Mixed Asian Markets Contrast With Gains in New York Futures Ahead of US Holiday
Asian stock markets showed a mixed performance on Monday morning, with Tokyo's Nikkei index declining by 0.1%, while South Korea and Hong Kong surged about 2%, and China rose 0.2%. Meanwhile, US futures indicated a potential rebound for Wall Street after a challenging week, with Dow Jones futures up 0.2%, S&P 500 futures rising 0.4%, and Nasdaq futures gaining 0.7%. No trading will occur on Friday due to the US Independence Day holiday.
Wall Street ended last week with five consecutive days of losses amid concerns over an artificial intelligence bubble, private credit market instability, ongoing supply chain disruptions linked to the war, and high interest rates. Despite strong earnings from chipmaker Micron, the S&P 500 and Nasdaq both posted weekly declines of approximately 2% and 4.6%, respectively, marking their first weekly drop since April 2024. Initial optimism from Micron's upbeat forecast faded, especially after Apple and Microsoft announced price hikes for MacBooks and Xbox consoles, highlighting growing cost pressures on end consumers.
Tech stocks struggled, with Apple shares plunging over 6% on Thursday, their worst day in more than a year, and Microsoft briefly hitting a 52-week low before recovering slightly. The Philadelphia Semiconductor Index (SOX) fell 7.9%, completing its worst week in over a year. Nvidia dropped 8.6%, its worst week since April 2025, erasing about $439 billion in market value. SpaceX shares also lost momentum, briefly falling below their IPO price before closing slightly higher.
Conversely, software stocks gained, reflecting investor preference for companies with service-based revenue models and stronger pricing power. Microsoft, ServiceNow, and other cloud and enterprise software firms contributed to gains in the IGV index, offsetting weakness in stocks like Oracle. Defensive sectors showed resilience, with the S&P 500 healthcare sector surging 7.9% to a record high, led by Johnson & Johnson's 11% gain, their best week since October 2008, pushing the company's market cap above $600 billion. Utilities rose 3.9%, benefiting from increased electricity demand linked to AI, while consumer staples added 1.5%, reinforcing their role as safe havens during volatility.
In corporate bonds, SpaceX raised about $25 billion in a record-demand issuance, initially tightening credit spreads. However, secondary market trading quickly reversed, with bonds weakening and spreads widening by approximately 0.28 percentage points above the issue price, indicating rapid value erosion and $305 million in paper losses by Thursday. The longer-dated bonds faced skepticism, erasing initial gains despite $90 billion in demand. This contrasted with more stable spreads in recent tech bond offerings from Nvidia and Alphabet.
Oil prices rose amid concerns over potential supply disruptions, with Brent crude up 0.8% to $72.57 per barrel and US WTI crude climbing 1.1% to $70 per barrel. Prices had fallen sharply during the week due to increased tanker traffic through the Strait of Hormuz and a US license allowing Iran to sell oil internationally for 60 days. US officials confirmed Iran would not charge transit fees in the strait, raising hopes for supply normalization.
This week, US macroeconomic data releases include consumer confidence, ADP employment figures, and manufacturing PMI indices from S&P Global and ISM. Market focus centers on the official June employment report due Thursday, which could influence Federal Reserve monetary policy amid concerns over potential rate hikes. RBC Capital Markets forecasts a continued strengthening labor market with 145,000 new jobs added, potentially reinforcing the Fed's inflation-fighting stance at the expense of labor market support.