US stock indices closed lower on Tuesday, with the Nasdaq Composite dropping 2.2% as technology shares continued their decline from the previous session. The Nasdaq had already fallen 1.3% on Monday, primarily pressured by Alphabet Inc (GOOG.US, GOOGL.US). The sell-off subsequently spread globally, with South Korea's KOSPI index leading losses in the Asia-Pacific region. Leading memory chipmaker SK Hynix closed down over 12%. The South Korean benchmark index, which had gained 95% year-to-date, fell nearly 10% on the day, while Japan's Nikkei 225 index dropped 3.55%, ending an eight-day winning streak.
In the US market, the Dow Jones Industrial Average fell 45.87 points, or 0.09%, to 51,666.84. The Nasdaq Composite dropped 579.56 points, or 2.21%, to 25,587.03. The S&P 500 index declined 107.33 points, or 1.44%, to 7,365.46. SpaceX (SPCX.US) closed up 1%. The Philadelphia Semiconductor Index plunged 7.8%, with Marvell Technology (MRVL.US) down 9%, Micron Technology (MU.US) down 13%, and NVIDIA Corp (NVDA.US) down 4%. The Nasdaq Golden Dragon China Index fell 0.55%, with XPeng Inc (XPEV.US) down over 4%.
In European markets, Germany's DAX 30 index fell 237.30 points, or 0.94%, to 24,914.18. The UK's FTSE 100 index rose 1.37 points, or 0.01%, to 10,439.22. France's CAC 40 index dropped 59.40 points, or 0.71%, to 8,340.71. The Euro Stoxx 50 index fell 75.96 points, or 1.20%, to 6,235.36. Spain's IBEX 35 index declined 93.84 points, or 0.48%, to 19,481.46. Italy's FTSE MIB index dropped 755.28 points, or 1.43%, to 52,041.50.
In Asian markets, Japan's Nikkei 225 index fell 3.55%, South Korea's KOSPI index dropped 9.99%, and India's Sensex index declined 1.16%.
The US Dollar Index, which measures the dollar against a basket of six major currencies, rose 0.38% to 101.408. By the close of New York forex trading, 1 euro traded at $1.1379, down from $1.1424 the previous session. 1 British pound traded at $1.3188, down from $1.3244. 1 US dollar traded for 161.57 Japanese yen, up from 161.42; 0.8100 Swiss francs, up from 0.8091; 1.4214 Canadian dollars, up from 1.4157; and 9.7466 Swedish kronor, up from 9.6212.
In cryptocurrencies, Bitcoin rose 0.9% to above $64,000. Ethereum gained nearly 1% to $1,735.28.
In the oil market, the August delivery contract for West Texas Intermediate crude fell 65 cents, or 0.88%, to settle at $73.21 per barrel. The August delivery contract for Brent crude fell 82 cents, or 1.05%, to settle at $77.08 per barrel.
In precious metals, spot gold fell 1.97% to $4,109.88. Spot silver was at $61.602.
Key Macroeconomic Developments
A new study from the Dallas Federal Reserve estimates that the recent spring surge in oil prices above $120 per barrel reduced US economic output by approximately 0.3 percentage points. However, this impact was significantly less than that caused by similar oil shocks in the 1980s, when the US was more dependent on oil imports. A conflict against Iran, supported by the US, led to a roughly 15% reduction in global oil supply, disruptions to shipping through the Strait of Hormuz, and turmoil in global commodity markets, resulting in price increases, supply shortages in some regions, and an overall decline in demand.
The US dollar reached its highest level since last November on Tuesday as traders consolidated expectations for Federal Reserve interest rate hikes this year. The Fed's policy outlook contrasts with that of other major central banks globally. Traders currently anticipate nearly two 25-basis-point rate hikes by early 2027. Jordan Rochester, a strategist at Mizuho International, stated, "The dollar has room to rise; it tends to strengthen before the Fed hikes rates. The market is currently focused on the possibility of the rate-hike cycle starting in September." Meanwhile, the euro fell to a one-year low after comments from European Central Bank President Christine Lagarde prompted traders to scale back bets on rate hikes in the region. The yen remained under pressure as the market perceives the Bank of Japan's pace of rate hikes as insufficient to curb the yen's decline, keeping traders alert to potential foreign exchange intervention.
The selection process for the new President of the Federal Reserve Bank of Atlanta is being closely watched as it enters its seventh month, offering a window into how new Fed Chair Wash might reshape the Federal Open Market Committee (FOMC) responsible for setting interest rate policy. The process has evolved as Wash begins to exert personal influence at the Fed. According to two individuals familiar with the process, under former Chair Powell, the Fed was already identifying candidates for the Atlanta Fed presidency. However, the selection process was paused to allow Wash to lead the appointment. The search is ongoing, and the sources requested anonymity. They indicated that Michael Faulkender, a former senior Treasury official under President Trump, was subsequently added to the list of candidates for the Atlanta Fed role. It remains unclear if Faulkender is still a candidate.
Notable Company News
SpaceX (SPCX.US) is venturing into the bond market with its inaugural bond issuance, aiming to raise $250 billion. This move tests fixed-income investors' confidence in Elon Musk's ambitious vision for the company's future. The Texas-based rocket manufacturing and artificial intelligence company is increasing investment to expand its various businesses, and this bond sale is seen as a bellwether for future financing deals. A buy-side institutional source said on Monday, "Banks are very keen for this deal to deliver good returns and leave a positive impression with investors, as SpaceX may return to seek another $100 billion in refinancing in the coming years." The bonds being issued have maturities ranging from 5 to 30 years. The issuance comes amid another round of declines for major technology stocks, driven by concerns over high valuations and the prospect of rising interest rates.
A $7 billion private credit fund under Morgan Stanley (MS.US) has set a redemption cap at 5%, allowing investors to redeem less than half of the shares they requested to cash out in the second quarter. The North Haven Private Income Fund stated in a letter on Tuesday that investors requested to redeem 11.6% of their holdings in Q2, up from 10.9% in Q1. Across the approximately $1.8 trillion private credit market, overall redemption requests have generally increased this quarter, as many funds limited full exits in the prior quarter. The fund's letter noted that over half of the Q2 repurchase requests came from investors who were unable to fully redeem their funds in the previous three months.
Baird analyst Ben Kallo forecasts that Tesla Inc (TSLA.US) will deliver approximately 392,900 vehicles in the second quarter. He added that the electric vehicle maker's total deliveries are projected to reach 1.68 million by 2026. The analyst wrote, "We believe a merger between SpaceX (SPCX.US) and Tesla is highly likely, expected to take 12 to 18 months." He further stated that a merger of the two companies is the "ultimate direction," and it is "clear and compelling that both companies would benefit from greater scale." Kallo reiterated an Outperform rating and a $522 price target on Tesla.
Comments