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A horror session on Wall Street points to heavy losses for Australian shares after the market-leading US tech sector suffered its biggest plunge in months.
The ASX looks set to open almost 2 per cent lower. SPI200 index futures skidded 119 points or 1.95 per cent as the Nasdaq dived nearly 5 per cent, the S&P 500 3.5 per cent and the Dow more than 800 points.
What’s driving the market
US stocks making new highs each night during a deep recession looked increasingly ripe for a sell-off. What appeared to start as a rotation out of over-bought ‘stay-at-home’ stocks into potential recovery stories gathered its own momentum as the session wore on, deepening into a full-blown tech wreck.
The Nasdaq plunged 598 points or 4.96 per cent as Apple slumped 8 per cent, Microsoft 6.2 per cent, Alphabet 5.1 per cent, Amazon 4.6 per cent and Facebook 3.8 per cent.
“Someone hit the ‘sell tech, buy dreck’ button,” Adam Crisafulli of Vital Knowledge told CNBC. “Stocks are seeing large percent declines, but this comes after a massive recent rally. Tech has been untethered from fundamentals for a while and momentum can work in both directions.”
The S&P 500 reeled back from record levels, falling 126 points or 3.51 per cent. The S&P 500 technology sector declined 5.83 per cent, its biggest loss since March.
The Dow Jones Industrial Average advanced to within 1.5 per cent of a record before sliding 808 points or 2.78 per cent, its heaviest loss in almost three months. Wall Street’s “fear gauge”, the VIX, spiked 26.5 per cent to its highest level since late June.
Aussie outlook
The S&P/ASX 200 looked set to unwind almost two days of gains at today’s open, tipping the market towards a third straight weekly loss. A volatile week saw the benchmark index hit a four-week low on Tuesday before a sharp rebound over the last two sessions.
Traders looking for angles will examine pockets of strength in the overnight action. While the heavyweight US market-leaders were smashed, recovery plays – stocks that have yet to regain their pre-pandemic highs – outperformed. Cruiselines rallied, the S&P 1500 airlines index held steady and battered retailers like Macy’s and Kohl’s put on up to 7.9 per cent. Losses among financials were comparatively mild.
There was little in the night’s US economic data to trigger the carnage. While trade data disappointed, first-time claims for unemployment benefits declined by 130,000 to a seasonally-adjusted 881,000, lower than the 940,000 consensus estimate. Gauges for services sector and manufacturing activity both showed solid growth.
A new six-year high in iron ore proved a flimsy shield for BHP and Rio Tinto. BHP’s US-listed stock slumped 3.85 per cent and its UK-listed stock 3.52 per cent. Rio Tinto eased 3.32 per cent in the US and 3.33 per cent in the UK. The spot price for iron ore landed in China climbed $2.75 or 2.1 per cent yesterday to US$130.80 a dry ton, its highest point since January 2014.
If there was a plus for Australian investors last night, it was a sharp retreat in the dollar in a classic ‘flight to safety’ to the greenback. The Aussie dropped 0.8 per cent to 72.69 US cents, easing pressure on exporters after it hit a two-year high earlier this week.
Australian retail sales data for July are due this morning at 11.30 am EST.
Commodities
Energy was the best of the US sectors, falling less than 0.7 per cent as oil prices sustained minor losses. Brent crude settled 36 cents or 0.8 per cent lower at US$44.07 a barrel, its weakest level since late July.
Gold stocks also weathered the storm fairly well. The NYSE Arca Gold Bugs Index dipped 0.8 per cent as gold for December delivery settled $6.90 or 0.4 per cent lower at US$1,937.80 an ounce.
Nickel led a retreat in industrial metals. Benchmark nickel on the London Metal Exchange skidded 3.9 per cent to US$15,060 a tonne. Copper dropped 2 per cent, aluminium 0.2 per cent, zinc 0.8 per cent and tin 0.7 per cent. Lead gained 0.4 per cent.
