-session rally that had driven futures into overbought territory.
Corporate Developments
Several noteworthy corporate events unfolded during the trading session:
Boeing Co. experienced a decline in its stock value after warning that deliveries of its lucrative 737 jetliner would fall at the lower end of its yearly target due to a recently discovered supplier issue affecting production.
General Motors Co. extended a counteroffer to the United Auto Workers union, proposing a 16 percent pay increase for top-wage earners in its plants and a substantial 56 percent raise for newer employees earning less. UAW President Shawn Fain swiftly responded, labeling the proposal as “insulting.”
Ford Motor Co. announced wage increases for 8,000 hourly workers represented by the United Auto Workers union, just one week before the expiration of its union contract.
Dell Technologies Inc. faced a decline in its stock price following a downgrade to “underweight” by Barclays Plc, citing concerns about the personal-computer company’s performance.
C3.ai Inc. saw a drop in its stock value after issuing a lackluster sales forecast and indicating that profitability would take longer to achieve than anticipated, sparking concerns that the software company might struggle to capitalize on the enthusiasm for artificial intelligence.
BlackBerry Ltd. experienced a slide in its stock value after lowering its second-quarter revenue guidance, falling below the average of analyst estimates.
Walmart Inc. recorded gains following reports that the company had reduced its starting pay for some new hires as part of a revamped wage structure implemented in July.
McDonald’s Corp. saw an increase in its stock price after Wells Fargo upgraded the fast-food chain to “overweight,” with expectations that the company would continue to perform well despite a slowdown in quick-service restaurant trends.
