Equity benchmarks in Japan and South Korea fell more than 1% in early Asian trading. The Nasdaq 100 lost 1% after a tepid outlook from Texas Instruments Inc. and a 10% slump in Netflix Inc. In late hours, Tesla Inc. slid as earnings missed estimates despite a sales surge.
Adding to the jitters, traders were watching developments in Washington after the Trump administration said it’s considering curbs on software exports to China, stoking fresh trade tensions. Meanwhile, oil jumped almost 3% after the US announced sanctions on Russia’s biggest producers in its latest bid to pressure President Vladimir Putin to negotiate an end to the war in Ukraine.
The yield on 10-year Treasuries was steady after falling one basis point to 3.95% on Wednesday. A $13 billion sale of 20-year bonds was strong. The dollar index was little changed. Gold retreated for a third session.
In the US, assets favored by retail momentum traders bore the worst losses, among them precious metals, crypto and companies in the artificial-intelligence space. Indexes used by quant investors to track the theme in the equity market, such as the Bloomberg US Pure Momentum Portfolio, have fallen sharply in recent days.
The last week has seen a significant cooling in enthusiasm for areas of the market that since the start of August had gone “parabolic,” according to Bespoke Investment Group.“It appears that, at least temporarily, the music has stopped and the party has ended for the most-speculative names,” the Bespoke strategists said. “No one knows when the music will pick back up again, but usually, the higher they go, the harder they fall.” In Japan, newly appointed Prime Minister Sanae Takaichi ordered a fresh round of economic measures to help households and businesses cope with persistent inflation. Shares of Disco Corp. and Lasertec Corp. fell more than 4% to lead losses on Nikkei 225.
US Earnings
At a time when the equity rally has slowed, the flip side is that the proportion of US companies beating earnings expectations this quarter is the highest since 2021. Most S&P 500 firms typically top expectations, but this season stands out considering that analysts had set the bar higher.
Companies should continue to deliver superior earnings growth supported by a robust AI investment cycle, ongoing deficit spending and a still-resilient consumer, JPMorgan Chase & Co.’s Dubravko Lakos-Bujas says.
Meantime, the Federal Reserve has shown other US regulators the outlines of a revised plan that would dramatically relax a Biden-era bank capital proposal for Wall Street’s largest lenders, according to people familiar with the matter.
Separately, the US central bank is no longer receiving data on private-sector employment from an independent provider, adding to policymakers’ lack of timely information on the economy amid the ongoing federal government shutdown.
Payroll services firm ADP Research stopped providing the data, which covers about 20% of the US private labor force, after an Aug. 28 speech by Fed Governor Christopher Waller that referenced the statistics, according to a person familiar with the situation.
