FX.co ★ Tech Stocks May Regain Ground Following Yesterday's Sell-Off

The major U.S. index futures indicate a higher open today, driven by anticipated rebounds in tech stocks following yesterday's downturn. Investors appear keen to capitalize on the reduced levels in tech stocks after the Nasdaq, heavily weighted in technology firms, experienced its steepest decline since December 2022.

Optimism surrounding interest rates might also spur initial buying interest. The Labor Department's recent report indicated a significant increase in first-time claims for U.S. unemployment benefits for the week ending July 13th, which may contribute to this positive sentiment.

The Labor Department reported that initial jobless claims climbed to 243,000, marking a 20,000 increase from the previous week's adjusted figure of 223,000. This rise surpassed economists' expectations, who had forecast an increase to 230,000 from the initially reported 222,000.

Wednesday saw mixed results across major U.S. stock indexes, influenced by geopolitical tensions and a profit warning from Dutch semiconductor company ASML, which set a cautious tone in the market. The Dow soared to a new record high, while the Nasdaq experienced a sharp decline.

Specifically, the Dow concluded with an increase of 243.60 points or 0.6 percent at 41,198.08. In contrast, the S&P 500 ended with a loss of 78.93 points or 1.4 percent at 5,588.27, and the Nasdaq plunged 512.42 points or 2.8 percent to 17,996.92.

Semiconductor stocks took a significant hit, resulting in the Philadelphia Semiconductor Index losing nearly 7 percent. This downturn was precipitated by a Bloomberg report suggesting that President Joe Biden's administration is contemplating stricter trade rules against companies as part of its chip policy regarding China. The report indicated that the administration might employ the most stringent trade restrictions if companies continue to supply China with advanced semiconductor technology.

Bloomberg, citing sources familiar with recent discussions, mentioned that the U.S. might enforce the foreign direct product rule, which allows the country to impose controls on foreign-made products that incorporate any amount of American technology.

Further negative sentiment arose when former President Donald Trump proposed that Taiwan should compensate the U.S. for defense expenditures, alleging that Taiwan had taken "about 100%" of America's chip business.

As a result, Nvidia declined by 6.6 percent, Advanced Micro Devices fell by over 10 percent, Applied Materials dropped 10.6 percent, Micron Technology decreased by 6.25 percent, and KLA Corporation lost 10 percent.

Tech giants such as Meta Platforms, Apple Inc., Microsoft Corporation, Alphabet, Eli Lilly, Amazon, Tesla, Broadcom, Oracle Corporation, Qualcomm, and Texas Instruments also saw significant declines.

Conversely, companies like ADP, Progressive Corporation, AT&T, Comcast Corporation, Pfizer, Verizon Communications, Philip Morris International, Abbott Laboratories, McDonald's Corporation, Cisco Systems, Wells Fargo, PepsiCo, Coca-Cola, and Chevron Corporation reported strong gains.

From an economic perspective, the Commerce Department reported a notable rebound in new residential construction in the U.S. for June. Housing starts increased by 3.0 percent to an annual rate of 1.353 million in June, following a 4.6 percent drop to a revised rate of 1.314 million in May. Economists had anticipated a 2.6 percent rise to 1.310 million.

Building permits saw a 3.4 percent surge to an annual rate of 1.446 million in June after a 2.8 percent decrease to a revised rate of 1.399 million in May. The expected rise was a modest 0.3 percent to an annual rate of 1.390 million.

Additionally, a report from the Federal Reserve showed that industrial production in the U.S. increased more than expected in June. Industrial production rose by 0.6 percent in June after a 0.9 percent increase in May. Economists had forecast a 0.3 percent rise.

**Commodity, Currency Markets**

Crude oil futures have dipped by $0.14 to $82.71 a barrel after climbing $2.09 to $82.85 a barrel on Wednesday. Gold futures, following a $7.90 drop to $2,459.90 per ounce in the previous session, are up by $12.20 to $2,472.10 per ounce.

In currency markets, the U.S. dollar is trading at 156.44 yen, slightly higher than the 156.20 yen at Wednesday's close in New York. Against the euro, the dollar is valued at $1.0929, compared to $1.0939 in the previous session.

**Asia**

[Additional content on Asian market trends can be inserted here.]Asian stocks experienced a significant decline on Thursday as technology shares faced substantial selling pressure due to escalating trade tensions between China and the United States.

Reports indicated that Washington is considering stricter restrictions on the export of advanced semiconductor technologies to China. Additionally, Republican presidential nominee Donald Trump proposed that Taiwan should compensate the U.S. for defense services, which sparked controversy.

The dollar hovered near a four-month low in Asian trading, following the Japanese yen's rise to a six-week high, fueling speculation about potential official intervention. Concurrently, gold neared record highs amid speculation of a U.S. rate cut, while oil prices extended gains from the previous session following a reduction in U.S. crude stockpiles.

China's Shanghai Composite Index rose 0.5 percent to 2,977.13, and Hong Kong's Hang Seng Index slightly increased by 0.2 percent to 17,778.41, buoyed by investor optimism for growth-boosting policies from a high-level Chinese Communist Party meeting.

Japanese markets, however, saw a sharp decline, especially within the tech sector, as the yen's appreciation against the dollar affected export-oriented stocks. The Nikkei 225 Index plummeted 2.4 percent to 40,126.35, and the broader Topix Index dropped 1.6 percent to 2,868.63. Companies like Tokyo Electron, Screen Holdings, Advantest, and SoftBank Group suffered major losses, ranging from 4.9 percent to 8.8 percent. This was despite positive data indicating that Japan recorded a trade surplus in June for the first time in three months.

In Seoul, stocks ended lower with the Kospi falling 0.7 percent to 2,824.35, mainly due to declines in tech stocks. SK Hynix shares dropped 3.6 percent, Hyundai Motor fell 3 percent, while Samsung Heavy Industries rose 1.3 percent.

Australian markets dropped from a record high reached in the previous session, influenced by employment data surpassing expectations in June, which raised fears of potential rate hikes. The S&P/ASX 200 Index decreased by 0.3 percent to 8,036.50, prompted by declines in banks and tech stocks, while the All Ordinaries Index fell 0.4 percent to 8,272.70. Domino's Pizza Enterprises shares plummeted 8.2 percent following a weak outlook for its store growth.

In New Zealand, the benchmark S&P/NZX-50 Index edged up 0.3 percent to 12,329.44.

**Europe**

European stocks mostly rose on Thursday after the European Central Bank's decision to keep interest rates unchanged. The French CAC 40 Index climbed 0.8 percent, the U.K.'s FTSE 100 Index increased by 0.7 percent, and the German DAX Index went up by 0.3 percent.

UK wage growth softened in the three months leading up to May, increasing hopes for interest rate cuts ahead of the Bank of England's next rate decision. Wage growth fell below 6 percent for the first time in nearly two years, indicating a cooling labor market.

In corporate news, Swedish hygiene products maker Essity surged following better-than-expected second-quarter core earnings. 3i Group saw gains after reporting an "encouraging start" to the new financial year. Frasers Group and Publicis Groupe also experienced significant increases, with the latter raising its organic growth target for 2024. Automakers climbed sharply higher due to positive data showing a strong recovery in new car sales in the EU in June.

Conversely, industrial bearings maker SKF fell after missing second-quarter profit expectations. Swiss engineering group ABB reported a 3 percent drop in orders, leading to a decline in its stock. Finnish telecom equipment maker Nokia also saw a sharp fall after a 32 percent drop in its second-quarter operating profit, attributed to weak demand for its 5G equipment.

**U.S. Economic Reports**

The Labor Department reported that first-time claims for U.S. unemployment benefits surged significantly in the week ending July 13. Initial jobless claims rose to 243,000, marking an increase of 20,000 from the previous week's revised level of 223,000. Economists had anticipated a smaller increase to 230,000 from the initially reported 222,000 in the prior week.The latest report indicates that the less volatile four-week moving average has risen to 234,750, marking an increase of 1,000 from the revised average of 233,750 from the previous week.

In other news, the Federal Reserve Bank of Philadelphia announced on Thursday that the pace of economic growth surged significantly in July, surpassing expectations. According to the Philly Fed, the diffusion index for current general activity climbed to 13.9 in July from 1.3 in June, with a positive reading signifying growth. Economists had initially predicted the index to rise only to 2.9.

Furthermore, the report pointed out that most future activity indicators also increased, indicating a more widespread expectation of overall growth in the upcoming six months.

Later today, at 10 AM ET, the Conference Board is set to release its report on leading economic indicators for June. The leading economic index is anticipated to decline by 0.3 percent in June, following a 0.5 percent drop in May.

At 11 AM ET, the Treasury Department will provide details regarding this month's auctions of two-year, five-year, and seven-year notes.

Dallas Federal Reserve President Lorie Logan is scheduled to deliver opening remarks at 1:45 PM ET during the "Exploring Conventional Bank Funding Regimes in an Unconventional World" conference.

San Francisco Federal Reserve President Mary Daly is slated to participate in a fireside chat at 6:05 PM ET during the same conference.

Later, at 7:30 PM ET, Federal Reserve Board Governor Michelle Bowman will also speak at the "Exploring Conventional Bank Funding Regimes in an Unconventional World" conference.