Global Tech Sector Pressure Weighs on Tel Aviv Stock Market Ahead of US Jobs Report

The Tel Aviv Stock Exchange is expected to open under significant pressure from the global technology sector, which has dragged major markets down overnight. Asian markets followed Wall Street's decline, led by local tech and semiconductor giants, signaling a challenging start for dual-listed tech stocks in Tel Aviv. Tower Semiconductor, Palo Alto Networks, Nova, and Camtek are set to open with negative arbitrage gaps ranging from 1.8% to 4.6%, while Opko Health and Elbit Systems may see modest gains. The KOSPI index in South Korea fell sharply by 4.3%, influenced by major chipmakers SK Hynix and Samsung, with similar declines in Japan's Nikkei and Hong Kong's Hang Seng. In contrast, the Shanghai Composite remained relatively stable.

Yesterday, the Tel Aviv 35 index closed down 0.7%, impacted by easing US-Iran tensions and hopes for a Hormuz Strait reopening deal. The cleantech and oil & gas sectors fell by approximately 3.2% and 2%, respectively, amid falling oil prices near $80 per barrel. Banking and infrastructure indices also declined, while the security sector was the sole gainer, rising 1.5%, led by Ta'at Technologies following strong earnings. El Al shares surged nearly 15% after reporting a 27% revenue increase and a 103% net profit rise in Q2, marking its best day in four years. The Tel Aviv Stock Exchange itself rose after a 36% revenue jump in Q2. Conversely, software company NICE saw a decline despite beating revenue forecasts, due to a cautious Q3 outlook.

In the bond market, Israeli government bonds rose slightly, lowering yields, while US Treasury yields remain near highs amid expectations of future rate hikes. The 2-year US yield rose to 4.19%, reflecting possible September hikes, while longer-term yields eased slightly. Oil prices dropped this morning, with Brent crude at $79.08 and WTI at $74.69 per barrel, following progress in Iran-Oman talks and optimism about a US-Iran agreement. However, concerns persist over Houthi attacks and US oil inventories. The Israeli shekel stabilized near 3.01 against the dollar, supported by reduced regional risk premiums.

US labor data released yesterday showed a significant slowdown, with only 44,000 private sector jobs added in July, well below expectations and the lowest since January. The decline was broad-based across company sizes and sectors, including losses in leisure, trade, transportation, and manufacturing. Despite slower hiring, wage growth accelerated for job changers to 7.0%, signaling tight labor supply and inflationary pressures. This mixed labor market data may complicate Federal Reserve policy decisions.

The Q2 earnings season is shaping up as one of the strongest in history, driven by massive AI investments, with the S&P 500 expected to report a 47% annual earnings growth. Tech giants Alphabet and Amazon lead this surge, though some gains stem from one-time events. Analysts caution about downward revisions for 2027 earnings forecasts, now at 13.5% growth, down from 18%. Despite these concerns, the near-term market outlook remains positive, with investors encouraged by easing geopolitical tensions and strong corporate results.