Rotation out of Tech into small caps continues

Big Tech and AI stocks resumed their sell off as investors continued to rotate into the undervalued small cap and cyclical sectors.

The broad S&P 500 fell 0.5 per cent, while the Nasdaq closed 0.9 per cent lower. The Dow Jones was the best performer of the major indices finishing the day in the green up 0.2 per cent after rallying as much as 1.5 per cent in the early session.

The Russell 2000 lifted by 1.26 per cent overnight, as investors continued their shift into the smaller end of town. Small-cap stocks have outperformed the Nasdaq-100 by approximately 18 per cent over the last 11 sessions.

The big news of the day was around the continued sell off in big tech and AI as investors continued to exit the tech space in favour of cyclicals and small caps which are both seen as key beneficiaries of an easing in monetary policy. Nvidia fell 2 per cent, Alphabet declined more than 3 per cent, Meta & Microsoft both slumped 2 per cent while Advanced Micro Devices fell 4 per cent. The VanEck Semiconductor ETF closed 2 per cent lower on the day.

In other company news, Ford Motor collapsed 18.4 per cent after reporting lower than expected second-quarter earnings . ServiceNow surged 13 per cent on stronger-than-expected earnings and Edwards Lifesciences slumped 31 per cent for its worst day since 2000 after slashing its forecast for transcatheter aortic valve replacements.

IBM closed 4.3 per cent higher after it reported a jump in bookings for its artificial intelligence business as customers work to implement the latest technology. US defence giant Northrop Grumman closed over 6 per cent higher after it raised its forecast for full-year revenue and profit, amid increased global defence spending and a strong backlog.

In macro-economic news, second-quarter GDP showed the economy grew 2.8 per cent much stronger than consensus expectations of a 2.1 per cent rise. Consumer spending was driven by a rebound in durable goods such as cars and furnishings. Despite the acceleration in growth, the figures represent a moderation from last year as high interest rates have cooled consumer spending and broader economic activity, gradually taming inflation.

Turning to US sectors, Communication Services was the worst performer on the day, closing down by 1.86 per cent. Energy was the best performer, closing higher by 1.47 per cent.

In European market news, the regional Stoxx 600 closed down 0.72 per cent, following the US lead as technology stocks weighed on the index. Consumer goods giant Unilever climbed 6 per cent despite missing a sales growth forecast as it upgraded its full-year margin guidance.

Futures

The SPI futures are pointing to a 0.4 per cent gain.

Currency

One Australian dollar at 7.35am was buying 65.36 US cents.

Commodities

Gold has lost 2.60 per cent. Silver has dropped 4.57 per cent. Copper has added 0.40 per cent. Oil has added 0.89 per cent.

Figures around the globe

European markets closed mixed. London’s FTSE added 0.40 per cent, Frankfurt lost 0.48 per cent, and Paris closed 1.15 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei lost 3.28 per cent, Hong Kong’s Hang Seng fell 1.77 per cent, while China’s Shanghai Composite closed 0.52 per cent lower.

The Australian share market closed 1.29 per cent lower at 7861.21

Dividends payable

Steamships Trading Co Ltd (ASX:SST)
360 Capital Group (ASX:TGP)
360 Capital REIT (ASX:TOT)
Turners Automotive Group Ltd (ASX:TRA)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap, Marketech.
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