Tech sell off continues amid heightened volatility

General market commentary

Equity markets finished lower on Wednesday as investors weighed a fresh wave of retailer earnings, providing insight into consumer strength. Energy and consumer staples led gains, while consumer discretionary and technology shares lagged. Bond yields eased, with the 10-year U.S. Treasury yield at 4.29%, while the U.S. dollar weakened against major currencies. Elsewhere, Asian markets mostly advanced after China’s central bank held its one-year loan prime rate steady at 3.0%, while European equities also climbed as euro area inflation held at 2.0%, matching the European Central Bank’s target. Oil prices edged higher after U.S. crude stockpiles declined, according to industry data.

On the earnings front, Target and Lowe’s both posted quarterly results slightly ahead of forecasts, with stronger-than-expected sales suggesting consumers remain resilient despite a softer labour market. Market bellwether Walmart reports later this week, while overall, corporate reporting has been robust: 82% of S&P 500 companies have beaten estimates, with broad-based earnings growth across 10 of 11 sectors. Technology shares, however, continued to retreat after driving much of the market’s rebound earlier this year, with the Magnificent Seven megacaps all weaker on Wednesday. Investors are now looking ahead to U.S. economic data and Federal Reserve Chair Jerome Powell’s remarks at Jackson Hole, which may offer clues on the outlook for interest rate cuts and the potential for a broader rotation from growth into value equities.

Latest market and economic update

Most Asian equities advanced on Thursday as technology shares steadied and Australia’s ASX 200 hit record highs on strong PMI data. Chinese markets rose to multi-year peaks on recovery hopes, while South Korea’s KOSPI rebounded after recent tech losses. Japan lagged amid weak manufacturing data, and Hong Kong was flat as Baidu’s disappointing earnings weighed.

US equity futures held steady overnight as investors awaited key catalysts, including Fed Chair Jerome Powell’s Jackson Hole speech for guidance on interest rate policy. Futures trading was muted ahead of weekly jobless claims, existing home sales, and earnings from Walmart and Workday, with markets cautious after recent volatility in technology shares.

European equities ended mixed on Wednesday as investors weighed US weakness and global rate prospects. The Eurozone’s STOXX 50 slipped 0.2% while the STOXX 600 added 0.3%. Industrials such as Siemens, Airbus, Schneider and Rolls Royce led losses, while consumer defensives including Danone, L’Oréal and AB InBev advanced.

The dollar index held near 98.3 this morning as traders awaited Fed Chair Jerome Powell’s Jackson Hole remarks for clarity on rate cuts. Futures now price an 82% chance of a September quarter-point cut. The euro traded at $1.1648, steady as markets weighed the Fed’s inflation concerns against easing expectations.

Oil prices extended gains in Asia, with Brent at $67.20 and WTI at $63.11 after U.S. crude stockpiles fell by 6 million barrels, far exceeding forecasts. Strong exports, refinery activity, and resilient fuel demand underpinned sentiment. Traders also monitored potential Russia-Ukraine peace talks, which could reshape supply and sanction dynamics.

The Fed’s July minutes showed most officials backed holding rates at 4.25%-4.50%, with two dissenting in favour of a cut amid labour market weakness. Softer jobs data and Trump’s tariffs, which are stoking inflation, dominated discussions. Policymakers debated inflation pressures and policy restrictiveness, while markets now price an 82% chance of a September cut.

President Donald Trump demanded Federal Reserve Governor Lisa Cook resign over alleged mortgage fraud, citing two mortgages where she declared properties as primary residences. The call follows a letter from FHFA Director Bill Pulte urging investigation. Trump reportedly considers firing Cook, expanding legal scrutiny of Democrats amid his criticism of the Fed’s interest rate stance.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Meta has frozen hiring in its AI division after months of aggressively recruiting top talent with huge pay offers and reverse acquihires. The restructuring splits AI efforts into four teams, with superintelligence a key focus. Investors, however, are increasingly uneasy over Meta’s $72 billion AI spend, with recent doubts fuelling a 5% share decline.

Investors reacted negatively to Target naming insider Michael Fiddelke as CEO, doubting he can fix persistent sales, margin, and inventory issues. Shares fell over 6% despite slightly better-than-expected quarterly results. Fiddelke plans to improve merchandise, customer experience, and technology, but confidence in a swift turnaround remains low.

Microsoft restricted Chinese companies’ access to early warnings on cybersecurity flaws following a suspected leak linked to SharePoint hacks. The attacks, attributed to state-sponsored hackers, affected more than 400 organisations, including the US National Nuclear Security Administration, prompting the tech giant to tighten controls through its Active Protections Program.

Lowe’s will acquire interior building products distributor Foundation Building Materials for $8.8 billion, boosting its presence in the professional builder market. The move follows April’s $1.33 billion Artisan Design purchase. Q2 earnings beat estimates at $4.33 per share, shares rose less than 1%, and Lowe’s raised its annual sales forecast to $84.5–$85.5 billion.

Estee Lauder cut inventory and promotions to offset rising costs, warning that $100 million in tariffs would weigh on profits, sending shares down 4%. Fourth-quarter organic sales fell 13%, with weakness in the US, China, and Europe. The company expects 2026 restructuring charges of $1.2–$1.6 billion and full-year adjusted EPS of $1.90–$2.10.

Baidu reported a 4% drop in Q2 revenue to 32.71 billion yuan ($4.56 billion) as its core online advertising, which makes up 60% of revenue, fell 15% amid China’s economic slowdown. AI investments, including Ernie Bot, have yet to boost ad revenue significantly. Cloud revenue grew 27%, but could not offset the decline.

TJX Companies raised its annual profit forecast, citing strong demand for apparel and home goods at its off-price stores, sending shares up 6%. Second-quarter sales and earnings beat estimates, with margins at 30.7%. The company expects fiscal 2026 EPS of $4.52–$4.57 and comparable store sales growth of 3%, benefiting from resilient demand and flexible sourcing.

Intel is seeking another equity infusion at a discounted price, days after SoftBank’s $2 billion investment, to support its struggling contract manufacturing business. Shares fell 7% amid financing talks. Years of missteps and limited AI chip presence have strained Intel’s balance sheet, with losses of $18.8 billion in 2024, its first since 1986.

Sony will raise U.S. PlayStation 5 prices by around $50, with the PS5 Pro reaching $749.99, citing slow market recovery and rising costs from U.S. tariffs. The move follows similar European price hikes and Xbox increases. While premium game launches had promised growth, delays and higher console costs cast uncertainty over the videogame market.

UBS maintained its Buy rating and $650 target on Microsoft, citing strong AI positioning and expected cloud revenue growth from new pricing and licensing changes. Effective Nov. 1, the net price increase of 3–14% affects Online Services, including Azure, M365, and Dynamics 365. Benefits may be gradual, as changes apply on contract renewal.

Daiwa Capital Markets downgraded Applied Materials to Neutral, cutting its price target to $170 due to weaker China demand and soft guidance. Third-quarter results were solid, but export delays, reduced Chinese buying, and lower chip equipment demand weighed on forecasts. Revenue and earnings estimates for 2025–26 were cut, with a rebound expected to take time.

Piper Sandler initiated coverage of Figma with an Overweight rating and $85 target, highlighting its differentiated platform, strong 92% gross margins, and near $1 billion ARR. Analysts see potential to triple revenue by 2030 via AI features, international expansion, and paid conversions, though near-term volatility and competition pose risks.

Bank of America upgraded Snowflake to Buy from Neutral, raising its price target to $240, citing strong demand and long-term growth in AI and data services. Analysts expect Q2 product revenue of $1.06 billion and highlighted robust AI adoption, shorter sales cycles, and a $155 billion addressable market, despite risks from competition and consumption-based revenue.

Upcoming data and events

The day’s lineup includes key reports on manufacturing and services PMI, initial jobless claims, existing home sales, the Philadelphia Fed Manufacturing Index, and earnings from companies including Walmart.

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