There’s been so much news — I don’t feel we’ve talked enough about the markets yet this morning. Let’s remedy that!
Stocks edged lower across the board on Tuesday amid fears that AI spending is hitting chipmakers. This was nowhere more apparent than on South Korea’s KOPSI which ended the day down 5.5%. Fun fact: Samsung and chipmaker SK Hynix make up more than half of the index so it’s hugely exposed to tech tumbles.
That sentiment then played out on Wall Street with the evergreen Nasdaq looking decidedly red.
Investors have ridden the AI wave over the past four years as massive spending powered corporate profits and economic growth, but more recently, worries about concentration risk and whether a payoff will come soon enough have weighed.
“The AI trade has been driving the market for the first part of the year up until the third quarter and usually the Nvidias and AMDs trade down ahead of the hyperscalers’ earnings announcements because of the uncertainty with regards to the capital spending cycle,” said Gerry Sparrow, president and portfolio manager at Sparrow Capital Management.
There are also fears about the AI challengers coming out of China, particularly memory chip maker CXMT.
Industrials, healthcare and financials also drove losses on Wall Street.
Now let’s talk banks – because it’s a blockbuster week of quarterly earnings in the US and it kicked off with results from some of the big banks.
Shares in JP Morgan Chase, Wells Fargo and Goldman Sachs all dropped after they reported. We’re waiting for Alphabet, Amazon, Meta and Nvidia later this week.
“Until we get clarity on hyperscaler capital spending and revenue on the AI trade, you’re going to see some very mixed results on the benchmarks: Dow, S&P 500 and the Nasdaq,” Sparrow said.
Brent crude futures also fell as traders assessed developments in the Middle East conflict.
On Wall Street, all three indexes finished lower, with industrials, healthcare, and financials driving losses.
And (for a finance joke) it wouldn’t be Q2 FY26-27 if we didn’t talk about bonds.
The benchmark 10-year yield fell 2.72 basis points to 5.22%, inching away from the 24-year high of 5.364% it hit last week.
Borrowing costs have risen to multi-decade highs worldwide.
Also, last but not least, traders are awaiting US inflation data on Wednesday for clues on the Federal Reserve’s policy path. They are pricing in an 80.6% chance that it holds rates steady later this month, up from 51% a month earlier, the CME FedWatch tool showed.
I could go on… but I shouldn’t; there are too many other stories to get to