ASX nosedives after US tech sell-off sends stocks skidding
By Millie Muroi
The Australian sharemarket tumbled on Friday and miners lead the decline after a sell-off in big-name technology stocks on Wall Street overnight dragged major US equity indices lower.
Most sectors lost ground as the S&P/ASX 200 Index fell 64.9 points, or 0.8 per cent, to 7971.6. The Australian dollar was fetching US66.99¢.
Smaller stocks fell more than the rest of the market on Wall Street on Thursday. Credit: AP
Miners, many of which are exposed to China, were among the weakest companies as the prices for key commodities iron ore, gold and copper all fell.
Gold mining shares slumped. Evolution (down 2.2 per cent) and Newmont (down 2.8 per cent) both slid. Index heavyweights BHP (down 2.1 per cent), Fortescue (down 1.9 per cent) and Rio Tinto (down 1.7 per cent) also lost ground.
After rallying earlier in the week, shares in the big four banks all traded in the red. Westpac fell by 0.9 per cent despite the Australian Prudential Regulation Authority reducing the $1 billion capital add-on applied to the bank by $500 million in response to the bank’s progress in improving its risk governance, culture and risk management.
Capital.com analyst Kyle Rodda said the ASX 200 gave back its weekly gain amid heightened US political uncertainty and underwhelming announcements from Chinese officials in their third plenum.
“US political uncertainty is dampening market sentiment,” he said. “Rumours are swirling that US President Joe Biden will withdraw his candidacy over the weekend. Worse, there’s speculation that rather than endorse Vice President Kamala Harris, he’ll throw open the nomination for it to be decided by the Democratic Party, potentially drawing out the uncertainty for another month.”
Rodda also said markets were disappointed by policy measures announced by China. “China remains unwilling to launch major countercyclical policies and directly support the property market, with authorities keeping the bigger picture in mind. In reality, China’s structural issues have no quick fix, and policymakers appear to be sticking to their long-term economic strategy,” he said.
Shares in Domino’s Pizza slumped 13.6 per cent.Credit: Bloomberg
On Wall Street overnight, the S&P 500 Index slipped 0.8 per cent, backing further away from its record high set on Tuesday. The Dow Jones Industrial Average tumbled 1.3 per cent from its own record set a day earlier, while the tech-heavy Nasdaq Composite Index sank 0.7 per cent.
Several big-name tech stocks led the market lower. Drops of 2 per cent for Apple, 2.2 per cent for Amazon and 0.7 per cent for Microsoft were three of the heaviest weights on the lacklustre performance of the S&P 500.
The sharpest loss came from Domino’s Pizza, whose shares dropped 13.6 per cent despite topping analysts’ expectations for profit. The pizza chain temporarily suspended its forecast for how many stores would open globally over the long term. While that’s likely to be due to reasons beyond the company’s control, analysts said it could frustrate investors.
Stocks of computer chip companies stabilised after tumbling a day earlier. US-traded shares of Taiwan Semiconductor Manufacturing rose 0.4 per cent after the industry giant reported stronger profit for the latest quarter than analysts expected. It bounced back from its loss of 8 per cent the previous day.
Nvidia shares rose 2.9 per cent after flipping between gains and losses throughout the day. The stock is still up 145 per cent this year.
Earlier this year, a climb for Nvidia and some of the other handful of stocks that came to be known as the “magnificent seven” may have been enough to prop up the rest of the market.
However, there has been a shift in market sentiment over the past week. Instead of piling into big tech stocks, which critics have called too pricey, investors are moving towards the shares of smaller companies, whose profits are more closely tied to the economy’s strength and other areas that have previously been unloved.
The momentum kicked into high gear after an encouraging report on inflation raised expectations for the US Federal Reserve to begin easing interest rates in September. Lower rates and a solid US economy could mean bigger benefits for smaller companies than for big tech giants.
In the bond market, Treasury yields rose following some mixed economic data. One report said more workers applied for unemployment benefits last week than economists expected. That could be a signal of a softening jobs market, though the number remains at a historic low.
Wall Street is hoping Federal Reserve chair Jerome Powell is moving towards a rate cut. Credit: AP
A separate report said manufacturing in the mid-Atlantic region was growing much better than economists thought. The yield on the 10-year Treasury rose to 4.19 per cent, from 4.16 per cent late Wednesday.
With AP
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