The share market was set to lose its grip on record levels following a tech-led retreat in the US and a volatile night on commodity markets.
ASX futures skidded 52 points or 0.73 per cent a day after the S&P/ASX 200's first record finish since the start of the pandemic. The ASX 200 climbed 1.3 per cent yesterday to an all-time closing high.
'Big Tech' led an accelerating sell-off in the US. Copper retreated from record levels. Oil gave up early gains. Gold rose for a fourth night. Iron ore's record run continued in China yesterday.
The Nasdaq Composite tumbled 350 points or 2.55 per cent as traders dumped sectors with the greatest exposure to inflation and rate rises. Tesla dived 6.44 per cent, Facebook 4.11 per cent, Netflix 3.4 per cent, Amazon 3.07 per cent and Apple 2.58 per cent.
The S&P 500 shed 44 points or 1.04 per cent. The Dow Jones Industrial Average rose as much as 300 points to a new high before fading to a loss of 35 points or 0.1 per cent.
The tech rout followed downgrades for Facebook and Alphabet from Citigroup. The broker said it expected advertising growth to decelerate in the second half.
Star stock-picker Cathie Wood's Ark Innovation ETF fell 5.23 per cent to its lowest level since November. Wood's fund was one of last year's big success stories and is seen as a bellwether for innovative firms such as Tesla and other 'disruptive' tech companies. The fund has fallen almost 35 per cent since February.
The yield on ten-year US treasuries climbed nearly three basis points overnight, but remained well below levels in February/March that triggered a month of stock market jitters. The slump in growth stocks appeared counter-intuitive after soft jobs data on Friday doused expectations the Federal Reserve would be forced to curtail stimulus spending and raise rates to cool an overheating economy.
“The tech price action is especially frustrating for many as the thought was Friday would elicit a more sustainable rebound in the space,” Adam Crisafulli, founder of Vital Knowledge, told clients. “Instead, the group is seeing aggressive selling and accumulating technical damage as prices breach key levels.”
Some analysts suggested the tech selling was a pre-emptive move ahead of tomorrow night's US consumer inflation report.
"Inflation data is pretty important from a market leadership perspective," Keith Parker, head of U.S. and global equity strategy at UBS, told Reuters.
"The number should come in strong, and probably contribute to another leg in the reflation value rotation."
Value stocks outperformed their growth counterparts. The Russell 1000 Value Index eased 0.19 per cent, versus a 2.05 per cent decline in the Growth Index.
The ASX's push to new highs is on hold following a generally jittery night on world markets. The S&P/ASX 200 managed a record close yesterday, but did not pass last year's intraday high, missing by around 25 points.
Yesterday's bold advance owed much to commodity markets, which showed signs of nerves overnight (more below). The S&P materials sector hit an all-time high before fading to a loss of 0.41 per cent as commodities joined a general retreat from risk assets. BHP and Rio Tinto resisted the reversal after closing at record levels on the ASX yesterday.
Iron ore continued its extraordinary ruin of gains yesterday, but looks wildly over-extended and must surely fall prey to the same forces that pulled industrial metals lower overnight, if not today then soon.
Bright spots in the overnight US action included utilities +1.02 per cent, consumer staples +0.77 per cent and real estate +0.35 per cent. In other words, traditional havens. Gold rallied, but miners were caught up in the selling. The NYSE Arca Gold Bugs Index dipped 0.57 per cent. US financials closed modestly lower, falling 0.12 per cent.
Chinese inflation figures are scheduled for 11.30 am AEST. Recruitment firm Hiremii is scheduled to list today.
The dollar declined 0.3 per cent to 78.34 US cents.
Copper fell back from record levels amid fears of a correction following year-to-date gains of almost 40 per cent. Aluminium and zinc reversed from three-year highs.
“What we’re seeing this afternoon is recently established longs getting nervous, not having such a big pain threshold and backing out at the first sign of trouble,” Ole Hansen, head of commodity strategy at Saxo Bank, told Reuters.
“And with these kind of high numbers, there’s a very strong temptation to book profits while we wait to get a firm idea about any impact on demand from this price spike.”
Benchmark copper on the London Metal Exchange dropped 0.4 per cent to US$10,378.75 a tonne. Aluminium gave up 0.4 per cent, nickel 1.7 per cent, lead 1.1 per cent, zinc 0.9 per cent and tin 0.3 per cent.
BHP and Rio Tinto advanced in the US after iron ore extended a parabolic rally yesterday. BHP's US-listed stock put on 1.83 per cent and its UK-listed stock gained 1.63 per cent. Rio Tinto added 0.69 per cent in the US and 1.88 per cent in the UK. The spot price for iron ore landed in China climbed $16.80 or 7.9 per cent to US$229.55 a tonne.
Oil settled little changed as traders debated the implications of a ransomware attack that forced the shutdown of the US's most import fuel pipeline. Brent crude settled four cents or 0.1 per cent ahead at US$68.32 a barrel.
Gold was one of the night's winners, rising for a fourth session as the US dollar index fell to its weakest level in two and a half months. Gold for June delivery settled $6.30 or 0.3 per cent higher at US$1,837.60 an ounce.