US tech stocks are poised to end a bruising month of losses with a bounce, as better than expected earnings from sector leaders eased a pessimistic market environment.
The tech-focused Nasdaq Composite share index opened 1.8 per cent higher, ahead of quarterly updates from Apple and Amazon and following better than expected earnings from Facebook owner Meta on Wednesday. The latter company’s shares were up 14 per cent in early New York trading.
Still, the Nasdaq was on track to fall more than a tenth in April, in what would be its worst monthly performance since the global financial crisis of 2008.
Wall Street’s broad-based S&P 500 added 1.3 per cent, with the benchmark US share gauge still poised for a loss of more than 7 per cent this month, which would be its worst trading month since March 2020.
“The mood in the market has improved markedly this morning,” said Candice Bangsund, portfolio manager at Canadian asset manager Fiera Capital. “[But] the macroeconomic backdrop remains fraught with uncertainties,” she added, citing China’s coronavirus lockdowns and the US central bank being poised to raise borrowing costs to battle soaring inflation.
Tech stocks, many of which fared well during the pandemic-induced era of ultra-loose monetary policy — “remain vulnerable to rising interest rates”, Bangsund said.
Thursday’s gains came even as the US economy contracted unexpectedly in the first quarter of the year, with GDP dropping 1.4 per cent on an annualised basis following a 6.9 per cent rise in the last quarter of 2021. The overall slowdown masked strong spending by consumers and businesses, however, firming expectations of inflationary pressures continuing.
The yield on the 10-year US Treasury note — a benchmark for global borrowing costs — added 0.03 percentage points to 2.85 per cent as the price of the debt fell. Inflation erodes the real value of bonds’ fixed income payments.
The US dollar index, which measures the reserve currency against six others, added 0.8 per cent to reach its highest point since 2002 as traders piled into bets of the US Federal Reserve starting a rapid interest rate rise cycle at its May monetary policy meeting. Earlier this month, Fed chair Jay Powell said it was “appropriate in my view to be moving a little more quickly” towards tightening monetary policies.
“Not only do you have the Fed hiking considerably more aggressively than central banks in other developed markets but every time you get concerns about Russia and Ukraine [the dollar] is the ultimate safe haven,” said Seema Shah, chief global strategist at Principal Global Investors.
“The Swiss franc does not work so well as a haven trade any more as it’s in Europe,” Shah added. “The US is much less exposed to the Russia-Ukraine conflict.”
The Japanese yen weakened further on Thursday to cross the ¥130 mark against the dollar, a new multi-decade low, after the Bank of Japan vowed to keep bond yields at zero just as the Fed and other central banks prepare to raise interest rates rapidly.
Brent crude, the international oil benchmark, was broadly flat at $105.27 a barrel.
In Europe, the Stoxx 600 share index gained 0.7 per cent. German government bond prices followed Treasuries lower, with the 10-year Bund yield almost 0.1 percentage point higher at just under 0.91 per cent.
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