Thursday's stock market lacked clear direction, weighed down by a weak technology sector, as investors awaited developments in US-Iran talks and looked ahead to Friday's key US employment report. As of writing, Dow futures were up 0.17%, S&P 500 futures rose 0.10%, and Nasdaq futures fell 0.51%. In Europe, the Stoxx Europe 600 index gained 0.4% as the earnings season nears its end. Germany's DAX index edged up after data showed German factory orders in June increased more than analysts expected, suggesting a long-awaited recovery in Europe's largest economy might finally be taking hold. Shares of Deutsche Telekom, Europe's largest telecom operator, climbed over 5% after the company expanded its share buyback program. Conversely, Siemens shares fell as a weaker-than-expected outlook disappointed investors. In other European earnings, Merck KGaA shares rose after the company raised its full-year profit and sales forecasts, boosted by strong performance in its lab equipment and electronics divisions, sending its stock up 2.6% at one point. Wizz Air shares declined after reporting a quarterly loss and warning of ongoing challenges ahead. Swiss Re's first-half profit exceeded market expectations, with the company stating all main business units met their targets and announcing a new round of cost-cutting measures. WPP Plc shares surged after its first-half profit beat analyst estimates, supported by the advertising group's cost-cutting measures in a weak market. Rheinmetall shares fell after the company lowered its sales forecast for the year, impacted by the loss of a multi-billion euro contract with the German navy. Commerzbank reported net profit that exceeded analyst expectations and announced a new share buyback program. Nordic Semiconductor ASA rose after providing a third-quarter revenue forecast that was higher than analyst predictions. Zurich Insurance shares fell as its first-half performance fell short of market expectations. South Korea's stock market fell again, with the chip sector also in focus in Asia. The Korea Composite Stock Price Index, a key barometer for AI-related trades, dropped 4.8%, led lower by SK Hynix and Samsung Electronics. "Investors are increasingly questioning what additional catalysts are needed to sustain the Asian memory chip trade," said Gary Tan, a portfolio manager at Allspring Global Investments. Assessing the AI rally, memory chip maker SanDisk fell 9% in pre-market trading, while competitor Western Digital plunged 15% following the release of their quarterly results. Additionally, AppLovin shares dropped 16% as revenue missed analyst expectations. The market is also watching the opening of trading for SpaceX shares, valued at approximately $101 billion, on Thursday. After SpaceX released its first quarterly report since its debut, the stock fell 14% at one point, though it recovered slightly in pre-market trading. As the tech-led rally pauses, investors are reassessing the valuations of AI-related stocks that had bounced back from last month's sell-off. "The overnight market decline is a natural adjustment within the recent upward trend, and the overall bullish trajectory could still continue," said Hani Redha, a multi-asset portfolio manager at MetLife. Recently, strong corporate earnings and renewed investor enthusiasm for AI-related tech stocks have driven Wall Street to multiple record highs. "This is just part of the digestion process following the market's exuberance over the past few sessions," Redha said. "We still maintain a relatively positive view... I don't expect the same pace of returns in the coming weeks, but the market environment remains favorable for risk assets, especially equities." Meanwhile, Brent crude oil prices hovered around $80 per barrel after Iran stated it had reached an agreement with Oman on a proposed shipping route through the Strait of Hormuz, increasing the possibility of resumed energy transport through this key waterway. However, a long-term US-Iran agreement capable of truly easing inflationary pressures and reducing upward pressure on US Treasury yields remains elusive. US President Donald Trump said Wednesday he would "see what happens" regarding the ongoing talks. Reports indicate the US and Iran are finalizing a draft agreement on Wednesday that could allow Tehran to oversee vessels entering the Persian Gulf but would not permit Iran to collect tolls or service fees. "The market is adopting a wait-and-see stance pending confirmation of more positive developments in the Middle East and ahead of tomorrow's important US jobs data," said Karl Steiner, head of analysis at SEB. "This is reflected in the stock market, which is essentially unchanged; limited oil price movement; and only minor changes in the US 10-year Treasury yield." Despite the US-Iran conflict and AI investment being major market factors this year, market sensitivity to these events is decreasing, said MetLife's Redha. "Overall, we are less concerned about seemingly negative developments in the region. A significant surge in oil prices would create a headwind, but we don't believe it would derail the overall economic cycle." Analysts at Deutsche Bank noted, "The market has experienced many so-called 'false dawns' throughout this conflict. Still, the market tends to lean towards a positive outcome, although most of the good news now appears to be priced in." Meanwhile, latest US data showed domestic crude inventories increased by 2.5 million barrels last week, contrary to market expectations of a modest decline. The US dollar index extended its decline from the previous session. "Improved sentiment in the Gulf region is weighing on the dollar, but the greenback remains dependent on a very stable Fed rate expectations," strategists at ING, led by Francesco Pesole, wrote in a note. "With the US nonfarm payrolls report due, the market may continue to adopt a wait-and-see approach, limiting FX volatility today." US Treasury markets stabilized, with the benchmark 10-year yield holding around 4.61%. "The market is in a wait-and-see mode before confirmation of more positive Middle East developments and ahead of tomorrow's important US jobs data (NFP)," said SEB analyst Karl Steiner. Eurozone government bond yields remained steady. Germany's benchmark 10-year yield rose less than 1 basis point to 3.1118%. Later in the day, the French government is expected to issue approximately €130 billion (about $150 billion) in bonds. Meanwhile, global bond and currency investors are debating whether to revive last year's popular "sell the US" trade after a series of economic policy decisions from Washington over the past two weeks. Gold prices jumped 1.4% at one point, briefly breaking above $4,300. "The market is increasingly focusing on the disinflationary impact of lower energy prices. Expectations of further Fed tightening have declined, improving the outlook for non-yielding assets like gold," ING analysts said. Investors are awaiting the US employment data due later in the day, which is expected to show further strengthening of the job market and provide clues about the Fed's future policy path. "From a macro perspective, today still feels like a wait-and-see trading day," said Skylar Montgomery Koning, a macro strategist at Bloomberg. "Tomorrow's NFP report will be a key dividing line: a second consecutive weak jobs report would reinforce expectations for a dovish policy stance, but a strong number could prove June's data was an anomaly and push expectations for the next rate hike forward." The global crude oil market is engaged in a fierce battle between "optimistic expectations" and "harsh reality." As of August 6, Brent crude prices have fallen from a high of $100 per barrel in late July to below $80. The rebound in market confidence is mainly due to diplomatic signals. According to multiple officials from the US, Iran, and Gulf states, the parties are close to reaching a new agreement that could restore partial passage through the Strait of Hormuz, a global energy chokepoint. However, the reality is far more dangerous than during the "failed" ceasefire attempt in mid-June. Currently, the premium of Brent crude for October delivery over November contracts is as high as $1.5, a strong "backwardation" structure clearly indicating extreme tightness in the spot market. Even if some crude supply is restored, the crisis in the refined products market has not eased. Due to prolonged disruption, global oil product inventories have been depleted during the peak summer consumption season, with the situation for diesel being the most severe. Morgan Stanley's latest assessment report indicates that the brutal sell-off in global tech stocks in July may be profoundly changing the market structure of tech trading. The ability of hedge funds to participate could structurally decline, while the influence of retail investors is expected to expand further, potentially increasing volatility in the tech sector. The bank warns that the severe losses in tech stocks in July may force hedge funds to implement stricter risk management frameworks and concentration limits, thereby restricting their capacity to hold high-volatility tech stocks. Additionally, prime brokers may reduce balance sheet space allocated to such strategies. "If this assessment proves correct and hedge fund capacity for tech exposure structurally contracts, tech trading will become more reliant on retail investors over the long term, making it more susceptible to volatility shocks from levered ETFs, retail options buying, and retail margin accounts," the bank's strategists wrote. JPMorgan CEO Jamie Dimon recently warned that leverage levels in current financial markets remain high, cautioning investors that hidden borrowing could exacerbate market volatility. "Margin debt is at an all-time high. And there's a lot more borrowing that is not counted as margin debt, done under other names. This leverage, some hidden, some overt," he said. He further noted that these borrowing channels include prime brokerage, hedge funds, exchange-traded funds (ETFs), and Treasury arbitrage strategies, stating, "Overall, market leverage is quite high." Dimon pointed out that a high-leverage environment increases the likelihood of a single investor or fund triggering widespread volatility. "In this environment, the probability of a single entity quickly disrupting the market and causing investor panic is indeed higher." Peloton Interactive shares fell nearly 14% after the interactive fitness company reported its fiscal fourth-quarter results. The company's earnings per share of $0.13 met expectations, while revenue beat consensus estimates; however, paid active subscribers declined 8.8% year-over-year. Shares of Moderna rose 4% after the US Food and Drug Administration (FDA) approved its mRNA flu vaccine, mFlusiva, for adults aged 50 and older. Versant Media shares gained 5% after the media company raised its full-year guidance, with both revenue and profit exceeding expectations. The company now expects 2026 revenue of $6.2 billion to $6.45 billion and adjusted EBITDA of $1.9 billion to $2.05 billion. Warby Parker shares fell 7% after the eyewear brand reported second-quarter revenue of $235.5 million, below the LSEG consensus estimate of $238 million, though EBITDA beat expectations. The company reiterated its full-year guidance. IonQ shares rose 3.9% after the quantum computing company reported second-quarter revenue that beat expectations. Its full-year revenue guidance of $280 million to $290 million was above the FactSet consensus estimate of $268.6 million. SanDisk shares plunged 10% after its next-quarter revenue guidance fell short of trader expectations. The company guided for first-quarter revenue in the range of $10.3 billion to $10.8 billion, compared to the LSEG consensus of $10.47 billion; its fourth-quarter revenue and profit both exceeded market expectations. Figma shares fell 14% after the graphic design collaboration tool company provided a weaker-than-expected full-year adjusted operating profit forecast. The company expects adjusted operating profit of $125 million to $135 million, below the FactSet market estimate of $133.2 million; its second-quarter results met expectations across various metrics. DoorDash shares rose 4% after reporting quarterly revenue of $4.45 billion, above the LSEG estimate of $4.34 billion, with earnings per share of $0.46, in line with expectations. Zillow shares plunged over 11% after the online real estate platform announced the promotion of CFO Jeremy Hoffman to also serve as COO. After the close, the company reported adjusted earnings per share of $0.52, above the LSEG estimate of $0.45, and revenue of $772 million, exceeding the expected $758 million. Earlier in the day, the company announced it would cut approximately 500 jobs. Western Digital shares tumbled over 15% after its current-quarter guidance fell short of market expectations. The company guided for revenue of $4.1 billion (plus or minus $100 million) and adjusted earnings per share of $4.00 (plus or minus $0.15), compared to LSEG market estimates of $4.04 billion and $3.81 per share. Salesforce shares fell nearly 5% after the company announced on Wednesday that Miguel Milano would become its new Chief Operating Officer. Milano, a former Oracle executive, previously worked at Salesforce's European division for nearly a decade. The stock is down over 27% year-to-date. Duolingo shares fell 7% after the language learning app provided current-quarter revenue guidance of $302 million, below the FactSet estimate of $303.9 million; its bookings guidance for the period was also weaker than expected, at $307 million versus the market estimate of $308.8 million. Shares of Bumble fell 5%. The dating app reported a second-quarter loss per share of $0.84, compared to a FactSet market estimate of a $0.25 profit. The company issued third-quarter guidance for adjusted EBITDA in the range of $56 million to $60 million, below the FactSet estimate of $68.7 million. AppLovin shares tumbled nearly 20% after the mobile marketing platform's third-quarter outlook disappointed Wall Street. The company expects current-quarter adjusted EBITDA in the range of $1.71 billion to $1.74 billion, while the StreetAccount consensus was $1.75 billion; second-quarter revenue also slightly missed estimates. Diageo, the world's largest spirits company, saw its shares rise 7% after launching a $1 billion cost-saving and efficiency plan to drive a business recovery. For the fiscal year ending in June, the company's net sales declined year-over-year, but adjusted operating profit grew.
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