US stock indices reversed early gains to close in negative territory on Monday. The market faced headwinds amid ongoing geopolitical tensions, including continued US airstrikes on Iranian-backed targets in retaliation for attacks on oil tankers in the Strait of Hormuz. Separately, Yemen's Houthi group, an Iranian ally, announced a maritime blockade against Saudi Arabia. Following the market close, the White House announced new 50% ad valorem tariffs on certain Canadian products, set to take effect on August 19, in response to what it termed discriminatory Canadian trade measures on automobiles and parts.
The Dow Jones Industrial Average fell 307.16 points, or 0.59%, to close at 51,839.26. The Nasdaq Composite declined 12.17 points, or 0.05%, to 25,508.07. The S&P 500 dropped 14.41 points, or 0.19%, ending the session at 7,443.28.
Bitcoin-related stocks gained ground as the cryptocurrency itself broke above the $65,000 level. MicroStrategy Inc (MSTR) shares rose over 3%, while Circle Internet Corp. (CRCL) surged 8%. In contrast, Oracle Corp (ORCL) fell nearly 4%, Tesla Inc (TSLA) dropped close to 3%, and SK Hynix Inc (SKHY) declined 1.8%. The Nasdaq Golden Dragon China Index closed 0.9% higher, with Alibaba Group Holding Ltd (BABA) advancing 4.6% and JD.com Inc (JD) gaining 3%.
European and Asian Market Performance
In Europe, the German DAX 30 edged up 0.07% to 24,844.98, while the UK's FTSE 100 fell 0.75% to 10,520.76. France's CAC 40 was nearly flat, gaining 0.02% to 8,340.11. The pan-European STOXX 50 index dipped 0.07% to 6,226.75. Spain's IBEX 35 slipped 0.10% to 19,197.45, and Italy's FTSE MIB declined 0.07% to 51,847.00.
In Asia, South Korea's KOSPI index dropped 4.46%.
Currency and Commodity Movements
The US Dollar Index, which measures the greenback against a basket of major currencies, rose 0.19% to settle at 100.957. In late New York trading, the euro bought $1.1415, down from $1.1436. The pound traded at $1.3436, down from $1.3454. The dollar was quoted at 162.50 Japanese yen, 0.8100 Swiss francs, 1.4059 Canadian dollars, and 9.6856 Swedish kronor.
In cryptocurrencies, Bitcoin broke through the $65,000 barrier, last quoted at $65,201. Ethereum surpassed the $1,900 level.
Oil prices advanced. The August West Texas Intermediate (WTI) crude contract rose 74 cents, or 0.9%, to settle at $83.23 per barrel. The September Brent crude contract gained $1.12, or 1.27%, to close at $89.22 per barrel.
Spot gold reclaimed the $4,000 level, trading at $4,008.7 per ounce. Spot silver was quoted at $56.416 per ounce.
Key Economic Developments
Short interest in US stocks has reached a record high, reflecting growing investor skepticism about the sustainability of the AI-driven market rally. Despite the S&P 500's 18% gain since late March, the short interest ratio for its components has climbed to 3.79% of free float, a record high according to data from S3 Partners LLC dating back to 2010. A similar record was set for the Russell 3000 index. Ihor Dusaniwsky, head of predictive analytics at S3, noted an increase in both short-selling activity and the breadth of stocks being targeted.
In Canada, the annual inflation rate fell more than expected to 2.8% in June, down from 3.2% in May. A key core inflation measure dropped to 1.85%, its lowest level since September 2020 and the first time it has fallen below 2% in nearly six years. This cooling in core inflation suggests that economic slack is helping to contain price pressures stemming from geopolitical conflicts.
Notable Corporate News
BlackRock Inc is leading a debt financing deal of at least $12 billion to fund a major data center project in El Paso, Texas, which it is co-developing with Meta Platforms Inc (META). BlackRock holds an 80% stake in the project, with Meta owning the remaining 20%. The facility is expected to have a computing capacity of approximately 1 gigawatt. JPMorgan Chase & Co and Morgan Stanley are managing the debt issuance.
A US federal judge issued a temporary restraining order halting the planned merger between Paramount Global and Warner Bros. Discovery Inc (WBD). The order, granted by Judge Alarcón Martínez-Olguín, pauses the deal for two weeks while the court considers an antitrust challenge filed by a coalition of 12 states. A hearing is scheduled for August 3 to consider a preliminary injunction that could block the merger for a longer period.
Alphabet Inc (GOOG, GOOGL) is developing a new server chip, internally codenamed "Frozen v2," designed to run its Gemini AI models more efficiently. Engineers working on the project anticipate it could be 6 to 10 times more efficient per watt for processing tokens compared to Google's current in-house AI chips. The company aims to deploy the chip as early as 2028 to alleviate AI computing capacity shortages.
Brokerage Rating Update
UBS Group lowered its price target for QUALCOMM Incorporated (QCOM) to $190 from $235.
Comments