Rally set to fizzle as tech gloom outweighs China stimuli

The Dow Jones closed 163 points higher on Thursday, marking its ninth-straight session of gains and its longest winning streak since September 2017. Meanwhile, the S&P and the Nasdaq lost 0.7% and 2%, respectively dragged by tech shares as latest corporate earnings were in focus. On the economic front, recession signals flared after the Conference Board said its Leading Economic Index fell for the 15th straight month – the longest such string since the run-up to the 2007-2008 Great Recession. Consumer Discretionary shares were among the weakest performers yesterday along with tech companies. Health care and utilities were the strongest performers. In Europe, shares ended higher yesterday, with the Euro Stox 50 Index up 0.3% led by the basic materials sector.

Summary for 21.07.2023

Most Asian shares moved in a flat-to-low range on Friday as investors weighed more Chinese stimulus measures against weakness in technology shares after chipmaking giant TSMC presented a bleak outlook for the year.

European shares are set to nudge lower, tracking a decline in US peers as investors digested earnings and the Federal Reserve’s outlook. Top companies expected to report earnings Friday include American Express and Schlumberger.

Oil prices were on the rise this morning after wild swings through the week as markets weighed tightening supplies and uncertainty over demand, with the focus now shifting squarely towards a Federal Reserve meeting next week.

Chinese authorities announced measures earlier today intended to help boost sales of automobiles and electronics with the goal of shoring up a sluggish economy, but the steps failed to impress investors who have been clamouring for stronger stimulus. Regions will be encouraged to increase annual car purchase quotas and efforts will be made to support sales of second-hand vehicles. Authorities will also encourage scientific research institutes and market entities to actively apply domestic AI technology to improve intelligence levels of electronic products.

In the US, the Conference Board on Thursday said its Leading Economic Index, a measure that anticipates future economic activity, declined by 0.7% in June to 106.1 following a revised decrease of 0.6% in May. The decline was slightly greater than the median expectation among economists.

American Airlines shares fell over 6% even after the company topped earnings expectations and boosted its full-year profit outlook. Shares of other airlines, except for United Airlines, also fell, possibly reflecting concerns a recession would dampen travel demand.

Freeport-McMoRan shares rose 3% after the mining company met earnings per share expectations and surpassed revenue forecasts.

Johnson & Johnson shares surged 6% after quarterly earnings and revenue outpaced Wall Street expectations. A big jump in its Med-Tech division sales fuelled the strong quarter. Med-Tech includes the company’s cardiovascular, surgical, and orthopaedic products, so the strength there could point to increased demand for medical procedures.

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