Traders work on the floor of the New York Stock Exchange during afternoon trading on April 09, 2024 in New York City.
Michael M. Santiago | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Nasdaq’s worst session
The Nasdaq Composite suffered its worst session since December 2022, plunging nearly 3%, as semiconductors came under pressure amid reports of tougher trade restrictions. The S&P 500 also retreated as the rotation out of technology stocks continued. Meta Platforms tumbled 5.7%, while Big Tech peers Netflix and Microsoft dropped more than 1% and Apple slid 2.5%. Bucking the trend, the Dow Jones Industrial Average closed above 41,000 for the first time. The small-cap focused Russell 2000 slipped 1%, ending its five-day win streak. The yield on the 10-year Treasury was little changed, while U.S. oil prices rose 2.6%.
Getting closer
Federal Reserve Governor Christopher Waller suggested that interest rate cuts could come soon, barring major surprises in inflation and employment data. “I believe current data are consistent with achieving a soft landing… while I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted,” Waller said. His comments align with those of other policymakers, indicating a rate cut is unlikely at the upcoming Federal Open Market Committee meeting, but more probable in September.
United soars
United Airlines‘ second-quarter profits soared more than 20%, driven by strong international travel demand. However, the carrier’s third-quarter earnings forecast fell short of expectations, now projecting $2.75 to $3.25 per share compared with the expected $3.44. Despite an industry-wide struggle with overcapacity pressuring airfares, United and Delta Air Lines have thrived by increasing international flights and premium offerings.
Boeing strike
Boeing factory workers in Washington state overwhelmingly voted in favor of a strike mandate, seeking a 40% raise in their first full negotiation with the company in 16 years. The workers, who build Boeing’s 737 Max and other jets, cannot strike before their contract expires on Sept. 12. The labor talks come at a challenging time for Boeing, as the company faces competition from Airbus and navigates a crisis after an incident with a 737 Max jet earlier this year.
Asia markets fall on chip sell-off
Markets in the Asia-Pacific region fell sharply as chip-related stock sank on reports of stricter U.S. export restrictions and as former President Donald Trump’s remarks raised geopolitical concerns. Japan’s Nikkei 225 declined 1.9%, with shares of Tokyo Electron and Advantest falling 9% and 4% respectively. South Korea’s Kospi dipped 1.27%. Samsung Electronics fell 2% and SK Hynix dropped 4.3%. Taiwan Semiconductor Manufacturing Company — the world’s largest chip maker — fell more than 3%, dragging the Taiwan Weighted Index lower by 2%. Hong Kong’s Hang Seng index inched up 0.2% and mainland China’s CSI 300 added 0.1%.
[PRO] Will the rally last?
The small cap-focused Russell 2000 index, reached new highs this week, as investors switched out of tech stocks. The index has outperformed the broader S&P500 by the widest margin since November 2021. Will the rally last? Investors share their take — and their picks
The bottom line
A Bank of America survey of global fund managers — conducted July 5-11 before an attempt on Donald Trump’s life — revealed that “geopolitical conflict” had overtaken “higher inflation” as the primary risk for investment.
The survey was conducted against a backdrop of multiple global tensions: France’s hung parliament, pressure on President Joe Biden to step down as the Democratic presidential candidate, Russia’s ongoing war on Ukraine, Israel’s war in Gaza and the fraught relationship between China and Taiwan.
Trump’s interview with Bloomberg and his choice of VP, JD Vance, have further heightened geopolitical concerns. Taiwan “did take about 100% of our chip business. I think, Taiwan should pay us for defense,” Trump said. Casting doubt on U.S. commitments to Taipei was enough to send the Taiwan Weighted Index and Taiwan Semiconductor Manufacturing Co tumbling on Wednesday.
A Trump victory could be bad for global inflation, CNBC’s Karen Gilchrist writes, as his “America-first” policy could trigger tariffs of “more than 60%” on Chinese imports and 10% on all U.S. imports. Trump’s 2018 trade war with China cost Americans $195 billion and resulted in the loss of 245,000 jobs.
“Donald is a dealmaker. The president is a dealmaker, he wants to make a deal with China, you know he wants to make a deal.” Howard Lutnik, CEO of Cantor Fitzgerald, told CNBC’s “Squawk on the Street.” “But he called out China the last time, I think there is a deal out there he’s thinking about and he’s working on. But he’s going to start tough and then he’s going to make a deal. He cares about business in America, I know he cares about business in America.”
Vance has strongly opposed aid for Ukraine. “God help Ukraine” was the reaction of Timothy Ash, emerging markets strategist at BlueBay Asset Management, as CNBC’s Holly Ellyatt writes. Vance has also identified China as the “biggest threat” to the United States.
Adding to the tension, the Biden administration is considering more restrictions on companies exporting critical chipmaking equipment to China. This news caused shares of ASML, Nvidia, and TSMC to fall sharply.
These converging factors have heightened market risk, triggering a nearly 3% slide in the Nasdaq as investors shift toward other sectors. Bank of America cautions that retail investors in AI stocks could face losses reminiscent of past bubbles, while CFRA Research’s chief investment strategist, Sam Stovall, warns that even the rotation trade may not shield the S&P 500 from a double-digit correction.
— CNBC’s Jeff Cox, Pia Singh, Alex Harring, Leslie Josephs, Sarah Min, Samantha Subin, Arjun Kharpal, Rebecca Picciotto, Charmaine Jacob and Weizhen Tan contributed to this report.
